No s. 271(1)(c) Penalty If Quantum Appeal Admitted By High Court: Delhi High Court

The assessee’s appeal against the disallowance made u/s 14A was admitted by the High Court. The AO levied penalty u/s 271(1)(c) in respect of the said disallowance. The CIT(A) and the ITAT set aside the penalty levied u/s 271(1)(c) on the ground that the issue of deduction u/s 14A was a debatable issue. On appeal by the Department to the High Court HELD:

Both the CIT(A) as well as the ITAT have set aside the penalty imposed by the AO u/s 271(1)(c) on the ground that the issue of deduction u/s 14A of the Act was a debatable issue. We may also note that against the quantum assessment where under deduction u/s 14A of the Act was prescribed to the assessee, the assessee has preferred an appeal in this Court u/s 260A of the Act which has also been admitted and substantial question of law framed. This itself shows that the issue is debatable. For these reasons, we are of the opinion that no question of law arises in the present case.

See also Yugal Kishore Jajoo vs. DCIT (Indore) (included in file) where the issue is discussed in detail, Nayan Builders (Mum) & Rupam Mercantile 91 ITD 237 (Ahd). The contrary view in Khanna & Annadhanam 142 TTJ 1 (Del) may not be good law now