Mr. Kanwaljit Singh, New Delhi V. ACIT, New Delhi

ITA 5768/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4721 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 08-05-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 28-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN GOTRU
• Keywords: Salary income; Application of stay; Question of law
• Section: 148

Judgement Text

1 IN THE INCOME TAX APPELATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NOS. 5766 TO 5768/DEL/2014 ALONGWITH STAY APPLICATION NOS. 55 TO 57/DEL/2016 (IN ITA NOS. 5766 TO 5768/DEL/2014 A.YRS. : 2003-04 TO 2005-06 MR. KANWALJIT SINGH, VS. ACIT, CIRCLE-37(1), 75, FRIENDS COLONY (WEST), NEW DELHI NEW DELHI 110 0065 (PAN: AAXPS6495A) (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. SWEETY KOTHARI, CA DEPARTMENT BY : SH. SHRAVAN GOTRU, SR. DR O R D E R PER H.S. SIDHU, JM THESE APPEALS BY THE ASSESSEES ARE DIRECTED AGAINST THE RESP ECTIVE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- XXVIII, NEW DELHI RELATING TO ASSESSMENT YEARS 2003-04 TO 2005-06. ASSESSEE AL SO FILED THE 03 STAY APPLICATIONS FOR STAY OF OUTSTANDING DEMAND/PENA LTY IN DISPUTE. SINCE THE ISSUES INVOLVED IN THESE APPEALS AND STAY APP LICATIONS ARE COMMON AND IDENTICAL, HENCE, THE SAME WERE HEARD TOGET HER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVEN IENCE, BY DEALING WITH ITA NO. 5766/DEL/2014 (AY 2003-04) ONLY. 2 2. THE GROUNDS RAISED IN ALL THE APPEALS ARE COMMON A ND IDENTICAL, EXCEPT THE CHANGE IN FIGURE OF PENALTY IN DISPUTE, TH EREFORE, FOR THE SAKE OF BREVITY, WE ARE ONLY REPRODUCING THE GROUNDS INVOLVED IN ITA NO. 5766/DEL/2014 (AY 2003-04) WHICH READ AS UNDER:- 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE LEVY OF PENALTY OF RS. 86,92,330/- U/S. 271(1)(C) OF THE ACT IGNORING THE FACTS, EVIDENCES AND SUBMISSIONS PLACED ON RECORD. THUS THE LEVY OF PENALTY U/S. 271(1)(C) SHOULD BE DELETED. 2. THE APPELLANT CRAVES THE LEAVE TO ADD, SUBSTITUTE, MODIFY, DELETE OR AMEND ALL OR ANY GROUND OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD DECLARED AN INCOME OF RS. RS.4,78,820/- WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT). IN THIS CASE SURVEY UNDER SECTION133A OF THE ACT WAS CONDUCTED ON 10.0 2.2006 IN THE CASE OF M/S UZIND CORPORATION AND DURING SURVEY IT WA S NOTICED THAT M/S UZIND CORPORATION IS GSA OF UZBEKISTAN AIRWAYS AND TH E ASSESSEE RECEIVES COMMISSION AT 7% OF THE COST OF TICKETS AND CARGO FREIGH T IN ADDITION TO HIS REGULAR SALARY. M/S. UZIND CORPORATION HAD CREDITED COM MISSION OF RS.2,75,94,701/- IN THE BOOKS FOR THE YEAR UNDER CONSID ERATION WHILE THE 3 COMMISSION OFFERED FOR TAXATION BY THE ASSESSEE WAS RS.NIL. THE CASE OF THE ASSESSEE WAS REOPENED UNDER SECTION 