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Issues involved: The judgment involves challenges to penalty orders u/s 271(1)(c) of the Income Tax Act for assessment years 2004-05 and 2005-06.
Issue 1: Assessment Year 2004-05 The assessee filed a revised return disclosing additional income of `30 lacs after a survey u/s 133A revealed capital expenses wrongly claimed as revenue expenses. The Assessing Officer initiated penalty proceedings u/s 271(1)(c) alleging concealment and furnishing inaccurate particulars of income. The CIT(A) upheld the penalty, stating that the assessee deliberately claimed capital expenses as revenue. However, the ITAT found that the issue of capital vs. revenue expenses was debatable, and the assessee's actions did not amount to concealment or furnishing inaccurate particulars. Citing the Reliance Petroproducts case, the ITAT held that the penalty was not justified. Issue 2: Assessment Year 2005-06 The Assessing Officer levied a penalty u/s 271(1)(c) based on the assessee's agreement during a survey to declare additional income for the assessment year. The CIT(A) confirmed the penalty. However, the ITAT ruled that the penalty was not warranted as the return for the relevant assessment year was not due at the time of the survey. The ITAT found that the premature conclusion that the assessee would not have declared additional income without the survey was not justified, leading to the cancellation of the penalty. In conclusion, the ITAT allowed both appeals filed by the assessee, setting aside the penalties imposed u/s 271(1)(c) for the assessment years 2004-05 and 2005-06.
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