Penalty cannot be levied if addition itself was debatable

M/s Google India Pvt.Ltd. Vs ACIT (ITAT Bangalore)

It is pertinent to observe that while passing assessment order Ld.AO initiated penalty proceedings without referring to any charge as to for “concealment of income” or “filing of inaccurate particulars of income”. Further Ld. AO subsequent to order passed by Ld. CIT (A) passes penalty order, wherein penalty has been levied for deliberateness of “tax evasion”, which in our considered opinion is not at all the requirement of Sec.271(1)(c ) of the IT Act.

Be that as it may, it is observed that Hon’ble High Court for year under consideration admitted substantial questions of law by which addition itself becomes debatable. On perusal of decision relied upon by Ld.AR in case of CIT vs Ankita Electronics Pvt Ltd and CIT vs Dr Hirsha N. Biliangady (supra), additions in respect of which penalty was confirmed has been accepted by Hon’ble Karnataka High Court, leading to substantial question of law. Thus when Hon’ble High Court admitted substantial question of law on additions, it becomes apparent that issue is certainly debatable. In such circumstances penalty cannot be levied under section 271 (1) (c) of the Act.

FULL TEXT OF THE ITAT JUDGEMENT

Present penalty appeal has been filed by assessee against order dated 27/02/13 passed by Ld. CIT (A)-1, Bangalore for assessment year 2008-09 on following grounds of appeal:

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