In the proceedings under section 143(3), AO had made addition on two grounds i.e. disallowance and carried forward of loss at the time of splitting the society and carry forward to new society and disallowance of excess depreciation i.e. full depreciation claimed even on assets put to use for less than 180 days. Further, AO levied penalty on both these grounds. CIT(A) confirmed the disallowances as well as penalty levied by the AO. Aggrieved, assessee filed an appeal before Tribunal.  Tribunal held that the parent co-operative society had suffered losses in the earlier year and on splitting of parent society, assessee was created and took over the liability including the brought forward losses of the earlier years. The genuineness of the claim of assessee had not been doubted by the Authorities and assessee had disclosed all material facts in return as well as to the authorities.  Tribunal further held that in the notice of penalty, AO did not mention under which limb of section 271(1)(c) penalty was to be imposed. Accordingly, Tribunal held that penalty proceedings were vitiated and deleted the penalty.(AY. 2006-07)