Case Note & Summary
The Revenue filed an appeal under Section 260-A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal (ITAT) which had deleted the penalty imposed under Section 271(1)(c) of the Act. The assessee, M/s. Ankita Electronics Pvt. Ltd., was engaged in the business of computer consumables. For the assessment year 2001-2002, the Assessing Officer passed an order under Section 143(3) disallowing certain deductions claimed by the assessee towards salary paid to two lady directors and another person, a sum of Rs.26,00,000 under Section 68, and interest on loans, totaling Rs.33,90,940. The disallowance was confirmed by the Commissioner of Income Tax (Appeals) and the Tribunal. The assessee then filed an appeal before the High Court, which was admitted on 04.06.2012 in ITA No.282/2011 on substantial questions of law. Meanwhile, the Revenue had initiated penalty proceedings under Section 271(1)(c) for concealment of income, and the Assessing Officer imposed a penalty. The Tribunal deleted the penalty, holding that since the assessment order was under challenge and the appeal had been admitted on substantial questions of law, the issue was debatable and penalty could not be imposed. The Revenue challenged this order before the High Court. The High Court dismissed the Revenue's appeal, holding that the Tribunal was justified in deleting the penalty. The court reasoned that when the assessment order is under challenge and the appeal has been admitted on substantial questions of law, the issue is debatable, and penalty under Section 271(1)(c) cannot be imposed. The court found no substantial question of law arising from the Tribunal's order and dismissed the appeal.
Headnote
A) Income Tax - Penalty under Section 271(1)(c) - Debatable Issue - When the assessment order is under challenge and the appeal against the assessment has been admitted by the High Court on substantial questions of law, the issue is debatable and penalty under Section 271(1)(c) cannot be imposed - Held that the Tribunal was justified in deleting the penalty as the issue was debatable (Paras 1-5)
Issue of Consideration
Whether penalty under Section 271(1)(c) of the Income Tax Act, 1961 can be imposed when the assessment order is under challenge and the appeal against the assessment has been admitted by the High Court on substantial questions of law
Final Decision
The High Court dismissed the Revenue's appeal, holding that the Tribunal was justified in deleting the penalty under Section 271(1)(c) as the issue was debatable when the assessment order was under challenge and the appeal had been admitted on substantial questions of law.
Law Points
- Penalty under Section 271(1)(c) of the Income Tax Act
- 1961 cannot be imposed when the assessment order is under challenge and the appeal has been admitted on substantial questions of law
- as the issue is debatable
