2018 (9) TMI 881 - HC - Income Tax

Penalty u/s. 271(1)(c) - additions in respect of incentives received by the assessee in the form of excise duty refunds and sales tax exemption benefits - CIT(A) deleted such addition holding that the same were capital receipts and not chargeable to tax - Held that - While confirming the view of CIT(A) deleting such penalty, the Tribunal, in the impugned judgement, held and observed that the assessee had not concealed any particulars of his income. To the receipts in the form of sales tax and excise duty concessions, the assessee had followed his own interpretation believing that the receipts being capital in nature were not chargeable for computation of book profit under section 115JB. Tribunal was of the opinion that clearly two views were possible and the assessee had held the bonafide belief and acted on the same. In any case, there was no failure on part of the assessee to conceal any particulars of income. We are broadly in agreement with the view of the Tribunal. - Decided against revenue.

Summary

Issues:
1. Justification of upholding cancellation of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 by the CIT(A) amounting to ?3,42,08,425.

Analysis:
The case involved an appeal by the Revenue against the judgment of the Income Tax Appellate Tribunal concerning the imposition of a penalty under section 271(1)(c) of the Income Tax Act, 1961. The Assessing Officer had made additions regarding incentives received by the assessee in the form of excise duty refunds and sales tax exemption benefits. The CIT(A) ruled that these were capital receipts not chargeable to tax but should be included for computing book profit under section 115JB of the Act. The Tribunal upheld this view and concluded that the penalty imposed by the Assessing Officer was unjustified. The Tribunal found that the assessee had not concealed any income particulars and had a genuine belief that the receipts were not taxable under section 115JB. The Tribunal acknowledged that there were two plausible interpretations, and the assessee acted in good faith. Ultimately, the Tribunal held that there was no failure on the part of the assessee to conceal income details, leading to the dismissal of the Tax Appeals.

In essence, the main issue revolved around the interpretation of whether the incentives received by the assessee were capital receipts not subject to tax or should be considered for computing book profit under section 115JB of the Act. The Tribunal's decision to uphold the cancellation of the penalty was based on the finding that the assessee had not concealed income particulars and genuinely believed in the non-taxable nature of the receipts. The Tribunal's reasoning emphasized the assessee's bona fide belief and the absence of any intent to conceal income details, leading to the dismissal of the Tax Appeals. The judgment highlighted the importance of considering the assessee's interpretation and belief in determining the applicability of penalties under the Income Tax Act, ultimately affirming the Tribunal's decision.