2019 (3) TMI 264 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance of claim u/s 80IA for violation of sub section (8) - debatable issue - HELD THAT - Undisputedly, this is a case where the penalty levied pertains to an issue in respect of which the Hon ble Delhi High Court, in assessee s own case, for the relevant assessment year has framed substantial question of law. Thus, it is very much apparent that the issue is a debatable issue. Accordingly, in view of judgment of the Hon ble Delhi High Court in the case of CIT vs. Liquid Investment & Trading Company (2010 (10) TMI 1021 - DELHI HIGH COURT), we find no reason to interfere with the act of the Ld. CIT (Appeals) in deleting the penalty. - Decided in favour of assessee.

Summary

Issues:
1. Deletion of penalty u/s 271(1)(c) of the Income Tax Act, 1961 for assessment year 2002-03.
2. Whether the issue of disallowance of deduction u/s 80IA is debatable.

Analysis:
1. The appeal was filed by the department against the deletion of penalty of ?29,89,941 imposed u/s 271(1)(c) for the assessment year 2002-03. The case involved the assessee, engaged in motorcycle manufacturing, claiming a deduction u/s 80IA for its power generation unit. The Assessing Officer disallowed the claim, leading to a series of appeals where the disallowance was upheld. Subsequently, a penalty was imposed, which was later deleted by the Ld. CIT (Appeals) on the grounds of the issue being debatable.

2. The Ld. Authorised Representative of the assessee pointed out that the Hon'ble Delhi High Court had admitted the assessee's appeal against the quantum addition confirmed by the ITAT, on which the penalty had been imposed but deleted by the Ld. CIT (Appeals). The issue of disallowance of deduction u/s 80IA was considered debatable, as evident from the substantial question of law framed by the High Court. Citing precedent, the representative argued that no penalty should be levied on debatable issues, as established in the case law of CIT vs. Liquid Investment & Trading Company.

3. On the other hand, the Ld. Sr. Departmental Representative contended that the penalty deletion was incorrect since the quantum addition/disallowance had been confirmed by the ITAT. Various judicial precedents were cited to support the argument that the penalty should be restored. However, the Tribunal noted that the issue in question was debatable, as highlighted by the High Court's framing of substantial questions of law in the assessee's case.

4. The Tribunal, after considering the rival submissions and the legal precedents, upheld the deletion of the penalty by the Ld. CIT (Appeals). It was emphasized that the issue was debatable, as indicated by the High Court's involvement in framing substantial questions of law. Referring to a similar penalty deletion in the assessee's case for another assessment year, the Tribunal dismissed the department's grounds and ultimately dismissed the appeal, affirming the deletion of the penalty.

5. In conclusion, the Tribunal dismissed the department's appeal, confirming the deletion of the penalty imposed under section 271(1)(c) for the assessment year 2002-03. The decision was based on the debatable nature of the issue, as established by the involvement of the Hon'ble Delhi High Court and previous rulings in the assessee's favor.