2022 (12) TMI 792 - AT - Income Tax

Penalty u/s 271(1)(c) - deduction u/s 80G and 80HHC denied on the ground that the entire gross total income of the assessee comprised purely of Long Term Capital Gains and not business income - debatable issue - HELD THAT - The contention of the assessee, therefore, that the issue was debatable is correct. The Ld.CIT(A) has not dealt with this contention of the assessee at all, brushing it aside simply by stating that the claim is inadmissible as per law in view of section 112(2) of the Act. In view of the decision of ARVIND MILLS LTD. 2001 (9) TMI 53 - GUJARAT HIGH COURT laying down proposition in favour of the assessee it cannot be said that the claim was clearly inadmissible as per law. In these facts and circumstances of the case, the assessee cannot be charged with having furnished any inaccurate particulars of income so as to be exigible to levy of penalty u/s 271(1)(c)of the Act. The penalty so levied amounting is directed to be deleted. Appeal of the assessee is allowed.

Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income-tax Act, 1961 for Assessment Year 1999-2000.
2. Alleged concealment of income or furnishing inaccurate particulars of income.
3. Applicability of Section 80G and 80HHC deductions against Long Term Capital Gains.
4. Debatability of the issue and its impact on the penalty.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):
The assessee appealed against the penalty imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income-tax Act, 1961, which was confirmed by the Commissioner of Income-Tax (Appeals) [CIT(A)]. The penalty amounted to Rs. 1,55,96,843/- for the Assessment Year 1999-2000. The AO initiated penalty proceedings after disallowing the assessee's claim for deductions under Sections 80G and 80HHC of the Act, asserting that the assessee had filed inaccurate particulars of income.

2. Alleged Concealment of Income or Furnishing Inaccurate Particulars:
The AO held that the assessee's claim for deductions under Sections 80G and 80HHC against Long Term Capital Gains was incorrect and against the specific provisions of Section 112(2) of the Act. The AO concluded that the assessee furnished inaccurate particulars of income, leading to the imposition of the penalty. The CIT(A) upheld this finding, stating that the claim was inadmissible under the law.

3. Applicability of Section 80G and 80HHC Deductions:
The assessee contended that the claim for deductions was made in accordance with the legal position at the time of filing the return. The ITAT, Ahmedabad Benches, and the Hon'ble jurisdictional High Court had previously ruled in favor of similar claims, allowing deductions under Sections 80G and 80HHC even in the absence of business profits. The assessee cited the case of M/s. Arvind Ltd., where such deductions were upheld by the Hon'ble High Court.

4. Debatability of the Issue and Its Impact on the Penalty:
The assessee argued that the issue was debatable at the time of filing the return, supported by favorable judicial precedents. The ITAT in the assessee's own case for AY 2004-05 had previously deleted a similar penalty, recognizing the issue as debatable. The Tribunal noted that the legal position was in favor of the assessee until the Hon'ble Supreme Court's decision in the case of Jeyar Consultant & Investment Pvt. Ltd. in 2015, which ruled otherwise. The Tribunal concluded that the assessee's claim was bona fide and made in accordance with the prevailing legal position at the time.

Conclusion:
The Tribunal held that the issue was debatable and the assessee could not be charged with furnishing inaccurate particulars of income. The penalty of Rs. 1,55,96,843/- was directed to be deleted. The appeal of the assessee was allowed, and the remaining contentions were not addressed as the primary issue was resolved in favor of the assessee.

Order Pronouncement:
The order was pronounced in the Court on 16th December 2022 at Ahmedabad.

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