2026 (4) TMI 192

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.... the following grounds: "1. In the facts and circumstances of the case, whether the Ld. CIT(A) justified in holding that penalty cannot be levied when the assessment order is the subject matter of appeal before 1-lon'ble High Court, even though there is no such limitation as per provisions of the section 275 of the Income Tax Act, 1961? 2. In the facts and circumstances of the case, whether the Ld. CIT(A) justified in not disposing the appeal based on the merits of the case holding that penalty cannot be levied when the assessment order is the subject matter of appeal before Hon'ble High Court? 3. In the facts and circumstances of the case, whether the Ld. CIT(A) justified deleting the penalty when the Hon....

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....t in ITA Nos. 452 & 456/2023 and the Hon'ble Karnataka High Court had also admitted the appeals filed by the assessee and framed substantial questions of law. In the said appeal, the assessee had challenged the adjustment made by the AO by treating the transaction as international transaction. Subsequently, the AO had initiated the penalty proceedings u/s. 271C of the Act by issuing a notice u/s. 274 of the Act on the ground that the assessee had furnished inaccurate particulars of income. The assessee filed a detailed reply and submitted that penalty need not be levied since there is no concealment of any income or furnishing of inaccurate particulars of any such income. The assessee had also submitted that particulars of income was furnis....

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....e appeals of the assessee and framed the substantial questions of law and therefore followed the Hon'ble Jurisdictional High Court judgment reported in (2017) 79 taxmann.com 376 (Karnataka) in the case of CIT Vs. Dr. Harsha N. Biliangady and deleted the penalty levied u/s. 271C of the Act by stating that the addition made in the assessment order is a debatable one and therefore, the penalty need not be levied in such circumstances. 4. As against the said order, the present appeal has been filed by the revenue before this Tribunal. 5. At the time of hearing, the Ld.AR furnished the order sheets of the Hon'ble High Court and also the Division Bench judgment of the Hon'ble Jurisdictional High Court reported in (2015) 379 ITR 529 (Karnata....

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....s deemed to be an 'international transaction' within the meaning of section 928 of the Act? 2. Whether, on the facts and in the circumstances of the case and on the grounds urged, even if Chapter X is held to be applicable, the transaction, in essence, being entered into between two unrelated parties, the contractually agreed price can only represent the arm's length price? 3. Whether, on the facts and in the circumstances of the case and on the grounds urged, the finding of the Tribunal that the Appellant has transferred its controlling interest in USL to Relay B.V is contrary to the material on record and, thus, is perverse? 4. Whether, on the facts and in the circumstances of the case and on the gro....

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....ddition where High Court has admitted the appeal on substantial question of law, then sustainability of addition itself becomes debatable and in such circumstances, penalty cannot be levied u/s. 271(1)(c) of the Act." 11. The Ld.CIT(A) had considered the principles laid down by the Division Bench judgments of the Hon'ble Jurisdictional High Court and held as follows: "5.1 The appellant challenged the quantum appeal order of the ITAT before the Karnataka High Court on 06.07.2023. The Karnataka High Court in its order dated 29.08.2023 admitted the appeal and framed the substantial questions of law. The appellant contended that once High Court admitted the appeal the issue becomes debatable and accordingly penalty cannot be levied.....