2015 (10) TMI 2592 - AT - Income Tax

Penalty u/s 271(1)(c ) - Held that - Penalty proceedings are distinct and separate from assessment proceedings and just because an addition has been sustained in quantum proceedings, levy of penalty is not automatic. What has to be seen is whether there was a bonafide belief and bonafide explanation given by the assessee. If it is so, no penalty could be levied u/s 271(1)(c ) of the Act. Moreover, we also find that the additions sustained by this tribunal in quantum proceedings in the sum of ₹ 1,45,000/- has been admitted by the Hon ble Calcutta High Court as involving substantial question of law. Hence we hold that no penalty could be levied u/s 271(1)(c ) of the Act in respect of issues involving substantial question of law as no allegation could be raised on the assessee with regard to concealment of income or furnishing of inaccurate particulars of income and the issue involved is highly debatable in nature - Decided in favour of assessee

Summary

Issues Involved:
Whether penalty u/s 271(1)(c) of the Income Tax Act is leviable in the circumstances of the case.

Detailed Analysis:

Issue 1: Levy of Penalty u/s 271(1)(c)
The appeal concerned the imposition of a penalty under section 271(1)(c) of the Income Tax Act, 1961. The assessee, engaged in the business of manufacturing and selling gold, silver jewelry, and ornaments, had undergone a search where various valuables were found. The assessment resulted in an addition of a certain amount, against which penalty proceedings were initiated. The Tribunal had previously deleted a portion of the penalty but recalled the appeal to consider additional grounds raised by the assessee.

Issue 2: Finality of Additions
The Learned AR argued that the additions made by the AO had reached finality as certain amounts were sustained by the CITA. The AR contended that since no second appeal was filed by the revenue against the relief granted by the CITA, no penalty under section 271(1)(c) could be imposed on the same.

Issue 3: Independent Additions and Penalty
Two independent additions were made by the AO, out of which a portion was sustained by the Tribunal in quantum proceedings. The AR argued that since no penalty proceedings were initiated by the AO for these additions, the subsequent imposition of penalties was not in accordance with the law. Citing relevant case laws, the AR contended that the penalty cannot be imposed on grounds different from those on which the proceedings were initiated.

Issue 4: Judicial Precedents and Substantial Questions of Law
The Tribunal referenced judicial precedents to establish that penalty proceedings are distinct from assessment proceedings. It was emphasized that the mere sustenance of additions in quantum proceedings does not automatically warrant the levy of a penalty. The Tribunal further held that in cases involving substantial questions of law, where the issue is debatable, no penalty should be levied. This position was supported by citing relevant decisions from different High Courts and Tribunals.

Conclusion
The Tribunal, after considering the arguments and legal precedents, concluded that no penalty under section 271(1)(c) of the Act could be levied on the assessee. Consequently, the grounds raised by the assessee were allowed, and the appeal was decided in favor of the assessee.

This detailed analysis highlights the key aspects of the judgment, including the factual background, legal arguments presented, and the Tribunal's reasoning leading to the final decision.