2018 (10) TMI 609 - HC - Income Tax

Levy of penalty 271(1)(c) - under valuation of closing stock - ITAT deleted the penalty - Held that - Tribunal deleted the penalty imposed by the Assessing Officer and confirmed by the CIT (Appeals) on the ground that the issue was highly debatable and that there was no filing of inaccurate particulars or concealment of income by the assessee. - We see no reason to interfere. - Decided against the revenue.

Summary

Issues:
Penalty under Section 271(1)(c) of the Income tax Act, 1961 for under valuation of closing stock.

Analysis:

1. Penalty Imposed by Assessing Officer:
The issue in this case revolves around the penalty imposed by the Assessing Officer under Section 271(1)(c) of the Income tax Act, 1961. The Tribunal, after considering the facts, deleted the penalty imposed by the Assessing Officer and upheld by the CIT (Appeals). The Tribunal's decision was based on the grounds that the issue was highly debatable, and there was no evidence of inaccurate particulars or concealment of income by the assessee.

2. Tribunal's Rationale for Deletion of Penalty:
The Tribunal's decision to delete the penalty was supported by a detailed analysis of the facts. It noted that the business of the assessee continued as a partnership firm, unlike the case of ALA Firm where the business was discontinued. The Tribunal compared the facts of the case at hand with the decision of the Hon'ble Supreme Court in the case of Shakti Trading Company. It emphasized that the method adopted by the assessee was in line with the Supreme Court's decision, making the issue highly debatable. The Tribunal highlighted that when there are conflicting decisions, one in favor of the assessee and one in favor of the revenue, penalty under Section 271(1)(c) cannot be levied.

3. Final Decision of the High Court:
The High Court, after reviewing the Tribunal's reasoning, found no reason to interfere with the decision. Consequently, the Tax Appeal was dismissed, affirming the Tribunal's decision to delete the penalty under Section 271(1)(c) of the Income tax Act, 1961. The judgment underscores the importance of a thorough analysis of legal precedents and the debatable nature of issues in determining the imposition of penalties under tax laws.