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2019 (3) TMI 1830 - HC - Income TaxPenalty u/s 271(1)(c) - exemption under Section 54F - HELD THAT - Appeal need not be entertained. This is so because independently also, we can safely come to the conclusion that the entire issue was a debatable one. The dispute between the Assessee and the Revenue was with reference to actual payment for purchase of the flat and whether when the Assessee had purchased one more flat, though contagious, could the Assessee claim exemption under Section 54F - Assessee submitted that this latter issue is covered by the decisions of High Court. It can thus be seen that the Assessee had made a bona fide claim. Neither any income nor any particulars of the income were concealed. As per the settled legal position, merely because a claim is rejected, it would not automatically give rise to penalty proceedings. Reference in this respect can be made to the decision of Supreme Court in the case of Commissioner of Income Tax, Ahmedabad Vs. Reliance Petroproducts Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT - Decided in favour of assessee.
Issues:
1. Whether the ITAT was correct in deleting penalty under section 271(1)(c) of the Income Tax Act? 2. Whether admission of a tax appeal by the High Court indicates a debatable issue justifying the deletion of penalty? 3. Whether the Assessee's claim for exemption under Section 54F was bona fide? Analysis: Issue 1: The Revenue filed an appeal challenging the deletion of penalty under section 271(1)(c) of the Income Tax Act by the ITAT. The Assessee, an individual, claimed exemption under Section 54F for the Assessment Year 2006-2007, which was disallowed by the Assessing Officer leading to penalty proceedings. The Tribunal deleted the penalty citing the debatable nature of the issue due to the High Court admitting the Assessee's quantum Appeal. However, the High Court disagreed with this reasoning, citing a Gujarat High Court decision that mere admission of an appeal does not automatically make the issue debatable for penalty imposition. The High Court found the issue debatable and dismissed the Revenue's appeal. Issue 2: The High Court addressed whether the admission of a tax appeal by the High Court indicates a debatable issue justifying the deletion of penalty. The Court emphasized that admission of an appeal does not automatically imply a debatable issue, as it may simply indicate the need for further consideration. The Court clarified that penalty imposition should not be solely based on the admission of an appeal, and there must be independent grounds to support penalty under section 271(1)(c) of the Act. The Court overturned the Tribunal's decision to delete the penalty solely based on the admission of the Assessee's appeal by the High Court. Issue 3: The Court examined whether the Assessee's claim for exemption under Section 54F was bona fide. The dispute centered on the actual payment for the flat purchase and the Assessee's eligibility for exemption under Section 54F after purchasing an additional flat. The Court found that the Assessee's claim was bona fide, with no concealment of income or particulars. Referring to legal precedents, the Court emphasized that a rejected claim does not automatically lead to penalty proceedings. The Court dismissed the Revenue's appeal based on the Assessee's genuine claim for exemption under Section 54F. In conclusion, the High Court dismissed the Revenue's appeal, emphasizing that the issue was debatable, the admission of an appeal does not automatically warrant penalty deletion, and the Assessee's claim for exemption under Section 54F was bona fide, leading to the rejection of the penalty imposition.
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