2021 (10) TMI 662 - AT - Income Tax

Penalty u/s. 271(1)(c) - penalty levied on the enhancement of income made by CIT(A) - HELD THAT - Quantum enhancement which was made by CIT(A) and which is the basis of the impugned penalty has been restored to the file of CIT(A) by the Co-ordinate Bench of Tribunal for deciding the issue afresh as per the directions contained therein. Sub-clause (iii) of Section 271(1) contemplates that if it is held that the assessee concealed the particulars of income or furnished inaccurate particulars of income, then in addition to tax, if any, payable by him, a sum which shall not be less than, but shall not exceed three times, the amount of tax sought to be evaded by the reason of the concealment of particulars of his income or furnishing of inaccurate particulars of income, be directed to be paid. Penalty equivalent to the tax sought to be evaded or three times of the tax is to be computed on the addition for which a charge is to be proved that the assessee has concealed the particulars of this income. The addition in the present case is yet to be made. In such a situation, we are of the view that there cannot be any question of computing the penalty unless the amount is determined on which the allegation of evading tax can be levied. We therefore set aside the issue of penalty also to the file of CIT(A) and it is left to the wisdom of CIT(A) who may initiate or not initiate penalty proceedings after finalizing of quantum addition if any made to the income of the assessee. Thus ground of assessee is allowed for statistical purposes.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 based on quantum enhancement made by CIT(A) - Restoration of the matter back to CIT(A) by Tribunal for deciding the issue afresh.

Analysis:
The appeal before the Appellate Tribunal ITAT Delhi was directed against the order of the Commissioner of Income Tax (Appeals)-2, New Delhi for the Assessment Year 2011-12. The case revolved around the assessee's cash deposits in bank accounts and the subsequent addition to income. The Assessing Officer (AO) had issued a notice under section 148 of the Act as the assessee did not file the return of income. The AO made an addition to the income by applying Gross Profit on the aggregate credits in the bank accounts. The CIT(A) enhanced the addition to the income, leading to the imposition of a penalty under section 271(1)(c) of the Act. The assessee challenged the penalty order on various grounds, including lack of opportunity for hearing, non-specific grounds for penalty, and jurisdictional issues related to the assessment order.

The Learned AR representing the assessee argued that the penalty was levied based on the enhancement made by CIT(A), which had been set aside by the Tribunal for reconsideration. As the quantum addition had been remitted back to CIT(A), it was contended that the penalty appeal should also be sent back to CIT(A. The Learned DR did not object to this prayer. The Tribunal observed that the issue at hand was the levy of penalty under section 271(1)(c) of the Act. Since the quantum enhancement forming the basis of the penalty had been referred back to CIT(A) for fresh consideration, the Tribunal held that the penalty computation could not proceed until the final determination of the amount on which the tax evasion allegation could be based. Therefore, the Tribunal set aside the penalty issue to the file of CIT(A), leaving it to the discretion of CIT(A) to decide on penalty proceedings post-finalization of any quantum addition to the assessee's income. Consequently, the Tribunal allowed the assessee's appeal for statistical purposes.

In conclusion, the Tribunal's judgment focused on the procedural and jurisdictional aspects of the penalty imposition under section 271(1)(c) of the Act, emphasizing the necessity for a finalized quantum addition before penalty computation. The decision highlighted the importance of proper assessment procedures and the need for a clear basis for penalty imposition, ultimately remitting the penalty issue back to CIT(A) for further consideration post-quantum addition determination.