2021 (4) TMI 1011 - AT - Income Tax

Tribunal deletes penalty post settlement under Tax Vivad Se Vishwas Scheme

The Tribunal allowed the appeal, ordering the deletion of the penalty under section 271(1)(c) based on the settlement made by the appellant under the ... Settlement under the Direct Tax Vivad Se Vishwas Scheme (VSV Act) - declaration and Form No. 3 under the VSV Scheme - effect of settlement on pending penalty proceedings - penalty under section 271(1)(c) of the Income-tax Act - CBDT Circular No. 9 of 2020 - FAQ No. 8 regarding settlement of quantum and penalty appealsSettlement under the Direct Tax Vivad Se Vishwas Scheme (VSV Act) - declaration and Form No. 3 under the VSV Scheme - effect of settlement on pending penalty proceedings - CBDT Circular No. 9 of 2020 - FAQ No. 8 regarding settlement of quantum and penalty appeals - penalty under section 271(1)(c) of the Income-tax Act - Whether the penalty proceedings under section 271(1)(c) survive where the assessee has filed a declaration and obtained Form No. 3 under the VSV Scheme settling both the disputed tax and the penalty by payment of the prescribed percentage. - HELD THAT: - The Tribunal noted CBDT's FAQ No. 8 which clarifies that where both the quantum appeal covering disputed tax and the appeal against penalty on such disputed tax are pending, the declarant must give details of both and pay the prescribed percentage of disputed tax; it is not permissible to settle the penalty appeal alone while the disputed tax appeal remains pending. The assessee produced Form No. 3 and the declaration evidencing settlement of both the disputed tax and the penalty appeal and has paid the prescribed amount under the Scheme. Given that both the quantum and penalty appeals have been settled under the VSV Act in accordance with the scheme and FAQ No. 8, the pending penalty proceedings no longer subsist for adjudication. The Tribunal therefore concluded that the impugned penalty could not be sustained and must be dropped.Penalty under section 271(1)(c) deleted and the appeal allowed.Final Conclusion: The Tribunal allowed the appeal and deleted the penalty, holding that the assessee's declaration and Form No. 3 under the VSV Scheme settling both disputed tax and penalty (with payment of the prescribed percentage) extinguished the penalty proceedings. Issues:1. Assailing penalty u/s. 271(1)(c) confirmed by the first appellate authority.2. Settlement of dispute under Direct Tax Vivad Se Vishwas Scheme (VVS Scheme), 2020.3. Impact of settled quantum appeal on penalty appeal.4. Applicability of CBDT Circular No. 9 of 2020.5. Disposal of penalty proceedings u/s. 271(1)(c) of the Act.The judgment pertains to an appeal challenging the penalty imposed under section 271(1)(c) as confirmed by the first appellate authority. The appellant argued that they had opted for settlement under the Direct Tax Vivad Se Vishwas Scheme, 2020, for both quantum additions and penalties, and had received Form No. 3 from the appropriate authority. It was highlighted that the quantum appeal had been allowed to be withdrawn by the Tribunal, indicating that the penalty should not be applicable. The appellant relied on CBDT Circular No. 9 of 2020, emphasizing that settlement of penalty appeal alone is not possible when the appeal on disputed tax is pending. As the quantum appeal had been settled, it was contended that the penalty appeal should be dropped.The Tribunal examined the arguments presented and referred to FAQ No. 8 of the CBDT Circular, which clarified the procedure for settling penalty appeals while quantum appeals are pending. The FAQ emphasized that when both quantum and penalty appeals are pending, the declarant must provide details for both and pay the relevant percentage of disputed tax only. The Tribunal observed that the appellant had filed a declaration for both the disputed tax appeal and penalty appeal, paying the prescribed percentage as per the scheme. Since the appellant had settled both the quantum and penalty appeals by paying the disputed tax, the Tribunal concluded that the penalty appeal under section 271(1)(c) was no longer viable for adjudication, and the penalty was deemed deleted.In light of the provisions of the VSV Act and the CBDT Circular, the Tribunal allowed the appeal, ordering the deletion of the penalty under section 271(1)(c) based on the settlement made by the appellant. The judgment was pronounced on 19th April 2021, marking the resolution of the penalty proceedings in favor of the appellant.