148 OF THE ACT AS INCOME OF RS.2,75,94,701/- HAD ESCAPED ASSESSMENT, AFTER FOLLOWING THE DUE PROCEDURE. IN REPLY TO THE SHOW CAUSE ISSUED TO THE ASSESSEE, IT WAS CLAIMED THAT THE COMMISSION WAS PAYABLE TO THE ASSESSEE BY M /S. UZIND CORPORATION FOR NOT TAKING AWAY THE BUSINESS AND A MUT UAL SETTLEMENT WAS ARRIVED BETWEEN THE ASSESSEE AND M/S. UZIND CORPORATION ON 15.03.2002 WHICH WAS VALID FOR 5 YEARS. THIS COMMISSION INCOME IT WAS CLAIMED, WAS NOT PART OF THE SALARY AND THEREFORE THE ASSESSEE WAS NOT LIA BLE TO OFFER THE SAME ON MERCANTILE OR DUE BASIS. THE COMMISSION WAS OFFERED BY ASSESSEE ON CASH BASIS AS IT WAS NOT BEING EARNED BY VIRTUE OF EMP LOYER EMPLOYEE RELATIONSHIP. THE ASSESSEE WAS NOT WORKING UNDER THE DIRE CT CONTROL AND SUPERVISION OF PARTNERS OF M/S. UZIND CORPORATION. THE CONTRACT HAD NO RELATIONSHIP WITH THE EARLIER EMPLOYMENT CONTRACT AND THE ASSESSEE WAS ELIGIBLE TO RECEIVE THE AMOUNT EVEN IF THE ASSESSEE WAS N O LONGER IN EMPLOYMENT. THE CLAIM OF THE ASSESSEE WAS NOT ACCEPTED BY T HE ASSESSING OFFICER AS THE ASSESSEE WAS AN EMPLOYEE OF M/S.UZIND CORPO RATION; HE WAS RECEIVING A SALARY OF RS.11,OOO/- PER MONTH FROM M/S.UZ IND CORPORATION. BESIDES SALARY HE WAS ALSO RECEIVING CONSULTANCY FEE/COMMISSION FROM M/S.UZIND CORPORATION ,WHICH WAS THUS COVERED UNDER SECTI ON 17(I) OF THE ACT. THE ASSESSEE WAS A KEY PERSON IN M/S.UZIND CORPORATI ON AND WAS WORKING AS A MANAGER; HE WAS ALSO THE AUTHORIZED SIGNAT ORY TO OPERATE BANK 4 ACCOUNT OF M/S. UZIND CORPORATION. AS PER THE AGREEMEN T DATED 15.03.2002 BETWEEN THE ASSESSEE AND M/S.UZIND CORPORATIO N, THE ASSESSEE WAS TO RECEIVE COMMISSION AT 7% OF COST OF TICKETS AND 7% O F THE CARGO FREIGHT AND THE SAME AMOUNT HAS BEEN CLAIMED AS AN EXP ENSE BY THE FIRM. HOWEVER THE ASSESSEE HAD ONLY OFFERED A SMALL PORTION OF THIS AMOUNT FOR TAXATION. THERE IS NO EVIDENCE OF ANY WRITTEN CORRESPON DENCE BETWEEN THE ASSESSEE AND THE AIRWAYS REGARDING TRANSFER OF GSA OR THE CLAIM THAT THE AGREEMENT WAS A ON COMPETE AGREEMENT. ON THE ABOVE BA SIS THE ASSESSING OFFICER MADE AN ADDITION OF RS.2,75,94,701/-. THE ORD ER OF THE ASSESSING OFFICER WAS CONFIRMED BY THE COMMISSIONER OF INCOME TAX( A) BY TREATING THE SAME AS PART OF SALARY INCOME. HOWEVER, THE ITAT VIDE IT S ORDER PASSED IN ITA NOS.2311 TO 2313/0EL/ FOR A.Y. 2003-04 TO 2005-0 6 REVERSED THE ORDER OF LD. CIT(A) AND THE ASSESSING OFFICER STATING THAT THE PROVISIONS OF SECTION 28(V)(A) ARE APPLICABLE TO THE CASE OF THE ASSESSEE. THE HON'BLE DELHI HIGH COURT HOWEVER VIDE ITS ORDER ITA 602/2010,607/2010 AND 921/2011 DATED 30.09.2012 REVERSED THE DECISION OF THE ITAT STATIN G THAT THE COMMISSION AMOUNT WAS CLEARLY PART OF SALARY AND NOT COVERED UNDE R THE DEFINITION UNDER SECTION 17 OF THE ACT. THE ASSESSING OFFICER ISSUED A SHOW CAUSE FOR LEVY OF PENALTY TO THE ASSESSEE, IN RESPONSE THE ASSESSEE CLAIMED AS P ER PAGE 2 TO 5 OF THE PENALTY ORDER THAT AS PER AGREEMENT DATED 15. 