2023 (8) TMI 497 - AT - Income Tax

Penalty u/s 271(1)(c) - penalty levied which comes to 298% of the tax sought to be evaded - assessee could not prove that the stock did not pertain to him and that the assessee could not produce any material evidence in this regard - as submitted that such penalty should be reduced to 100% of tax sought to be evaded - HELD THAT - It is an admitted fact that the AO made addition being the value of excess stock of gold on the ground that the assessee could not substantiate with evidence that the stock available with him did not pertain to him. Accordingly, AO brought to tax an amount which was upheld by the CIT (A) in the quantum appeal and the AO thereafter initiated penalty proceedings u/s 271(1)(c) and levied penalty. Considering the totality of the facts of the case, we are of the considered opinion that levy of penalty of 100% of the tax sought to be evaded will meet the ends of justice, we, therefore, modify the order of the CIT (A) and direct the AO to restrict the penalty u/s 271(1)(c) at 100% of the tax sought to be evaded. Decided partly in favour of assessee.

Summary

Issues:
The issues involved in this case pertain to the ex-parte order of the learned CIT (A) confirming the levy of penalty under section 271(1)(c) of the Income Tax Act.

Facts and Decision:
The appellant, an individual engaged in gold and pawn broking, had a survey operation conducted at their business premises, resulting in certain additions to the total income for the assessment year 2014-15. The Assessing Officer made additions to the income, including differences in closing stock of gold and silver. The CIT (A) upheld these additions. Subsequently, penalty proceedings were initiated under section 271(1)(c) of the Act, and a penalty of Rs. 11,00,000 was levied by the Assessing Officer. The CIT (A) affirmed this penalty, leading to the appeal before the Tribunal.

Appellant's Argument:
The appellant's counsel argued that the penalty of Rs. 11,00,000, amounting to 298% of the tax sought to be evaded, should be reduced to 100% based on various legal precedents. They contended that the penalty was on the higher side.

Respondent's Argument:
The respondent, representing the revenue authority, heavily relied on the CIT (A)'s order and argued that the penalty was justified. They stated that the CIT (A) provided valid reasons for upholding the penalty, and therefore, it should be maintained.

Tribunal's Decision:
After considering both sides' arguments and reviewing the record, the Tribunal noted that the Assessing Officer had made additions to the income due to the appellant's inability to substantiate the stock discrepancies. The CIT (A) had upheld these additions. Regarding the penalty, the Tribunal found that a penalty of 100% of the tax sought to be evaded would be appropriate in this case. Therefore, the Tribunal modified the CIT (A)'s order and directed the Assessing Officer to restrict the penalty under section 271(1)(c) at 100% of the tax sought to be evaded. The Tribunal partly allowed the appellant's appeal.

Final Outcome:
The Tribunal partly allowed the appeal filed by the appellant, reducing the penalty to 100% of the tax sought to be evaded. The order was pronounced in the Open Court on 24th March 2023.