By C. N. Vaze
Shailesh Kamdar
Jagdish T. Punjabi
Bhadresh Doshi Chartered Accountants
fiogf49gjkf0d
Section 271(1)(c) – Penalty u/s. 271(1)(c) is not leviable when the High Court has admitted the substantial question of law on the question of addition.
Facts
The Assessing Officer (AO) passed an order levying penalty of Rs. 66,36,077 u/s. 271(1)(c) of the Act in respect of disallowance of Long Term Capital Loss on repurchase of units of US 64 scheme of Unit Trust of India. The AO held that the assessee had furnished inaccurate details of income with respect to long term capital loss claimed.
Aggrieved, the assessee preferred an appeal to the CIT(A) who upheld the action of the AO.
Aggrieved, the assessee preferred an appeal to the Tribunal where relying on the decision of the Bombay High Court in the case of CIT vs. M/s. Nayan Builders & Developers (ITA No.415/2012) order dated 8th July, 2014. it was contended that since the High Court has admitted substantial question of law, penalty u/s. 271(1)(c) is not leviable.
Held
The Tribunal noted that the substantial question of law “whether on the facts in the circumstances of the case and in law, the Tribunal was justified in holding that the appellant was not entitled to claim the loss of Rs.6. 34 crore arising on conversion of UTI US 64 units in to 6.75% Tax Free Bonds of UTI?” has been admitted by the Hon’ble jurisdictional High Court, vide order dated 19th September, 2014.
It also noted that the Hon’ble jurisdictional High court vide order dated 08-07-2014 in the case of CIT vs. M/s. Nayan Builders & Developers (ITA No.415/2012) held that no penalty is imposable u/s. 271(1)(c) of the Act in a case where substantial question of law has been admitted by the High Court. Likewise, the Tribunal, in the case of M/s. Nayan Builders & Developers Pvt. Ltd. (ITA No.2379/ Mum/2009) order dated 18th March 2011, deleted the penalty. In another case Advaita Estate Development (P.) Ltd. vs. ITO (2013) 40 Taxman.com 142 (Mumbai-Trib.) vide order dated 27/08/2013 deleted the penalty.
The Tribunal following the decision of the jurisdictional High Court allowed the appeal filed by the assessee. The Tribunal, however, observed that if at any stage, the order of the Tribunal on quantum addition is upheld by the Hon’ble High Court, the Department is free to proceed in accordance with law on penalty proceedings.
