PRINCIPAL COMMISSINOER OF INCOME TAX 1 vs. PRAKASH CHANDRA S SONI HUF

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TAXAP/976/2018HC GujaratGJHC24045197201820 August 2018Bench: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The Tribunal had deleted the penalty under Section 271(1)(c) on the grounds that the issue of closing stock valuation was highly debatable and that the assessee had not filed inaccurate particulars or concealed income. The Tribunal relied on the Supreme Court's decision in Shakti Trading Company, which supported the assessee's method. The Tribunal also noted that if there were conflicting Supreme Court decisions, it would render the issue debatable, making penalty imposition under Section 271(1)(c) inappropriate. The High Court found no reason to interfere with the Tribunal's order. The operative direction was to delete the penalty and allow the assessee's appeal.

What were the facts?

The Revenue, Principal Commissioner of Income Tax 1, filed an appeal against the Income-tax Appellate Tribunal's order dated February 26, 2018. The appeal concerns the deletion of a penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961. The penalty was levied on the assessee, Prakash Chandra S Soni HUF, due to the alleged under-valuation of closing stock. The Assessing Officer had imposed the penalty, which was confirmed by the CIT(Appeals). The Tribunal, however, deleted the penalty, leading to the present appeal by the Revenue.

What were the issues?

1. Whether the Appellate Tribunal has substantially erred in deleting the penalty under Section 271(1)(c) of the Income-tax Act, 1961, on account of under-valuation of closing stock? Assessee's Contentions: The assessee argued that the issue was highly debatable and that there was no filing of inaccurate particulars or concealment of income. The Tribunal observed that the method adopted by the assessee was supported by a Supreme Court decision in the case of Shakti Trading Company. Furthermore, the Tribunal noted that even if there were conflicting Supreme Court decisions, it would make the issue highly debatable, precluding the levy of penalty under Section 271(1)(c). Revenue's Contentions: The Revenue contended that the Tribunal erred in deleting the penalty. The specific arguments of the Revenue are not detailed in the judgment, but the appeal itself indicates a disagreement with the Tribunal's finding that the issue was debatable and that no inaccurate particulars were filed or income concealed.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

C/TAXAP/976/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 976 of 2018 ========================================================== PRINCIPAL COMMISSINOER OF INCOME TAX 1 Versus PRAKASH CHANDRA S SONI HUF ========================================================== Appearance: MRS MAUNA M BHATT(174) 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

Date : 20/08/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1.   Revenue has filed this appeal against the judgment of the Income­tax Appellate Tribunal dated   26.2.2018.   Following   question   is presented for our consideration. “Whether   the   Appellate   Tribunal   has substantially   erred   in   deleting   the penalty   u/s.271(1)(c)   of   the   Act   levied on account of under valuation of closing stock ?”

2.

Issue pertains to penalty imposed by the Assessing Officer under Section 271(1)(c) of the   Income­tax   Act,   1961   (the   'Act'   for short).   The   Tribunal   deleted   the   penalty imposed   by   the   Assessing   Officer   and confirmed by the CIT (Appeals) on the ground that the issue was highly debatable and that Page 1 of 3

C/TAXAP/976/2018 ORDER there was no filing of inaccurate particulars or concealment of income by the assessee. The Tribunal observed as under:­ “9. We   have   given   a   thoughtful consideration   to   the   orders   of   the authorities   below.   It   is   true   that   the business of the proprietary concern M/s. Suvarnamahal was continued as business of the   partnership   firm   on   and   from 25.02.2008. In the case of ALA Firm, the facts   were   that   the   firm   was   dissolved and   the   business   was   discontinued. Therefore,   the   stock   in   trade   were   re­ valued at market price whereas the facts of   the   case   in   hand   show   that   the business   continued   in   the   hands   of   the partnership  firm and the stock in trade were never valued. The facts of the case in   hand   are   in   line   with   the   facts considered   by   the   Hon'ble   Supreme   Court in   the   case   of   Shakti   Trading   Company (supra). In our considered opinion, when the   method   adopted   by   the   assessee   was duly   supported   by   the   decision   of   the Hon'ble Supreme Court, it cannot be said that   the   assessee   has   filed   inaccurate particulars   of   income   or   has   concealed the particulars of income. Moreover, when there   are   two   decisions   of   the   Apex Court, one in favour of the assessee and one in favour of the revenue itself makes the   issue   highly   debatable.   In   our understanding of the law, penalty cannot be levied u/s. 271(1)(c) of the Act under such circumstances. We, accordingly, set aside the findings of the ld. CIT(A) and direct the A.O. To delete the penalty so levied.  Appeal filed by the assessee  is allowed.” Page 2 of 3

C/TAXAP/976/2018 ORDER 3.  We see no reason to interfere. Tax Appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) K.K. SAIYED Page 3 of 3

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