9911796707
TMI Blog2012 (6) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant at the time of filing of return and had disclosed truly and fully all relevant particulars. 3] He further failed to appreciate and ought to have held that the issue was debatable issue and hence levy of penalty was unwarranted. 4] In view of the above the appellant prays that the AO be directed to delete the afore said penalty levied u/s 271[1][c] of the act. Without prejudice to ground No. 1 above Ground II 1] The appellant further prays that the AO be directed to appropriately reduce the afore said penalty levied u/s 271[1][c] of the act. Ground III The appellant craves leave to add, alter or amend the above ground of appeal. The sum and substance of ground No. 1 is that the appellant is aggrieved by the order of the CIT [A] upholding the levy of penalty of Rs.1534260.00 levied u/s 271[1][c] of the Act. Ground No. 2 is an alternative plea. 3. The Facts and circumstances under which the penalty was imposed by the AO on the Assessee and confirmed by the CIT(A) are as follows: The Assessee is a finance and investment company. For the Assessment year under consideration for which the relevant previous year was the period between 1-4-1992 to 31-3-1993, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her claim of the assessee was that after the rights issue the shares were quoted at Rs. 200 as against the price of Rs. 250 prior to the rights issue. If the cost of acquisition of right shares so determined then there would be a capital loss on sale of right shares 4. In the mean time the AO sought clarification from the Bombay stock exchange (BSE) regarding the Cum-right and Ex-right price of MGSW, which were subsequently received by the AO. The information received from the BSE quotation received from the BSE was that the price of shares cum-right was Rs.250/- per share on 10/06/1992 and first Ex-Right price was Rs.250.00 on 16/07/1992. If the cum-right price and ex-right price is at Rs.250 then as per the principles laid down by the Hon'ble Supreme court in the case of Dhan Kapadia [supra] the entire consideration received by the assessee will be regarded as capital gain because the cost of acquisition of the rights share would be nil. 5. The AO confronted this information to the assessee and sought its reply. The assessee did not give any explanation regarding the Cum-right and Ex-right quotation received by the AO from BSE. 6. The AO based on the information received from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, I do not consider it necessary to disturb the Assessing Officer's findings in this case, which are confirmed." 9. The matter was further agitated before the Income-tax Appellate Tribunal. On reference by the division bench, a Special bench was constituted to decide the following question : Issue : "Whether or not, on the facts and in the circumstances of the case and in the assessment years prior to assessment year 1995-96, while computing the gain or loss under the head 'Short term capital gains', the entire fall in value of cum-right shares held immediately before the rights issue vis-á-vis value of ex-rights shares immediately after the rights issue, is allowable as deduction as 'cost of acquisition of such entitlements?" 10. The special bench so constituted after considering the facts in totality held: "12. We have given our careful consideration to the rival submissions vis-a-vis the facts of the case. At the outset, it must be mentioned that on issue of right shares, the market price of the shares of the company is bound to go down. In the present case, the market rate of the share of MGS on 10-6-1992 was Rs.250 and on 22-6-1992 right shares were offered at R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not be levied 2] All related information of renunciation had been provided and the related facts were submitted hence there is no furnishing of inaccurate particulars. 3] Concealment in sec 271[1][c] imports the concept of mens rea or guilty mind and hence penalty cannot be levied unless the necessary mental element could be spelt out in his act from material on record. 13. The assessing officer rejected the contentions of the assessee stating that: 1] The addition made by AO has been confirmed by the CIT[A] and the Hon'ble Income-tax Appellate Tribunal have also upheld the action of the AO in principle, though reduced the quantum of addition. And as the assessee successively failed to substantiate its stand of non-taxability of premium received on renunciation or right shares, there fore issue involved cannot be construed as a debatable issue. 2] The assessee's contention that it has disclosed the entire consideration under the head 'Reserves & Surplus "does not hold any water as it has not mentioned the nature of its constituents and the fact of receipt of premium on renunciation of right shares has not been mentioned any where in the return of income, nor in the computa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the lower authorities that there was no concealment of income or furnishing of any inaccurate particulars. The assessee while filing the return of income has shown the premium amount received on renunciation of right shares under the head 'Capital Reserve'. Ld Sr.Counsel further submitted that since the company had incurred no cost on the renunciation of right shares, it legitimately took the stand that there was no capital gains involved following the ratio laid down by the Hon'ble Supreme court in the case of B.C.Srinivas Shetty [supra] therefore penalty so levied deserves to be cancelled. The