Income Tax Appellate Tribunal

Assistant Commissioner of Income Tax, Mumbai vs. Me N Moms Retails Pvt Ltd.

MANU/IU/0570/2021

02.09.2021

Direct Taxation

Quantum proceedings and penalty proceedings are independent and so, distinct proceedings and confirmation of an addition cannot, on a standalone basis, justify upholding of a penalty

By present miscellaneous application, the applicant revenue seeks to recall order passed, wherein the revenue's appeal was summarily dismissed on account of low tax effect. It is the claim of the revenue that though the 'tax effect' involved in the appeal in question was admittedly below the threshold monetary limit of Rs. 50 lac specified in the CBDT Circular No. 17/2019, dated 8th August, 2019, however, the same being covered by the exception carved out in Para 10(e) of the CBDT Circular No. 3/2018, dated 11th July, 2018 was thus, maintainable.

It is the claim of the assessing officer, that as the issue involved in the appeal in question pertains to a penalty that was imposed under Section 271(1)(c) of the Income Tax Act, 1961 (IT Act) in respect of addition of bogus purchases that was made on the basis of information received from the Sales Tax Authorities i.e an external agency, therefore, pursuant to the exception carved out in Para 10 of the CBDT Circular No. 3/2018, dated 11th July, 2018 the appeal was maintainable, and had wrongly been summarily dismissed on the ground of low tax effect therein involved .

It is a settled position of law that, quantum proceedings and penalty proceedings are independent and distinct proceedings and confirmation of an addition cannot on a standalone basis justify imposition/upholding of a penalty under Section 271(1)(c) of the IT Act. Adopting the same logic, present Tribunal is of the considered view that unless a specific exception is provided in the circular w.r.t penalty also, it could by no means be construed that penalty was to be treated at par with the quantum addition.

As is discernible from Para 10(e) of the CBDT Circular No. 3/2018 (as amended on 20th August, 2018), the same applies only to additions which were based on information received from external sources. Since the levy of penalty by no means could be construed as an addition within the meaning of Para 10(e) of the circular, therefore, there is no merit in the claim raised by the revenue that the aforementioned exception carved out in the CBDT Circular No. 3/2018 would also take within its sweep penalty imposed by the A.O under Section 271(1)(c) of the Act in respect of an addition of bogus purchases on the basis Assessment year: 2010-11 of an information received from Sales Tax Authorities i.e an external agency. The miscellaneous application filed by the revenue is dismissed.

Tags : Assessment Penalty Upholding of

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