2019 (4) TMI 1219 - AT - Income Tax

Penalty u/s 271(1)(c) - Quantum addition extinguished - HELD THAT - We find that sub-clause (iii) of section 271(1)(c) provides mechanism for quantification of penalty. The assessee would be directed to pay a sum in addition to taxes, if any, payable him, which shall not be less than but which shall not exceed three times the amount of tax sought to be evaded by reason of concealment of income and furnishing of inaccurate particulars of income. The quantification of the penalty is depended upon the addition made to the income of the assessee. Since in the present case, basis for visiting the assessee with penalty has been extinguished by the AO by not making additions pursuant to the order of the Tribunal the impugned penalty does not survive. In other words, there is no room for the Revenue to impose penalty under section 271(1)(c) in this case. - Decided in favour of assessee.

Summary

Issues:
Challenge to penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
The appellant contested the penalty of ?3,86,240 imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act, 1961. The appellant's total income was initially determined at ?18,65,990, with additions made for long-term capital gains and interest on bank deposits. However, a rectification order was issued, increasing the capital gain assessable to ?18,72,989. The Tribunal remitted the issue back to the AO for re-adjudication, resulting in a fresh assessment where the taxable income was determined at ?52,050, significantly lower than the initial determination. The appellant argued that since no additions were made in the fresh assessment, no penalty should be imposed. The Tribunal noted that the original assessment order and the order of the ld.CIT(A) were set aside, and the AO did not make the additions on which the penalty was based in the fresh assessment.

The Tribunal examined section 271(1)(c) which provides for the quantification of penalty based on additions made to the income of the assessee. As the AO did not make any additions in the fresh assessment, the basis for imposing the penalty no longer existed. Therefore, the Tribunal concluded that there was no justification for the Revenue to impose the penalty under section 271(1)(c) in this case. Consequently, the Tribunal canceled the penalty and set aside the orders of the Revenue authorities passed under section 271(1)(c) of the Act. The appeal of the assessee was allowed, and the decision was pronounced in the Open Court on 18th April 2019.