2021 (4) TMI 1011 - AT - Income Tax

Levy of penalty u/s. 271(1) - assessee has already opted for settlement of dispute for quantum additions as well as penalty under Direct Tax Vivad Se Vishwas Scheme (VVS Scheme), 2020 and already received Form No. 3 from appropriate authority - HELD THAT - In view the provisions of section 3 of the VSV Act and FAQ No. 8 as extracted above, it is quite discernible that when the tax arrears include penalty levied on such disputed tax, then in such a case only prescribed percentage of disputed tax is required to be paid by the declarant. Upon perusal for Form No. 3, we find that the assessee has filed declaration for both the appeals i.e. disputed tax appeal as well as penalty appeal and paid prescribed percentage as per the scheme. Since the quantum appeal as well as penalty appeal has been settled by the assessee on payment of disputed tax, the captioned appeal which is in relation to penalty u/s. 271(1)(c) does not survive for adjudication and the penalty would stand deleted.

Summary

Issues:
1. Assailing penalty u/s. 271(1)(c) confirmed by the first appellate authority.
2. Settlement of dispute under Direct Tax Vivad Se Vishwas Scheme (VVS Scheme), 2020.
3. Impact of settled quantum appeal on penalty appeal.
4. Applicability of CBDT Circular No. 9 of 2020.
5. Disposal of penalty proceedings u/s. 271(1)(c) of the Act.

The judgment pertains to an appeal challenging the penalty imposed under section 271(1)(c) as confirmed by the first appellate authority. The appellant argued that they had opted for settlement under the Direct Tax Vivad Se Vishwas Scheme, 2020, for both quantum additions and penalties, and had received Form No. 3 from the appropriate authority. It was highlighted that the quantum appeal had been allowed to be withdrawn by the Tribunal, indicating that the penalty should not be applicable. The appellant relied on CBDT Circular No. 9 of 2020, emphasizing that settlement of penalty appeal alone is not possible when the appeal on disputed tax is pending. As the quantum appeal had been settled, it was contended that the penalty appeal should be dropped.

The Tribunal examined the arguments presented and referred to FAQ No. 8 of the CBDT Circular, which clarified the procedure for settling penalty appeals while quantum appeals are pending. The FAQ emphasized that when both quantum and penalty appeals are pending, the declarant must provide details for both and pay the relevant percentage of disputed tax only. The Tribunal observed that the appellant had filed a declaration for both the disputed tax appeal and penalty appeal, paying the prescribed percentage as per the scheme. Since the appellant had settled both the quantum and penalty appeals by paying the disputed tax, the Tribunal concluded that the penalty appeal under section 271(1)(c) was no longer viable for adjudication, and the penalty was deemed deleted.

In light of the provisions of the VSV Act and the CBDT Circular, the Tribunal allowed the appeal, ordering the deletion of the penalty under section 271(1)(c) based on the settlement made by the appellant. The judgment was pronounced on 19th April 2021, marking the resolution of the penalty proceedings in favor of the appellant.