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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI R. C. SHARMA, AM & SHRI MAHAVIR SINGH, JM
आदेश / O R D E R Per Mahavir Singh, JM: This appeal by assessee is arising out of order of CIT(A)-5, Mumbai in Appeal No. IT-218/12-13/92/13-14 dated 12.12.2013. Assessment was framed by Dy. CIT, Mumbai u/s. 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2006-07 vide his order dated 26.10.2010. Penalty was imposed by Dy. CIT-2(2), Mumbai u/s. 271(1)(c) of the Act vide his order dated 31.01.2013.
The only issue in this appeal of the assessee is against the order of CIT(A) confirming the levy of penalty by the A.O. u/s. 271(1)(c) of the Act. The assessee has raised following three grounds: ‘1. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in confirming penalty of Rs.64.82.653/- u/s 271(1)(c)
2 ITA No. 1316/Mum/2014 (A.Y. 2006-07) Mahindra & Mahindra Limited vs. Dy. CIT of the Act levied by the Assessing Officer. The learned CIT(A) ought to have accepted the contention of the Appellant that it had neither furnished inaccurate particulars of its income nor concealed its income and that, at the highest, the subject matter of rejection of claim was a case of a debatable issue on which two views were reasonably possible. 2. The order levying penalty is bad in law, and in any event merits being cancelled. 3. Without prejudice to the above, on the facts and in the circumstances of the case and in law the learned CIT(A) erred in not adjudicating the ground regarding levy of penalty with reference to tax liability calculated applying tax rate of 35% ignoring the fact that the impugned long term capital loss on sale of R&D asset was set off/would be set off only against long term capital gains having tax liability @ 20% and not 35%. In any event therefore, the amount of penalty levied by learned Assessing Officer needs be reduced pro tanto.’
At the outset, the ld. Counsel for the assessee stated that the quantum appeal u/s. 260A of the Act has been admitted by the Hon’ble Bombay High Court in ITA No. 1289 of 2012 dated 08.3.2013, wherein the issue of disallowance of capital loss, pertaining to receipt arising out of sale of research and development of capital assets, has been admitted and reframed substantial question of law vide order dated 08.3.2013, as under:
‘1. Appeal is admitted on the following reframed substantial questions of law: (i) ……….. (ii) ……….. (xiii) Whether on the facts and in the circumstances of the case and in law, the Tribunal erred in sustaining disallowance of capital loss Rs.1,85,21,865/- pertaining to sale of Research and Development (R & D) capital assets?’
The learned counsel of the assessee also relied upon the judgment of the Hon'ble Bombay High Court in the case of CIT vs. Indusind Bank Ltd. in Income Tax Appeal No. 1293 of 2012 wherein the Hon'ble High Court has accepted the proposition that wherever substantial question of law is admitted, the Tribunal was right in deleting the penalty levied by AO on disallowance of depreciation on lease transactions. The Hon'ble High Court, vide order dated 24.09.2014 held as under: -
3 ITA No. 1316/Mum/2014 (A.Y. 2006-07) Mahindra & Mahindra Limited vs. Dy. CIT
“2] With their assistance, we have gone through the concurrent findings on the point of deletion of penalty. In para 5.2 of the order of the Commissioner of Income Tax (Appeals), it has been held that there is disallowance of depreciation made by the Assessing Officer in the assessment order for the assessment year in question, namely, 200102. That is with reference to the lease transactions entered by the Assessee during the assessment year 199596. The claim that these are genuine transactions and made by the Assessee was not accepted by the Revenue. However, the Assessee persisted and claimed depreciation in the assessment year in question as well. The Commissioner as also the Tribunal found that there is no concealment of particulars of income nor furnishing of inaccurate particulars of income for the assessment year. 3] The argument of Mr. Vimal Gupta is that when such was the stand of the department, the Assessee approached the Settlement Commission during some assessment years and accepted the order of the Settlement Commission. However, in the present assessment year, it raises the very claim and, therefore, the Commissioner's findings could not have been endorsed by the Tribunal and this is a substantial question of law particularly when it failed to assign independent reasons of its own. 4] We do not find any merit in this contention because in the given facts the only conclusion that has been reached is that all particulars were available with the department/Revenue. There was no concealment nor the particulars have been termed as inaccurate and for the subject assessment year. It is on these findings that the penalty has been deleted. Pertinently, it has been deleted also Qua other claims but the Revenue raised deletion of penalty on lease transaction as the only substantial question of law. For all these reasons, we do not find that the Tribunal's order is either perverse or vitiated by any error of law apparent on the face of the record. There is no merit in the Appeal. It is, accordingly, dismissed. No costs.” Similarly, the Hon'ble Delhi High Court in CIT vs. Liquid Investment and Trading Co. in ITA No. 240 of 2009 dated 04.10.2010 has laid down a similar proposition by observing as under: -
“Both the CIT(A) as well as the ITAT have set aside the penalty imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 on the ground that the issue of deduction under section 14A of the Act was a datable issue. We may also note that against the quantum assessment where under deduction under section 14A of the Act was prescribed to the assessee, the assessee has preferred an appeal in this Court under section 260A of the Act which has also been admitted and substantial question of law framed. This itself shows that the issue is debatable. For these reasons, we are of the opinion that no question of law arises in the present case.” 4. On the other hand, the Ld. CIT, DR Shri Sanjeev Jain argued and he relied on the decision of Hon’ble Delhi High Court in the case of CIT Vs. Splender Construction 352 ITR 588 (Del.). According to him, this issue where quantum proceedings have been considered by Hon’ble High Court and
4 ITA No. 1316/Mum/2014 (A.Y. 2006-07) Mahindra & Mahindra Limited vs. Dy. CIT
substantial question of law has been framed, it itself does not give rise to the facts that the issue is debatable. He referred to para 10 of Hon’ble High Court’s judgment, which reads as under: “10. The issue was not debatable, as held by the Tribunal in the impugned order. No doubt, appeal was admitted. However, the Tribunal has glossed over a very important and fundamental fact. In quantum proceedings, appeal filed by the assessee i.e. ITA 662/2009 came up for admission on 16th September, 2009. On the same date, appeal was admitted, arguments heard and orders were dictated in the Court dismissing the appeal there and then. In this factual backdrop, when order of the Assessing Officer in quantum proceedings was sustained by all successive authorities and this court also dismissed the appeal at the admission stage, albeit after admitting the same, it cannot be said that the issue was debatable.”
