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2011 (8) TMI 21 - HC - Income TaxPenalty u/s 271(1)(c)- Concealment of income - During the year under consideration, there is an increase of Rs.3 as security deposit. The assessee was asked to explain the same - As regard the deposit of Rs. 3 crores is reflected in the bank account as per photocopy submitted by the assessee, it has been explained by the assessee vide its letter dated 05.03.2001 as under - The receipt of Rs. 3 crores as security deposit by the assessee company from M/s Daewoo Motors (I) Ltd flows from the MOU entered into between them - The relevant clasue 8, 9, 10 and 11 of the MOU have been reproduced in our letter dated 06.02.2001 - In terms of clause 9 of the MOU, the fee payable by DMIL to MIL will accrue on the date on which the contract between the DTC and DMIL is signed or on which the DTC places an order on DMIL for the supply of buses - The order or the contract has yet not been awarded by DTC and hence the security deposit of Rs.3 cores has not yet changed its character and remains as a security deposit with the assessee company - This would amply demonstrate that the assessee had not concealed the particulars of his income nor it is a case where the assessee deliberately furnished inaccurate particulars of such income. This would also demonstrate that two views were possible and the claim of the assessee was bona fide - There would be no question of inviting the penalty under Section 271(1)(c) of the Act. - Decided in favour of assessee.
Issues Involved:
1. Nature of the Rs. 3 crores received by the assessee. 2. Whether the Rs. 3 crores should be taxed as income for the assessment year 1998-99. 3. Whether the assessee concealed particulars of income or furnished inaccurate particulars. 4. Legitimacy of the penalty imposed under Section 271(1)(c) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Nature of the Rs. 3 Crores Received by the Assessee: The assessee, a private limited company, received Rs. 3 crores from M/s Daewoo Motors India Ltd (DMIL) on 02.03.1998 under clauses 8 to 11 of the MOU. This amount was shown in the balance sheet as a "trade deposit" under liabilities. The CIT (Appeals) opined that the receipt was a revenue receipt for the assessment year 1998-1999 and not disclosed for taxation. The CIT (Appeals) enhanced the income by Rs. 3 crores and initiated penalty proceedings under Section 271(1)(c) for concealing particulars and furnishing inaccurate particulars. 2. Taxation of Rs. 3 Crores as Income for Assessment Year 1998-99: The CIT (Appeals) and subsequently the ITAT in quantum proceedings confirmed that the Rs. 3 crores was income assessable in the year 1998-1999. This was based on the interpretation that the amount was not refundable under any circumstances, thus constituting income on receipt. The ITAT's decision was upheld by the High Court, which dismissed the assessee's appeal, affirming that the amount accrued as income in the year it was received. 3. Concealment of Income or Furnishing Inaccurate Particulars: The Tribunal, in penalty proceedings, held that the assessee did not conceal particulars of income. The assessee disclosed the receipt of Rs. 3 crores, albeit as a liability. The Assessing Officer initially accepted this stand. The High Court noted that the assessee provided all relevant details, and the issue was debated in quantum proceedings. Thus, it was a bona fide claim with two possible views, negating the charge of deliberate concealment or furnishing inaccurate particulars. 4. Legitimacy of Penalty Under Section 271(1)(c): The High Court emphasized that penalty proceedings are independent of quantum proceedings. Penalty under Section 271(1)(c) requires proof of concealment or deliberate furnishing of inaccurate particulars. The Court found that the assessee's claim was bona fide, based on a possible interpretation of the MOU clauses. The Tribunal's conclusion that the claim was a bona fide interpretation, not concealment, was upheld. The Court referenced the Supreme Court judgment in CIT v. Reliance Petroproducts Pvt. Ltd., stating that merely making an unsustainable claim does not amount to furnishing inaccurate particulars. Conclusion: The High Court dismissed the Revenue's appeal, answering the substantial question of law in favor of the assessee. It concluded that the assessee did not conceal income or furnish inaccurate particulars, rendering the penalty under Section 271(1)(c) inapplicable.
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