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 dismissed the Revenue's appeal and 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, as well as 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 subsequently by the ITAT. 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 also imposed a penalty under Section 271(1)(c) for concealment of income. The ITAT 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, affirming the ITAT's decision. The court held that when the assessment order is under challenge and the appeal has been admitted on substantial questions of law, the issue is debatable, and therefore, penalty under Section 271(1)(c) cannot be imposed. The court found no error in the ITAT's order and dismissed the appeal with no order as to costs.
Headnote
A) Income Tax - Penalty under Section 271(1)(c) - Debatable Issue - When the assessment order is under challenge and the appeal has been admitted by the High Court on substantial questions of law, the issue is debatable and penalty under Section 271(1)(c) of the Income Tax Act, 1961 cannot be imposed - Held that the Tribunal rightly deleted the penalty as the assessee's appeal against the assessment was pending on substantial questions of law (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
Appeal dismissed. No order as to costs.
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
Case Details
2015 LawText (KAR) (04) 46
The Commissioner of Income Tax and The Deputy Commissioner of Income-Tax
M/s. Ankita Electronics Pvt Ltd.
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Nature of Litigation
Appeal by Revenue under Section 260-A of Income Tax Act, 1961 against order of ITAT deleting penalty under Section 271(1)(c)
Remedy Sought
Revenue sought to set aside ITAT order and restore penalty imposed under Section 271(1)(c)
Filing Reason
Revenue challenged ITAT order deleting penalty on ground that issue was debatable as assessee's appeal against assessment was pending on substantial questions of law
Previous Decisions
Assessing Officer disallowed deductions and imposed penalty; CIT(A) confirmed disallowance; ITAT dismissed assessee's appeal on merits but deleted penalty; High Court admitted assessee's appeal on substantial questions of law
Issues
Whether penalty under Section 271(1)(c) can be imposed when the assessment order is under challenge and the appeal has been admitted on substantial questions of law
Submissions/Arguments
Revenue argued that penalty was rightly imposed as assessee had concealed income
Assessee contended that since assessment was under challenge and appeal admitted on substantial questions of law, issue was debatable and penalty could not be imposed
Ratio Decidendi
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 involved is debatable and penalty under Section 271(1)(c) of the Income Tax Act, 1961 cannot be imposed.
Judgment Excerpts
The question raised in this appeal is as to in what circumstances an issue involved would be considered as debatable and as to whether when the tax imposed on the assessee is under challenge and the appeal filed by the assessee against the assessment proceedings has been admitted by the High Court on the substantial question of law, still penalty can be imposed under Section 271(1)(c) of the Income Tax Act ?
In the present case, the assessment order is under challenge and the appeal has been admitted on substantial questions of law. Thus, the issue involved is debatable and penalty under Section 271(1)(c) cannot be imposed.
Procedural History
Assessing Officer passed assessment order under Section 143(3) disallowing deductions and imposing penalty under Section 271(1)(c). CIT(A) confirmed disallowance. ITAT dismissed assessee's appeal on merits but deleted penalty. Revenue appealed to High Court under Section 260-A. High Court admitted assessee's appeal on substantial questions of law. Present appeal by Revenue against ITAT order deleting penalty.
Acts & Sections
- Income Tax Act, 1961: 260-A, 271(1)(c), 143(3), 68, 147
