TaxTMI 
TaxTMI 
2026 (9) TMI 442
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....uantum addition made by the AO of Rs. 5,05,47,687/-under the had capital gain u/s 50B of the I.T. Act 1961 was not pressed by the assessee before Ld. CIT(A) during the quantum appeal, thereby, accepting the addition made by AO u/s 50B of the IT Act, 1961." 3. Briefly stated facts of the case are that the assessee, an individual and proprietor of M/s Suvidh Engineering Industries, was engaged in the business of manufacture of automobile components, fabrication and precision job work. The assessee filed return of income for the year under consideration on 01.10.2012 declaring total income of Rs. 4,48,870/-, while claiming current year business loss of Rs. 5,26,53,985/-. In the return of income, the assessee disclosed capital gain of Rs.50,00,000/- arising from slump sale of his Nashik unit to a partnership firm working under the name and style of Suvidh Engineering Industry. The Nasik Unit i.e. undertaking had a negative net worth of Rs.5,05,47,687/-. Treating the negative net worth as nil, the assessee offered the entire sale consideration of Rs.50,00,000/- to tax under section 50B of the Act. 3.1 In the assessment, the Assessing Officer, relying upon the decision of the Speci....
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.... of the Tribunal in Summit Securities Ltd., ITA No. 4977/Mum/2009, wherein a contrary view was taken and the negative net worth was held to be relevant for computation of capital gains. According to the learned counsel, the controversy thus involved a pure question of law and was, at the relevant time, subject to divergent judicial views. 5.2 The learned counsel further submitted that, even in the quantum proceedings, the assessee had reiterated its reliance upon Zuari Industries Ltd. (supra). However, having regard to the fact that the business of the assessee had already been discontinued, that substantial brought-forward business losses were available and that the assessee did not expect any substantial tax liability even if the addition were sustained, the assessee, with a view to bringing the litigation to an end, chose not to press the ground relating to the addition under section 50B. It was submitted that the assessee, then aged about 75 years, had taken the aforesaid course solely with a view to avoiding further litigation and purchasing peace, and such conduct could not be construed as an admission that the original claim was false or mala fide. 5.3 The learned coun....
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....h Court and remained debatable, penalty under section 271(1)(c) was not warranted. 5.8 Reliance was also placed upon the decision of the Mumbai Bench of the Tribunal in Schrader Duncan Ltd., ITA No. 8223/Mum/2010, wherein, according to the learned counsel, it was held that admission of a substantial question of law by the jurisdictional High Court rendered the issue debatable and, consequently, penalty founded upon such addition could not be sustained. 5.9 The learned counsel further referred to the decision of the Pune Bench of the Tribunal in Mahalaxmi Co-operative Bank Ltd., ITA No. 2149/PUN/2016, and submitted that even where the issue had been decided against the assessee at the Tribunal level, admission of a substantial question of law by the jurisdictional High Court demonstrated the debatable nature of the issue and militated against levy of penalty under section 271(1)(c). 5.10 In conclusion, the learned counsel submitted that the assessee had made complete disclosure of the relevant facts, had adopted a legal position which was supported by a judicial precedent, and that the very issue had subsequently been admitted for consideration by the Hon'ble jurisdicti....
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....here the material facts have been fully disclosed and the controversy concerns the legal interpretation of a statutory provision. 6.4 In the present case, there is no finding that the assessee concealed the slump sale transaction or furnished any false particulars. The claim relating to computation of capital gains was disclosed in the return and was supported by a legal interpretation which was the subject matter of divergent judicial views. The subsequent decision against the assessee in the quantum proceedings, by itself, cannot furnish a sufficient foundation for imposition of penalty under section 271(1)(c). The finding of the learned CIT(A) on the issue in dispute is reproduced as under:- "5. Findings & determination: GROUND 1 The learned Asst. Commissioner of Income Tax, 32(3), Mumbal has erred in levying a penalty of Rs. 1,04,13,000/-u/s 271(1)(c) of the Income Tax Act. GROUND 2 The learned Asst. Commissioner of Income Tax, 32(3), Mumbai has erred in holding that there is concealment of income by the assessee on which a penalty u/s 271(1)(c) should be levied. Both the above grounds are adjudicated together. T....