2023 (5) TMI 695 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - Non disclosing capital gains on sale of goodwill - HELD THAT - We find that the assessee has not shown any capital gains on sale of goodwill inspite of the fact that the transferee company had already recorded goodwill in their books. The peculiar facts in this case are that the Chairman is common for both the assessee company as well as transferee company M/s. Pentafour Technologies Ltd. The transferee company, in its published accounts, recognized goodwill and it cannot be said that the assessee was not aware of the goodwill. Thus, we are of the opinion that it is a clear case of concealment of income by filing inaccurate particulars. As assessee has deliberately made an attempt not to disclose true facts before the Assessing Officer, thereby, concealed the income by filing inaccurate particulars. Thus, the provisions of section 271(1)(c) of the Act clearly applies to the present case. As argued penalty proceedings was initiated as per assessment order u/s 143(3) whereas, no penalty was initiated in view of the order u/s 143(3) r.w.s. 263 and therefore, penalty cannot be levied under section 271(1)(c) - AO has initiated penalty proceedings for concealment of goodwill. Subsequently, in his revision order u/s 263 CIT enhanced the quantum, which is continuation of the proceedings. The concealment of income and furnishing of inaccurate particulars has been considered by the AO by passing assessment order under section 143(3) of the Act dated 31.03.2003. It is not the case that the concealment started after passing order under section 143(3) r.w.s. 263 - Therefore, the argument of the ld. Counsel no penalty was initiated in view of the order u/s 143(3) r.w.s. 263 is rejected. Issue of limitation to pass penalty order u/s 271(1)(c) - In the present case, the assessee has not filed any additional ground and no reason was given and the ld. Counsel has raised this issue for the first time while arguing the case. In our opinion, only based on the argument, legal issue cannot be decided unless there is a ground raised in the appeal. Since no such ground was raised in the appeal, the argument of the ld. Counsel is rejected. Addition on the ground that there was deliberate attempt on the part of the assessee company not to disclose the sale of goodwill and non-disclosure of goodwill tantamount to concealment of income and furnishing of inaccurate particulars of income by adopting colourable device stating that the payments were made towards non-compete fee, IPR on brand value, IPR on brand, etc - Decided against assessee.

Issues Involved:
1. Condonation of Delay
2. Levy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961
3. Non-disclosure of Goodwill in Capital Gains
4. Validity of Penalty Proceedings
5. Limitation for Passing Penalty Order
6. Impact of Substantial Question of Law Framed by High Court

Condonation of Delay:
The appeal filed by the assessee was delayed by one day. The Tribunal condoned the delay as the assessee was prevented by reasonable cause, and there was no objection from the Department Representative (DR).

Levy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the levy of penalty of Rs. 13.50 crores under Section 271(1)(c) for furnishing inaccurate particulars and concealment of income. The assessee argued that the claim was based on an interpretation of the Act's provisions and all relevant information was furnished in the return of income, thus the penalty was unwarranted.

Non-disclosure of Goodwill in Capital Gains:
The assessee transferred its software and training division to its sister concern and claimed that the consideration received was for intellectual property rights and non-compete fees, not goodwill. The Assessing Officer (AO) disagreed, attributing a portion of the consideration to goodwill and assessed capital gains accordingly. The CIT, exercising powers under Section 263, found the AO's valuation of goodwill erroneous and directed a reassessment, resulting in an enhanced capital gain on goodwill.

Validity of Penalty Proceedings:
The AO initiated penalty proceedings under Section 271(1)(c) for non-disclosure of goodwill. The assessee contended that the penalty proceedings were time-barred and argued that the penalty could not be imposed as the substantial question of law was framed by the High Court. The Tribunal held that the AO's initiation of penalty proceedings was valid and not time-barred, as it was a continuation of the original proceedings.

Limitation for Passing Penalty Order:
The Tribunal rejected the assessee's argument that the penalty order was time-barred, noting that the issue of limitation was not raised before the lower authorities or in the grounds of appeal. The Tribunal emphasized that legal issues must be raised as grounds in the appeal.

Impact of Substantial Question of Law Framed by High Court:
The Tribunal dismissed the assessee's argument that no penalty could be imposed once the High Court framed a substantial question of law. The Tribunal noted that the ITAT had already confirmed the addition on the ground of non-disclosure of goodwill, which amounted to concealment of income and furnishing of inaccurate particulars.

Conclusion:
The Tribunal upheld the penalty levied under Section 271(1)(c) of the Act, confirming that the assessee had concealed income by not disclosing goodwill. The appeal filed by the assessee was dismissed.

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