Penalty u/s 271(1)(c) on highly debatable issue is unsustainable

A2Z Maintenance & Engineering Services Limited Vs DCIT (ITAT Delhi)

ITAT Delhi held that imposition of penalty under section 271(1)(c) of the Income Tax Act on a highly debatable issue is unsustainable in law.

Facts- The search and seizure operation u/s. 132 of the Act was conducted on the premises of the group cases including the assessee. The assessment was consequently carried out u/s. 153A of the Act. During the course of search operation, a disclosure of Rs.65 lakh was made under S. 132(4) of the Act. The aforesaid disclosure was included the Return of Income (ROI) filed in S. 153A proceedings and the income was assessed. Simultaneously, AO invoked Explanation-5A to Section 271(1)(c) of the Act and imposed penalty on the disclosure of Rs. 65 lakh made under Section 132(4) of the Act and incorporated in the ROI.

In the first appeal by the assessee, the CIT(A) denied any relief and confirmed the action of the Assessing Officer towards imposition of penalty under Section 271(1)(c) r.w. Explanation-5A thereto of the Act.

Further, aggrieved, the assessee preferred appeal before the Tribunal.

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