2022 (2) TMI 37 - AT - Income Tax

Penalty levied u/s 271(1)(c) - deemed dividend u/s 2(22)(e) - HELD THAT - The loan transaction was duly reflected in the books of account of the two companies and in fact, the loan transaction was treated as deemed dividend in the hands of M/s Raas Intratech P Ltd but subsequently, on the directions of the ld. CIT(A), the same was added in the hands of the assessee. At the inception itself, the issue being highly debatable, as to in whose hands the addition has to be made, therefore, the first appellate authority was convinced that the addition has been made in the deeming provision and is debatable. We are of the considered view that such a highly debatable issue at the relevant point of time Assessment Years under consideration cannot be the subject matter of filing inaccurate particulars of income or concealment of income when the facts were very much available with the Assessing Officer. Considering the facts of the case in totality, we do not find any reason to interfere with the findings of the ld. CIT(A). - Decide against revenue.

Summary

Issues involved:
Deletion of penalty under section 271(1)(c) of the Income-tax Act, 1961 in three appeals against orders of the ld. CIT(A) for Assessment Years 2004-05, 2005-06, and 2006-07.

Analysis:
The judgment pertains to three appeals filed by the Revenue against orders of the ld. CIT(A) for three separate Assessment Years. The common ground in all appeals is the deletion of penalty imposed under section 271(1)(c) of the Income-tax Act, 1961. The facts of the case involve a transaction between two companies, where one company made an advance payment to another for property acquisition and development. The transaction was reflected in the books of account. Subsequently, the amount received by one company was treated as deemed dividend in the hands of the assessee. The Assessing Officer initiated penalty proceedings under section 271(1)(c) based on the non-inclusion of the deemed dividend in the assessee's income.

Upon careful consideration, the Tribunal observed that the loan transaction was duly recorded in the books of account of both companies. The Tribunal noted that the issue of in whose hands the addition should be made was highly debatable. The first appellate authority had determined that the addition was made under a deeming provision and was a matter of debate. The Tribunal agreed with this view, emphasizing that the issue was contentious at the time of assessment and could not be construed as filing inaccurate particulars of income or concealment when all relevant facts were available to the Assessing Officer.

Ultimately, the Tribunal found no grounds to interfere with the findings of the ld. CIT(A) and dismissed the Revenue's appeals. The judgment highlights the importance of considering the debatable nature of an issue at the time of assessment and emphasizes that such contentious matters do not necessarily amount to inaccurate reporting or concealment of income. The decision underscores the significance of assessing each case based on its specific facts and circumstances to determine the applicability of penalties under the Income-tax Act, 1961.