Trans-1_Penalty U/S 122 (b)(2)

This query is : Resolved

Dipesh (Querist)
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02 May 2023 Hello Expert,

We have claimed excess ITC of Rs. 62K while filing Trans-1 but at the time of audit of Trans-1 by department, they have identified and suggest to reverse. We have reversed this ITC before issuing SCN. At the time of reversal of ITC we have excess balance in our ECL hence we not paid interest. Now department is asking penalty of 100% of Tax vide issuing DRC-07, which we have already reversed before SCN.
How to reply this DRC-07 or close this matter ??

CS Advocate Abhishek Goyal

CS Advocate Abhishek Goyal (Expert)
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04 May 2023 Did you reply to earlier SCN? under what section SCN was issued to you? if it was issued to you u/s 74 then penalty can be imposed at maximum of 15% since you have reversed the ITC before issuance of SCN. In case of section 73 no penalty is payable if reversed before SCN.