The Kolkata bench of the Income Tax Appellate Tribunal ( ITAT ) has deleted the penalty under Section 271(1) of the Income Tax Act, 1961, stating that penalties shall be calculated based on additions made to the income disclosed in the Income Tax Return ( ITR ) filed under Section 139(1) of the Income Tax Act.

The appeal was filed by an assessee against the penalty of Rs. 4,44,815 imposed under Section 271(1)(c) of the Income Tax Act. The primary grievance of the assessee centered on the confirmation of this penalty by the Commissioner of Income Tax ( Appeals ) [CIT (A)]. During the Proceedings, P.P. Barman, counsel for the respondent, argued that the addition upon which the penalty was computed had been deleted by the first Appellate Authority on the quantum appeal. Section 271(1)(c) of the Income Tax Act stipulates that if it is found that a person has concealed income or furnished inaccurate particulars of income without reasonable cause, a penalty may be imposed

. However, the penalty is to be calculated based on the additions made to the income disclosed in the return filed under Section 139(1) of the Income Tax Act. The two member bench of the tribunal comprising Rajesh Kumar ( Accountant member ) and Rajpal Yadav ( Vice President ) observed that the penalty has to be computed on the basis of the addition made to the income of the assessee disclosed in the ITR filed under section 139(1) of the Income Tax Act. The penalty could be either equivalent to the taxes sought to be evaded by the assessee or maximum to the extent 300 times. However, in this case, as the additions forming the basis of the penalty were deleted by the CIT(A), the tribunal ruled in favour of the assessee and deleted the penalty.