2014 (7) TMI 89 - HC - Income Tax

Penalty u/s 271(1)(c) of the Act Quantum additions - Whether the Tribunal is right in reversing the order passed by CIT(A) and deleting penalty levied u/s 271(1)(c) of the Act, in spite of the fact that the addition made in both the AYs were on the basis of seized documents establishing the fact of running an undisclosed business, taxing the income from which has been confirmed by the Appellate Tribunal Held that - The Tribunal erred in deleting the penalty - Admission of a Tax Appeal by the High Court, in majority cases, is exparte and without recording even prima facie reasons - Whether ex-parte or after by-parte hearing, unless some other intention clearly emerges from the order itself, admission of a Tax Appeal by the High Court only indicates the Court s opinion that the issue presented before it required further consideration - It is an indication of the opinion of the High Court that there is a prima facie case made out and questions are required to be decided after admission. Mere admission of an appeal by the High Court cannot without there being anything further, be an indication that the issue is debatable one so as to delete the penalty u/s 271(1)(c) of the Act even if there are independent grounds and reasons to believe that the assessee s case would fall under the mischief envisaged in the Clause (c) of Sub-Section (1) of Section 271 of the Act - unless there is any indication in the order of admission passed by the High Court simply because the Tax Appeal is admitted, would give rise to the presumption that the issue is debatable and that therefore, penalty should be deleted - upon mere admission of a Tax Appeal on quantum additions, is an indication that the issue is debatable one and that therefore, penalty should automatically be deleted without any further reasons or grounds emerging from the record the order of the Tribunal is set aside and remitted back for fresh consideration Decided in favour of Revenue.

Summary

Issues:
Appeal against Tribunal's judgment on penalty under Section 271(1)(c) of the Income Tax Act,1961.

Analysis:
1. The issue pertains to the penalty imposed by the Assessing Officer under Section 271(1)(c) of the Income Tax Act,1961, confirmed by CIT (Appeals), but reversed by the Tribunal. The Tribunal based its decision on the fact that the issue was debatable as the High Court had admitted the assessee's appeal and framed substantial questions of law.

2. The Tribunal's order deleting the penalty was primarily influenced by the High Court admitting the appeal, indicating the issue was debatable. However, the High Court's admission of an appeal does not automatically imply that the issue is debatable and that the penalty should be deleted under Section 271(1)(c) of the Act.

3. The Court emphasized that admission of a Tax Appeal by the High Court signifies the need for further consideration, not necessarily that the issue is debatable. Mere admission does not automatically lead to the presumption that the penalty should be deleted, especially without additional reasons or grounds justifying the deletion.

4. The Tribunal's decision to delete the penalty solely based on the High Court's admission of the appeal was deemed erroneous. The Court held that the Tribunal's order cannot be sustained, reversed the decision, and remanded the proceedings back to the Tribunal for fresh consideration and disposal in accordance with the law.

5. The Court clarified that while the admission of a Tax Appeal by the High Court may be a relevant factor in deciding the validity of a penalty order, it does not automatically render the issue debatable. The Tribunal's conclusion that admission of the appeal indicates a debatable issue, leading to penalty deletion without further justification, was found to be incorrect.

6. The judgment underscores that the mere admission of an appeal by the High Court does not inherently imply that the issue is debatable, especially when there are no explicit indications in the order suggesting such a conclusion. The decision highlights the importance of providing clear and substantive reasons for deleting a penalty under Section 271(1)(c) beyond the mere admission of an appeal.

7. In conclusion, the Court ruled in favor of the Revenue and against the assessee, reversing the Tribunal's order and remanding the case for fresh consideration. The judgment serves as a clarification on the significance of the High Court's admission of an appeal in determining the debatability of an issue related to penalty under the Income Tax Act.