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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI D.T. GARASIA & SHRI N.K. PRADHAN
Per D.T. GARASIA, Judicial Member:
The present appeal has been preferred by the Revenue against the order dated 28.04.2015 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2009-10.
The short facts of the case are that the assessee company is engaged in the business of slum redevelopment projects. The assessee company carries inventory of under construction projects (work-in-progress). During the year under consideration, the 2 M/s. Shivshahi Punarvasan Prakalp Ltd. assessee had claimed provision for loss of Rs.6,74,00,000/- which was disallowed by the Assessing Officer (hereinafter referred to as the AO) in the assessment order. Later assessee was granted relief on protective basis for Rs.3,65,35,260/- which was even upheld by the AO. Further the assessee claimed 10% depreciation on the transit accommodation which AO considered at 5% on the ground that this is a residential accommodation. On the above issue, the AO had levied penalty under sec. 271(1)(c ) on the ground that the assessee had filed inaccurate particulars of Income.
Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has allowed the appeal of the assessee by observing as under: “3.3 I have considered the appellant's submissions The appellant had claimed provision for loss of Rs.6,74,00,000/- which AO had disallowed considering it as pending in nature. However, CIT(A) and ITAT allowed loss on proportionate basis, for Rs.3,65,35,360/-. Further AO disallowed the depreciation for Rs.3,64,726/-. On the above two additions, the AO levied penalty under sec 271(1)(c ) on the ground that appellant had filed inaccurate particulars of income. However the appellant had filed appeal before the ITO. The appeal was admitted by the High Court vide its order Nos 353 of 2012 with No 355 of 2015 with Appeal No.368 of 2012 with Appeal No.375 of 2012 wherein appeal of the appellant was admitted by order dt. 10th July 2014 by Bombay High Court. When the appeal of the appellant is admitted by the High Court, then the matter becomes debatable In view of the Bombay High Court's decision in CIT-7 Vs M/s Nayan Builders and Developers of 2012 dt 8th July 201. Identical issue is held by CIT Vs Anita Electronics (Karnataka) ITA No. 297/2014, Supreme Court's decision in the case of Santosh Hazar Purushottam Tiwari Civil Appeal-No. 1117 of 2001 wherein High Court and Supreme Court the issue on the appellate that when question of law is admitted in HC/SC, then it has to be considered as debatable issue where two views are possible. In such a case, the issue is debatable in nature in the following cases:
(i) CIT Vs M/s Nayan Builders and Developers....It is therefore abundantly clear that the additions in respect of which penalty was confirmed have been accepted by the Hon'ble Bombay HC leading to substantial question of law. When the High Court admits substantial question of law on an addition, it becomes apparent that the addition is certainly debatable. In such circumstances, penalty cannot be levied under sec. 271 (1)(c) as has been held in several cases including Rupam Mercantile
3 M/s. Shivshahi Punarvasan Prakalp Ltd. Vs DCIT [(2004) 91 ITD 237 (Ahd) (TM)] and Smt. Ramila Ratilal Shah Vs ACIT [(1998) 60 TTJ (Ahd) 171]. The submission of substantial question, of law by the Hon'ble High Court lends credence to the bonafides of the assessee in claiming deduction. Once it turns out that the claim of the assessee could have been considered for deduction as per a persona properly instructed in law and is not completely debarred at all, the mere fact of confirmation of disallowance would not per se lead to the imposition of penalty. Since the additions, in respect of which penalty has been upheld in the present proceedings, have been held by the Hon'ble High Court to be involving a substantial question of law, in our considered opinion, the penalty is not eligible under this section. We therefore order for the deletion of penalty.
CIT Vs Ankita Electronics Pvt Ltd--- The mere admission of the appeal by the HC On the substantial questions of law as have been quoted above, would make it apparent that the additions made were debatable. The Tribunal has thus rightly held that the submission of substantial question of law by the HC leads credence to the bonafide of the assessee and therefore, the penalty is not eligible under Sec. 271(1)(c ) of the Act. Merely because the claim of the assessee has been rejected by the revenue authorities would not make the assessee liable for penalty.
