No penalty u/s 271(1)(c) in respect of a debatable issue

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No penalty u/s 271(1)(c) in respect of a debatable issue


Whether there can be any penalty u/s 271(1)(c) in respect of a debatable issue was an issue before the MP High Court in the case of

CIT Indore Vs S Kumars Tyres Manufacturing Co Ltd.

The Division bench of Madhya Pradesh High Court was considering department’s appeal when ITAT had given relief to the assessee by holding that there could not have been penalty u/s 271(1)(c) in respect of an amount of Rs 5.18 crores which was claimed as capital receipt while filing return of income but was not accepted till high court level and was adjudicated to be revenue receipt. The High court accepting arguments of the assessee that this is a debatable issue and adjudicated it, therefore, it cannot be held that the assessee concealed the particular of the income. In all fairness, the assessee disclosed the income, as per the advice given by his Tax Consultant / Chartered Accountant, as a business receipt, hence, the appellant tribunal has rightly held that it is not a case of concealment of particulars of income or non-furnishing inaccurate particulars of such income. The famous decision in the case of *CIT Vs Reliance Petroproducts Pvt ltd (2010) 322 ITR 158 (SC) **and *Price Water house coopers Pvt ltd Vs CIT Kolkata-1 and another (2012) 11 SCC 316(SC) **were referred to in favour of the proposition and finally the department’s appeal was dismissed on this issue.

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