2013 (7) TMI 579 - HC - Income Tax

Penalty u/s 271(1)(c) - Amount of goodwill debited to partners capital accounts - Tribunal deleted penalty holding that no capital gain tax is payable by writing off the goodwill in the books of accounts by debiting the partners account - Held that - claim made by the respondent assessee that the amount attributable to the goodwill amount which was written off is not chargeable to tax was not accepted by the revenue. In such circumstances, merely making of a claim which is found to be not sustainable and would not warrant imposition of penalty under Section 271 (1)(c) - Following decision of CIT v/s. Reliance Petro Products Ltd 2010 (3) TMI 80 - SUPREME COURT - Decided against Revenue.

Summary

Issues:
Challenge to deletion of penalty under Section 271(1)(c) of the Income Tax Act for Assessment Year 1992-93.

Analysis:
The High Court of Bombay heard an appeal filed by the Revenue challenging the deletion of penalty under Section 271(1)(c) of the Income Tax Act for the Assessment Year 1992-93. The Revenue contended that despite the assessee concealing income particulars, the Tribunal had canceled the penalty. The Revenue argued that the respondent had breached Section 45(4) of the Act. The respondent, on the other hand, maintained that they had fully disclosed all relevant information in their return of income and balance sheet. The Assessing Officer had imposed a penalty of Rs. 53.05 lakhs on the respondent for allegedly violating the law. The respondent appealed to the CIT(A), which set aside the penalty, stating that it was imposed due to differing interpretations of the law. The Tribunal upheld the CIT(A)'s decision based on the acceptance of the respondent's claim that no capital gains tax was payable. The Revenue contended that the Tribunal should have awaited the decision of the Court before upholding the penalty deletion. However, the Court found that there was no concealment of income or furnishing of inaccurate particulars by the respondent. The Court cited the Supreme Court's decision in the case of Reliance Petro Products Ltd., emphasizing that the imposition of a penalty requires concealment of income or furnishing inaccurate particulars, which was not the case here. Therefore, the Court dismissed the appeal, ruling in favor of the respondent and citing the Supreme Court's decision in Reliance Petro Products Ltd.

This judgment highlights the importance of full disclosure of information by taxpayers and the necessity of establishing concealment of income or furnishing inaccurate particulars for the imposition of penalties under the Income Tax Act. The Court's decision was based on the lack of evidence of concealment or inaccuracies by the respondent, emphasizing the need for a clear violation of tax laws to warrant penalties.