ITO 10(3)(1), MUMBAI vs. E BAY INDIA P. TD, MUMBAI

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ITA 2371/MUM/2013Status: DisposedITAT Mumbai31 December 2015AY 2005-063 pages
AI SummaryDismissed

What did the Tribunal hold?

The CIT(A) deleted the penalty, finding the assessee's belief regarding non-taxability to be bonafide and the issue debatable, especially since the AO initially agreed. The Tribunal upheld the CIT(A)'s order, finding no infirmity.

What were the facts?

The assessee sold 'user data' and considered it a self-generated capital asset with indeterminable cost of acquisition, thus not offering capital gains tax. The Assessing Officer initially agreed but later reopened the assessment and taxed the capital gains, subsequently levying a penalty for concealment of income.

What were the issues?

Whether a penalty under Section 271(1)(c) is leviable when the assessee had a bonafide belief about the non-taxability of income and the issue was debatable.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 147,Section 143(3)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI

Before: SHRI N.K. BILLAIYA & SHRI SANJAY GARG

For Appellant: Shri M.P. Lohia, A.R, Shri Nikhil Tiwari, A.R, Ms. Pratima Rathi, A.R
For Respondent: Shri G.N. Makwana, D.R
Hearing: 07.10.2015Pronounced: 31.12.2015

Per Sanjay Garg, Judicial Member:

1.

The present appeal has been preferred by the Revenue against the order dated 24.12.2012 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2005-06.

2.

The Revenue has agitated the deletion of the penalty of Rs.55,04,265/- levied by the Assessing Officer (hereinafter referred to as the AO) under section 271(1)(c) of the Act.

3.

The brief facts of the case are that the assessee entered into an agreement with eBay International AG, Switzerland for sale of ‘user data’ for a consideration of US$ 6,50,000/-. The assessee disclosed the entire details relating to the above sale of ‘user data’, in the return of income. The assessee

2 M/s. eBay India Pvt. Ltd. considered the ‘user data’ as a self generated capital asset and its cost of acquisition was considered as not determinable. The assessee accordingly adopted the proposition of law laid down by the Hon’ble Supreme Court in the case of “CIT vs. BC Srinivasa Setty (128 ITR 294) and accordingly did not offer any capital gains tax on the said sale of ‘user data’. During the course of assessment proceedings under section 143(3) of the Act, the assessee submitted the entire details regarding the sale of ‘user data’ and also its submissions regarding the non taxability of the same. The AO, after considering the submissions of the assessee, agreed that the consideration received by the assessee on account of sale of ‘user data’ was not taxable. However, subsequently the assessment was reopened under section 147 of the Act. In the reopened assessment proceedings, the AO considered the cost of acquisition of the ‘user data’ as nil and accordingly taxed the capital gains on the sale of the said ‘user data’. The assessee did not contest the above taxation. However, the AO initiated penalty proceedings under section 271(1)(c) of the Act and imposed the impugned penalty on account of concealment of particulars of income. The assessee preferred appeal before the Ld. CIT(A) against the levy of the penalty.

4.

Ld. CIT(A) deleted the penalty observing that the assessee was under bonafide belief regarding the non taxability of the amount received as consideration on sale of ‘user data’. Even the AO in the original assessment proceedings had also agreed to the claim of the assessee. This fact itself shows that the issue was debatable. He further observed that all the particulars of the sale and the non taxability of the capital gains were fully and duly disclosed in the return of income and also during the assessment proceedings. Hence, it was not a case of furnishing of inaccurate particulars of income or concealment of income. He therefore deleted the impugned penalty.

3 M/s. eBay India Pvt. Ltd. 5. After hearing the Ld. Representatives of the parties and going through the record, we do not find any infirmity in the well reasoned order of the Ld. CIT(A) on the above issue and the same is hereby upheld.

6.

There is no merit in the appeal of the Revenue and the same is therefore dismissed.

Order pronounced in the open court on 31.12.2015.

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