Pr CIT vs. Shree Gopal Housing & Plantation Corporation (Bombay High Court)

The Revenue urged the following questions of law for the consideration of the High Court:

(i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting the penalty levied u/s 271(1)(c) by the Assessing Officer, on addition as endorsed by the CIT(A), that the amount of Rs.1 crore was the assessee’s undisclosed income, without appreciating the fact that its two partners had admitted such undisclosed income by filing revised computation of their income, declaring therein their share of the aforesaid amount as their undisclosed income?

(ii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting the penalty levied u/s 271(1)(c) by the Assessing Officer on account of unaccounted cash receipts on sale of plots?

(iii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting the penalty levied u/s 271(1)(c) by the Assessing Officer, on addition as endorsed by the CIT(A), that the amount of Rs.1 crore was the assessee’s undisclosed income, without appreciating that by doing so that the Tribunal has contradicted ins own findings in the case of the partners, since in the case of the partners, the Tribunal has itself endorsed the disclosure of the impugned amount of Rs.1 crore as the partner’s undisclosed income, by further allowing telescoping benefit of unexplained investment in jewellery and undisclosed cash against the said unaccounted income?

HELD by the High Court:

(1) At the very outset, Mr. Sheth, learned Counsel appearing for the respondent Revenue points out that the Tribunal by the impugned order dated 10th February, 2015 deleted penalty by following its order dated 7th November, 2014 in quantum proceedings deleting the additions. It is further pointed out that an appeal being Appeal No.136 of 2015 from the order dated 7th November, 2014 of the Tribunal in quantum proceedings has been admitted by this Court on 12th December, 2017. Therefore, no appeal against an order deleting penalty will lie to this Court in view of the fact that the admission of appeal in quantum proceedings by itself indicates that the question does give rise to a debatable issue. Therefore, no occasion to impose any penalty can arise. Consequently, no question of entertaining an appeal in respect of deletion of penalty can arise. In support, reliance was placed upon the decision of this Court in Commissioner of Income Tax Vs. M/s. Nayan Builders and Developers (Income Tax Appeal No.415 of 2012), decided on 8th July, 2014. Our attention was also invited to the order dated 18th March, 2011 of the Tribunal in the case of M/s. Nayan Builders and Developers (supra) where the Tribunal had deleted the penalty on the ground that as this Court has admitted an appeal in quantum proceedings on substantial question of law, evidences that the issue is debatable. Thus, not warranting any penalty.

(2) We find that the decision of this Court in Nayan Builders (supra) upholding the order of the Tribunal proceeded on the basis that no case was made out for imposition of penalty and the same was rightly set aside by the Tribunal. Further, the order of the Tribunal against which the above appeal in Nayan Builders (supra) was filed by the Revenue, clearly records the fact that the issues which arose in the quantum proceedings related to a bona fide claim of deduction under the Act. Further, the Tribunal held that the disallowance of claim of deduction which has been made bonafide would not by itself lead to penalty. Therefore, each appeal in respect of the order deleting / imposing a penalty by the Tribunal would have to be considered in relation to the facts arising therein and also in the quantum proceedings. It cannot be said as a matter of rule that in case where this Court admits an appeal relating to quantum proceedings ipso facto i.e. without anything more, the penalty order get vitiated. Thus, the question of entertaining an appeal from an order imposing / deleting penalty would have to be decided on a case to case basis. There can be no universal rule to the effect that no penalty, if quantum appeal is admitted on a substantial question of law.

(3) In fact, the admission of an appeal in quantum proceedings, if arising on a pure interpretation of law or on a claim for deduction in respect of which full disclosure has been made, may, give rise to a possible view, that admission of appeal in the quantum proceedings would suggest no penalty can be imposed as it is a debatable issue. However, it cannot be a universal rule that once an appeal from the order of the Tribunal has been admitted in the quantum proceedings, then, ipso facto the issue is a debatable issue warranting deletion of penalty by the Tribunal. There could be cases where the finding of the Tribunal in quantum proceedings deleting addition could be perverse, then, in such cases, the admission of appeal in quantum proceedings would indicate that an appeal against deletion of penalty on the above account will also warrant admission.