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2016 (6) TMI 797 - AT - Income TaxPenalty u/s 271(1)(c) - addition u/s 68 being sale proceeds of shares, as income from undisclosed sources - Held that - The issue on hand is debatable, open and capable of having an alternate view as the same is held to be representing a substantial question of law by the Jurisdictional High Court at the time of admission of appeal. Accordingly, it is appropriate for us to hold, that the assessee was under a bona fide belief for staking its claim and in the presence of these factors, no penalty under section 271(1)(c ) is leviable. The Hon ble Delhi High Court in the case of CIT vs. Liquid Investment Limited (2010 (10) TMI 1021 - DELHI HIGH COURT) has clearly held that where High Court has accepted substantial question of law u/s 260A, this itself shows that issue is debatable and in such a case no penalty was imposable u/s 271(1)(c) of the Income-tax Act, 1961. - Decided in favour of assessee
Issues:
Department's appeal against deletion of penalty under section 271(1)(c) for assessment year 2005-06. Analysis: The Department appealed against the deletion of penalty amounting to ?29,04,614 imposed under section 271(1)(c) for the assessment year 2005-06 by the Ld. CIT(A), Faridabad. The case revolved around the claim of Long Term Capital Gains on the sale of shares by the assessee, which was disputed by the Assessing Officer. The AO made additions to the income of the assessee, leading to the initiation of penalty proceedings under section 271(1)(c) of the Act. The Ld. CIT (Appeals) deleted the additions, but the ITAT reversed the decision, upholding the AO's order. Subsequently, the AO imposed a penalty of ?29,04,614 for furnishing inaccurate particulars of income. The Ld. CIT(A) deleted the penalty, emphasizing that the AO failed to establish concealment or inaccurate particulars of income. The Revenue challenged this decision, arguing that the penalty cancellation was erroneous. The Ld. CIT(A) justified the cancellation of penalty by stating that the assessee disclosed all material facts regarding the claim of exemption under section 10(38) for Long Term Capital Gains. The AO's objections were countered by the appellant with substantial evidence, including capital accounts for the relevant assessment year. The Ld. CIT(A) highlighted that the AO did not disprove the sale prices of shares, contract notes, share certificates, or confirmations submitted by the assessee. The Ld. CIT(A) concluded that the AO did not conclusively prove concealment or furnishing of inaccurate particulars of income, thereby ruling out the imposition of penalty under section 271(1)(c). The ITAT considered the debatable nature of the issue, especially since the Hon'ble Punjab & Haryana High Court admitted the assessee's appeal on quantum addition. Citing precedents, the ITAT emphasized that where two views are possible or where there are debatable issues, no penalty should be levied. Referring to the decision in CIT vs. Nayan Builders, the ITAT highlighted that when a substantial question of law is admitted, the issue becomes debatable, warranting a cancellation of penalty. The ITAT aligned with the decisions of the Hon'ble Delhi High Court and Hon'ble Bombay High Court, confirming the cancellation of penalty under section 271(1)(c) due to the debatable nature of the issue. In conclusion, the ITAT dismissed the department's appeal, upholding the decision to cancel the penalty under section 271(1)(c). The judgment emphasized the debatable nature of the issue and the substantial questions of law admitted by the Jurisdictional High Court, leading to the conclusion that the penalty was not imposable in this case.
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