2021 (8) TMI 452 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - additions/disallowances which were suo motu surrendered by the assessee - HELD THAT - Hon'ble Delhi High Court in the case of PCIT vs. Harsh International Pvt. Ltd. 2020 (12) TMI 1082 - DELHI HIGH COURT has held that concealment of income can be levied only in cases where the concealment has been proved. It has further observed that if the quantum order itself has been challenged before the Hon'ble High Court and the High Court has framed substantial question of law in appeal then it would show that the alleged concealment is not final and the issue is disputable and the penalty levied by AO in such cases cannot survive. We are of the view that the ratio of the aforesaid decision would be squarely applicable to the facts of the present case. In such a situation, relying on the aforesaid decision in the case of Harsh International Pvt. Ltd. (supra), we find no reason to interfere with the order of CIT(A) and thus the ground of Revenue are dismissed.

Summary

Issues:
1. Appeal against penalty imposed under section 271(1)(c) of the Income Tax Act.
2. Deletion of penalties by the Commissioner of Income Tax (Appeals) - CIT(A).
3. Applicability of penalty provisions in disputed tax matters.

Analysis:

Issue 1: Appeal against penalty under section 271(1)(c)
The appeal filed by the Revenue was directed against the order of the Commissioner of Income Tax (Appeals) relating to the Assessment Year 2008-09. The assessment was framed under section 143(3) r.w.s. 144C of the Act, resulting in various additions and disallowances. The ITAT had partially deleted some additions/disallowances, set aside some for reconsideration, and confirmed others. Subsequently, penalties were imposed under section 271(1)(c) of the Act, leading to the appeal by the assessee.

Issue 2: Deletion of penalties by CIT(A)
The CIT(A) granted substantial relief to the assessee by deleting penalties imposed by the Assessing Officer (AO) on various disallowances claimed by the assessee under sections 80IA, 32(1)(iia), 35(1)(iv), 40(a)(ia), and others. The CIT(A) found that the issues involved were debatable and subject to substantial questions of law, as admitted by the Hon'ble Delhi High Court. The CIT(A) relied on the decision in the case of PCIT vs. Harsh International Pvt. Ltd., emphasizing that concealment of income must be proven for penalty imposition.

Issue 3: Applicability of penalty provisions in disputed tax matters
The ITAT, after hearing the rival submissions, noted that the quantum additions upheld by the Tribunal were challenged before the Hon'ble Delhi High Court, which admitted the appeal based on substantial questions of law. Citing the precedent in PCIT vs. Harsh International Pvt. Ltd., the ITAT concluded that penalties under section 271(1)(c) cannot be sustained in cases where the concealment is debatable and subject to legal interpretation. Therefore, the ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the penalties.

In conclusion, the ITAT dismissed the Revenue's appeal against the deletion of penalties by the CIT(A), emphasizing the need for proven concealment of income for penalty imposition in disputed tax matters.