2008 (2) TMI 55 - HC - Income Tax

Amount of enhanced compensation and interest on such enhanced compensation received by the assessee - highly debatable issue whether impugned amount taxable on receipt basis - bona fide belief on the part of the appellant that this income could not be subjected to tax held that making of such claim bona fide could not be treated as concealment of its income by the assessee or furnishing of inaccurate particulars of such income hence no penalty under section 271(1)(c) could be imposed

Summary

Issues:
1. Whether the Income-tax Appellate Tribunal was right in deleting the penalty levied under section 271(1)(c) of the Income-tax Act, 1961?
2. Whether the Income-tax Appellate Tribunal was right in holding that the view of the assessee regarding non-taxability of enhanced compensation was bona fide?

Analysis:
1. The case involved an appeal by the Revenue against the Income-tax Appellate Tribunal's order deleting the penalty under section 271(1)(c) of the Income-tax Act for the assessment year 1998-99. The Tribunal found that the enhanced compensation and interest received by the assessee were taxable, but the assessee did not offer them for tax. The Revenue argued that the explanation offered by the assessee was false and penalty was rightly imposed. However, the Tribunal held that the issue of taxability was debatable, and the assessee's claim was based on a possible view, not amounting to concealment of income. The Tribunal concluded that no question of law arose, and the appeal was dismissed.

2. The second issue revolved around the Tribunal's decision on the bona fide belief of the assessee regarding the non-taxability of enhanced compensation. The Commissioner of Income-tax (Appeals) accepted the assessee's appeal, stating that the taxability of the compensation was still a matter of litigation and not conclusively settled. The Commissioner held that there was a bona fide belief on the part of the assessee that the income was not taxable, hence no penalty should be imposed. The Tribunal upheld this decision, emphasizing that the assessee's claim was based on a possible view and did not amount to concealment of income. The Tribunal found no material to show inaccurate particulars in the income return, leading to the dismissal of the appeal.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing that the assessee's claim was based on a possible view regarding the taxability of enhanced compensation, which did not constitute concealment of income. The Court found no substantial question of law in the appeal and dismissed it.