He also relied on the decision of Hon’ble Gujarat High Court in the case of Dharamshi B. Shah 51 Taxmann.com 274 wherein it was held that the penalty u/s. 271(1)(c) of the Act cannot be deleted on the sole ground of admission of assessee’s appeal and framing of substantial question of law by the Hon’ble High Court. Hon’ble High Court held as under:
“8. Identical question came to be considered by the Division Bench of this Court in Tax Appeal No.606/23010 and in paragraph 10 to 13 the Division Bench of this Court has observed as under and has quashed and set aside the order of the tribunal deleting the penalty on the aforesaid ground and has remanded the matter to the tribunal to consider the appeal afresh in accordance with law and on its own merits.
"10. Having, thus, heard learned counsel for the parties, we reiterate that the sole ground on which the Tribunal deleted the penalty was that with respect to the quantum additions, the assessee had approached the High Court and High Court had admitted the appeal framing substantial questions of law for consideration. In view of the Tribunal, this would indicate that the issue was debatable and that therefore, no penalty under Section 271(1)(c) could be imposed.
We are of the opinion that the Tribunal erred in deleting the penalty on this sole 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 Court's 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 O/TAXAP/189/2014 JUDGMENT 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 assessee's case would fall
5 ITA No. 1316/Mum/2014 (A.Y. 2006-07) Mahindra & Mahindra Limited vs. Dy. CIT under the mischief envisaged in the 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. 12. 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. 13. 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."
In view of these case laws the Ld. CIT, DR stated that the penalty imposed by AO be not deleted solely on the basis that the assessee is able to demonstrate that there is substantial question of law admitted by Hon’ble High Court.
We have heard both sides and gone through the facts and circumstances of the case. We find that the only issue is disallowance of capital loss, pertaining to receipt arising out of sale of research and development of capital assets, on which the AO has levied penalty and CIT(A) confirmed. On this issue the Hon'ble Bombay High Court, in quantum, has admitted the substantial question of law as noted above. In view of these facts, we find that the issue is squarely covered by the decision of the jurisdictional High Court in assessee’s own case cited supra and also of Hon'ble Delhi High Court in the case of Liquid Investment and Trading Co., supra, wherein it is held that whenever the assessee had preferred appeal in Hon'ble High Court under section 260A of the Act, which has been admitted and substantial question of law frames, that itself shows that the issue is debatable and for that reason the penalty under section 271(1)(c) of the Act cannot be levied. We are of the view that Hon’ble
6 ITA No. 1316/Mum/2014 (A.Y. 2006-07) Mahindra & Mahindra Limited vs. Dy. CIT Jurisdictional High Court has clearly laid down the principle that once Hon’ble High Court admits the substantial question of law in quantum appeal of the assessee, that itself shows that the issue is debatable and for that reason penalty u/s. 271(1)(c) of the Act cannot be levied. As the issue is squarely covered by jurisdictional High Court and respectfully following the same and Hon'ble Delhi High Court, we delete the penalty and allow the appeal of the assessee. In the result, the assessee’s appeal is allowed.
Order pronounced in the open court on April 07th, 2016 Sd/- Sd/- (R. C. Sharma) (Mahavir Singh) लेखा सद�य / Accountant Member �या�यक सद�य / Judicial Member
मुंबई Mumbai; �दनांक Dated : 07.04.2016
व.�न.स./Roshani, Sr. PS
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. आयकर आयु�त(अपील) / The CIT(A) 4. आयकर आयु�त / CIT – concerned 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard File आदेशानुसार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, मुंबई / ITAT, Mumbai