2018 (2) TMI 1742 - AT - Income Tax

Tribunal upholds penalty deletion under sec 271(1)(c) based on High Court's substantial questions of law

DCIT, Circle- 1 (1) (1), Versus Convergys Customer Management Group Inc.,

DCIT, Circle- 1 (1) (1), Versus Convergys Customer Management Group Inc., - TMI Issues:Deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961.Analysis:The appeal was filed by the Revenue against the order of the CIT(A) relating to the assessment year 2006-07, specifically challenging the deletion of a penalty of Rs. 23,90,093 under section 271(1)(c). The assessee had initially shown an income of Rs. 40,006,350, but the assessment order passed by the Assessing Officer attributed a much higher income of Rs. 2,944,673,964, making significant additions. The Tribunal had previously held that the assessee had a Permanent Establishment (PE) in India, with profits attributed to the PE and certain charges deemed non-taxable. The High Court had admitted substantial questions of law related to the case.The counsel for the assessee argued that since the High Court had admitted substantial questions of law, the issue was debatable, citing a precedent where it was held that no penalty under section 271(1)(c) should be levied in such cases. The Tribunal upheld the CIT(A)'s decision to delete the penalty, emphasizing that the issue was subject to different interpretations, and in light of the High Court's admission of substantial questions of law, no penalty could be levied. Therefore, the Tribunal dismissed the Revenue's appeal, affirming the deletion of the penalty under section 271(1)(c).In conclusion, the Tribunal upheld the decision to delete the penalty under section 271(1)(c) based on the High Court's admission of substantial questions of law, which rendered the issue debatable and precluded the imposition of the penalty. The appeal filed by the Revenue was consequently dismissed, affirming the CIT(A)'s order in favor of the assessee.