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Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order dt. 18.01.2010 of CIT(A)-23,Mumbai the Assessing Officer (AO.)has filed the present appeal.Assessee-company is engaged in the business of freight forwarding,logistics and related services.It is also an approved air cargo and customs house agent. It filed its return of income 01.11. 2004,declaring total income at Rs.1.12 crores.The assessment u/s.143(3) of the Act,was completed on 28.12.2006 determining the total income of the assessee at Rs.56.19 crores.Effective ground of appeal is about deletion of penalty,levied by the AO,u/s.271(1)(c)of the Act. Brief facts: During the year under appeal,the assessee had transferred the international air cargo business to a company,namely DHL Banzar Lumier Pvt. Ltd.wherein 51% shares were held by the partners of the assessee firm.The remaining facts are that it received a sum of Rs.57.73 crores for the said sale, that it offered the consideration received under the head “capital gains”, that the sale proceeds were invested in NABARD bonds and NHB bonds,that it claimed exemption u/s.54EC of the Act.The AO,referring to clause 3.4 of the Deed of transfer of business(dtd.29.5.2003),held that the amount received by the assessee was for non-compete and was covered by section 28(va) of the Act.He further held that 3055/M/10-Lemuir income was taxable under the head profit and gains of business/profession.An addition of Rs.5473 crores was made as compensation for non-compete fee and closure of the business under the head business income.He also initiated penalty proceedings u/s.271(1)(c)of the Act for furnishing inaccurate particulars of income. In the meanwhile the quantum proceedings were contested before the First Appellate Authority(FAA),who restricted the non compete fee to Rs.4.5cr. The matter travelled up to the Tribunal.Vide its order dt9.10.15(ITAs No.3245 & 2430/Mum/2008),the Tribunal dismissed appeals filed by the aa as well as the AO.
4.During the penalty proceedings the assessee made elaborate submission before the AO, however, he levied a penalty, vide its order dt.31.3.09, of Rs.1,61,43,750/-.He held that by showing the business receipt as long term capital gain furnished inaccurate particulars of income, that there was an element of non compete fee in the amt recd by the assessee.
5.Aggrieved by the penalty order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA).Before him,the assessee argued that it has neither concealed any particulars of income not furnished any inaccurate particulars, that full and true disclosure was made about sale proceeds of Rs.54.37 crores under the head “capital gains”, that there was difference of opinion between the assessee and the AO, that in such a case penalty could not be levied, that investment made in NABARD and NHB bonds prove that assessee was of the opinion that it was entitled to claim exemption u/s. 54EC of the Act, that the penalty proceedings and assessment proceedings were different and independent of each other, that mere non-acceptance of the claim of the assessee did not ipso fact lead to the conclusion it had filed inaccurate particulars of income,that the FAA had restricted the non-compete fee to Rs.4.5 crores,that he had accepted the contention of the assessee that the amount 3055/M/10-Lemuir received by it was for transfer of goodwill, that the calculation of non-compete fee was based on an estimate,that the issue was a debatable issue,that penalty could not be levied in respect of a legal claim irrespective of the fact that the same was decided against the assessee.
6.In our opinion,whether a receipt/expense is capital or revenue is a legal issue. Non acceptance of such a legal claim cannot be considered as concealment of income for furnishing of inaccurate particulars of income that would warrant imposition of penalty u/s.271(1)(c) of the Act. After considering the submission of the assessee and the penalty order,the FAA held that AO had relied on the findings given in the assessment order while passing the penalty order,that he had not brought any amount to justify that there was concealment of income or filing of inaccurate particulars,that the quantum addition did not automatically lead to concealment, that addition could be due to difference in opinion and difference in perception to the same issue,that on merits the assessee had submitted a bona fide explanation as to the deduction claimed by it though not accepted by the AO,that penalty could not be levied on additions made on account of difference of opinion, that mere rejection of an explanation of an assessee would not lead to a conclusion that explanation was false, that the AO had not been able to establish that explanation of the assessee was not bona fide. Finally,the FAA deleted the penalty.
7.During the course of hearing before us,the DR supported the order of the AO and stated that assessee had not disclosed the income under proper head, that the Tribunal had dismissed the appeal filed by the assessee with regard to quantum additions.The AR relied upon the cases of Anant Overseas(P) Ltd. (54taxmann 211),M/s.SM Construction(Appeal no.412/2013)Fortune Hotels and Estates (P.) Ltd.(52taxmann330).