Ld Sr.Counsel, further drew our attention to the fact that the Hon'ble High court of Judicature at Bombay in Income tax appeal No.663 of 2007 has admitted appeal of the assessee against the order of the Tribunal in the quantum proceedings and a substantial question of law has been framed. It is relevant to point out at this stage itself that the substantial question of law is only restricted to the determination of capital gain and not the very chargeability to tax of the capital gain. Since the Hon'ble High Court has admitted substantial question of law against the orders in the qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch were as under: Capital Redemption Reserve 92-93 91-92 Balance as per last balance sheet 2000 2000 Add: Premium of renunciation of Right shares received 9452025 0 General reserve Balance as per last BS 113859 6359 Add: Transfer during the year 168341 107500 282200 113858 Surplus as per profit & loss account 570 972 9736795 118831 21. Admittedly, the entire consideration received by the assessee company on renunciation of right shares was shown under the head "Reserves & Surplus" without mentioning the nature of its constituents and as to how the same was exempt . Moreover, this fact was not mentioned any where in the Return of Income. Nothing was revealed in this regard by way of even a note to computation of total income chargeable to capital gains. The Ld Sr.Counsel's argument that the issue relating to the Cum-right and Ex-right value of shares being debatable and there fore no penalty should be levied, does not hold any water because this is not a case of fling inaccurate particulars but of concealment of income, and undoubtedly, the appellant company has not disclosed the share premium received on renunciation of right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpletion by third parties. Thus the amount received is by virtue of a restrictive covenant and therefore is in the nature of capital receipt not liable to tax.' (underlining by us for emphasis) The AO added the said sum u/s28(ii)(c) as income of the Assessee. The Quantum addition was sustained in part by the order of the Income-tax Appellate Tribunal. The Assessee preferred appeal before the High Court. In the mean time AO levied penalty u/s 271[1][c]. The penalty so levied was contested in appeal which was cancelled by the Income-tax Appellate Tribunal. The tribunal while disposing off the appeal held : "Even otherwise , on the facts of the present case itself proved that the issue is highly debatable because of two opinions. The AO formed an opinion that the receipts received on account of restrictive covenant are revenue receipts and liable to be taxed in view of the provisions of sec28[ii][c]. The tribunal knocked this view that in view of the provisions of sec 28[ii][c], the receipts are taxable. However, the Tribunal opined that part of the receipts may be treated as on account of restrictive covenant and part of the receipts may be treated as revenue receipt. There is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be debatable, only the quantum may increase/decrease. The charge in the present case is concealment of particulars of income. The Assessee's failure to disclose facts material to determination of income is the subject matter of the present penalty proceedings. When the charge is of furnishing inaccurate particulars of income i.e., when there is disclosure but taxability of the sum is in dispute then it was open to an Assessee to plead that the question whether the sum is taxable or not was debatable and therefore the Assessee claimed that the income was not taxable. Such a plea cannot be taken when there is non-disclosure of material facts. 24. The ld Sr counsel further relied upon the decision of the tribunal in the case of Maersk India pvt ltd vs Dy.CIT Cir6[3]3 Mumbai In ITA No 883/Mum/2006[supra]. In this case the tribunal cancelled the penalty holding that the assessee has claimed amortization of lease premium as revenue expenditure on the basis of certain judicial decisions available at the time of filing of the return and the facts regarding the claim was duly disclosed therefore the Tribunal concluded that it is a case of legal claim made by the assessee which has been re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the afore mentioned case also goes against the appellant as the Hon'ble Supreme Court has clearly held that the return of income is the only document where the assessee can furnish his particulars of income, where as in the instant appeal, the appellant company has not disclosed the receipt of premium received on renunciation of rights in its return of income nor in the computation of income accompanied with the return of income. 27. After considering the facts and circumstances of the appeal under consideration and also distinguishing the facts of the cases relied upon by the ld Sr Counsel for the appellant, we do not find any infirmity or error in the order of the ld CIT [A]. We therefore confirm the order of the ld CIT [A]. Ground No. I, with all its sub - grounds of appeal, is dismissed. 28. Ground No. II is an alternative plea by which the assessee has prayed to direct the AO to appropriately reduce the penalty levied u/s 271[1][c] of the Act. We find that the AO has levied penalty which is @ 200 % of the tax sought to be evaded. While disposing off the appeal the ld CIT[A] at page 16 of his order at para 7.0 has concluded that : " in view of the afore said facts the AO is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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