Gujarat H.C : Assessee’s appeal in respect of addition on basis of which penalty under section 271(1)(c) was levied, had been admitted by High Court, it could not be said that issue was debatable so as to delete penalty

High Court Of Gujarat

CIT Vs. Dharamshi B. Shah

Section 271(1)(C)

Assessment Year 1995-96

M.R. Shah And K.J. Thaker, JJ.

Tax Appeal No. 189 Of 2014

June 9, 2014

JUDGMENT

M.R. Shah, J. – Being aggrieved and dissatisfied with the impugned judgment and order passed by the Income-tax Appellate Tribunal, ‘B’ Bench, Ahmedabad (hereinafter referred to as “the Tribunal”), dated July 5, 2013, in I. T. A. No. 1116/Ahd/2010 for the assessment year 1995-96 deleting the penalty imposed by the Assessing Officer confirmed by the Commissioner of Income-tax (Appeals), the Revenue has preferred the present tax appeal raising the following substantial questions of law :

“(i) Whether, in the facts and in the circumstances of the case and in law, the Income-tax Appellate Tribunal is justified in not upholding the penalty under section 271(1)(c) of the Act imposed by the Assessing Officer and upheld by the Commissioner of Income-tax (Appeals), without appreciating that the assessee had failed to offer any satisfactory explanation to show as to why the impugned income was not disclosed by him in his return and not offered for tax even though the said income was undoubtedly liable for tax under section 45(3) of the Act and, therefore, the assessee had failed to rebut the presumption in Explanation 1 to section 271(1)(c) of the Act ?

(ii) Whether, in the facts and in the circumstances of the case and in law, the Income-tax Appellate Tribunal is justified in not upholding the penalty under section 271(1)(c) of the Act imposed by the Assessing Officer and upheld by the Commissioner of Income-tax (Appeals) holding that since the substantial question of law in respect of the addition on which the penalty has been levied, has been admitted by the hon’ble Gujarat High Court, the penalty would not survive without appreciating that the addition on which the penalty was levied was confirmed by the Commissioner of Income-tax (Appeals) and by Income-tax Appellate Tribunal itself ?

(iii)Whether, in the facts and in the circumstances of the case and in law, the Income-tax Appellate Tribunal is justified in not upholding the penalty under section 27(1)(c) of the Act imposed by the Assessing Officer and upheld by the Commissioner of Income-tax (Appeals), solely on the ground that the assessee’s appeal in respect of the addition sustained by the Income-tax Appellate Tribunal had been admitted by the hon’ble Gujarat High Court, without appreciating that there is no such provision in the Act by which the assessee is discharged from its onus under section 271(1)(c) of the Act under such circumstances ?

(iv)Whether, in the facts and in the circumstances of the case and in law in respect of the quantum addition by the hon’ble Gujarat High Court warrants the cancellation of the penalty under section 271(1)(c) of the Act since a mere admission of substantial question of law by the hon’ble Gujarat High Court does not amount to a decision under section 260A(5) of the Income-tax Act, 1961 ?”

2. While issuing notice for final disposal, the Division Bench passed the following order on April 21, 2014.

“The Revenue has challenged the judgment of the Income-tax Appellate Tribunal (‘the Tribunal’ for short) dated July 5, 2013, deleting the penalty imposed by the Assessing Officer and confirmed by the Commissioner of Income-tax (Appeals). In doing so, the Tribunal observed as under :

‘…This is the settled position of law that the penalty under section 271(1)(c) of the Income-tax Act, 1961, is imposable in respect of any concealment of income or furnishing of inaccurate particulars of income by the assessee. When for the addition made by the Assessing Officer which is confirmed by the Tribunal, a substantial question of law is admitted by the hon’ble Gujarat High Court, it has to be accepted that the issue is not free from debate, and, hence, in our considered opinion, under these facts, it cannot be said that the assessee has concealed his income or furnished inaccurate particulars of income, and, therefore, penalty is not justified. We, therefore, delete the same.’

Counsel for the Revenue pointed out that the sole reason recorded by the Tribunal and reproduced hereinabove would not be sufficient to delete the penalty as was ordered by this court in an order dated November 15, 2011, rendered in Tax Appeal No. 606 of 2010.

In the result, issue notice for final disposal returnable on June 9, 2014.”

3. In response to the notice for final disposal issued by this court, Shri Bandish Soparkar, learned advocate has stated that he has instructions to appear on behalf of the respondent-assessee and he has filed the vakalatnama with the Registry.

4. Shri Parikh, learned advocate appearing on behalf of the appellant-Revenue, has submitted that as such the issue/questions involved in the present tax appeal is squarely covered by the decision of this court in the case of CIT v. Prakash S Vyas rendered in Tax Appeal No. 606 of 2010. It is submitted that in the present case also the Tribunal has deleted the penalty imposed by the Assessing Officer confirmed by the Commissioner of Income-tax (Appeals) solely on the ground that the appeal against the order passed by the Income-tax Appellate Tribunal is admitted by the High Court and, therefore, the issue is not free from debate and, consequently, the Tribunal has set aside the penalty. It is submitted that the aforesaid is not accepted by the Division Bench of this court in the case of Prakash S Vyas (supra). It is submitted that, therefore, the impugned order passed by the Tribunal is required to be quashed and set aside and the matter is required to be remanded to the Tribunal to decide the appeal afresh in accordance with law and on its own merits.

