2018 (7) TMI 2002 - AT - Income Tax

Penalty u/s 271(1)(c) - whether the gain arising on appreciation rights is a capital gain or revenue receipt? - classification of income - concealment of income or whether the assessee have furnished inaccurate particulars of income - HELD THAT - It is nobody s case that the assessees have concealed the allotment of Stock Appreciation Rights or gain arising out of such appreciation. As rightly pointed out by assessee the difference of opinion between the assessee and AO is on classification of head of income. In other words whether the gain arising on appreciation rights is a capital gain or revenue receipt. This Tribunal is of the considered opinion that the classification of head of income is depending upon the understanding of the scheme and provisions of Income-tax Act. There may be difference of opinion among various authorities on classification of head of income. Therefore a mere difference of opinion between the assessees and the AO or other Revenue authorities on classification of income under different heads cannot be construed as furnishing of inaccurate particulars of income or concealing any part of assessee s income. This Tribunal is of the considered opinion that it is not a fit case for levy of penalty under Section 271(1)(c) - Decided in favour of assessee.

Summary

Issues:
Penalty under Section 271(1)(c) of the Income-tax Act, 1961 - Classification of Stock Appreciation Rights as capital gain or revenue receipt.

Detailed Analysis:
1. The appeals were against the penalty levied by the Assessing Officer under Section 271(1)(c) of the Income-tax Act, 1961. The assessees, employees of a company, were given Stock Appreciation Rights by the parent company. The assessees considered the gains from these rights as capital assets and disclosed them for taxation. However, the Assessing Officer treated it as a revenue receipt, confirmed by the CIT(Appeals) and the Tribunal. The main issue was the classification of the gains as capital or revenue receipt.

2. The assessees argued that the Stock Appreciation Rights were capital assets, and the gains should be treated as capital gains. They disclosed the rights and gains in their returns, believing it to be a capital receipt. The difference of opinion with the Assessing Officer was on the classification of income. They contended that this disagreement did not amount to concealment or furnishing inaccurate particulars of income.

3. The Departmental Representative argued that the gains were profits in lieu of salary and should be assessed as revenue receipts. Claiming it as capital gains was providing inaccurate particulars of income. The dispute centered on whether the gains were capital or revenue in nature.

4. The Tribunal considered the submissions and found that the disagreement between the assessees and the Assessing Officer was on the classification of income. It noted that the assessees had disclosed the Stock Appreciation Rights and gains, indicating no concealment. The Tribunal held that a variance in the understanding of the income classification did not constitute concealment or inaccurate reporting. Consequently, the penalty under Section 271(1)(c) was deemed unwarranted, and the orders of the lower authorities were set aside, deleting the penalty.

5. The Tribunal concluded that the appeals by the assessees were allowed, emphasizing that the differences in income classification did not justify the penalty under Section 271(1)(c) of the Income-tax Act, 1961.