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Income Tax Appellate Tribunal, “B”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI RAM LAL NEGI, JM
O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order of CIT(A)- Mumbai, dated 26-7-2012, for the assessment year 2002-2003, in the matter of imposition of penalty u/s.271(1)(c) of the I.T.Act.
Ld. AR placed on record order of the Hon’ble Bombay High Court wherein substantial question of law has been admitted with regard to the additions confirmed by the Tribunal. He further relied on the following judicial pronouncements in support of the proposition that no penalty should be imposed when substantial question of law had been admitted by High Court :-
2 i) Nayan Builders and Developers, ITA No.415/2012(Bombay High Court), ii) Ramesh D. Tainwala (ITA No.2175/Mum/2015), iii) Liquid Invesmtnet and Trading Co., ITA 240/2009(Delhi Hgh Court), iv) M/s Schrader Duncan Ltd., ITA No.8223/Mum/2010, v) Vidyavihar Containers Ltd., ITA Nos.5541&5544/Mum/2013 and vi) Nelito Systems Ltd, ITA No.547/Mum/2013, Ld. AR further submitted that it has been held by the Tribunal in case of Nayan Builders and Developers(supra), that 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 u/s.271(1)(c).
On the other hand, it was contended by ld. CIT DR that Hon’ble High Court has only accepted the substantial question of law but has not decided the issue, therefore appeal should be kept in abeyance till the decision of Hon’ble High Court.
We have considered rival contentions and found that with regard to the additions confirmed by Tribunal, for which penalty has been levied, substantial question of law has been admitted by Hon’ble Bombay High Court in Income Tax Appeal No.1026 of 2012, order dated 15-3-2013, which reads as under : “Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the transaction entered into by the appellant with PIL in respect of transfer of individual assets of M seal division constitutes a slump sale contemplated in Section 2(42C) read with Explanation 1 to Section 2(19AA) and section 50B and not itemized sale of individual assets as claimed by the appellant.”
We had gone through the various judicial pronouncements cited at bar by ld. AR. In case of Nayan Builders and Developers (supra), the ITAT Mumbai Tribunal in ITA No.2379/Mum/2009. vide order dated 18-3-2011 held as under :- “3. It is, therefore, abundantly clear that the additions in respect of which penalty was confirmed have been accepted by the Hon’ble Bombay High Court 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 u/s 271(1)© as has been held in several cases including Rupam Mercantile Vs. DCIT [(2004) 91 ITD 237 (Ahd) (TM)] and Smt.Ramila Ratilal Shah Vs. ACIT [(1998) 60 TTJ (Ahd) 171]. The admission of substantial question of law by the Hon’ble High Court lends credence to the bona fides 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 person 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 exigible under this section. We, therefore, order for the deletion of penalty.”
We further found that appeal filed by the revenue against the above order of ITAT has been dismissed by the Hon’ble Bombay High Court in Income Tax Appeal No.415 of 2012, vide order dated 8-7-2014. 8. The Hon’ble Delhi High Court in case of Liquid Investment and Trading Company, ITA No.240/2009, order dated 5-10-2010, held as under :- “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.”