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2018 (10) TMI 856 - AT - Income TaxPenalty u/s 271(1)(c) - addition for bogus purchase - Held that - The instant appeal before us relates to penalty levied on the alleged addition of ₹ 21,64,100/-. The basis of calculating the penalty is the alleged addition. As Co-ordinate bench has deleted the addition to the extent of 75% of the alleged bogus purchases and the remaining addition is only at ₹ 5,41,025. We are of the considered view that the alleged penalty of ₹ 6,68,710/- also needs to be scaled down to 25% of the impugned penalty. We therefore in the given facts and circumstances of the case direct the Assessing Officer to levy the penalty at ₹ 1,67,178/- (being 25% of the penalty of ₹ 6,68,710/-).
Issues:
Penalty under section 271(1)(c) of the Income Tax Act 1961 - Quantum of penalty reduction - Alleged bogus purchases - Assessment of penalty amount - Relief granted by Co-ordinate Bench - Appeal against the order of Ld. Commissioner of Income Tax(Appeals) - Consideration of facts by Ld.CIT(A) - Final opportunity of being heard - Justification of penalty. Analysis: 1. Penalty under section 271(1)(c) of the Income Tax Act 1961: The appeal before the Tribunal pertains to the penalty levied under section 271(1)(c) of the Income Tax Act 1961 on the alleged addition made by the Assessing Officer for bogus purchases. The penalty was initially imposed at 150% of the tax sought to be evaded but was later reduced to 100% by the Ld. Commissioner of Income Tax(Appeals). 2. Quantum of penalty reduction: The Co-ordinate Bench in a previous judgment reduced the quantum of addition for bogus purchases to 25% of the alleged amount. Considering this reduction, the Tribunal decided to scale down the penalty amount accordingly. The penalty was recalculated at 25% of the original penalty imposed by the Assessing Officer. 3. Alleged bogus purchases: The case involved an individual assessee whose income tax return declared an income of ?11,86,300. However, during scrutiny, an addition was made on account of bogus purchases amounting to ?21,64,100. The penalty proceedings under section 271(1)(c) were initiated based on this addition. 4. Assessment of penalty amount: The penalty was initially set at ?10,03,065, which was 150% of the tax sought to be evaded due to the bogus purchases. Subsequently, the Ld. Commissioner of Income Tax(Appeals) reduced the penalty to ?6,68,710, which was 100% of the tax evaded. The Tribunal further reduced the penalty to ?1,67,178, which was 25% of the revised penalty amount. 5. Relief granted by Co-ordinate Bench: The assessee received substantial relief in a previous appeal before the Co-ordinate Bench, where the quantum addition for bogus purchases was sustained only to the extent of 25% of the alleged amount. This relief was a significant factor in the Tribunal's decision to reduce the penalty amount accordingly. 6. Appeal against the order of Ld. Commissioner of Income Tax(Appeals): The appeal before the Tribunal challenged the decision of the Ld. Commissioner of Income Tax(Appeals) to maintain the penalty at 100% instead of 150%. The assessee argued that no penalty should have been levied due to the substantial reduction in the quantum addition for bogus purchases. 7. Consideration of facts by Ld.CIT(A): The assessee contended that the Ld. Commissioner of Income Tax(Appeals) did not consider the facts presented before him adequately. The appellant claimed that no final opportunity of being heard was given before the appeal order was passed, which led to the unjustified penalty confirmation. 8. Justification of penalty: After hearing the rival contentions and examining the records, the Tribunal found that the penalty levied by the Assessing Officer needed to be scaled down in line with the reduction in the quantum addition. The Tribunal directed the Assessing Officer to levy the penalty at 25% of the original penalty amount, resulting in the partial allowance of the assessee's appeal. This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision regarding the penalty under section 271(1)(c) of the Income Tax Act 1961 in the case.
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