03.2002 BETWEEN THE ASSESSEE AND M/S.UZIND CORPORATION THE ASSESSEE WAS RECEIVING AMOUNTS FROM M/S.UZIND CORPORATION IN DUAL CAPACITY I.E. AS SA LARY AND AS NON 5 COMPLETE FEE FOR NOT TAKING AWAY THE BUSINESS OF THE F IRM. THE ASSESSEE CLAIMED THAT IN CASE OF THE ASSESSEE TAKING AWAY THE BUSIN ESS HE WAS UNDER AN OBLIGATION TO GIVE SIMILAR AMOUNTS TO M/S.UZIND COR PORATION. THE PAYMENT RECEIVED BY THE ASSESSEE WAS FOR NOT PROVIDING ANY SERVICE TO THE SAID FIRM BUT FOR NOT GETTING TRANSFERRED THE GSA IN HIS NAME. THE AMOUNT RECEIVED BY THE ASSESSEE WAS NOT ON ACCOUNT OF HIS SKILL TO HANDLE AIR LINES BUSINESS BUT FOR THE BENEFIT OF THE FIRM FOR NOT USING THE SKILLS A GAINST THE FIRM. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE CLAIM OF TH E ASSESSEE AS THE HON'BLE DELHI HIGH COURT HAS ALREADY HELD THAT THE IN COME RECEIVED BY THE ASSESSEE WAS SALARY OF THE ASSESSEE IN TERMS OF SECTION 17. ON THE BASIS THAT THE ASSESSEE HAS FILED INACCURATE PARTICULARS OF HIS INCO ME AND ON THE BASIS OF DETAILED REASONS GIVEN ON PAGE 6 TO 9 OF THE P ENALTY ORDER, THE ASSESSING OFFICER LEVIED A PENALTY OF RS.86,92,330/- VIDE HIS ORDER DATED 30.7.2013 PASSED U/S. 271(1) OF THE ACT. AGAINST THE PE NALTY ORDER, THE ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HER I MPUGNED ORDER DATED 26.8.2014 HAS DISMISSED THE APPEAL OF THE ASSESSEE BY CONFIRMING THE PENALTY IN DISPUTE. AGGRIEVED WITH THE IMPUGNED OR DER, THE ASSESSEE IS IN APPEAL BEFORE US. 4. DURING THE HEARING, LD. A.R. OF THE ASSESSEE HAS STAT ED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE B Y THE VARIOUS DECISIONS OF THE ITAT, HONBLE HIGH COURTS AND THE HONBLE APEX COURT. SHE FURTHER STATED THAT IN THE PRESENT CASE DEBATABLE ISSUE IS INVOLVED AND 6 APPEAL HAS BEEN ADMITTED IN THE HONBLE SUPREME COU RT OF INDIA. THEREFORE, SHE STATED THAT NO PENALTY CAN BE LEVIED WHEN THE ADD ITION IS MADE ON DEBATABLE ISSUE AND APPEAL IS ADMITTED IN HONBLE HIGH COURT/ HONBLE SUPREME COURT. SHE FURTHER STATED THAT ALSO NO PENA LTY IS LEVIABLE WHEN THERE IS ONLY A CHANGE IN HEAD OF INCOME BY THE AO. IN THIS REGARD, SHE HAS FILED TWO PAPER BOOKS ONE IS CONTAINING PAGES 1 TO 83 IN WHICH SHE HAS ATTACHED THE COPY OF VARIOUS DECISIONS OF THE ITAT, HONBL E HIGH COURT AND THE HONBLE SUPREME COURT ON THE DEBATABLE ISSUE AND WHEN THERE IS ONLY CHANGE IN HEAD OF INCOME BY THE AO. IN ANOTHER PAPER B OOK WHICH IS CONTAINING PAGES 95 TO 193 IN WHICH SHE HAS ATTACHED THE COPIES OF VARIOUS DECISIONS AND A PHOTOCOPY OF THE ORDER DATED 3.2.2014 PASSED BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF ASSESEE G RANTING LEAVE AGAINST THE ORDER OF HONBLE HIGH COURT; PHOTOCOPY OF THE ORDER DATED 5.4.2013 PASSED BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF THE ASSESEE IN ABOVE SLP; CASE STATUS UPDATED ON 4.5.2017 OF THE SLP; COPY OF ASSESSMENT ORDER DATED 28.2.2005 & 29.11.2007 FOR AY 20 03-04 & 2005-06 IN THE CASE OF UZIND CORPORATION; PHOTOCOPY OF AGREEME NT DATED 15.3.2002 ENTERED INTO BETWEEN M/S UZIND CORPORATION AND THE A SSESEE; COPY OF ACKNOWLEDGEMENT OF RETURN AS ON 31.3.2003; AY 2004-0 5 & 2005-06 ALONGWITH ITS ENCLOSURES; PHOTOCOPY OF CHART SHOWING THE YEAR-WISE DETAILS OF NON-COMPETE FEES AND LIST OF CASES RELIED UPON BY THE A SSESSEE. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, SHE REQ UESTED THAT BY 7 FOLLOWING THE AFORESAID DECISIONS THE PENALTY IN DISPUT E MAY BE CANCELLED AND APPEAL OF THE ASSESSEE MAY BE ALLOWED AND ACCORDINGLY , STAY APPLICATIONS MAY BE DISMISSED. 5. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORD ERS PASSED BY THE REVENUE AUTHORITIES ALONGWITH THE RELEVANT RECORDS AV AILABLE WITH US AND THE COPY OF THE DECISIONS OF ITAT AND HIGHER AUTHORITIES FI LED IN THE SHAPE OF PAPER BOOKS. IT IS AN ADMITTED FACT THAT ASSESSEE HAD DE CLARED AN INCOME OF RS. RS.4,78,820/- WHICH WAS PROCESSED UNDER SECTION143(1) OF THE INCOME TAX ACT, 1961 AND SURVEY UNDER SECTION133A OF THE ACT WAS CONDUCTED ON 10.02.2006 IN THE CASE OF M/S UZIND CORPORATION AND DURING SURVEY IT WAS NOTICED THAT M/S UZIND CORPORATION IS GSA OF UZBEKISTA N AIRWAYS AND THE ASSESSEE RECEIVES COMMISSION AT 7% OF THE COST OF TICKETS AND CARGO FREIGHT IN ADDITION TO HIS REGULAR SALARY. M/S. UZIND CORPORA TION HAD CREDITED COMMISSION OF RS.2,75,94,701/- IN THE BOOKS FOR THE YEAR UNDER CONSIDERATION WHILE THE COMMISSION OFFERED FOR TAXATIO N BY THE ASSESSEE WAS RS.NIL. THE CASE OF THE ASSESSEE WAS REOPENED UNDER SECTION 1 48 OF THE ACT AS INCOME OF RS.2,75,94,701/- HAD ESCAPED ASSESSMENT, AFTER FOLLOWING THE DUE PROCEDURE. IN REPLY TO THE SHOW CAUSE ISSUED TO THE ASSESSEE, IT WAS CLAIMED THAT THE COMMISSION WAS PAYABLE TO THE ASSESSEE BY M /S. UZIND CORPORATION FOR NOT TAKING AWAY THE BUSINESS AND A MUT UAL SETTLEMENT WAS 8 ARRIVED BETWEEN THE ASSESSEE AND M/S. UZIND CORPORATION ON 15.03.2002 WHICH WAS VALID FOR 5 YEARS. THIS COMMISSION INCOME IT WAS CLAIMED, WAS NOT PART OF THE SALARY AND THEREFORE THE ASSESSEE WAS NOT LIA BLE TO OFFER THE SAME ON MERCANTILE OR DUE BASIS. THE COMMISSION WAS OFFERED BY ASSESSEE ON CASH BASIS AS IT WAS NOT BEING EARNED BY VIRTUE OF EMP LOYER EMPLOYEE RELATIONSHIP. THE ASSESSEE WAS NOT WORKING UNDER THE DIRE CT CONTROL AND SUPERVISION OF PARTNERS OF M/S. UZIND CORPORATION. THE CONTRACT HAD NO RELATIONSHIP