Quantification of penalty is dependent upon the additions made to the income

The appeal of the assessee is directed against the action of CIT(A) 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 (The Act).

The Ld. AR for the assessee submitted that the addition amounting to Rs.5,32,58,717/- in the quantum proceedings agitated in ITA No.3838/Del/2019 has resulted in the penalty proceedings u/s 271(l)(c) of the Act.

On due consideration of the facts and circumstances of the case, we find 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 sub-judiced before the CIT(A) owing to the order of the ITAT in quantum proceedings in ITA No.3838/Del/2019 (supra). After adjudication the issue of quantum on merit, it will be in the discretion of the CIT(A) 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(A) for fresh adjudication in the light of outcome of quantum appeal.

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