(iii) Santosh Hazari Vs Purushbttam Tiwari --- When a question of law is fairly arguable, where there is room for difference of opinion on it or where the court thought it necessary to deal with that question at some length and discuss alternative view, then the question would be a substantial question of law.
3.4 Here as High Court admitted the case, it means substantial question of law is invoked. Hence issue is debatable in nature. Penalty levied is cancelled.
3.5 Regarding the second issue, disallowance of depreciation, it is the claim of the appellant which AO disallowed. In such a case, when the claim is disallowed by the AO in the decision of CIT Vs Reliance Petro Products (P) Ltd. Reported in (2010) 322 ITR 158 held that when the claim is disallowed by the AO it would be equivated with filing of inaccurate particulars of income for concealment of particulars. Hence penalty levied is cancelled in view of the above decision. Hence ground of appeal is allowed.”
4. Aggrieved by the decision of the Ld. CIT(A), Revenue has come in appeal before us.
The Ld. D.R. has submitted the written submissions which read as under: “We are of the opinion that the Tribunal erred in deleting the penalty on this sole 4 M/s. Shivshahi Punarvasan Prakalp Ltd. 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 Courts 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 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 assessees case would fall under the mischief envisaged in the 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.
This is not to suggest that no such intention can be gathered from the order of 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 insofar 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.
This is precisely what has been done by the Tribunal in the present case. Order of the Tribunal, therefore, cannot be sustained. Question framed is answered in favour of the Revenue and against the assessee. 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. Tax Appeal is disposed of accordingly......”
The Ld. D.R. relied upon the order of the Hon’ble Gujarat High Court in the case of CIT vs. Prakash S. Vyas.
The Ld. A.R. has relied upon the order of the Ld. CIT(A).
We have heard the rival contentions of both the parties. We find that the Ld. CIT(A), following the decision of Hon’ble Bombay High Court in the case of CIT vs. Nayan Builders and Developers, held that when the question of law is admitted in High Court or 5 M/s. Shivshahi Punarvasan Prakalp Ltd. Hon’ble Supreme Court then the addition is debatable and when two views are possible the penalty cannot be imposed. Therefore, appeal was allowed.
The Ld. D.R. has relied upon the decision of Hon’ble Gujarat High Court in the case of CIT vs. Prakash S. Vyas and submitted that as per the decision of Hon’ble Gujarat High Court the appeal of the Department may be allowed.
We have heard the rival contentions of both the parties. Looking to the facts and circumstances of the case, we find that the Hon’ble Gujarat High Court, in the case of CIT vs. Prakash S. Vyas considering the various decisions, held that an admission of tax appeal by Gujarat High Court in many cases are ex-parte without recording a prima-facie vision and it is a prima-facie opinion of the court that mere admission of appeal in High Court cannot be an indication that issue is debatable and delete the penalty. We find that the Jurisdictional High Court has taken a contrary view and when the Jurisdictional High Court in the case of Nayan Builders and Developers has specifically held that when addition in respect of which the penalty was confirmed has been accepted by Hon’ble Gujarat High Court leading to a substantial question of law, then it is apparent that addition is certainly debatable. We find that the High Court has relied upon the decision of Tribunal in Roopam Mercantile vs. DCIT 19 ITD 239 (Ahmedabad -Third Member). Therefore, when jurisdictional High Court in this appeal has admitted the appeal
6 M/s. Shivshahi Punarvasan Prakalp Ltd. which clearly borne out from the appeal admitted by High Court vide order No.353 of 2012 with No.355 of 2015 with Appeal No.368 of 2012 with appeal No.375 of 2012 wherein appeal of the assessee was admitted by order dt. 10th July 2014 by Bombay High Court. Therefore, respectfully following the decision Jurisdictional High Court, we dismiss the Departmental appeal.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 24.01.2018.