IMPOSITION OF PENALTY UNDER SECTION 271(1)C

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P.S.VISHWANATHAN

P.S.VISHWANATHAN (Querist)
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01 June 2009 ONE OF MY DIRECTORS HAD FILED(WOMAN) HAD FILED HER RETURN FOR THE ASSESMENT YEAR 2006-07. Declaring her income as Rs.2,28,000.00 which also included capital gains(indexing) of Rs.83,000.00 . The tax was paid by her in normal rates as applicable to an individual.

During the assesment the income was arrived at Rs.2,91,971.00. Since special rates was imposed on capital gain,she was required to pay only Rs.7,600.00 as additional tax which was duly paid.

In the penalty proceedings however, the ITO HAS IMPOSED PENALTY OF RS.21,522.00 ON AN ADDITION OF RS.63841.00 (100% OF TAXSOUGHT TO BE EVADED ON THE ADDITION).
MY QUERY IS WHEN THE ADDITIONAL TAX ITSELF WAS RS.7,600.00 ON THE COMPLETION OF ASSESMENT SHOULD THE PENALTY ALSO NOT BE IMPOSED ON THIS TAX ONLY?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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01 June 2009 Minimum penalty u/s 271(1)(c) is 100% of the amount of tax sought to be evaded. Therefore, as you said,Rs.21,522/- can be levied.

Ratan Sharma

Ratan Sharma (Expert)
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01 June 2009 hi,
In my opinion your querry is correct. 271(1)(c) prescribes the words " Tax sought to be evaded ". When the additional tax after assessment is Rs. 7600/- only then how the AO can levy penalty more than Rs. 7600/-. It should be 100% to 300% of Rs. 7600/-.

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