2016 (1) TMI 666 - AT - Income Tax

Penalty u/s 271(1)(c) - capital gains on the sale of the said user data - CIT(A) deleted the penalty - Held that - As 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. As 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. - Decided in favour of assessee

Summary

Issues:
1. Deletion of penalty under section 271(1)(c) of the Income Tax Act by the CIT(A) for assessment year 2005-06.

Analysis:
The appeal before the Appellate Tribunal ITAT Mumbai pertains to the deletion of a penalty imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act. The penalty of Rs. 55,04,265/- was levied on the assessee for concealment of particulars of income related to the sale of 'user data' to eBay International AG, Switzerland. The assessee believed that the 'user data' constituted a self-generated capital asset and relied on a Supreme Court judgment for non-taxability of capital gains from its sale. The AO, during the initial assessment, agreed with the assessee's position. However, in a reopened assessment, the AO treated the cost of acquisition of 'user data' as nil and taxed the capital gains, leading to the imposition of the penalty under section 271(1)(c).

The CIT(A) deleted the penalty, emphasizing that the assessee acted in good faith with a genuine belief in the non-taxability of the income from the sale of 'user data'. The CIT(A) noted that the assessee fully disclosed all relevant details during the assessment proceedings, indicating no intention to conceal income or provide inaccurate particulars. The CIT(A) considered the issue debatable, given the initial agreement by the AO and the disclosure made by the assessee. Consequently, the CIT(A) concluded that the penalty was unwarranted and overturned it.

Upon review, the Appellate Tribunal ITAT Mumbai upheld the CIT(A)'s decision, finding no flaws in the well-reasoned order. The Tribunal concurred that the assessee's actions did not amount to concealment of income or furnishing inaccurate particulars. Therefore, the Tribunal dismissed the Revenue's appeal, affirming the deletion of the penalty by the CIT(A). The judgment was pronounced in open court on 31.12.2015, bringing the matter to a close.