Quantification of Penalty depends on Addition made to Income of Assessee: ITAT [Read Order]

SEBI Penalty - penalty - ITAT

While hearing the case of Kamlesh P. Modi and Rohit P. Modi, Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) ruled that quantification of penalty is depended upon addition made to the income of the Assessee.

Both the Assessees in the instant case are individuals filed their return of income for the relevant assessment year and declared total income at Rs. 55,89,030 in the case of Kamlesh. P. Modi and Rs. 55,52,790 in the case of Rohit. P. Modi.

During the course of the search, incriminating documents were found which were inventoried as annexure A/14 which indicate that they are related to haveli transactions. The AO further observed that a sum of Rs.7.5 lakhs was paid by each assessee during the year 2004 and it was returned in 2005.

Payment was made to M/s.Nayankunj Co-op. Hsg. Society. Society is within the limit of Jodhpur/Vejalpur and due to the proximity of place known as “Haveli” in the area, the transaction was recorded in the name of “Haveli”. The said 7.5 lakhs was entered as sale value of the land as per the seized documents. Therefore the AO made the addition of Rs.3,42,00,000 on account of unaccounted investment and Rs.22.00 lakhs on account of unaccounted income. Consequently, the AO initiated penalty proceedings under section  271(1)(c) of the Income Tax Act 1961 recomputed their total income at Rs. 2,03,99,775 and Rs. 2,03,63,515 respectively after making an addition of Rs.1,48,10,725 in the hands of each Assessee.

On appeal, the CIT(A) granted relief to them to the extent of Rs.67,04,225 and confirmed addition at Rs.81,06,500 in the hands of each Assessee and he imposed the penalty of Rs.27 lakhs in the hands of each Assessee. Thereafter the Assessee has challenged the deletion of addition before the Tribunal on appeal.

While allowing the appeal filed by the Assessee, the Tribunal bench consist of Judicial Member and Accountant Member observed that “no transaction for sale or purchase of Vejalpur land was carried out by the Assessee which was simply assumed by the AO and there was no document found during the course of search exhibiting execution of such transaction”.

The division bench further observed that “sub-clause (iii) of section 271(1)(c) provides a mechanism for quantification of penalty. It contemplates that 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. While concluding the issue the bench held that the quantification of the penalty is depended upon the addition made to the income of the assessee”.

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