CIT Vs S. Kumar Tyres Manufacturing Co. Ltd. (Madhya Pradesh High Court)
Sub-Whether there can be any penalty u/s 271(1)(c) in respect of a debatable issue?
The Division bench of Madhya Pradesh High Court was considering department’s appeal when ITAT had given relief to the assessee by holding that there could not have been penalty u/s 271(1)(c) in respect of an amount of Rs 5.18 crores which was claimed as capital receipt while filing return of income but was not accepted till high court level and was adjudicated to be revenue receipt.
The High court accepting arguments of the assessee that this is a debatable issue and adjudicated it, therefore, it cannot be held that the assessee concealed the particular of the income.
In all fairness, the assessee disclosed the income, as per the advice given by his Tax Consultant / Chartered Accountant, as a business receipt, hence, the appellant tribunal has rightly held that it is not a case of concealment of particulars of income or non-furnishing inaccurate particulars of such income.
The famous decision in the case of CIT Vs Reliance Petroproducts Pvt ltd (2010) 322 ITR 158 (SC) and Price Water house coopers Pvt ltd Vs CIT Kolkata-1 and another (2012) 11 SCC 316(SC) were referred to in favour of the proposition and finally the department’s appeal was dismissed on this issue.
FULL TEXT OF THE JUDGMENT/ORDER OF MADHYA PRADESH HIGH COURT
The appellant / Commissioner of Income Tax – I has filed the present appeal under Section 260-A of the Income Tax Act, 1961 being aggrieved by the order dated 30.04.2003 passed by the Income Tax Appellate Tribunal in ITA Nos.284/IND/02 and 339/IND/02 for the Assessment Year, 1992-93.
2. The facts of the case in short are as under:-
2.1. Respondent / Company was established in the year 1985 and thereafter entered into the manufacturing of tyers and trading of fabrics. The respondent filed an IT return on 31/12/1992 showing the loss of Rs. 1,02,86,772/- with a Tax Audit Report both for the Tyer Division and Fabric Division. During the assessment proceedings, it was noticed that the respondent started its commercial production on 4/5/1988 with business losses claimed in the AY 1989-90. Letter on the respondent claimed that commercial production was started on 1/31992 but the Assessment Officer did not accept the claim of the petitioner in respect of capitalizing the amount of Rs.6,00,91,886/- in respect of expenses and loss incurred up to 01.03.1992. The assessment was completed on 28.02.1995 determining total income of Rs.2,42,17,558/- with following conditions: –
