PCIT Vs Chandravadan Desai (HUF) (Calcutta High Court)
Calcutta High Court held that initiation of penalty proceedings under section 271(1)(c) of the Income Tax Act and passing of penalty order thereof in the name of a non-existent entity (i.e. dissolved HUF) is liable to be quashed. Accordingly, appeal of revenue dismissed.
Facts- AO completed the assessment for the assessment year under consideration u/s. 143(3) of the Act by order dated 30.12.2016. While completing the assessment, an addition of Rs.7,29,59,117/- was made on the ground of disallowance of capital loss on dissolution of the HUF. In the assessment order, AO has stated that he is satisfied that the assessee has furnished inaccurate particulars of the income by claiming the said amount as deduction and hence penalty proceedings u/s. 271(1)(c) of the Act is initiated. It appears that no formal orders have been passed by the Assessing Officer in the petition filed u/s. 154 of the Act. At the same time, no tax has been demanded from the assessee which would go to show that the entire issue is tax neutral. Penalty proceedings were initiated on the alleged ground that the assessee furnished inaccurate particulars of income by claiming the said amount as deduction.
