Scrutiny assessment

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Anu (Querist)
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27 October 2013 An assessee had purchased a house property in 2005-06. The source for this was housing loan of Rs.20 lacs from bank and gift from his parents and in laws amounting to Rs.12 lacs. During scrutiny assessment, the assessee has submitted proof for the source. However the ITO is not convinced about the gift from relatives and has decided to disallow Rs.3 lacs on estimate basis. On this disallowance, tax amounts to Rs.1.3 lacs including interest.
Although the assessee has sufficient proof, he is ready to pay this amount to buy peace. If penalty is levied, he would rather prefer to appeal, since he is sure of winning the case.

Query: Is the assessing officer, after passing order with only tax and interest, in a position to levy penalty u/s 271? Whether imposing penalty in scrutiny assessment is compulsory or discretionary on the part of IT department?

An early reply is requested since the assessee has to pay tax within October end and he has to be advised whether to pay the tax and interest, or to prefer proceedings for appeal .

Nikhil Kaushik

Nikhil Kaushik (Expert)
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27 October 2013 1. penalty is always at the discretion.

2. If you have the evidence for the sources of fund, then better challenge the disallowance too.

3. Often where there is no mis-representation, penalty proceedings are quashed by higher courts.

In my view, file appeal against all the disallowances.

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