2017 (1) TMI 1414 - HC - Income Tax

Penalty under Section 271(1)(C) - deduction claimed under Section 80(1)(a)(4) - Held that - Bombay High Court in the case of Nayan Builders and Developers Pvt. Ltd. Vs. The Taxing Authorities 2010 (9) TMI 1004 - BOMBAY HIGH COURT concurrent finding s are recorded by the Commissioner (Appeal) and the Tribunal, they came to the conclusion that when an appeal involving a substantial question of law was pending consideration before the High Court, the addition became a debatable one and when the addition was debatable and subjudice before the Appellate Authority, penalty under Section 271(1)(c) could not be levied as the admission of appeal and the substantial question of law framed credence to the bonafide of the assessee to say that there was no deliberate concealment. Accordingly appeals filed by the Revenue were dismissed and the orders passed by the Commissioner, Income Tax Appeal, Bhopal, was upheld. The findings recorded by the Commissioner, Income Tax Appeal was to the extent that as the question of deduction was pending consideration in the appellate forum, therefore, penalty imposed should be canceled. We find that the aforesaid view taken by the Tribunal, to say that till decision on the appeal by the High Court the bonofide of the assessee in claiming the deduction cannot be disputed, the Commissioner, Income Tax Appeals and the Tribunal have not committed any error and in dismissing the appeal of revenue on such consideration, no error has been committed nor any substantial question of law arises warranting consideration.

Summary

Issues:
Appeal challenging orders under Section 271(1)(C) of the Income Tax Act - Disallowance of deduction under Section 80(1)(a)(4) - Imposition of penalty - Interpretation of law regarding imposition of penalty during pendency of appeal on deduction matter.

Analysis:
The High Court dealt with Revenue's Appeal under Section 260-A of the Income Tax Act, challenging orders passed by the Income Tax Appellate Tribunal regarding the imposition of penalty under Section 271(1)(C) of the Income Tax Act. The appeals related to the disallowance of deduction claimed under Section 80(1)(a)(4) for assessment years 2005-2006 to 2008-2009. The Tribunal concluded that penalty could not be imposed when an appeal involving a substantial question of law was pending before the High Court, as it indicated a debatable issue. Citing judgments of the Tribunal and the Bombay High Court, the Tribunal held that the admission of appeal and framing of substantial questions of law supported the assessee's bonafide claim, indicating no deliberate concealment. Consequently, the Tribunal dismissed the Revenue's appeals, upholding the orders of the Commissioner, Income Tax Appeal, Bhopal.

The Commissioner's findings emphasized that as the deduction matter was under consideration in the appellate forum, the imposed penalty should be canceled. The High Court agreed with the Tribunal's view that until the High Court decided on the appeal, the genuineness of the assessee's deduction claim could not be questioned. Therefore, the Commissioner, Income Tax Appeals, and the Tribunal were found to have not erred in dismissing the Revenue's appeal based on this reasoning. The High Court concluded that no substantial question of law arose warranting further consideration, and as a result, all the appeals were dismissed.

In summary, the judgment clarified that during the pendency of an appeal on a deduction matter, the imposition of a penalty under Section 271(1)(C) of the Income Tax Act could not be justified. The decision highlighted the importance of the debatable nature of the deduction issue and the bonafide intentions of the assessee in claiming the deduction, ultimately leading to the dismissal of the Revenue's appeals.