Landmark Cases on Penalty

Disallowance of expenses during assessment proceedings does not automatically mean that the assessee has furnished incorrect particulars of income or that the additions/disallowances will attract penalty.

The Assessing Officer must record satisfaction in the assessment order regarding a violation of Section 269SS for penalty proceedings under Section 271D to be validly initiated.

A revised return surrendering additional income is not a bona fide voluntary disclosure if filed only after the department detects concealment, and penalty under section 271(1)(c) remains leviable.

The levy of penalty under section 271(1)(c) is not automatic and requires satisfaction of the specified conditions, considering the assessee's state of mind. Mens rea is not to be proved by the revenue, but the conditions in the section, namely concealment and furnishing of inaccurate particulars, must be proven.

Penalty for concealment of income requires circumstances that reasonably point to the conclusion that the disputed amount represented income and the assessee consciously concealed particulars or deliberately furnished inaccurate particulars. An assessee must offer an acceptable explanation for undisclosed income or inaccurate particulars to rebut the presumption of concealment.

A taxing provision imposing liability is presumed to be prospective, not retrospective, unless the language of the provision clearly indicates otherwise. Amendments that enlarge the scope of penalty, being substantive, are prospective.

A penalty is not automatically leviable merely because an addition to income was made during assessment proceedings or because a revised return was filed. The facts of the addition and the assessee's conduct must be considered.

A penalty under section 272A(2)(e) is not leviable for failure to file returns within the stipulated time if the assessee acted upon the advice of its chartered accountant and had a bona fide belief that filing returns was not required. The assessee must be given an opportunity to explain why the penalty should be waived, especially where civil consequences arise.

Levying penalty under section 271(1)(c) for treating business loss as speculative loss is not justified if there is no concealment of income or furnishing of inaccurate particulars.

A penalty for furnishing inaccurate particulars cannot be imposed merely because the Assessing Officer (AO) treated expenditure claimed as revenue by the assessee as capital expenditure, provided the assessee disclosed the nature of the transaction.

The explanation furnished by an assessee for making a claim is not found to be bona fide, triggering Explanation 1 to Section 271(1)(c) of the Income Tax Act, 1961.

Journal entries in the books of accounts that reflect the transfer or repayment of loans or deposits do not fall foul of Section 269SS or 269T of the Income-tax Act, 1961, and therefore, no penalty is leviable under Section 271D or 271E.

A mere surrender of additional income under Section 132(4) of the Income-tax Act, 1961, during a search, without any incriminating material being found, does not attract the penalty provisions under Explanation 5A to Section 271(1)(c) of the Act.

Penalty under section 271(1)(c) is not attracted when the issue of classification of income (capital vs. revenue) is debatable, and the assessee has not furnished inaccurate particulars.

The Commissioner of Income Tax (Appeals) errs in deleting a penalty under section 271(1)(c) if the assessee failed to substantiate transactions claimed in its return, thereby evading taxes.

A search action leading to the detection and declaration of additional income by the assessee attracts penalty provisions under Section 271(1)(c) of the Income Tax Act.

A thing is done in 'good faith' if it is done honestly, irrespective of whether negligence was involved. This is guided by Section 3(22) of the General Clauses Act.

Penalty under Section 271D for violation of Section 269SS is not leviable if the transaction is genuine and there was a reasonable cause for accepting the cash loan.

Penalty cannot be levied under section 271(1)(c) merely because a deduction claim is denied by the Assessing Officer, if all facts relating to the claim were disclosed by the assessee and there was no concealment.

Penalty provisions in tax law must be interpreted strictly. If the language of a statute is clear and unambiguous, the plain meaning should be followed, even if it results in an injustice.

Penalties under sections 271D and 271E are triggered only when breaches of sections 269SS and 269T are undisputed and admitted by the assessee, or when the transactions are part of the books of account or used to explain assets.