Levy of penalty u/s. 122 is on Gross GST liability as per R-1 or Net GST liability (Net of ITC)

Good Evening,

Penalty order is issued u/s.122 for levy of penalty @ 10% of GST liability declared in GSTR-1. GST liability as per R-1 was SGST Rs.280200 and CGST Rs.280200. Penalty order is issued for penalty of SGST Rs.28020 and CGST Rs.28020.

There was ITC of SGST Rs.190000 and CGST Rs.190000 which was not considered by officer. Net GST liability was SGST Rs.90200 and CGST Rs.90200 after considering ITC.

Question is whether penalty of 10% shall be SGST Rs.28020 and CGST Rs.28020 which is on gross GST liability as per R-1 or penalty shall levied on Net GST liability of SGST Rs.90200 and CGST Rs.90200 in which case penalty would be SGST Rs.9020 and CGST Rs.9020 only.

Kindly reply

Thank You