5. Shri Soparkar, learned advocate appearing on behalf of the respondent, is not in a position to dispute the above and is not disputing that as such the aforesaid issue/questions are squarely covered by the decision of the Division Bench of this court in Tax Appeal No. 606 of 2010.

6. Heard the learned advocates appearing on behalf of the respective parties and perused the impugned judgment and order passed by the Tribunal. At the outset, it is required to be noted that by the impugned judgment and order, the Tribunal has deleted the penalty imposed by the Assessing Officer and confirmed by the Commissioner of Income-tax (Appeals) by observing as under :

“… This is the settled position of law that the penalty under section 271(1)(c) of the Income-tax Act, 1961, is imposable in respect of any concealment of income or furnishing of inaccurate particulars of income by the assessee. When for the addition made by the Assessing Officer which is confirmed by the Tribunal, a substantial question of law is admitted by the hon’ble Gujarat High Court, it has to be accepted that the issue is not free from debate, and, hence, in our considered opinion, under these facts, it cannot be said that the assessee has concealed his income or furnished inaccurate particulars of income, and, therefore, penalty is not justified. We, therefore, delete the same.”

7. Therefore, identical question, which is posed for consideration of this court is, whether the Appellate Tribunal is right in law and on the facts in reversing the order passed by the Commissioner of Income-tax (Appeals) deleting the penalty under section 271(1)(c) of the Act solely on the ground that the High Court has admitted the appeal and, therefore, the issue can be stated to be debatable ?

8. Identical question came to be considered by the Division Bench of this court in Tax Appeal No. 606 of 2010 and in paragraphs 10 to 13 the Division Bench of this court has observed as under and has quashed and set aside the order of the Tribunal deleting the penalty on the aforesaid ground and has remanded the matter to the Tribunal to consider the appeal afresh in accordance with law and on its own merits.

“10. Having, thus, heard learned counsel for the parties, we reiterate that the sole ground on which the Tribunal deleted the penalty was that with respect to the quantum additions, the assessee had approached the High Court and the High Court had admitted the appeal framing substantial questions of law for consideration. In view of the Tribunal, this would indicate that the issue was debatable and that, therefore, no penalty under section 271(1)(c) could be imposed.

11. We are of the opinion that the Tribunal erred in deleting the penalty on this sole ground. Admission of a tax appeal by the High Court, in majority cases, is ex parte and without recording even prima facie reasons. Whether ex parte or after by-parte hearing, unless some other intention clearly emerges from the order itself, admission of a tax appeal by the High Court only indicates the court’s opinion that the issue presented before it required further consideration. It is an indication of the opinion of the High Court that there is a prima facie case made out and the questions are required to be decided after admission. Mere admission of an appeal by the High Court cannot without there being anything further, be an indication that the issue is debatable one so as to delete the penalty under section 271(1)(c) of the Act even if there are independent grounds and reasons to believe that the assessee’s case would fall under the mischief envisaged in said clause (c) of sub-section (1) of section 271 of the Act. In other words, unless there is any indication in the order of admission passed by the High Court simply because the tax appeal is admitted, would give rise to the presumption that the issue is debatable and that, therefore, penalty should be deleted.

12. This is not to suggest that no such intention can be gathered from the order of the court even if so expressed either explicitly or in implied terms. This is also not to suggest that in no case, admission of a tax appeal would be a relevant factor for the purpose of deciding validity of a penalty order. This is only to put the record straight in so far as the opinion that the Tribunal as expressed in the present impugned order, viz., that upon mere admission of a tax appeal on quantum additions, is an indication that the issue is debatable one and that, therefore, penalty should automatically be deleted without any further reasons or grounds emerging from the record.

13. This is precisely what has been done by the Tribunal in the present case. The order of the Tribunal, therefore, cannot be sustained. The question framed is answered in favour of the Revenue and against the assessee. The order of the Tribunal is reversed. Since apparently the assessee had raised other contentions also in support of the appeal before the Tribunal, the proceedings are remanded before the Tribunal for fresh consideration and disposal in accordance with law. The tax appeal is disposed of accordingly.”

9. In view of the above, the impugned order passed by the Tribunal also deserves to be quashed and set aside and the matter is required to be remanded to the Tribunal to consider, decide and dispose of the appeal afresh in accordance with law and on its own merits.

10. In view of the above and for the reasons stated hereinabove, more particularly, the reasons stated in the judgment and order passed in Tax Appeal No. 606 of 2010 reproduced hereinabove, the present tax appeal succeeds and the impugned judgment and order passed by the Income-tax Appellate Tribunal, “B” Bench, Ahmedabad (hereinafter referred to as “the Tribunal”) dated July 5, 2013, in I. T. A. No. 1116/Ahd/2010 is hereby quashed and set aside and the matter is remanded to the Tribunal for fresh consideration and disposal in accordance with law on its own merits.

11. With this, the present tax appeal is disposed of accordingly.

[Citation : 366 ITR 140]

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