2013 (7) TMI 766 - AT - Income Tax

Tribunal sets aside CIT(A)'s penalty cancellation, orders fresh adjudication

The Tribunal found that the CIT(A) erred in canceling the penalty solely based on the admission of the appeal by the High Court without a detailed ... Penalty u/s 271(1)(c) - Whether the CIT(A) erred in law and on facts in deleting the addition of penalty levied u/s.271(1)(c) - CIT(A) has erred in deleting the penalty on technical ground without considering the merits of the facts - Mere admission of an appeal by the High Court cannot without there being anything further, be an indication that the issue is debatable one so as to delete the penalty under Section 271(1)(c) even if there are independent grounds and reasons to believe that the assessee's case would fall under the mischief envisaged in the section 271(1)(c) - unless there is any indication in the order of admission passed by the High Court - held that the CIT (A) has erred in cancelling the penalty imposed u/s 271(1)(c) on the only issue that since the appeal of the assessee in the quantum case has been admitted the issue is debatable one, so as to delete the penalty under section 271(1)(c) – order of CIT set aside – appeal decided in favour of revenue. Issues:Validity of penalty imposed under section 271(1)(c) of the Act amounting to Rs.210,33,19,341.Detailed Analysis:The appeal by the Revenue was against the order of the CIT(A)-XIV, Ahmedabad dated 30-3-2010, regarding the validity of the penalty imposed under section 271(1)(c) of the Act amounting to Rs.210,33,19,341. The Revenue contended that the CIT(A) erred in deleting the penalty without considering the merits of the case and that the CIT(A) passed an unsustainable order. The CIT(A) had allowed the appeal of the assessee based on the decision of the ITAT, Ahmedabad in a previous case, holding that the issue was debatable and more than one view was possible. However, the Revenue argued that the mere admission of an appeal by the High Court did not necessarily indicate a debatable issue warranting the deletion of the penalty under section 271(1)(c) of the Act.The counsel for the assessee acknowledged that the CIT(A) had not adjudicated on all the issues raised by the assessee, focusing only on one issue related to the penalty. The CIT(A) had directed the AO to await the judgment of the High Court before further deliberating on the merits of the case. The CIT(A) had based the cancellation of the penalty on technical grounds and the existence of a substantial question of law, following the precedent set by the ITAT in a previous case. The CIT(A) had not addressed the issue of 'furnishing inaccurate particulars' on its merits due to the pending judgment of the High Court.Upon careful consideration, the Tribunal found that the CIT(A) had erred in canceling the penalty solely based on the admission of the appeal by the High Court, without a detailed analysis of the merits of the case. The Tribunal set aside the CIT(A)'s order and directed a fresh adjudication of all contentions and issues raised by both parties, emphasizing the need for a comprehensive and speaking order by the CIT(A) after providing a fair hearing to both parties. The Tribunal stressed that the observations made did not affect the merit of the issues to be decided by the CIT(A), and instructed the CIT(A) to dispose of the appeal within three months.In conclusion, the appeal of the Revenue was allowed for statistical purposes, and the Tribunal's order was pronounced in open court.