3055/M/10-Lemuir 8.We have heard the rival submissions and perused the material before us. We find that during the year under consideration the assessee had sold its business and had received a sum of Rs.54.73 crores, that the sale proceeds were invested in bonds and it claimed an exemption u/s.54EC of the Act, that the AO held that the transaction fell under the head business income, that he made the addition of Rs.54.73 to the income of the assessee treating the same as non-compete fee, that in the appellate proceedings the FAA reduced it to Rs.4.5 crores,that his order was challenged before the Tribunal,that the Tribunal dismissed both the appeals,that the AO initiated penalty proceedings of Rs.4.5 crores and levied a penalty of Rs.1.61 crores. Considering these facts we are of the opinion that there was neither furnishing of inaccurate particulars of income nor concealing the particulars of income. The assessee had filed all the details of transaction in the return of income itself. There was difference of opinion between the AO and the assessee as to under which head the sale proceeds of transaction should be taxed.The assessee had offered income under the head ‘capital gain’ whereas the AO taxed the same as ‘business income’.In our opinion,in such cases, no penalty should be levied u/s. 271(1)(c ) of the Act. We would like to refer to the case of Anant Overseas(P) Ltd. (supra) of the Delhi High Court. In that case the assessee had declared STCG on sale of shares however, the AO held that same was to be taxed under the head business income.He also levied penalty u/s. 271(1)(c ) for concealing the particulars of income.The FAA deleted the penalty levied by the AO.Matter travelled upto the Hon'ble High Court . Vide its order dated 4.9.2014 the court held as under : “8. ………………..A glance at this provision would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. Present is not the case of concealment of the income. That is not the case of the Revenue either. However, the learned counsel for the Revenue suggested that by making incorrect claim for the expenditure on interest, the assessee has furnished inaccurate particulars of the income. As per Law Lexicon, the meaning of the word "particular" is a detail or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word "particulars" used in Section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the return was found to be incorrect 3055/M/10-Lemuir or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars.
The learned counsel argued that "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". We do not think that such can be the interpretation of the words concerned. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In CIT v. Atul Mohan Bindal [(2009) 9 SCC 589] where this Court was considering the same provision, the Court observed that the assessing officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This Court referred to another decision of this Court in Union of India v. Dharamendra Textile Processors [(2008) 13 SCC 369] as also the decision in Union of India v. Rajasthan Spg. & Wvg. Mills [(2009) 13 SCC 448] and reiterated in para 13 that: (Atul Mohan Bindal case [(2009) 9 SCC 589] , SCC p. 597, para 13) "13. It goes without saying that for applicability of Section 271(1)(c), conditions stated therein must exist."
Therefore, it is obvious that it must be shown that the conditions under Section 271(1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise.
In Dilip N. Shroff v. CIT [(2007) 6 SCC 329] this Court explained the terms "concealment of income" and "furnishing inaccurate particulars". The Court went on to hold therein that in order to attract the penalty under Section 271(1)(c), mens rea was necessary, as according to the Court, the word "inaccurate" signified a deliberate act or omission on behalf of the assessee. It went on to hold that clause (iii) of Section 271(1) provided for a discretionary jurisdiction upon the assessing authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term "inaccurate particulars" was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars.
It was further held in Dilip N. Shroff [(2007) 6 SCC 329] that the assessee must be found to have failed to prove that his explanation is not only not bona fide but all the facts relating to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a finding as to how and in what manner, the assessee had furnished the particulars of his income. The Court ultimately went on to hold that the element of mens rea was essential.
In view of the aforesaid position, we do not think any substantial question of law arises for consideration before us in this appeal. The appeal is dismissed. No costs.” ”
We are also of the opinion that confirmation of an addition by Appellate Authority do not justify levy of penalty u/s. 271(1)(c),as the assessment proceedings and penalty proceedings are different so decision taken during the 3055/M/10-Lemuir assessment stage would not and should not lead to automatic levy of concealment penalty.It has to be seen that what explanation was offered by the assessee while filing reply to the penalty notice.After going through the explanation filed by the assessee,we are of the opinion that it was one of the plausible explanation.The issue of taxing a particular income under the head business income or income arising of capital gains is a debatable issue.In our opinion no penalty should be levied in such circumstances.Therefore,upholding the order of the FAA,we decide the effective ground of appeal against the AO.