PR. COMMISSIONER OF INCOME TAX - 11 vs. M/S NATIONAL TRAVEL SERVICE

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ITA/445/2018HC DelhiDLHC01534645201713 April 2018Bench: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MR. JUSTICE A. K. CHAWLA1 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no question of law arose from the ITAT's decision. The Court noted that the ITAT had set aside the penalty imposed by the AO and upheld by the CIT(A) on the ground that since the addition was a question of law, no penalty could arise. The Court further observed that additions were made under Section 2(22)(e) of the Income Tax Act, which were confirmed, but the assessee's appeal questioned the correctness of the decision relied upon for these additions. Consequently, the Court concluded that the imposition of penalty did not arise. The appeals filed by the Revenue were dismissed.

What were the facts?

The Revenue (Pr. Commissioner of Income Tax – 11) filed appeals against the decisions of the Income Tax Appellate Tribunal (ITAT). The ITAT had set aside penalties that were initially imposed by the Assessing Officer (AO) and subsequently upheld by the CIT(A). The ITAT's reasoning for setting aside the penalties was that since the addition made to the assessee's income was based on a question of law, no penalty could arise. The judgment notes that additions were made, including under Section 2(22)(e) of the Income Tax Act, which were confirmed. However, the assessee's appeal questioned the correctness of the decision relied upon for these additions. Consequently, the imposition of penalty was deemed not to arise.

What were the issues?

1. Whether the imposition of penalty is sustainable when the underlying addition to income is based on a question of law, particularly when the correctness of the precedent relied upon for the addition is doubted by the assessee? Assessee's Contentions: The judgment does not record specific contentions made by the assessee. However, the ITAT's decision, which the Revenue is appealing, implies that the assessee likely argued that no penalty should be levied if the addition itself is contentious or based on a legal interpretation that is being challenged. Revenue's Contentions: The Revenue's appeals are based on the premise that the ITAT erred in setting aside the penalty. The Revenue likely argued that the penalty provisions are independent of the merits of the addition, and if the conditions for penalty were met, it should be upheld, irrespective of the subsequent challenge to the addition's basis. The Revenue's appeals are against the ITAT's reasoning that no penalty arises if the addition is a question of law.

Which sections of the Income-tax Act were involved?

Section 2(22)(e)

AI-generated summary — verify with the full judgment below

$~19, 21 & 22 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 442/2018 & CM APPLN 14358/2018 + ITA 444/2018 & CM APPLN 14359/2018 + ITA 445/2018 & CM APPLN 14360/2018

PR. COMMISSIONER OF INCOME TAX – 11 ..... Appellant Through Mr.Zoheb Hossain, Sr. Standing Counsel.

versus

M/S NATIONAL TRAVEL SERVICE ..... Respondent Through Mr.U.A.Rana and Mr.Himanshu Mehta, Advocates.

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE A. K. CHAWLA

O R D E R %

13.04.2018 The Revenue appeals are against the decisions of the Income Tax Appellate Tribunal which had set aside the penalty imposed by the Assessing Officer (AO) and upheld by the CIT(A). The ITAT’s reasoning is that the since the addition was a question of law framed by this Court, no question of imposing of penalty arises. In this case, the Court notes that additions were inter alia made under Section 2(22)(e) of the Income Tax Act where they were subsequently confirmed. The assessee’s appeal has doubted the correctness of the decision which was relied upon while confirming the addition made in this case. Consequently, imposition of penalty does not arise. No question of law arises. Appeals are dismissed.

S. RAVINDRA BHAT, J

A. K. CHAWLA, J APRIL 13, 2018/ndn

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