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Facts
The assessee claimed exemption under Section 10(38) for shares of Kailash Auto Groups. Initially, the ITAT allowed the claim, but the High Court reversed this, restoring the disallowance. Consequently, penalty proceedings were initiated.
Held
The Tribunal held that penalty under Section 271(1)(c) is not leviable when there are divergent views on an issue, even if the quantum addition is confirmed. Since there was a difference of opinion regarding the exemption under Section 10(38), the penalty was deleted.
Key Issues
Whether penalty under Section 271(1)(c) is leviable when there is a divergent view on the allowability of exemption under Section 10(38)?
Sections Cited
10(38), 271(1)(c)
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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAJESH KUMAR
O R D E R Per Bench : These two appeals filed by the assessee against the separate orders of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, both dated 25.12.2024 for the assessment year 2015-2016 against the confirmation of penalty levied u/s.270(1)(c) of the Act.
It was submitted by the Ld.AR that in the return filed by the assessee the assessee had claimed exemption u/s.10(38) of the Act in respect of certain shares of Kailash Auto Groups to an extent of Rs.35,05,477/-. The claim of the assessee u/s.10(38) of the Act came to be rejected by AO and the ITAT had allowed the assessee’s claim of exemption u/s.10(38) of the Act. It was submission that the revenue filed appeal before the Hon’ble jurisdiction High Court and the Hon’ble Jurisdiction High Court reversed the findings of the Tribunal and restored the disallowance of the claim of exemption u/s.10(38) of the Act. It was submission that consequently penalty u/s.271(1)(c) of the Act came to be initiated and levied on the assessee in respect of concealment the income. It was submission that on earlier occasions, being decisions in the case of Smt. Shreyashi Ganguli passed in GA No. 2281 of 2012 of 2012, dated 05/09/2012 as also in the decision in the case of Bhagawati Prasad Agarwal in ITA 22 of 2019 vide order dated 29/04/2009, the Hon’ble jurisdictional High Court had been granting the assessee’s benefit of the exemption u/s.10(38) of the Act in identical circumstances. It was submission that in the assessee’s case, however, the Hon’ble jurisdictional High Court had taken a completely opposite view and had denied the assessee’s claim of exemption u/s.10(38) of the Act. It was submission that the decision of the Hon’ble jurisdictional High Court itself shows that there was contradictory decisions and when two views are possible, penalty 271(1)(c) of the Act is not liable to be levied in view of the decision of the Hon’ble Kolkata High Court in the case of Durga Kamal Rice Mills, reported in 265 ITR 25(Calcutta). It was prayer that the penalty as levied may be cancelled. It was also the submission that the all details in support of the assessee’s claim of deduction u/s.10(38) of the Act had been produced in the course of the assessment proceeding as also the appellate proceeding.
In reply, the Ld.Sr DR submitted that the quantum issues have already been settled and the assessee’s claim of exemption u/s.10(38) of the Act has been denied by the Hon’ble jurisdiction High Court of Calcutta. It was submission that in such cases penalty is leviable. It was submission that the penalty as levied by the AO and confirmed by the Ld.CIT(A) is liable to be upheld.
We have considered the rival submissions. A perusal of the facts in the present case clearly shows that in respect of issues of exemption u/s.10(38) of the Act, the Hon’ble jurisdictional High Court in the case of Shreyasi Ganguli and Bhagawati Prasad Agarwal had been holding the issue in the favour of the assessee. It is subsequently in the case of the assessee that the issue has now been reversed. It must also be mentioned here that various other High Courts are also granting the assessee’s the benefit of deduction u/s.10(38) of the Act. Thus, there is divergent of views on this issue. When there is a divergent view on the issue of the assessee penalty u/s.271(1)(c) is not leviable. Just because quantum addition has already been confirmed does not mean that penalty is automatic. Penalty proceedings and assessment proceedings are two independent proceedings and the assessee is fully entitled and challenged the addition in the penalty proceeding for the non-levy of the penalty. The assessee successfully shown that there is divergent of view on the issue and as there are difference of opinion in regard to the allowance of deduction/exemption u/s.10(38) of the Act and that too especially in case of shares of Kailash Auto, in the interest of justice penalty as levied by the AO and confirmed by the Ld.CIT(A) stands deleted.