Nagaiah Kekkireni Vs ITO (ITAT Hyderabad)
Penalty Cannot Stand When Quantum Issue Is Pending Before High Court-Once the High Court admits an appeal on the quantum issue, the matter becomes debatable
The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) deleted the penalty of ₹12.12 lakh levied under section 271(1)(c), holding that penalty proceedings cannot survive when the very quantum addition is sub judice and admitted by the High Court on a substantial question of law.
In this case for AY 2009-10, the penalty was levied in respect of an addition of ₹42.84 lakh made towards unexplained investment in purchase of land. Though the addition had earlier been sustained by the ITAT, the assessee carried the matter further, and the Hon’ble Telangana High Court admitted the appeal under section 260A, framing a substantial question of law on whether the Tribunal was justified in adopting an estimated sale value ignoring registered sale deeds, thereby allegedly violating section 43CA.
The Tribunal observed that once the High Court admits an appeal on the quantum issue, the matter becomes debatable, and the allegation of concealment or furnishing of inaccurate particulars cannot be said to have attained finality. Relying on the Delhi High Court judgment in PCIT v. Harsh International (P) Ltd. and a consistent line of precedents, the ITAT reiterated that penalty is not automatic and cannot be levied as a matter of course where the underlying issue is arguable and pending judicial scrutiny.
Accordingly, since the foundation of the penalty itself was unsettled, the ITAT held that the penalty under section 271(1)(c) was unsustainable and directed its deletion in full. The appeal of the assessee was allowed.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
