Penalty to be Levied on Tax Amount Sought to be Evaded: ITAT Reduces Penalty u/s 271(1)(c) After Adjusting TDS and Self-Assessment Tax [Read Order]
Finding merit in assessee’s submissions, the Tribunal observed that the tax sought to be evaded must be reduced by the amount of advance tax, TDS and self-assessment tax paid before issuance of notice
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that while penalty under Section 271(1)(c) of the Income Tax Act, 1961 was rightly leviable in a case of non-filing of return, the quantum of penalty must be restricted to the tax actually sought to be evaded.
Niripraj Singh Sohal appealed against the order passed by the Commissioner of Income Tax (Appeals), NFAC, Delhi, wherein a penalty of ₹8.56 lakh imposed under Section 271(1)(c) for AY 2015-16 was sustained. Reassessment proceedings were initiated as the assessee had not filed his return of income despite earning salary and interest income.
The Assessing Officer issued notice under Section 148 of the Act, in response to which the assessee filed a return declaring total income of ₹33.56 lakh. A penalty of ₹8.56 lakh, being 100% of the tax sought to be evaded, was imposed for concealment of income.
Before the Tribunal, the assessee contended that since the reassessment was completed on the returned income, no penalty could be levied under Section 271(1)(c). It was further submitted that substantial tax had already been paid by way of TDS and self-assessment tax even before issuance of notice under Section 148, and therefore, the penalty amount required recomputation in terms of Explanation 4(c) to Section 271 of the Act.
The Tribunal rejected the contention that penalty was not leviable merely because assessed income was the same as returned income. It was observed that the assessee had failed to file the return voluntarily. The Tribunal held that the case was covered by Explanation 3 to Section 271, which dealt with non-filing of return.
However, on the alternative plea regarding computation of penalty, the Tribunal found merit in the assessee’s submissions. Referring to clause (c) of Explanation 4 to Section 271, the Tribunal held that in cases covered by Explanation 3, the tax sought to be evaded must be reduced by the amount of advance tax, tax deducted at source and self-assessment tax paid before issuance of notice. The Tribunal noted that TDS of ₹7.09 lakh and self-assessment tax of ₹60,900 had already been paid prior to reopening.
Accordingly, the Tribunal directed the Assessing Officer to recompute the penalty by reducing the amount of tax already paid and restrict the penalty to ₹85,992 instead of ₹8.56 lakh.
The appeal was thus partly allowed. The order was pronounced by a Bench comprising Mahavir Singh (Vice President) and Renu Jauhri (Accountant Member).
