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Facts
The assessee, an individual, filed an income return declaring ₹1,51,200 for AY 2006-07. He received ₹16,00,000 as a one-time settlement from Kotak Mahindra Old Life Insurance, claiming it as an exempt capital receipt for loss of source of income. The AO added the amount to his income and subsequently levied a penalty of ₹5,28,234 under Section 271(1)(c), which was upheld by the Ld. CIT(A).
Held
The Tribunal ruled that the one-time settlement received by the assessee for loss of source of income was a capital receipt, not a revenue receipt, citing Supreme Court decisions. It further held that since the assessee had fully disclosed the particulars of the settlement in the return of income, no penalty under Section 271(1)(c) was imposable, even if the revenue disagreed with the tax treatment.
Key Issues
1. Whether a one-time settlement received as compensation for loss of source of income is a capital receipt or a revenue receipt. 2. Whether a penalty under Section 271(1)(c) is leviable when the assessee has fully disclosed the income but claimed it as exempt.
Sections Cited
143(1), 144, 271(1)(c)
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Income Tax Appellate Tribunal, “B” BENCH, KOLKATA
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 03.02.2025 for the AY 2006-07.
The only issue raised in various grounds of appeal is against the order of the ld. CIT (A) confirming and upholding the penalty of ₹5,28,234/- as levied by the ld. AO u/s 271(1)(c) of the Income-tax Act, 1961 (the Act).
The facts in brief are that the assessee is an individual filed the return of income on 30.10.2006, declaring total income of ₹1,51,200/-, which was processed u/s 143(1) of the Act. The assessee during the
In the appellate proceedings, the ld. CIT (A) affirmed the order of the ld. AO by holding that the amount shown as “settlement proceeds” represented taxable remuneration income of the assessee and that the assessee has consciously and deliberately concealed the income leading to non-taxability of the resultant income.
After hearing the rival contentions and perusing the materials available on record, we find that in this case the assessee was employed with Kotak Mahindra Old Life Insurance as an employee and he received one time settlement from said company as compensation towards loss of source of income. The assessee duly disclosed the said income in the return of income, however, same was claimed as exempt on account of being a capital receipt. The ld. AO imposed the
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 26.08.2025.