2019 (6) TMI 1375 - HC - Income Tax

Penalty u/s 271(1)(c) - furnishing of income under an incorrect head - assessee shown stock appreciation rights and gain as capital gain in place of perquisites under salary - whether short payment of taxes does not amount to concealment of income or furnishing of inaccurate particulars of income? - HELD THAT - Assessee that there had been no deliberate concealment nor there had been deliberate non disclosure and that the assessee disclosed the amount which according to the Department should have been shown as a perquisite because the employer had treated it as a perquisite and deducted tax at source. Though the assessee offered an explanation it was not found to be acceptable by the AO. CIT(A) when he proposed to confirm the findings of the AO should record his own independent reasons as to how the conduct of the assessee was deliberate in not disclosing the perquisites shown by the employer in Form 16 and as to how such a deliberate conduct would amount to concealment of income. CIT(A) did not give independent reasons in support of his conclusions except stating that the assessee s conduct was deliberate. This would be sufficient to set aside the orders passed by the CIT(A). The Tribunal in our considered view examined the conduct of the assessee. The assessee who is a salaried employee had disclosed the value of the stock appreciation rights and gain thereof and claimed the same as capital gain. AO treated the gain as a revenue receipt and levied tax. In such circumstances whether it could have been stated that there was concealment of income or whether the assessee furnished inaccurate particulars of income. Tribunal rightly held that it is nobody s case that the assessee concealed the allotment of stock appreciation rights or gain arising out of such appreciation. In fact there had been a difference of opinion or difference in interpretation of the manner in which the assessee interpreted the returns. Therefore when there were two opinions possible it cannot be stated that the conduct of the assessee amounted to deliberate concealment of income with certain mala fide intentions.

Summary

Issues:
Appeal against deletion of penalty under Section 271(1)(c) of the Income Tax Act, 1961 for assessment years 2011-12 and 2012-13.

Analysis:
The Revenue filed appeals under Section 260A of the Income Tax Act challenging the Tribunal's order deleting penalties. The primary issue was whether the Tribunal was justified in allowing the appeals filed by the assessee and overturning the penalty orders. The CIT(A) confirmed the penalty orders passed by the Assessing Officer, but the Tribunal ruled in favor of the assessee. The Tribunal examined the conduct of the assessee, who disclosed the stock appreciation rights as capital gains, while the Assessing Officer treated it as a revenue receipt. The Tribunal found that there was no deliberate concealment or furnishing of inaccurate particulars of income by the assessee.

The CIT(A) was criticized for lack of reasoning in his orders, and for not addressing the defective penalty notices raised by the assessee. The Court emphasized the importance of providing detailed reasons in judgments. The assessee contended that there was no deliberate concealment or non-disclosure of income, as the employer had treated the perquisites as such and deducted tax at source. The CIT(A) failed to provide independent reasons supporting the conclusion of deliberate conduct by the assessee in not disclosing the perquisites. The Tribunal correctly analyzed the conduct of the assessee and found no deliberate concealment.

The Court referred to relevant legal precedents, including the case of CIT Vs. Zoom Communication (P) Ltd., to support the assessee's position. It was noted that there was no established mala fide conduct by the assessee, and there were differing opinions between the assessee and the Assessing Officer. Another case, Jivanlal and Sons Vs. ACIT, was distinguished as it involved a different scenario where the penalty was imposed due to the Chartered Accountant's error. The Court concluded that the Revenue failed to establish a case to interfere with the Tribunal's order.

In summary, the Court dismissed the tax case appeals and connected CMPs, upholding the Tribunal's decision to delete the penalties under Section 271(1)(c) for the assessment years 2011-12 and 2012-13.