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Issues involved: Assessment of penalty under Section 271(1)(c) of the Income Tax Act, 1961 in relation to quantum addition pending before the High Court.
Judgment Summary: Issue 1: Assessment of penalty under Section 271(1)(c) of the Income Tax Act, 1961 The Tribunal upheld the order of the Commissioner of Income Tax (A) stating that no penalty is leviable upon the respondent-assessee. The question was whether profits from the sale of land should be taxed as capital gains or business income. The penalty was deleted as the respondent-assessee had succeeded in the quantum proceedings, and there was no quantum addition. It was also noted that there was no concealment of facts by the respondent-assessee, and in a case where two views are possible, no penalty should be imposed. Issue 2: Independence of penalty proceedings from quantum proceedings The Revenue argued that since the High Court entertained its appeal from the quantum proceedings, the appeal regarding penalty should also be entertained. However, it was clarified that penalty proceedings are separate from quantum proceedings. Mere rejection of a claim in quantum proceedings does not automatically lead to the imposition of a penalty under Section 271(1)(c) of the Act. The Supreme Court precedent in Commissioner of Income Tax v. Reliance Petroproducts (P) Limited established that mere rejection of a claim does not warrant a penalty unless there is concealment of income or furnishing of inaccurate particulars. In conclusion, the Court dismissed the appeal, emphasizing that the penalty cannot be imposed solely based on the rejection of a claim in the quantum proceedings without meeting the requirements of Section 271(1)(c) of the Act.
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