WITH THE EARLIER EMPLOYMENT CONTRACT AND THE ASSESSEE WAS ELIGIBLE TO RECEIVE THE AMOUNT EVEN IF THE ASSESSEE WAS N O LONGER IN EMPLOYMENT. THE CLAIM OF THE ASSESSEE WAS NOT ACCEPTED BY T HE ASSESSING OFFICER AS THE ASSESSEE WAS AN EMPLOYEE OF M/S.UZIND CORPO RATION; HE WAS RECEIVING A SALARY OF RS.11,OOO/- PER MONTH FROM M/S.UZ IND CORPORATION. BESIDES SALARY HE WAS ALSO RECEIVING CONSULTANCY FEE/COMMISSION FROM M/S.UZIND CORPORATION ,WHICH WAS THUS COVERED UNDER SECTI ON 17(I) OF THE ACT. THE ASSESSEE WAS A KEY PERSON IN M/S.UZIND CORPORAT ION AND WAS WORKING AS A MANAGER; HE WAS ALSO THE AUTHORIZED SIGNAT ORY TO OPERATE BANK ACCOUNT OF M/S. UZIND CORPORATION. AS PER THE AGREEMEN T DATED 15.03.2002 BETWEEN THE ASSESSEE AND M/S.UZIND CORPORATIO N, THE ASSESSEE WAS TO RECEIVE COMMISSION AT 7% OF COST OF TICKETS AND 7% O F THE CARGO FREIGHT AND THE SAME AMOUNT HAS BEEN CLAIMED AS AN EXP ENSE BY THE FIRM. HOWEVER THE ASSESSEE HAD ONLY OFFERED A SMALL PORTION OF THIS AMOUNT FOR TAXATION. THERE IS NO EVIDENCE OF ANY WRITTEN CORRESPON DENCE BETWEEN THE 9 ASSESSEE AND THE AIRWAYS REGARDING TRANSFER OF GSA OR THE CLAIM THAT THE AGREEMENT WAS A ON COMPETE AGREEMENT. ON THE ABOVE BA SIS THE ASSESSING OFFICER MADE AN ADDITION OF RS.2,75,94,701/-. THE ORD ER OF THE ASSESSING OFFICER WAS CONFIRMED BY THE COMMISSIONER OF INCOME TAX( A) BY TREATING THE SAME AS PART OF SALARY INCOME. HOWEVER, THE ITAT VIDE IT S ORDER PASSED IN ITA NOS.2311 TO 2313/0EL/ FOR A.Y. 2003-04 TO 2005-0 6 REVERSED THE ORDER OF LD. CIT(A) AND THE ASSESSING OFFICER STATING THAT THE PROVISIONS OF SECTION 28(V)(A) ARE APPLICABLE TO THE CASE OF THE ASSESSEE. THE HON'BLE DELHI HIGH COURT HOWEVER VIDE ITS ORDER ITA 602/2010,607/2010 AND 921/2011 DATED 30.09.2012 REVERSED THE DECISION OF THE ITAT STATIN G THAT THE COMMISSION AMOUNT WAS CLEARLY PART OF SALARY AND NOT COVERED UNDE R THE DEFINITION UNDER SECTION 17 OF THE ACT. THE ASSESSING OFFICER ISSUED A SHOW CAUSE FOR LEVY OF PENALTY TO THE ASSESSEE, IN RESPONSE THE ASSESSEE CLAIMED AS P ER PAGE 2 TO 5 OF THE PENALTY ORDER THAT AS PER AGREEMENT DATED 15. 03.2002 BETWEEN THE ASSESSEE AND M/S.UZIND CORPORATION THE ASSESSEE WAS RECEIVING AMOUNTS FROM M/S.UZIND CORPORATION IN DUAL CAPACITY I.E. AS SA LARY AND AS NON COMPLETE FEE FOR NOT TAKING AWAY THE BUSINESS OF THE F IRM. THE ASSESSEE CLAIMED THAT IN CASE OF THE ASSESSEE TAKING AWAY THE BUSIN ESS HE WAS UNDER AN OBLIGATION TO GIVE SIMILAR AMOUNTS TO M/S.UZIND COR PORATION. THE PAYMENT RECEIVED BY THE ASSESSEE WAS FOR NOT PROVIDING ANY SERVICE TO THE SAID FIRM BUT FOR NOT GETTING TRANSFERRED THE GSA IN HIS NAME. THE AMOUNT RECEIVED BY THE ASSESSEE WAS NOT ON ACCOUNT OF HIS SKILL TO HANDLE AIR LINES BUSINESS BUT 10 FOR THE BENEFIT OF THE FIRM FOR NOT USING THE SKILLS A GAINST THE FIRM. