2014 (7) TMI 1189 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - Respectfully following the above decisions of Hon ble Jurisdictional High Court of Delhi in the case of Liquid Investment Ltd. (2010 (10) TMI 1021 - DELHI HIGH COURT ) and other relevant decisions we are inclined to hold that the penalty was imposed on the assessee pertaining to the issue on which a substantial question of law has been framed by Hon ble High Court and the same has become debatable then no penalty is leviable thereon. Accordingly, we hold that the AO was not justified in imposing penalty and the CIT(A) confirmed the same without any basis and justified ground which is not sustainable in view of foregoing discussions. Resultantly, the sole ground of assessee is allowed.

Summary

Issues:
Penalty imposed under section 271(1)(c) of the Income Tax Act 1961 based on inaccurate particulars filed.

Analysis:
The appeal was against the penalty upheld by the CIT(A) under section 271(1)(c) of the Income Tax Act 1961. The assessee contended that the penalty was wrongly imposed and factually incorrect. The Tribunal considered the arguments and relevant material presented. The assessee referred to a High Court order in a related appeal questioning the nature of a receipt from M/s. Newell Rubbermaid Inc. as revenue or capital. The assessee relied on precedents to argue that when a substantial question of law is framed by the High Court, the issue becomes debatable, and no penalty should be imposed. The Department acknowledged the admission of the appeal by the High Court on quantum proceedings but argued that quantum and penalty proceedings are separate. The Tribunal noted that the impugned addition was upheld, but since a substantial question of law was framed by the High Court, following precedents, it concluded that no penalty should be levied when an issue is debatable and appeal is admitted in the High Court.

The Tribunal found that the penalty was unjustified as a substantial question of law had been framed by the High Court, making the issue debatable. Relying on decisions of the Jurisdictional High Court, including the case of Liquid Investment Ltd., the Tribunal held that when an issue is debatable due to an appeal being admitted in the High Court, no penalty under section 271(1)(c) of the Act is sustainable. Therefore, the Tribunal allowed the sole ground raised by the assessee, concluding that the penalty imposed was not justified. The appeal of the assessee was allowed, and the order was pronounced on 4th July, 2014.