2010 (6) TMI 825 - AT - Income Tax

Summary

Issues Involved:
1. Levy of penalty u/s 271(1)(c) of the IT Act.
2. Calculation of penalty amount.

Summary:

1. Levy of Penalty u/s 271(1)(c) of the IT Act:
The assessee challenged the levy of penalty of Rs. 30,00,000/- u/s 271(1)(c) of the IT Act, which was rectified to Rs. 28,07,744/-. The assessee claimed deduction u/s 80 HHC for the export of computer software, which was found to be bogus by the AO. The AO treated Rs. 61,03,793/- as unexplained income and disallowed the deduction u/s 80 HHC. The CIT(A) and the Tribunal upheld the AO's findings. The AO issued a show cause notice for penalty u/s 271(1)(c), which was contested by the assessee on the grounds that there was no concealment of income. The AO, however, found the assessee's intention to be mala fide and levied the penalty. The CIT(A) confirmed the penalty in principle but reduced it to the minimum amount.

2. Calculation of Penalty Amount:
The assessee argued that the penalty should be imposed only on the revised taxable income of Rs. 3,28,357/- and not on Rs. 61,03,793/-. The CIT(A) rejected this contention, stating that the unexplained receipt of Rs. 61,03,793/- justified the penalty. The Tribunal, however, considered the revised total income of Rs. 3,28,357/- and directed the AO to levy the minimum penalty based on this amount. The Tribunal concluded that the penalty should be calculated on the tax payable on the revised total income of Rs. 3,28,357/-, not on the gross amount of Rs. 61,03,793/-.

Conclusion:
The appeal was partly allowed, directing the AO to levy the minimum penalty on the tax calculated on the revised total income of Rs. 3,28,357/-.