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE CLAIM OF TH E ASSESSEE AS THE HON'BLE DELHI HIGH COURT HAS ALREADY HELD THAT THE IN COME RECEIVED BY THE ASSESSEE WAS SALARY OF THE ASSESSEE IN TERMS OF SECTION 17. ON THE BASIS THAT THE ASSESSEE HAS FILED INACCURATE PARTICULARS OF HIS INCO ME AND ON THE BASIS OF DETAILED REASONS GIVEN ON PAGE 6 TO 9 OF THE P ENALTY ORDER, THE ASSESSING OFFICER LEVIED A PENALTY OF RS.86,92,330/- VIDE HIS ORDER DATED 30.7.2013 PASSED U/S. 271(1) OF THE ACT. AGAINST THE PE NALTY ORDER, THE ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HER I MPUGNED ORDER DATED 26.8.2014 HAS DISMISSED THE APPEAL OF THE ASSESSEE BY CONFIRMING THE PENALTY IN DISPUTE. 6.1 WE FURTHER FIND CONSIDERABLE COGENCY IN THE SUBM ISSIONS OF THE ASSESSEES AR THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE VARIOUS DECISIONS OF THE ITAT, HONBLE HIGH C OURTS AND THE HONBLE APEX COURT, BECAUSE IN THE PRESENT CASE DEBATABL E ISSUE IS INVOLVED AND LEAVE HAS BEEN GRANTED BY THE HONBLE SUPREME C OURT OF INDIA IN THE CASE OF ASSESSEE VIDE SLP NO. 11699-11701/2013 (FROM THE JUDGEMENT AND ORDER DATED 30.11.2012 IN ITA NO. 602/2010, ITA NO. 607/2010, ITA NO. 921/2010 OF THE HONBLE DELHI HIGH COURT). HENCE, THE PENALTY CANNOT BE LEVIED WHEN THE ADDITION IS MADE ON DEBATABLE ISSU E AND APPEAL IS ADMITTED IN HONBLE HIGH COURT/ HONBLE SUPREME COURT. OUR VIEW IS FORTIFIED BY THE DECISION OF THE ITAT, MUMBAI IN THE CASE OF NAYAN BUILDERS & 11 DEVELOPERS (P) LTD. VS. ITO IN ITA NO. 2379/MUM/2009 VIDE ORDER DATED 18.3.2011 AND HONBLE HIGH COURT OF MUMBAI DECISION O F THE ABOVE SAID CASE IN REVENUES APPEAL BEING CIT VS. NAYAN BUILDERS & DEVELOPERS PVT. LTD. IN ITA NO. 415/2012 VIDE ORDER DATED 8.7.2014. ). THE ITAT NAYAN BUILDERS & DEVELOPERS (P) LTD. VS. ITO IN ITA NO. 2379 /MUM/2009 VIDE ORDER DATED 18.3.2011 HAS HELD AS UNDER:- 3. IT IS, THEREFORE, ABUNDANTLY CLEAR THAT THE ADDITIONS IN RESPECT OF WHICH PENALTY WAS CONFIRMED HAVE BEEN ACCEPTED BY THE HON'BLE BOMBAY HIGH COURT LEADING TO SUBSTANTIAL QUESTION OF LAW. WHEN THE HIGH COURT ADMITS SUBSTANTIAL QUESTION OF LAW ON AN ADDITION, IT BECOMES APPARENT THAT THE ADDITION IS CERTAINLY DEBATABLE. IN SUCH CIRCUMSTANCES PENALTY CANNOT BE LEVIED U/S. 271(1) AS HAS BEEN HELD IN SEVERAL CASES INCLUDING RUPAM MERCANTILE VS. DCIT (2004) 91 ITD 237 (AHD.) (TM)] AND SMT. RAMILA RATILAL SHAH VS. ACIIT (1998) 60 TTJ (AHD) 171). THE ADMISSION OF SUBSTANTIAL QUESTION OF LAW BY THE HONBLE HIGH COURT LENDS CREDENCE TO THE BONAFIDES OF THE ASSESSEE IN CLAIMING DEDUCTION. ONCE IT TURNS 12 OUT THAT THE CLAIM OF THE ASSESSEE COULD HAVE BEEN CONSIDERED FOR DEDUCTION AS PER A PERSON PROPERLY