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2015 (11) TMI 753 - AT - Income TaxPenalty under section 271(1)(c) - addition on account of ingenuine share application received - Held that - We find that in the instant case, the Assessing Officer levied penalty under section 271(1)(c) of the Act for concealment of income / submission of inaccurate particulars of income on the amount of addition of ₹ 90 Lac claimed to have been received as share application by the assessee. The addition made was confirmed by the Tribunal in appeal filed before it by the assessee. We find that the Hon ble Bombay High Court in the case of Shree Nirmal Commercial Ltd. (2008 (8) TMI 158 - BOMBAY HIGH COURT) has held that no penalty under section 271(1)(c) of the Act can be levied where the income is assessed under section 68 of the Income Tax Act, 1961. Also in the case of M/s. Manjunatha Cotton and Ginning Factor, Ballary (2013 (7) TMI 620 - KARNATAKA HIGH COURT ) has held that if the explanation offered by the assessee, even though not substantiated, but is found to be bonafide and all facts relating to the same and material to the computation of his total income has been disclosed by him, no penalty could be imposed. - Decided in favour of assessee.
Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act on the assessee for concealment of income regarding share application money of Rs. 90 Lac. Detailed Analysis: 1. The appeal was filed against the order of the Commissioner of Income Tax (Appeals) confirming the penalty of Rs. 32,28,750 under section 271(1)(c) of the Act. The Assessing Officer had added Rs. 90 Lac to the income of the assessee as share application money, which was not accepted as genuine. 2. The Tribunal upheld the addition of Rs. 90 Lac as share application money, leading to the initiation of penalty proceedings under section 271(1)(c) by the Assessing Officer. The penalty was imposed on the grounds of concealing income or furnishing inaccurate particulars. 3. The Commissioner of Income Tax (Appeals) also upheld the penalty, stating that the assessee failed to provide a valid explanation regarding the source of the increased share capital. The Authorized Representative of the assessee referred to relevant case laws to support their argument against the penalty. 4. The Tribunal considered the decisions of the Hon'ble Bombay High Court and the Hon'ble Karnataka High Court, which emphasized that no penalty should be levied if the income addition is debatable or if the explanation provided by the assessee, even if not substantiated, is found to be bonafide. 5. The Tribunal noted that the assessee had filed an order of the Hon'ble High Court of Jharkhand admitting an appeal against the Tribunal's decision on the share capital addition. Referring to the decision of the Hon'ble Delhi High Court and the Hon'ble Bombay High Court, the Tribunal concluded that the issue of share capital addition was debatable. 6. Citing precedents, the Tribunal held that when a substantial question of law is admitted by the High Court, indicating a debatable issue, the imposition of a penalty under section 271(1)(c) is not justified. Therefore, the Tribunal set aside the lower authorities' orders and deleted the penalty, allowing the appeal of the assessee. 7. Consequently, the appeal of the assessee was allowed, and the penalty of Rs. 32,28,750 was revoked. The Tribunal pronounced the order in Ranchi on 27.10.2015, highlighting the importance of debatable issues in determining the applicability of penalties under the Income Tax Act.
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