2014 (7) TMI 98 - HC - Income Tax

High Court reverses Tribunal, reinstates penalty under Income Tax Act for AY 1995-96

The High Court overturned the Income Tax Appellate Tribunal's decision to delete the penalty under Section 271(1)(c) of the Income Tax Act for the ... Penalty u/s 271(1)(c) of the Act – Failure to offer satisfactory explanation - Whether the Tribunal is right in reversing the order passed by the CIT(A) deleting the penalty u/s 271(1)(c) of the Act solely on the ground that the High Court has admitted the appeal and, therefore, the issue can be stated to be debatable – Held that:- The decision in Prakash S Vyas [2014 (7) TMI 89 - GUJARAT HIGH COURT] followed - The Tribunal erred in deleting the penalty - Admission of a Tax Appeal by the High Court, in majority cases, is exparte and without recording even prima facie reasons - Whether ex-parte or after by-parte hearing, unless some other intention clearly emerges from the order itself, admission of a Tax Appeal by the High Court only indicates the Court's opinion that the issue presented before it required further consideration - It is an indication of the opinion of the High Court that there is a prima facie case made out and questions are required to be decided after admission. 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 u/s 271(1)(c) of the Act even if there are independent grounds and reasons to believe that the assessee’s case would fall under the mischief envisaged in the Clause (c) of Sub-Section (1) of Section 271 of the Act - unless there is any indication in the order of admission passed by the High Court simply because the Tax Appeal is admitted, would give rise to the presumption that the issue is debatable and that therefore, penalty should be deleted - upon mere admission of a Tax Appeal on quantum additions, is an indication that the issue is debatable one and that therefore, penalty should automatically be deleted without any further reasons or grounds emerging from the record – the order of the Tribunal is set aside and remitted back for fresh consideration – Decided in favour of Revenue. Issues:1. Penalty under Section 271(1)(c) of the Income Tax Act imposed by the Assessing Officer and upheld by the Commissioner of Income Tax (Appeals).2. Justification of penalty deletion by the Income Tax Appellate Tribunal based on the admission of substantial questions of law by the High Court.3. Discharge of the assessee's onus under Section 271(1)(c) of the Act due to the admission of the assessee's appeal by the High Court.4. Impact of the admission of substantial questions of law by the High Court on the cancellation of penalty under Section 271(1)(c) of the Act.Analysis:Issue 1:The appellant challenged the deletion of penalty under Section 271(1)(c) by the Income Tax Appellate Tribunal (ITAT) for the Assessment Year 1995-96. The ITAT justified its decision by stating that the penalty cannot be imposed when the issue is debatable, as seen in the admission of substantial questions of law by the High Court. The tribunal held that the assessee did not conceal income or furnish inaccurate particulars, thus deleting the penalty.Issue 2:The Division Bench considered whether the deletion of penalty solely based on the admission of the appeal by the High Court was justified. The tribunal's reasoning was challenged, citing a previous case where such grounds were deemed insufficient to delete the penalty. The Division Bench emphasized that the mere admission of a Tax Appeal does not automatically indicate a debatable issue warranting penalty deletion under Section 271(1)(c).Issue 3:The appellant contended that the deletion of penalty by the ITAT based on the admission of the appeal by the High Court does not discharge the assessee from the onus under Section 271(1)(c) of the Act. The argument centered on the lack of provision in the Act that absolves the assessee from penalties in such circumstances.Issue 4:The Division Bench's decision in a previous case highlighted that the admission of a Tax Appeal by the High Court does not inherently imply a debatable issue justifying penalty cancellation. The tribunal's deletion of the penalty solely on these grounds was deemed erroneous. The Court reversed the tribunal's decision, emphasizing that further reasons or grounds must support penalty deletion beyond the mere admission of the appeal.In conclusion, the High Court quashed and set aside the ITAT's decision to delete the penalty under Section 271(1)(c) and remanded the matter for fresh consideration. The Court reiterated that the admission of a Tax Appeal does not automatically indicate a debatable issue justifying penalty cancellation, emphasizing the need for additional reasons to support such a decision.