Can penalty u/s. 271(1)(c) be imposed in a case where assessee has raised a debatable issue?

CIT Vs. Indersons Leather P. Ltd. (P&H HC)-  The assessee company, after discontinuing its manufacturing business, leased out its shed along with fittings and disclosed the income as income from business, whereas the Revenue contended that the same be assessed as “Income from house property. The issue under consideration is whether penalty under section 271(1)(c) can be imposed in such a case. On this issue, the High Court observed that, mere raising of a debatable issue would not amount to concealment of income or furnishing inaccurate particulars and therefore, penalty under section 271(1)(c) cannot be imposed.

HIGH COURT OF PUNJAB & HARYANA

COMMISSIONER OF INCOME TAX

Vs.

INDERSONS LEATHER (P) LTD.

IT Appeal No. 118 of 2009

24th August, 2009

Asst. Year: 2001- 02

JUDGMENT

Adarsh Kumar Goel, J. :

The Revenue has preferred this appeal under s. 260A of the IT Act, 1961 (for short, “the Act”) against the order of the Tribunal, Amritsar Bench, Amritsar dt. 12th Sept., 2008 passed in ITA No. 50/Asr/2008 for the asst. yr. 2001- 02, proposing to raise the following substantial question of law :

“Whether on the facts and circumstances of the case (having furnished of inaccurate particulars of income established) the Tribunal was right in law in deleting the penalty imposed under s. 271(1) (c) of the IT Act, 1961 ?”

The assessee made a claim declaring his income as business income while the AO held the same to be income

from house property, which view has been upheld by the Tribunal. The AO also levied penalty under s. 271(1)(c), which was upheld by the CIT(A). The Tribunal, however, held that the assessee was not guilty of any concealment or giving inaccurate particulars and had raised a debatable issue. In such a situation, penalty was deleted.

We have heard learned counsel for the Revenue.

In view of the finding of the Tribunal that the assessee had not concealed income nor furnished inaccurate

particulars and had merely raised a debatable issue, we are unable to hold that any substantial question of law arises.

The appeal is dismissed.