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2012 (4) TMI 261 - AT - Income TaxPenalty u/s 271(1)(c) - compensation received from the landlord on failure to provide an alternate accommodation on vacating one of its premises - AO considered it as income received on termination of warehousing agreement - Held that - the assessee claimed the amount as not chargeable to tax which view as not accepted by the taxation authorities. Obviously it cannot be a case of concealment of income. - section 271(1)(c) reveals that the concealment of particulars of income or furnishing of inaccurate particulars of such income by the assessee is sine qua non for the imposition of penalty under this section - the assessee succeeds in proving that none of these conditions are satisfied in his case, then obviously the addition made by the Assessing Officer shall not constitute income in respect of which particulars have been concealed for the purposes of section 271(1)(c) - all the material facts relating to the case were disclosed by him the penalty would not be attracted - appeal in favour of assessee
Issues Involved:
1. Legitimacy of the penalty imposed under section 271(1)(c) of the Income-tax Act. 2. Determination of whether the compensation received by the assessee was a capital receipt not chargeable to tax. 3. Examination of the bona fide belief and disclosure by the assessee regarding the non-taxability of the compensation received. 4. Applicability of Explanation 1 to section 271(1)(c) in the context of concealment of income or furnishing inaccurate particulars. Issue-wise Detailed Analysis: 1. Legitimacy of the Penalty Imposed under Section 271(1)(c): The appeal concerns the penalty of Rs. 68,69,912 imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income-tax Act, upheld by the Commissioner of Income-tax (Appeals) (CIT(A)). The penalty was related to the assessment year 1994-1995, following the AO's addition of Rs. 1,32,75,193 to the assessee's income, which was claimed as a capital receipt not chargeable to tax by the assessee. 2. Determination of Whether the Compensation Received was a Capital Receipt Not Chargeable to Tax: The assessee received Rs. 1,32,75,193 from the landlord as compensation for vacating premises and claimed it as a capital receipt. This claim was based on a legal opinion by Shri S.E. Dastur, a Senior Advocate, who opined that the amount was a capital receipt not liable to tax. The assessee disclosed this amount in its Profit and Loss Account under 'Extraordinary item' and provided a note in the annual accounts and computation of income, asserting the non-taxability of the amount based on the Supreme Court decision in CIT v. B.C. Srinivasa Shetty (128 I.T.R. 294). 3. Examination of Bona Fide Belief and Disclosure by the Assessee: The Tribunal noted that the assessee's belief in the non-taxability of the amount was bona fide and based on a legal opinion. The assessee made due disclosure in the Profit and Loss Account and the computation of income filed with the return. The Tribunal emphasized that the assessee's bona fide belief and proper disclosure indicated that there was no intention to conceal income or furnish inaccurate particulars. 4. Applicability of Explanation 1 to Section 271(1)(c): Explanation 1 to section 271(1)(c) stipulates that if an assessee fails to offer an explanation, offers a false explanation, or offers an explanation that is not substantiated and fails to prove it is bona fide, the amount added is deemed to represent concealed income. The Tribunal found that the assessee had offered a substantiated explanation, which was bona fide and properly disclosed all relevant facts. Therefore, the conditions for deemed concealment under Explanation 1 were not met. Conclusion: The Tribunal concluded that the penalty under section 271(1)(c) was not justified. The assessee's claim was bona fide, supported by a legal opinion, and properly disclosed. The Tribunal referred to the Supreme Court judgment in CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158, which held that merely making an unsustainable claim does not amount to furnishing inaccurate particulars. Consequently, the Tribunal ordered the deletion of the penalty. Judgment: The appeal was allowed, and the penalty imposed under section 271(1)(c) was deleted.
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