2023 (4) TMI 802 - AT - Income Tax

Penalty u/s 271(1)(c) - quantification of the penalty - HELD THAT - In the present case, the assessee had filed appeal before the Tribunal against quantum addition in the year under consideration. The Tribunal vide order 2021 (10) TMI 1402 - ITAT AHMEDABAD had remitted the issue back to the file of the ld.CIT(A) for reconsideration and no addition exists as of now, therefore, imposition of penalty at this stage is premature and not justifiable. Since the addition on quantum has been remitted to the file of the ld.CIT(A), we also remit the issue regarding levy of penalty to his file for reconsideration based on the outcome in set aside proceedings pending before him - Appeal of the assessee is allowed for statistical purpose.

Summary

Issues:
The issues involved in this case are the imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961, the validity of assessment framed under section 143(3), and the quantification of the penalty.

Imposition of Penalty under Section 271(1)(c):
The appeal was filed against the order confirming the penalty under section 271(1)(c) of the Act. The grounds raised by the appellant included the lack of recording mandatory satisfaction by the AO, the erroneous quantification of the penalty, and the failure to consider submissions and explanations by the appellant. The appellant argued that since the additions were set aside by the ITAT in the quantum appeal, the penalty should be set aside as well. The ITAT agreed that since the issue of validity of assessment was being reconsidered, the imposition of penalty did not survive and should be set aside.

Validity of Assessment Framed under Section 143(3):
The ITAT found that the AO had expanded the limited scrutiny to complete scrutiny without obtaining approval from the higher authority. The ITAT set aside the order of the Revenue authority and directed the CIT(A) to decide the issue afresh. The ITAT noted that there was no evidence of approval from the higher authority for converting the case to detailed scrutiny. Therefore, the case was restored to the file of the CIT(A) for adjudication based on the direction contained in the ITAT's order.

Quantification of Penalty:
The ITAT observed that the quantification of the penalty under section 271(1)(c) is dependent on the additions made to the income of the assessee. As the quantum appeal had remitted the issue back to the CIT(A) for reconsideration and no addition existed at the time, the imposition of penalty was deemed premature and not justifiable. The ITAT remitted the issue of penalty levy to the CIT(A) for reconsideration based on the outcome of the set-aside proceedings pending before him. Therefore, the CIT(A) was directed to decide on the penalty based on the outcome of the quantum appeal.

In conclusion, the appeal of the assessee was allowed for statistical purposes, and the order was pronounced in the Court on 17th April 2023 at Ahmedabad.