Quantification of Penalty is dependent upon Additions made to Income of Assessee: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi bench consisting of Pradip Kumar Kedia, Accountant Member and Narender Kumar Choudhry, Judicial Member held that quantification of penalty is dependent upon additions made to income of assessee.

The appeal has been filed by the assessee, Bharat Rana Chaudhry against the order of the Commissioner of Income Tax relevant to Assessment Year 2006-07 whereby action of the CIT in confirming the penalty of Rs.1,81,97,948/- imposed by the Assessing Officer under Section 271(1)(c) of the Income Tax Act, 1961 has been assailed by the Assessee.

The Tribunal observed that “sub-clause (iii) of section 271(l)(c) provides 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. In other words, the quantification of the penalty is dependent upon the additions made to the income of the assessee. Upto and until the issue regarding determination of the taxable income is finalized, penalty under section 271(l)(c) of the Act cannot be imposed upon the assessee. The determination of taxable income of the assessee is presently subjudiced before the CIT owing to the order of the ITAT in quantum proceedings. After adjudication the issue of quantum on merit, it will be in the discretion of the CIT to consider the appropriate modification in penalty amount on the issue against the assessee in accordance with law. The appeal is thus set aside and restored to the file of CIT for fresh adjudication in the light of outcome of quantum appeal.”

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