2016 (9) TMI 1203 - AT - Income Tax

Penalty u/s. 271(1)(c) - determination of liability - guilty of concealment of income - Held that - Assessee was under a bona fide belief that ₹ 13 crores was a determined liability for A.Y. 2008-09 in accordance with the terms of the Full and Final Settlement Agreement dt. 22.02.2008 signed by him with the two companies. It was noted that he offered this amount for taxation in A.Y. 2009-10 under a bonafide belief that in accordance with the terms of Deed of Settlement recording the Consent Terms between the parties dt. 29.01.2009, this amount had become not payable and he accordingly, wrote back this amount in his books of accounts and paid taxes thereon in accordance with law. Thereafter, on professional advice, he has offered it for taxation in A.Y. 2008-09 and simultaneously, reduced it from his income for A.Y. 2009-10. Under these facts and circumstances, it is difficult to fault the assessee and accuse him of concealment of income. It is clear from the facts that the assessee had no intention whatsoever to conceal this amount of ₹ 13 crores. Even the dates of the two agreements entered into by the assessee with the companies on 22.02.2008 and 29.01.2009 go on to support his argument that his belief was bonafide initially, that this amount of ₹ 13 crores was a determined liability in A.Y. 2008-09 and became income in A.Y. 2009-10. In fact, the assessee paid taxes on this amount in A.Y. 2009-10 to the tune of ₹ 3,13,24,962/- on 27.09.2009. We find that Ld. CIT(A) in his impugned order has noted that the AO accepted the voluntary surrender of the assessee of an amount of ₹ 13 crores for A.Y. 2008-09 in his order u/s. 143(3) of the Act dt. 26.11.2010. Furthermore, the AO also accepted the assessee s revised return for A.Y. 2009-10, in the assessee had reduced his income by the said ₹ 13 crores vide his Order u/s. 143(3) of the Act dt. 20.12.2011. AO held the assessee is guilty of concealment of income of ₹ 13 crores for A.Y. 2008-09. The AO mentioned in the penalty order that the assessee had filed an appeal before CIT(A) against this addition. In fact, the assessee accepted this addition of ₹ 13 crores since he had voluntarily offered it for taxation for A.Y. 2008-09. In view of the above, Ld. CIT(A) has rightly held that that there is no case for imposition of penalty u/s. 271(1)(c) of the Act on the assessee with reference to the amount of ₹ 13 crores, hence, he rightly directed the AO not to impose any penalty u/s. 271(1)(c) with reference to this amount of ₹ 13 crores. - Decided in favour of assessee.

Summary

Issues:
1. Deletion of penalty under section 271(1)(c) by Ld. CIT(A)
2. Bonafide belief of the assessee regarding tax liability

Analysis:
1. The appeal was filed by the Revenue against the order of the Ld. CIT(A) deleting the penalty of ?13 crores imposed under section 271(1)(c) of the Income Tax Act. The Revenue contended that the assessee filed a revised computation of income only after receiving a notice under section 143(2) for the assessment year 2008-09, questioning the bonafide nature of the revision. The Ld. CIT(A) had allowed relief on certain grounds but dismissed the appeal on the issue of initiation of penalty under section 271(1)(c). The penalty was imposed by the Assessing Officer despite the assessee's explanation and subsequent revision of income in the following assessment year.

2. The Ld. CIT(A) extensively analyzed the facts and circumstances of the case to determine the bonafide belief of the assessee regarding the tax liability of ?13 crores. It was noted that the assessee had entered into agreements regarding the liability, recorded it in the books of accounts, and filed returns accordingly. Subsequently, due to settlement agreements with the concerned companies, the liability was considered not payable, leading to the revision of income in the subsequent assessment year. The Ld. CIT(A) found that the assessee had no intention to conceal income, as evidenced by the voluntary surrender of the amount and payment of taxes in accordance with the law. The AO's decision to impose the penalty was based on the concealment of income, which was not supported by the facts presented.

3. The Tribunal upheld the decision of the Ld. CIT(A) based on the detailed analysis of the case. It was concluded that the assessee had a bonafide belief regarding the tax liability, supported by the agreements and subsequent actions taken. The Tribunal found no grounds to interfere with the Ld. CIT(A)'s order and dismissed the appeal of the Revenue. The judgment emphasized the importance of considering the bonafide belief of the taxpayer in such cases to prevent unjust penalties for alleged concealment of income.

This comprehensive analysis highlights the key legal aspects and reasoning behind the judgment, focusing on the deletion of the penalty and the bonafide belief of the assessee, as discussed and decided by the Ld. CIT(A) and upheld by the Tribunal.