SALIM VALIMOHAMAD MEMAN,AHMEDABAD vs. ITO, WARD-6(1)(5), AHMEDABAD

Present appeal is directed at the instance of the assessee against order of ld.CIT(A)-6, Ahmedabad dated 12.11.2018 passed for the Asstt.Year 2013-14.

Only grievance of the assessee is that the ld.CIT(A) has erred in confirming penalty of Rs.19,19,029/- imposed by the AO under section 271(1)(c) of the Income Tax Act, 1961.

With the assistance of the ld.representatives, we have gone through the record carefully. It emerges out from the record that in an assessment framed under section 143(3) r.w.s. 147 of the Act, the income of the assessee was finalized by making addition of Rs.64,54,080/-. This quantum addition was confirmed by the ld.CIT(A) on account of non-appearance before the ld.first appellate authority. Thereafter, the ld.AO initiated penalty proceedings under section 271(1)(c) by issuance of notice under section 274 of the Act. For want of satisfactory explanation from the assessee in the penalty proceedings, the ld.AO imposed penalty of Rs.19,19,029/- being 100% of the amount of tax sought to be evaded. Action of the ld.AO also confirmed by the ld.CIT(A). Aggrieved by action of the ld.Revenue authorities in imposing penalty under section 271(1)(c) of the Act, the assessee is now before the Tribunal.

The ld.counsel for the assessee at the very outset submitted that addition made by the ld.AO and confirmed by the ld.CIT(A) was challenged before the ITAT vide and the ITAT vide order dated 26.7.2019 has set aside exparte order of the ld.CIT(A) on quantum appeal, and remitted the issue back to his file for re- adjudication. Thus, the determination of income for the purpose of taxation is yet to be finalized. In other words, whether the additions on account of unexplained cash deposits in bank, unexplained expenditure and disallowance of deductions claimed under Chapter VIA require to be made in the hands of the assessee or not, is subjudiced before the ld.first appellate authority, and therefore, levy penalty under section 271(1)(c) is not justifiable, and the orders of the Revenue authorities in this behalf are to be set aside back to the file of the ld.CIT(A) for a relook based on the outcome of the additions pending before him. On the other hand, the ld.DR has not disputed factual position of the case stated by the ld.counsel for the assessee.

On due consideration of the facts and circumstances, and the submissions of both the parties, we find that sub-clause (iii) of section 271(1)(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 by 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 depended upon the addition made to the income of the assessee. In the present case, the assessee has filed appeal before the Tribunal against quantum addition in the year under consideration. The Tribunal vide order dated 26.7.2019 (supra) has remitted the issue back to the file of the ld.CIT(A), therefore, imposition of penalty at this stage is premature and not justifiable. Therefore, since the addition on quantum has been remitted to the file of the ld.CIT(A), we also remit the issue regarding levy of penalty to his file for reconsideration based on the outcome of addition pending before him. In other words, the ld.CIT(A) shall decide the issue regarding levy of penalty after assessing the income in pursuance of Tribunal’s order cited (supra) in the assessee’s quantum appeal.

In the result, appeal of the assessee is allowed for statistical purpose.