ITO 12(2)(4), MUMBAI vs. RENUKA VASWANI, MUMBAI

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ITA 3865/MUM/2013Status: DisposedITAT Mumbai22 October 2015AY 1999-004 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that since a substantial question of law regarding the classification of income was admitted by the High Court, the issue was debatable. Therefore, penalty under Section 271(1)(c) was not justified.

What were the facts?

The Assessing Officer treated the assessee's short-term capital gains from share trading as speculative business income. Consequently, penalty proceedings were initiated under Section 271(1)(c). The CIT(A) deleted the penalty.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable when the classification of income (capital gains vs. business income) is a debatable issue admitted by the High Court.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

Before: SHRI N.K. BILLAIYA & SHRI AMARJIT SINGH

Hearing: 27.10.2015Pronounced: 27.10.2015

O R D E R

PER N.K. BILLAIYA, AM:

1.

This appeal by the Revenue is preferred against the order of the Ld. CIT(A)-23, Mumbai dated 28.2.2013 pertaining to Assessment year 1999-2000.

2.

The sum and substance of the grievance of the Revenue is that the Ld. CIT(A) erred in deleting the penalty levied by the AO u/s. 271(1)(c) of the Act.

3.

The roots for the levy of penalty lie in the assessment order dated 28.3.2002 made u/s. 143(3) of the Act. While scrutinizing the return of income, the Assessing Officer noticed that the assessee is indulged in share trading and accordingly the claim of the assessee under the head ‘Short Term Capital Gains’ was not accepted and consequently the net earnings from the speculative share transactions shown at Rs. 14,19,043/- was treated as income from speculative business.

3.1. Against this backdrop, penal proceedings were initiated u/s. 271(1)(c) of the Act.

3.2. At the very outset, the Ld. Counsel for the assessee stated that the Hon’ble High Court of Bombay has admitted the following substantial question of law:

“ Whether on the facts and in the circumstances of the case and in law was the Tribunal justified in treating the income of the appellant from the sale of shares as business income as against income from short term capital gain declared in the return of income filed by the appellant?

3.3. It is the say of the Ld. Counsel that once a substantial question of law is admitted by the Hon’ble High Court, no case is made out for levy of penalty. Reliance was placed on the decision in the case of M/s. Navyan Builders and Developers in Tax Appeal No. 415 of 2012, Mumbai.

4.

The Ld. Departmental Representative could not bring any distinguishing decision in favour of the Revenue.

5.

After going carefully through the orders of the authorities below, we find that the Hon’ble High Court of Bombay in the case of Navyan Builders and Developers (supra) has held as under:

“We find that this appeal cannot be entertained as it does not raise any substantial question of law. The imposition of penalty was found not to be justified and the appeal was allowed. As a proof that the penalty was debatable and arguable issue, the Tribunal referred to the order on assessee’s appeal in quantum proceedings and the substantial questions of law which have been framed therein. In our view, there was no case made out for imposition of penalty and the same was rightly set aside”

6.

A similar view was taken by the Hon’ble High Court of Delhi in the case of Liquid Investment and Trading Co. in Income-Tax Appeal No. 240/2009. The findings of the Hon’ble High Court read as under:

“Both the CIT(A) as well as the ITAT have set aside the penalty imposed by the AO u/s. 271(1)(c) of the I.T. Act, 1961 on the ground that the issue of deduction u/s. 14A of the Act was a debatable issue. We may also note that against the quantum assessment where under deduction u/s. 14A of the Act was prescribed to the assessee, the assessee has preferred an appeal in this Court u/s. 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.”

Respectfully following the decisions referred to hereinabove, in our considered opinion, this is not a fit case for the levy of penalty u/s. 271(1)(c) of the Act. We, therefore, do not find any reason to interfere with the findings of the Ld. CIT(A).

7.

In the result, the appeal filed by the Revenue is dismissed.

Order pronounced in the open court at the time of hearing on 27th October, 2015

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