2016 (11) TMI 1417 - AT - Income Tax

Penalty levied in 271(1)(c) - assessee claimed the foreign payment as the compensation for cancellation of a contract and is a capital receipt. Whereas the Assessing Officer relied on the judicial decisions treated the receipt as the revenue receipt u/s. 28(v)(a) - Held that - We found that the Assessing Officer in penalty proceedings relied mainly on the Assessment Order and is of the opinion that the assessee has disclosed inaccurate particulars while filing the Return of income. Further, we found the issue is not clear and debatable and the Hon ble High Court of Madras has admitted the case. Considering the above facts and there is no lapse on the part of the assessee in filing the Return of income and the disputed issue of sharing success bonus is debatable to treat as capital or revenue and co-ordinate bench of this Tribunal in the assessee s husband case penalty issue 2015 (6) TMI 1129 - ITAT CHENNAI wherein held that there is debtability on this issue. It is also undisputed fact that the Hon ble High Court has admitted the appeal and the same is pending for final adjudication. Considering all these undisputed facts, we find no default in disclosure of information in the return of income by the assessee. Debatability is evident as narrated by the ld. Counsel for the assessee before us. On the other hand, the Revenue failed to prove the absence of debatability on the issue. Considering the overall factual matters of the case, we are of the opinion that it is not a fit case for levying penalty u/s. 271(1)(c) of the Act - Decided in favour of assessee.

Summary

Issues:
1. Penalty under section 271(1)(c) of the Income Tax Act - Whether penalty levied by the Assessing Officer is justified or not.

Analysis:
The Revenue filed an appeal against the order of the Commissioner of Income Tax (Appeals) challenging the deletion of penalty under section 271(1)(c) by the Ld. CIT(A). The main issue revolved around the treatment of success sharing bonus received by the assessee as a revenue receipt or a capital receipt. The Assessing Officer contended that the receipt should be treated as a revenue receipt under section 28(v)(a) of the Act. However, the assessee argued that the amount received was forgoing the right to sue and initiate legal proceedings, which should be considered a capital receipt. The Ld. CIT(A) found the issue debatable and relied on various judicial decisions to support the cancellation of the penalty.

The Tribunal confirmed that the success sharing bonus is indeed a revenue receipt, leading to the initiation of penalty proceedings by the Assessing Officer under section 271(1)(c). The Ld. AR of the assessee reiterated the nature of the receipt as a success sharing bonus due to managerial abilities and not a revenue receipt. The Assessing Officer, however, relied on the jurisdictional High Court decision and imposed a penalty. The Ld. CIT(A) considered the facts and arguments, emphasizing that the issue was debatable and not a fit case for levying the penalty under section 271(1)(c).

The Revenue appealed the CIT(A)'s decision, arguing that the penalty should not have been deleted as the assessee furnished inaccurate particulars. The Ld. AR of the assessee contended that the issue was debatable, citing precedents and the admission of the Tax Case by the High Court. The Tribunal considered the arguments, finding the issue unclear and debatable, especially since the High Court admitted the case for final adjudication. The Tribunal upheld the decision of the CIT(A) and dismissed the Revenue's appeal, concluding that the penalty levied by the Assessing Officer was not in accordance with the law.

In summary, the judgment revolved around the treatment of a success sharing bonus as a revenue or capital receipt, leading to penalty proceedings under section 271(1)(c). The Tribunal, after considering the debatable nature of the issue and the admission of the case by the High Court, upheld the decision to cancel the penalty, emphasizing the lack of default in disclosing information and the complexity of the issue.