2016 (8) TMI 153 - HC - Income Tax

Penalty u/s. 271 (1)(c) - Held that - Perusal of the order of the CIT (Appeals) on the quantum as well as penalty and perusal of the order of the Tribunal on quantum would persuade us that the entire issue of taxable amount of the principal sum was the highly debatable issue. The CIT (Appeals) noted that the assessee had made full disclosures and presented full accounts which were duly audited. Thus, at best, it was a case of wrong claim in law and not any attempt on part of the assessee to suppress the income or provide inaccurate particulars thereof. In any case, therefore, the penalty would not be leviable. - Decided in favour of assessee.

Summary

Issues:
- Appeal against deletion of penalty imposed under Section 271(1)(c) of the Income Tax Act.

Analysis:
1. Issue of Penalty Deletion by CIT (Appeals):
The appellant appealed against the penalty of ?1.24 crores imposed under Section 271(1)(c) of the Income Tax Act. The CIT (Appeals) upheld the quantum additions but deleted the penalty. The CIT (Appeals) observed that the appellant had disclosed complete particulars regarding the claim of deduction under Section 80IA, which was debatable due to differing judgments. The CIT (Appeals) found that the appellant's explanation was reasonable and bona fide, supported by expert advice and auditor reports. It was noted that rejection of the claim did not amount to concealment, as there were differing views on the matter. The CIT (Appeals) concluded that there was no deliberate attempt to conceal income, and various case laws supported the appellant's claim, leading to the deletion of the penalty.

2. Tribunal's Decision on Penalty Deletion:
The Revenue and the appellant approached the Tribunal on the issue of penalty. The Tribunal allowed the appellant's appeal, deleted the additions, and observed that the basis for levying the penalty did not survive after the deletions. The Tribunal confirmed the CIT (Appeals) order deleting the penalty, emphasizing that in view of the quantum appeal decision, the penalty was not justified. The Tribunal dismissed the Revenue's appeal against the penalty deletion, aligning with the CIT (Appeals) decision.

3. High Court's Consideration and Dismissal:
The High Court admitted the appeal against the Tribunal's decision on deleting the additions. However, the High Court dismissed the tax appeal, considering the CIT (Appeals) and Tribunal's orders. The High Court noted that the issue of the taxable amount was highly debatable, and the appellant had made full disclosures and presented audited accounts. It was concluded that the penalty was not justifiable, as it was a case of a wrong claim in law rather than an attempt to suppress income or provide inaccurate particulars. Therefore, the High Court upheld the deletion of the penalty, emphasizing the lack of malafide intent on the appellant's part.

In summary, the High Court upheld the deletion of the penalty imposed under Section 271(1)(c) of the Income Tax Act, considering the debatable nature of the issue, the appellant's full disclosures, and the lack of deliberate concealment or inaccurate particulars. The decision was based on the assessment of the CIT (Appeals) and the Tribunal, emphasizing the absence of malafide intent on the part of the appellant.