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Income Tax Appellate Tribunal, DELHI BENCH ‘H’ NEW DELHI
Before: SHRI I.C. SUDHIR & SHRI L.P. SAHU
ORDER
Per L.P. Sahu, Accountant Member:
This appeal at the instance of assessee, arises out of order dated 01.02.2012 of ld. CIT(A)-VI, New Delhi for the assessment year 2006-07. By way of various grounds, the assessee has assailed the impugned order sustaining penalty of Rs.22,54,519/- imposed u/s. 271(1)(c) of the Income-tax Act, 1961 (‘the Act’ for short).
The relevant facts, in brief, are that the assessee received a sum of Rs.66,97,922/- as a settlement amount from its employer M/s. B.S.I India Pvt. Ltd., as a result of unilateral termination of its employment, which the assessee declared as capital receipts in its computation of income filed along with the return for the accounting period relevant to assessment year under consideration. The ld. Assessing Officer in the scrutiny assessment proceedings, after considering the replies of the assessee, assessed the said amount to tax as “profit in lieu of Salary” within the meaning of section 17(3) of the Act vide assessment order u/s. 143(3), which stood confirmed upto the stage of Tribunal. This led the Assessing Officer to initiate penalty proceedings u/s. 271(1)(c) of the Act and considering the explanations of the assessee unsatisfactory, the AO imposed a penalty of Rs.22,54,519/- vide order dated 17.03.2011. Aggrieved by this order, the assessee preferred an appeal before the ld. CIT(A), who dismissed the same observing that the assessee failed to explain his bona fide contention of receiving the aforesaid amount as capital receipt and, therefore, the Assessing Officer was justified to impose penalty on the aforesaid sum, which was received by assessee as profit in lieu of salary as also held by Tribunal in the quantum proceedings. Being aggrieved, the assessee is in appeal before us.
During the course of hearing, the ld. Counsel for the assessee submitted that after termination of employment, the relationship of employer and employee ceased to exist and the amount was received as a result of settlement in the legal battle on certain conditions such as non-competition, non-solicitation and non-disclosure of business secrets. Therefore, the assessee was under bona fide belief that the aforesaid amount received is in the nature of capital receipt. It was also submitted that since the impugned sum was received as a result of withdrawals of various proceedings at various forums filed against the employer and that it was a one-time payment on cessation of employment, the explanation offered by the assessee cannot be termed as non-bona fide for declaring the same as capital receipts. It was further submitted that the impugned sum received has been voluntarily disclosed in the return of income as capital receipt, which claim of the assessee was not accepted by the Revenue Authorities. Relying upon the decision of Hon’ble Supreme Court rendered in the case of CIT vs. Reliance Petro Products Pvt. Ltd., 322 ITR 158, it was submitted that mere making a claim which is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars of income, entailing penalty u/s. 271(1)(c) of the Act. He, therefore, urged for allowance of appeal.
On the other hand, the ld. DR relied upon the orders of the authorities below and submitted that once the impugned addition on the basis of which penalty has been imposed, stood confirmed by the Tribunal, the order of the ld. CIT(A) needs no interference.
We have considered the rival submissions and have also gone through the entire material on record. A perusal of the record shows that there is no dispute that the assessee has voluntarily disclosed the impugned sum received in the computation of income filed along with the return for the assessment year under consideration. This sum was claimed to have been received in the nature of capital receipt, which was not accepted by the authorities below who treated the same as taxable under the head “profits in lieu of salary”. In this situation, in our considered opinion, penalty is not leviable in view of the decision of Hon’ble Apex Court in Reliance Petroproducts Pvt. Ltd. (supra), wherein it has been held that mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. This decision of Hon’ble Supreme Court has also been followed by various High courts and Tribunal, inter alia, in the following cases, relied by the assessee : (i). CIT vs. Madhushree Gupta 216 Taxman 65 (Del. Mag.) (ii). CIT vs. Smt. Neenu Dutta (2013) 35 Taxmann. Com 454 (Del. HC)
(iii). CIT vs. Nalin P. Shah (HUF) in of 2013 (copy placed on record) (iv). ITAT Delhi Benches in the case of DCIT vs. M/s. Specialty Food India Pvt. Ltd. in ITA No. 3270/Del./2011 (copy placed in paper book). (v). ITAT Delhi Benches in the case of M/s. Supertex Industries vs. ACIT, in ITA No. 3727/Del./2012 (copy placed in paper book) Besides, the explanations given by the assessee with respect to its bona fide belief to treat the said amount as capital receipts, as noted above, have not been rebutted by the authorities below by way of categorical findings on the same. In the present case the assessee disclosed all the details of the sum received and, therefore laying our hands on the above decisions, we are of the opinion that a wrong claim made by the assessee does not tantamount to furnishing inaccurate particulars of income to attract penalty in the peculiar facts and circumstances of the present case. Accordingly, the appeal of the assessee is found full of merits and deserves to be allowed.