In ITA Nos.383 & 384/M/2021-ITAT- Assessing Officer failed to apply his mind at the time of recording his satisfaction to initiate penalty proceedings under section 271(1)(c) of Income Tax Act: says ITAT (Mumbai), orders penalties imposed to be deleted
Gagan Goyal (Accountant) and Kuldip Singh (Judicial) [18-04-2023]

Read Order: Suresh Henry Thomas v. Income Tax Officer 9(2)(3)

LE Correspondent

Mumbai, April 21, 2023: The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has recently held that while initiating penalty proceedings under section 271(1)(c) of the Income Tax Act, the Assessing Officer has not applied his mind while recording his satisfaction.

 “The AO has failed not only to make himself satisfied at the time of making disallowance/additions in assessment order if the assessee has furnished inaccurate particulars of income or has concealed particulars of his income rather he has to be on the safer side invoked both the limbs of section 271(1)(c) of the Act,” the Tribunal observed.

For the penalty levied on account of salary disallowance, the Tribunal further observed that AO had merely made adhoc addition by way of guess work and held that on the basis of any adhoc addition, penalty proceedings under section 271(1)(c) of the Act cannot be levied.

Thus, the penalties levied by the AO and confirmed by the Ld. CIT(A) under section 271(1)(c) of the Act were held to be unsustainable in the eyes of law and were ordered to be deleted.