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Income Tax Appellate Tribunal, MUMBAI BENCHES “D”, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
Appellant by : Shri Nitesh Joshi,AR Respondent By : Shri B. S. Bist, Sr. DR Date of Hearing : 25.08.2016 Date of pronouncement : 18.11.2016 ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2007-08. The appeal is directed against the order of the Commissioner (Appeals) -16, Mumbai and arises out of the penalty imposed u/s 271(1)(c) of the Income Tax Act 1961 (‘the Act’).
The sole ground of appeal by the assessee is that the ld. CIT(A) erred in confirming the penalty of Rs.70,93,850/- imposed by the Assessing Officer (AO) u/s 271(1)(c) of the Act without appreciating the fact that the assessee-company had made full and true disclosure of relevant facts in the financial statement submitted along with return of income and had neither concealed income nor furnished inaccurate particulars of such income.
3. In a nutshell, the facts are that the assessee filed its return of income for the A.Y. 2007-08 on 30.10.2007 declaring total income at Rs.5,33,93,427/-. The AO completed the assessment u/s 143(3) on 1.12.2009 assessing the total income at Rs.7,48,17,884/- after making disallowance of Rs.3,49,457/- u/s 14A and a further addition of Rs.2,10,75,000/- under the head “short term capital gains” . The AO has imposed penalty u/s 271(1)(c ) on the addition of Rs.2,10,75,000/- .The undisputed fact is that the assessee-company has credited Rs.2,10,75,000/- being capital receipt under capital reserves. It had entered into Joint Venture Agreement (‘JVA’) with land Instruments International Limited, UK (“ LIIL or JV Partner”) in May 27, 2005, pursuant to which the assessee- company along with the Joint Venture, partner incorporated a Venture Company namely Land DEL Infrared Private Limited (‘Land DEL’ or ‘JV Company’). Subsequently, LIIL was taken over by Ametek Inc, USA and accordingly as per the terms of JVA the assessee-company decided to exercise its option to sell all the shares of the JV Company to JV partner. However, pursuant to discussion and negotiation, the assessee-company waived and gave up all its rights and entitlement to sell its shares as per the terms of the JVA and for waiving this right, the assessee-company received a sum of Rs.2,10,75,000/-.
The ld. CIT(A) confirmed the penalty imposed by the AO on the following reasons:
In the instant case, the claim of the receipt as being a capital receipt was found to be patently incorrect, after examination of the agreement and the provisions of law and hence the claim of the appellant cannot be held to be a bonafide claim. The facts on record clearly show that the claim was not allowable as has been brought out in the assessment order as also upheld in first appeal, briefly mentioned in the foregoing paragraphs. The appellant made a claim of receipt as not taxable when it is not allowable to it. It is not a claim where there is a debatable issue involved and where two views are possible.
Before us, the ld. Counsel of the assessee submits that pursuant to discussion and negotiation, the assessee-company waived and gave up all its rights and entitlement to sell its shares as per the terms of the JVA and for waiving this right, it received a sum of Rs.2,10,75,000/-. Further, it is stated that the assessee-company has credited the said receipt of Rs.2,10,75,000/- to capital reserve being capital profit. The ld. Counsel further submits that the assessee-company had all times made due and appropriate disclosure whether in its return of income, financial statements during the course of assessment as well as appellate proceedings. Also it is stated by him that the assessee-company had produced all the relevant documents pertaining to its claim about the consideration received for waiver of rights. Thus it is stated that there is no attempt from the side of the assessee-company to furnish inaccurate particulars. Reliance was placed by him on the decision in the cases of CITvs. Reliance Petroproducts (P) Ltd [2010] 189 Taxman 322 (SC) ; CIT vs. Harshvardhan Chemicals and Mineral Ltd. [2003] 133 Taxman 320 (Raj.), ACIT vs. VIP Industries [2009] 30 SOT 254 (Mum.); Industrial Development Bank of India Ltd. vs. DCIT [2010] 42 SOT 325 (Mum.).
The ld. DR supports the order of the ld. CIT(A) confirming the penalty of Rs. 70,93,850/- imposed by the AO u/s 271(1)(c) of the Act.
We have heard the rival submission and perused the relevant material on record. We find that the assessee-company has credited Rs.2,10,75,000/- being capital receipt under capital reserves. We also find that documents relating to JVA were filed before the AO and the ld. CIT(A) (p. 1-13 of the paperbook). Also the letter of “Change in controlling interest in Land Group UK” was filed by the assessee-company before the AO as well as the ld. CIT(A) (p. 14 of paperbook). We also find that the waiver agreement was filed before the AO and the ld. CIT(A)(p.16-22 of the paperbook). Thus all the details relevant to the receipt of Rs.2,10, 75,000/- were filed by the assessee-company before the AO and ld. CIT(A). The dispute is whether the same is a capital receipt or revenue receipt or capital gains.
7.1 Now we shall discuss the decisions relied on by the ld. Counsel of the assessee. In Reliance Petroproducts (P) Ltd.(supra), the Hon’ble Supreme Court held the following:
“ The word 'particulars' must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. In the instant case, there was no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c). A mere making of the claim, which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. [Para 9]”. 7.2 In Harshvardhan Chemicals and Mineral Ltd.(supra), the Hon’ble Rajasthan High Court held that “ where assessee has claimed certain amount as deduction which is debatable but has not been allowed, it cannot be said that assessee has concealed any income or furnished inaccurate particulars for evasion of tax so as to attract penalty under section 271(1)(c)”
7.3 In VIP Industries(supra), the Tribunal has held : “ In the instant case, the assessee had bona fidely made a claim for deduction under section 35 in respect of cost of car purchased for the purpose of R&D activity by disclosing all the necessary particulars in the audit report. The facts that the car was purchased by the assessee and also used for the purpose of the business had not been controverted by the Assessing Officer. Further, the granting of depreciation at 20 per cent instead of hundred per cent deduction claimed by the assessee showed that there was a genuine difference of opinion between the assessee and the Assessing Officer on this aspect of the matter. It could not be said that the assessee, under such circumstances, had concealed its income and was caught within the four corners of section 271(1)(c). Therefore, the Commissioner (Appeals) had rightly deleted the impugned penalty levied upon the assessee. [Para 12]”. 7.4 In Industrial Development Bank of India Ltd.(supra), the Tribunal has held: “In the instant case, the assessee had made a claim which was not only in accordance with several decisions of the Co-ordinate Benches but also entirely based on a possible construction of certain lease agreements. It was not a frivolous, absurd or patently inadmissible claim that had been made by the assessee. Therefore, the explanation for the legal claim of depreciation made by the assessee could not be said to be a wholly fantastic or unacceptable explanation. [Para 9] For all these reasons, and in the light of the settled legal position discussed above, it was indeed not a fit case for confirmation of impugned penalty. Therefore, the Assessing Officer was to be directed to delete the impugned penalties in respect of depreciation on leased assets. [Para 10]”
7.5 We conclude that in the instant case, the details relating to JVA were disclosed by the assessee in its return of income and financial statements. A mere making of the claim, which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars of income. Examined on the touchstone of the legal principles delineated here-in-above, the order of the ld. CIT(A) sustaining the penalty of Rs. 70,93,850/- imposed by the AO u/s 271 (1) (c ) of the Act is cancelled.
In the result, the appeal is allowed.
Order pronounced in the open court on 18/11/2016.