2011 (5) TMI 1031 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of penalty u/s 271(1)(c) of the IT Act by the Ld. Commissioner of Income Tax (Appeals).

Summary:

Issue 1: Deletion of Penalty u/s 271(1)(c)

The Revenue appealed against the order of the Ld. Commissioner of Income Tax (Appeals) dated 06.08.2009, which pertained to the assessment year 2000-01. The primary issue was whether the Ld. Commissioner of Income Tax (Appeals) erred in deleting the levy of penalty u/s 271(1)(c) of the IT Act.

The assessee, an employee of M/s Zee Telefilms Ltd., was given an option (ESSOP) to acquire 2,00,000 equity shares at Rs. 212 per share. The assessee declared a perquisite of Rs. 7.72 crores for the assessment year 1999-2000, based on the market value of Rs. 598 per share as on 01.02.1999. However, the Assessing Officer assessed the perquisite at Rs. 916.25 per share for the assessment year 2000-01, based on the market value of Rs. 1128.25 per share as on 30.04.1999. The Hon'ble ITAT restored the order of the Assessing Officer, considering the transaction and resultant income in the assessment year 2000-01.

In the penalty proceedings, the Assessing Officer held that the assessee furnished inaccurate particulars to reduce his tax liability, leading to a penalty of Rs. 4,88,19,965/- u/s 271(1)(c). However, the Ld. Commissioner of Income Tax (Appeals) found that the assessee had offered an explanation, which was bona fide and genuine. The assessee voluntarily disclosed the offer of ESOP shares in the assessment year 1999-2000 and paid taxes accordingly. The issue was debatable, as evidenced by the matter traveling to the Hon'ble Supreme Court in the case of Infosys Technologies Ltd. 297 ITR 167.

The Ld. Commissioner of Income Tax (Appeals) noted that the decision of the Hon'ble ITAT and the subsequent amendment in the Act indicated that there was uncertainty and scope for multiple opinions. The explanation offered by the assessee was considered bona fide, and the penalty was deemed unjustifiable. The Hon'ble ITAT upheld this view, stating that the issue was controversial and the existence of two opinions could not be ruled out at the relevant time.

Moreover, for 2/3rd of the shares offered, which were subject to a lock-in period, there was no perquisite value as per the law laid down by the Hon'ble Apex Court in Infosys Technology Ltd. 297 ITR 16. The appeal against the ITAT order was admitted by the Hon'ble Jurisdictional High Court, further supporting the contention that the issue was debatable.

In conclusion, the Hon'ble ITAT found no infirmity or illegality in the order of the Ld. Commissioner of Income Tax (Appeals) and upheld the deletion of the penalty u/s 271(1)(c). The Revenue's appeal was dismissed.

Order pronounced in the open court on 27/05/2011.