2014 (8) TMI 33 - HC - Income Tax

Penalty u/s 271(1)(c) Disallowance of deduction u/s 80HHC Held that - CIT(A) set aside the penalty and it has been confirmed by the Tribunal - assessee has disclosed all the material facts while filing the return of income - disallowance of the Assessee s claim of issues cannot amount to concealment of income or furnishing of inaccurate particulars of income - Tribunal rightly observed that when the issue like unit wise deduction, exclusion of excise duty and sales tax from total turnover etc. had been a matter of dispute between the Department and the Assessee and thus the issue of deduction is a debatable one on which two opinions are possible, penalty under Section 271(1)(c) of the Act is not required to be imposed / levied order of the Tribunal is upheld Decided against Revenue.

Summary

Issues:
1. Appeal against the impugned judgment and order passed by the Income Tax Appellate Tribunal for AY 2000-01.
2. Appeal against the impugned judgment and order passed by the Income Tax Appellate Tribunal for AY 1999-2000.

Analysis:
1. The High Court heard two appeals concerning the same assessee but for different assessment years, both challenging the orders passed by the Income Tax Appellate Tribunal (ITAT) confirming the deletion of penalties imposed under Section 271(1)(c) of the Income Tax Act. The Revenue filed the appeals questioning the correctness of the ITAT's decision to delete the penalties. The key issue was whether the ITAT erred in confirming the order of the Commissioner of Income Tax (Appeals) deleting the penalties amounting to specific sums for each assessment year.

2. The assessee had claimed deduction under Section 80HHC of the Act, which was disallowed by the Assessing Officer leading to the imposition of penalties under Section 271(1)(c). However, the CIT(A) deleted the penalties, a decision upheld by the ITAT. The High Court noted that the deduction issue was debatable, with two possible opinions, as various matters were in dispute between the Department and the Assessee. The ITAT justified the deletion of penalties by emphasizing that the Assessee disclosed all material facts during the return filing, and the disputed issues did not amount to concealment of income or furnishing inaccurate particulars. The High Court concurred with the ITAT's reasoning, emphasizing that in debatable matters, penalties under Section 271(1)(c) are not warranted. Therefore, the High Court upheld the ITAT's decision to delete the penalties for both assessment years.

3. The High Court agreed with the ITAT's view that in cases where disputes exist on debatable issues, penalties for concealment of income should not be imposed. Given the debatable nature of the deduction issue and the Assessee's disclosure of material facts, the High Court found no grounds to interfere with the ITAT's decision. Consequently, the High Court dismissed both appeals, as they raised the same question and issue, affirming the deletion of penalties by the ITAT for both assessment years.