2008 (2) TMI 204 - HC - Income Tax

Assessee was awarded compensation in lieu of his acquired land - Whether the amount of enhanced compensation and interest was assessable on receipt basis, was a highly debatable issue - making of such claim that it was not assessable was bona fide on the basis of a possible view therefore it could not be treated as concealment of its income it can t be treated as furnishing of inaccurate particulars of such income so penalty could not be levied

Summary

Issues:
1. Appeal against deletion of penalty under section 271(1)(c) of Income Tax Act.
2. Taxability of enhanced compensation and interest on enhanced compensation.

Analysis:

Issue 1: Appeal against deletion of penalty under section 271(1)(c) of Income Tax Act
The Revenue filed an appeal challenging the deletion of penalty under section 271(1)(c) by the Commissioner of Income Tax (Appeals). The assessee had disclosed all income particulars, relying on a Supreme Court judgment regarding the taxability of enhanced compensation. The Commissioner noted the ongoing litigation on this issue and the ambiguity in the law. The High Court held that the penalty was not justified due to the assessee's bona fide belief and the existing ambiguity. The Tribunal upheld the Commissioner's decision, emphasizing that the claim made by the assessee was based on a possible view and could not be considered as concealment of income. The Tribunal dismissed the Revenue's appeal, stating that no substantial question of law arose from the order.

Issue 2: Taxability of enhanced compensation and interest on enhanced compensation
The case involved the taxability of enhanced compensation and interest received by the assessee for the Assessment Year 1998-99. The assessee, an agriculturist, had received compensation for acquired land, which was later enhanced by the court. The Assessing Officer taxed the enhanced compensation and interest under section 143(3). The Commissioner of Income Tax (Appeals) upheld the taxability, leading to penalty proceedings under section 271(1)(c). The Tribunal noted the debatable nature of the issue, with two possible views on the taxability of the amounts received. The Tribunal held that the claim made by the assessee was based on a possible view and could not be deemed as concealment of income. The Tribunal dismissed the Revenue's appeal, stating that the claim was made in good faith and no inaccurate particulars were filed in the return of income.

In conclusion, the High Court dismissed the appeal, upholding the decisions of the Tribunal and Commissioner of Income Tax (Appeals) regarding the deletion of penalty and the taxability of enhanced compensation and interest. The judgments were based on the bona fide belief of the assessee and the existing ambiguity in the law regarding the tax treatment of the amounts received.