Penalty need not be deleted on mere ground that Quantum Appeal is admitted on a Substantial Question of Law: Bombay High Court [Read Order]

The Bombay High Court in the case of Principal Commissioner of Income Tax­2 vs. M/s Shree Gopal Housing & Plantation corporation held that there can be no universal rule to the effect that no penalty can be levied if the quantum appeal is admitted on a substantial question of law.

Sheth, counsel appeared on behalf of Assessee pointed out that Tribunal deleted the penalty by following its order in quantum proceedings of deleting the additions. The advocate also argued that since no appeal against an order deleting penalty will lie to the present court in view of the fact that the admission of appeal in quantum proceedings by itself indicates that the question does give rise to the debatable issue.

The Court pressed the reliance of court in the decision of the commissioner of Income Tax Versus M/s Nayan Builders and developers where the tribunal deleted penalty while this court admitted an appeal in quantum proceedings on the substantial question of law.

The bench comprising Justice M.S. Sanklecha and Justice Riyaz I. Chagla had a considered opinion regarding the Nayan builder’s case wherein the issue which arose in the quantum proceedings related to bona fide claim of deduction under Act, further Tribunal held that the disallowance of claim of deduction which has been made bona-fide would not by itself lead to penalty.

Likewise, the Court directed that the question of entertaining deletion or imposing a penalty would have to be decided on the case by case basis.

Accordingly, the bench observed as “it cannot be a universal rule that once an appeal from the order of a Tribunal has been admitted in the quantum proceedings, then the issue is a debatable issue warranting deletion of penalty by the tribunal. There could be cases were the findings of the tribunal in quantum proceedings deleting addition could be perverse, then in such cases, the admission of appeal in quantum proceedings would indicate that an appeal against deletion of penalty on the above account will also warrant admission”.