Penalty 271(1)(c) can not be imposed when High Court admits substantial question of law on quantum addition making apparent that addition is debatable – ITAT
ABCAUS Case Law Citation:
982 2016 (08) ITAT
Assessment Year: 2005-06
Date/Month of Judgment: August 2016
Brief Facts of the Case:
During the scrutiny proceedings, AO found that the assessee had earned income under the head commission from net working business, capital gain in shares, income other sources and loss from house property and made additions before passing order u/s 143(3). The Assessing officer also initiated the penalty proceedings u/s 271(1) (c) for not disclosing the income of the assesse and levied penalty.
Aggrieved, the assessee preferred an appeal before the CIT(A). The CIT(A) confirmed the order of the Assessing Officer in imposing penalty u/s 271(1)( c). Aggrieved, the assessee went in appeal before the Tribunal.
Contentions of the Assessee:
The assessee submitted that there was no satisfaction recorded by the AO in assessment order framed u/s 143(3) as to whether the assessee was found guilty in concealment of income or for furnishing of inaccurate particulars of income.
The assessee also argued that against the second appellate authority (Tribunal) order confirming the quantum of additions made by the AO, he had preferred an appeal before the High Court which was admitted. Thus he argued that the additions made by the AO is debatable in view of the admission of assessee’s own appeal by the High Court.
Observations made by ITAT:
The Tribunal noted that a similar issue had come before ITAT Mumbai Bench, wherein the Tribunal observed that the penalty cannot be levied u/s. 271(1)(c) for the reasons admission of appeal of assessee by the Hon’ble High Court of Bombay.
The relevant portion of Bombay High Court were under:-
Having heard Mr Ahuja, learned counsel appearing on behalf of the Appellant, we find that this Appeal cannot be entertained as it does not raise any substantial question of law. The imposition of penalty was found not to be justified and the Appeal was allowed. As a proof that the penalty was debatable and arguable issue, the Tribunal referred to the order on Assessee’s Appeal in Quantum proceedings and the substantial questions of law which have been framed therein. We have also perused that order dated 27th September 2010 admitting Income Tax Appeal No.2368 of 2009. In our view, there was no case made out for imposition of penalty and the same was rightly set aside. The Appeal raises no substantial question of law, it is dismissed. No costs
The ITAT held that when High Court admits substantial question of law on an addition, it becomes apparent that the addition is certainly debatable and in such circumstances penalty cannot be levied u/s 271(1)(c) of the Income Tax Act 1961. Accordingly the Tribunal set aside the penalty and allowed the appeal.