2016 (1) TMI 136 - HC - Income Tax

Penalty u/s. 271(1)(c) - Held that - Where an issue is debatable/ arguable, no occasion to impose penalty can arise and the fact that the appeal in quantum proceedings had been admitted, was evidence enough of the issue being debatable. See Nayan Builders & Developers Pvt. Ltd. v/s. ITO 2014 (7) TMI 1150 - BOMBAY HIGH COURT - Decided in favour of assessee.

Summary

Issues:
1. Challenge to the order passed by the Income Tax Appellate Tribunal for the Assessment Year 2003-04.
2. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.
3. Deletion of penalty by the Commissioner of Income Tax (Appeals) and the Tribunal.
4. Interpretation of whether admission of a question of law before the High Court warrants cancellation of penalty under Section 271(1)(c).
5. Consideration of whether an issue being debatable or arguable precludes the imposition of penalty.

Analysis:
The High Court of BOMBAY HIGH COURT heard an appeal challenging the order of the Income Tax Appellate Tribunal for the Assessment Year 2003-04. The primary issue revolved around the imposition of a penalty under Section 271(1)(c) of the Income Tax Act based on the quantum proceedings. The Commissioner of Income Tax (Appeals) had initially deleted the penalty, a decision upheld by the Tribunal. The Tribunal's reasoning was that the High Court had admitted the appeal from the Tribunal's order, indicating a substantial question of law, which led to the penalty deletion.

Furthermore, the High Court considered whether the mere admission of a question of law before the High Court justified the cancellation of the penalty under Section 271(1)(c). The Court analyzed a previous case, Nayan Builders & Developers Pvt. Ltd. v/s. ITO, where the penalty was deleted based on the admission of a substantial question of law in quantum proceedings. The Court noted that where an issue is debatable or arguable, the imposition of a penalty is not warranted. The Court cited its previous judgment dismissing the Revenue's appeal in a similar case, emphasizing that the admission of an appeal in quantum proceedings signifies a debatable issue, thus precluding the imposition of a penalty.

Consequently, the High Court relied on the precedent set by the Tribunal in Nayan Builders & Developers to dismiss the Revenue's appeal, concluding that no substantial question of law arose for consideration. The appeal was ultimately dismissed, with no order as to costs issued by the Court.