Income Tax Appellate Tribunal (ITAT) of Hyderabad bench held that Levy of penalty of 100% of the tax sought to be evaded would meet the ends of justice and set aside the order passed by assessing officer.
The above order was passed in the assessee Kishore Kumar’s case, an individual and engaged in the business of gold.
A survey operation was conducted in the business premises of the assessee and certain incriminating material was found and impounded.
Thereafter, the assessee filed a return of income and the case was selected for scrutiny. The assessing officer made addition after scrutiny. Against the addition assessee filed an appeal before the CIT(A).
The CIT(A) upheld the action of the Assessing Officer on the ground that the 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.
Thereafter, the assessing officer initiated proceedings under Section 271(1)(c) of the Income Tax Act.
K.A. Sai Prasad, counsel for the assessee submitted that the Assessing Officer levied a penalty of Rs.11,00,000/- which comes to 298% of the tax sought to be evaded. The penalty should be reduced to 100% of tax sought to be evaded.
K.P.R.R. Murthy, counsel for the revenue contented that the CIT (A) has given justifiable reasons while upholding the penalty of Rs.11.00 lakhs levied by the Assessing Officer under Section 271(1)(c) of the Income Tax Act.
The Tribunal of K. Narasimha Chary, (Judicial Member) and R.K. Panda, (Accountant Member) observed that “levy of penalty of 100% of the tax sought to be evaded will meet the ends of justice” .
Therefore, the bench modified the order of the CIT(A) and directed the Assessing Officer to restrict the penalty under Section 271(1) (c) of the Income Tax Act at 100% of the tax sought to be evaded.
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