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TMI Blog2017 (7) TMI 961X X X X Extracts X X X X X X X X Extracts X X X X ..... nue receipt or capital receipt was clearly debatable and therefore, Assessee chose to take a position which is favourable for her. This in our opinion does not in any manner qualify as deliberate non disclosure or concealment. We do not find any mens rea on the part of the Assessee qua concealment and non disclosure. Therefore, we have no hesitation in coming to the conclusion that this may not be a case which warrants penalty proceedings under Section 271(1)(c) of the IT Act. However, this being an appeal under Section 260A of the IT Act, it can be entertained only on substantial questions of law and not even on questions of law. As there is nothing of substance, of purport or nothing that would decide the right of parties qua questions of law, we have no hesitation in holding that the two questions of law as propounded by Revenue are not substantial questions of law at all. We are also of the view that they may not even qualify as questions of law as the very language in which the questions are couched would demonstrate that there is a huge factual element built into them. Independent of the aforesaid two questions suggested by the Revenue in the Memorandum of Appeal, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO under Section 28(va) of the IT Act. This sum of ₹ 3.82 Crores was received by the Assessee from a Dutch company for relinquishing her right to sue for damages. Assessee's contention that this is a capital receipt was turned down and the AO treated the same as revenue receipt. 3(d) Thereafter, owing to the above said addition, separate penalty proceedings under Section 271(1)(c) of the IT Act were initiated against the Assessee. In and by order dated 30.7.2013, the Deputy Commissioner of Income Tax, Company Circle-IV(1), Chennai imposed a penalty of ₹ 89,84,690/- being an amount equivalent to tax, which according to the said authority was the tax sought to be evaded by the Assessee by reason of the alleged concealment of particulars of income. The order of penalty came to be passed on the basis that the Assessee has concealed income in the nature of 'success sharing bonus' to the tune of ₹ 2,67,60,000/- being the money received by her from the Dutch company as aforesaid for giving up her right to sue for damages. 3(e) Aggrieved, Assessee preferred a statutory appeal before the Commissioner of Income Tax (Appeals)-8, Chennai-600 034 (hereinaft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessee was to be offered such shares at the prices at which any third party has expressed its readiness to purchase. Only if the Assessee is unable to purchase the share at the value stated therein within a period of thirty days from the date of offer, the Netherlands based company, i.e., Vedior NV, will have the right to transfer such shares to a third party. 4(b) However, Vedior NV entered into a deal with another company, being Randstad, wherein and whereby Vedior NV was taken over by Randstad. The acquisition by Randstad was acquisition of Vedior NV as a whole. Aggrieved by the action of Vedior NV, the Assessee issued a legal notice to Vedior NV, alleging that by virtue of being taken over by Randstad, her shares (which were sold to Vedior NV) also stood transferred to Randstad. This, according to the Assessee, has violated and breached her right of preemptive purchase of shares of Ma Foi. 4(c) In the said assessment year (i.e., 2009-10), there was a settlement between Assessee and Randstad. In the settlement, Randstad offered to monetarily compensate the Assessee in a sum of Rupees one million Euro, if she withdraws the notice to Vedior NV. The settlement fructified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the above said addition alleging that the same is willful concealment and non disclosure of income, separate penalty proceedings were initiated and penalty equivalent to a sum of tax allegedly sought to be evaded was levied. Such penalty was levied under Section 271(1)(c) of the IT Act as mentioned supra. This penalty component alone was assailed by the Assessee before the CIT(A) successfully as set out supra. CIT(A), relying on the ratio in various reported judgments that a debatable issue cannot be the foundation for levy of penalty, came to the conclusion that this is not a fit case for imposition of penalty. 5(d) CIT(A) noticed that the issue whether it is a revenue receipt or a capital receipt is res integra as the matter is pending in this Court. Besides this, CIT(A) also relied on a decision of ITAT in the case of Assessee's spouse where the same has been put in issue. ITAT, in the case of Assessee's spouse vide I.T.A.No.54/Mds/2015 dated 12.6.2015, had cancelled the penalty levied on the same issue, observing that it is not a dispute regarding disclosure of information relating to income as all relevant particulars pertaining the contentious receipt had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that in the absense of mens rea on the part of Assessee to conceal the income or deliberate non disclosure, penalty proceedings cannot be initiated. To be noted, as far as tax component is concerned, the same has been levied and it is now the subject matter of T.C.A.Nos.92 and 93 of 2013, which will be decided independently on the merits of the matter. 5(i) We further put it to the learned Standing Counsel for Revenue as to how he attempts to sustain penalty proceedings when it cannot be disputed that the lone issue which is the crux of the matter is debatable. To this, learned Standing Counsel for Revenue replied by taking us through Section 275 of the IT Act. Learned Standing counsel for Revenue would submit that there is a cap qua time frame for imposing penalty, if they await the outcome of T.C.A.Nos.92 and 93 of 2013, it will become too late for them to impose the penalty and therefore, they have commenced penalty proceedings and imposed penalty on the Assessee, though the issue is, indisputably, debatable. 5(j) This submission, though attractive at first blush, on a closer scrutiny does not find favour with us. The reason is, the question before us is whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... numerate the principles regarding the concept of substantial question of law. The same case was referred to by the Supreme Court in Hero Vinoth Vs. Seshammal [(2006) 5 SCC 545] to lay down the principles regarding substantial question of law in an appeal under Section 100 of CPC. 5(m) With regard to 'substantial question of law', the tests laid down by the Supreme Court of India for finding out whether a given set of questions of law are mere questions of law or substantial questions of law is found in Hero Vinoth's case judgment. The ratio laid down by the Supreme Court is found in paragraphs 21 to 23 of the said judgment, which read as follows : 21. The phrase substantial question of law, as occurring in the amended Section 100 CPC is not defined in the Code. The word substantial, as qualifying question of law, meansof having substance, essential, real, of sound worth, important or considerable. It is to be understood as something in contradistinction withtechnical, of no substance or consequence, or academic merely. However, it is clear that the legislature has chosen not to qualify the scope of substantial question of law by suffixing the words of general imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning the question are well settled and there is a mere question of applying those principles or that the plea raised is palpably absurd the question would not be a substantial question of law. 22. In Dy. Commr. v. Rama Krishna Narain [1954 SCR 506 : AIR 1953 SC 521] also it was held that a question of law of importance to the parties was a substantial question of law entitling the appellant to a certificate under (the then) Section 100 CPC. 23. To be substantial a question of law must be debatable, not previously settled by law of the land or a binding precedent, and must have a material bearing on the decision of the case, if answered either way, insofar as the rights of the parties before it are concerned. To be a question of law involving in the case there must be first a foundation for it laid in the pleadings and the question should emerge from the sustainable findings of fact arrived at by court of facts and it must be necessary to decide that question of law for a just and proper decision of the case. An entirely new point raised for the first time before the High Court is not a question involved in the case unless it goes to the root of the matter. It will, there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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