INSTRUCTED IN LAW AND IS NOT COMPLETELY DEBARRED AT ALL, THE MERE FACT OF CONFIRMATION OF DISALLOWANCE WOULD NOT PER SE LEAD TO THE IMPOSITION OF PENALTY. SINCE THE ADDITIONS, IN RESPECT OF WHICH PENALTY HAS BEEN UPHELD IN THE PRESENT PROCEEDINGS, HAVE BEEN HELD BY THE HONBLE HIGH COURT TO BE INVOLVING A SUBSTANTIAL QUESTION OF LAW, IN OUR CONSIDERED OPINION, THE PENALTY IS NOT EXIGIBLE UNDER THIS SECTION. WE, THEREFORE, ORDER FOR DELETION OF PENALTY. 6.2 THE HONBLE HIGH COURT OF MUMBAI AGAINST THE ORDE R OF THE ITAT DATED 18.3.2011, AS AFORESAID IN THE CASE OF CIT VS. NAYAN BU ILDERS & DEVELOPERS PVT. LTD. IN ITA NO. 415/2012 VIDE ORDER DATED 8.7. 2014.) HAS HELD AS UNDER:- 1. HAVING HEARD MR. AHUJA, LEARNED COUNSEL APPEARING ON BEHALF OF THE APPELLANT, WE FIND THAT THIS APPEAL CANNOT BE ENTERTAINED AS IT DOES NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW. THE IMPOSITION OF PENALTY WAS FOUND NOT TO BE JUSTIFIED AND THE 13 APPEAL WAS ALLOWED. AS A PROOF THAT THE PENALTY WAS DEBATABLE AND ARGUABLE ISSUE, THE TRIBUNAL REFERRED TO THE ORDER ON ASSESSEES APPEAL IN QUANTUM PROCEEDINGS AND THE SUBSTANTIAL QUESTIONS OF LAW WHICH HAVE BEEN FRAMED THEREIN. WE HAVE ALSO PERUSED THAT ORDER DATED 27 TH SEPTEMBER, 2010 ADMITTING INCOME TAX APPEAL NO. 2368 OF 2009. IN OUR VIEW, THERE WAS NO CASE MADE OUT FOR IMPOSITION OF PENALTY AND THE SAME WAS RIGHTLY SET ASIDE. THE APPEAL RAISES NO SUBSTANTIAL QUESTION OF LAW, IT IS DISMISSED. NO COSTS. 7. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RESPE CTFULLY FOLLOWING THE PRECEDENTS, AS AFORESAID, WE DELETE THE P ENALTY IN DISPUTE AND DECIDE THE ISSUE IN FAVOR OF THE ASSESSEE AND AGAINST THE REVENUE. 8. AS REGARDS THE ITA NO. 5767 & 5768/DEL/2014 (AYRS 2 004-05 & 2005- 06) ARE CONCERNED, FOLLOWING THE CONSISTENT VIEW AS TAK EN AFORESAID, THE PENALTY INVOLVED IN 5767 & 5768/DEL/2014 (AYRS 2004- 05 & 2005-06) ALSO STAND DELETED AND APPEALS OF THE ASSESSEE ARE ALLOWED. 9. AS REGARDS THE 03 STAY APPLICATION NO. 55 TO 57/D EL/2016 (IN ITA NO. 5766 TO 5768/DEL/2014 RELATING TO ASSESSMENT YEARS 2003- 04 TO 2005-06 ARE CONCERNED, SINCE WE HAVE ALREADY ALLOWED ALL TH E 03 APPEALS OF THE 14 ASSESSEE AND DELETED THE PENALTY IN DISPUTE IN ALL THE APPEALS, AS AFORESAID, HENCE, ALL THE 03 STAY APPLICATIONS FILED BY THE ASSESSEE HAVE BECOME INFRUCTUOUS AND AS SUCH THE SAME ARE DISMISSED. 10. IN THE RESULT, ALL THE 03 APPEALS FILED BY T HE ASSESSEE STAND ALLOWED AND ALL THE 03 STAY APPLICATIONS FILED BY THE ASSESSEE STA ND DISMISSED. ORDER PRONOUNCED ON 31/08/2017. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 31/08/017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4.CIT (A) 5. DR , ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES