PRINCIPAL COMMISSIONER OF INCOME-TAX VADODARA - I vs. MAYUR S SHETH

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TAXAP/563/2018HC GujaratGJHC24025081201813 June 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no question of law arose from the ITAT's order. The Tribunal had deleted the penalty on the grounds that the assessee had made full disclosures, the issue was not free from doubt, and the assessee had acted under legal advice. Furthermore, the Tribunal had noted that the quantum additions themselves were pending appeal before the High Court. The High Court found these reasons sufficient to dismiss the Revenue's appeal, implying that the conditions for levying penalty under Section 271(1)(c) were not met in this case, particularly concerning the element of concealment or furnishing inaccurate particulars. The operative direction was to dismiss the appeal.

What were the facts?

The Revenue, Principal Commissioner of Income-Tax Vadodara - I, is in appeal against a judgment of the Income Tax Appellate Tribunal (ITAT), Ahmedabad, dated June 27, 2017. The appeal challenges the ITAT's deletion of a penalty of Rs. 1,05,38,000 levied under Section 271(1)(c) of the Income-tax Act. This penalty was related to an addition of Rs. 5,26,90,000 made on account of capital gains wrongly claimed as exempt by the assessee, Mayur S Sheth. The ITAT had deleted the penalty primarily on the grounds that the assessee made full disclosures and the issue was not free from doubt. The Tribunal also noted that the assessee had acted under legal advice and that the quantum additions were pending appeal before the High Court.

What were the issues?

1. Whether, in the facts and circumstances of the case, the Tribunal has erred in law and on facts in deleting the penalty of Rs. 1,05,38,000 levied under Section 271(1)(c) of the Income-tax Act with respect to an addition of Rs. 5,26,90,000 on account of capital gain wrongly claimed as exempt by the assessee? 2. Whether, in the facts and circumstances of the case, the Tribunal has erred in law and on facts in deleting the penalty of Rs. 1,05,38,000 levied under Section 271(1)(c) of the Income-tax Act without appreciating that the assessee had not offered the amount to tax on the basis of an artificial dispute with a mala fide intention, and that mere disclosure in notes did not protect the assessee from penal action provided under Section 271(1)(c) of the Income-tax Act? Assessee's contentions: The assessee argued that full disclosures were made, the issue was not free from doubt, and the assessee had acted under legal advice. The quantum additions were also pending appeal before the High Court. Revenue's contentions: The Revenue contended that the assessee had not offered the amount to tax on the basis of an artificial dispute with a mala fide intention, and that mere disclosure in notes did not protect the assessee from penal action under Section 271(1)(c).

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/563/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL No. 563 of 2018 ============================================================== PRINCIPAL COMMISSIONER OF INCOME-TAX VADODARA - I Versus MAYUR S SHETH ============================================================== Appearance : Mr. VARUN K. PATEL, Advocate for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ============================================================== CORAM: HONOURABLE Mr. JUSTICE AKIL KURESHI and HONOURABLE Mr. JUSTICE B.N. KARIA 13th June 2018  ORAL ORDER (PER : HONOURABLE Mr. JUSTICE AKIL KURESHI) Revenue is in appeal against the judgment of the Income  Tax   Appellate   Tribunal,   Ahmedabad   dated   27th  June   2017,  raising the following questions for our consideration : [A] “Whether in the facts and circumstances  of the case, the Tribunal has erred in law and  on   facts   in   deleting   the   penalty   of   Rs.  1,05,38,000/= levied under Section 271 [1](c) of  the Income­tax Act with respect to addition of  Rs.   5,26,90,000/=   on   account   of   capital   gain  wrongly claimed, as exempt by the assessee ?” [B] “Whether in the facts and circumstances  of the case, the Tribunal has erred in law and  on   facts   in   deleting   the   penalty   of   Rs.  1,05,38,000/= levied under Section 271 [1](c) of  Page 1 of 2

the Income Tax Act without appreciating that assessee had not offered the amount to tax on the basis of artificial dispute with  mala fide intention and mere disclosure in notes did not protest   the   assessee   from   penal   action provided   under   Section   271   [1](c)   of   the Income­tax Act  ?”

Issue pertains to penalty. Quantum additions have been confirmed   upon   the   stage   of   the   Tribunal.   The   Department desired   to   levy   penalty   from   the   assessee.   The   Tribunal, however, deleted the penalty principally on the ground that the full disclosures were made and the issue was not free from doubt. In the opinion of the Tribunal, thus, the claim was not free from doubt or devoid of any basis.

We further notice that the assessee in addition to having made full disclosure, also claimed that he had been under legal advice.   The   Tribunal   also   noted   that   even   in  quantum additions, the appeal is entertained by the High Court  and is pending.

No question of law arises. Tax Appeal is dismissed. [Akil Kureshi, J.] [B.N Karia, J.] Prakash

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