9911796707
TMI Blog2013 (10) TMI 1370X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;the Act'). The appellant, however, succeeded before the Commissioner of Income-tax (Appeals) who deleted the penalty observing as under: "10. In the facts and circumstances of this case, it is noted that the appellant made a claim that certain receipts were capital in nature, and therefore, not liable to tax. However, probably realizing the contentious nature of the claim, full taxes were paid on the 'capital' receipt before filing of the return. The return was accompanied by a detailed note on the claim and, with a claim for refund. It is the appellant's case that there has been no concealment, as all facts were disclosed in the return of income itself. It is also argued that the explanation offered by him was on the basis of bona fide belief, and even if such claim was not accepted by the Assessing Officer, the explanation was neither false, nor unsubstantiated, nor mala fide. The bona fides of the appellant are proven by the disclosure in the return and the payment of taxes. After careful consideration, I am inclined to agree with this contention. The penalty order mainly relies on the provisions of section 273B, to hold that there was no 'reasonable cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITD 287 (Delhi) (SB). The Tribunal has distinguished these decisions on facts with this observation that in these cases the assessee was paid non-compete fee whereas in the case of the present assessee the payment has been made for termination of services. We are thus of the view that when provisions u/s 17(3) of the Act were clear and the amount whatever nomenclature can be attached to it was admittedly paid to the asessee due to termination of employer-employee relation, there was no scope of any debate that the amount received was not profits in lieu of salary within the meaning of the said provisions of section 17(3) of the Act. We are thus of the view that there was not any reason available with the assessee for nurturing a belief that the amount received is a capital receipt not chargeable to tax. Merely by depositing the due tax on the amount received the bona fide of the assessee in not declaring the receipt as income in its return of income is not established. The benefit of Explanation 1 to section 271(1)(c) of the Act for the exemption of levy of penalty is available to an assessee when assessee is able to establish that the explanation furnished by him for non-disclosur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hl on terms and conditions as laid out in letter dated April,6, 1999. A copy of this letter is filed here with these papers. This letter carried several preconditions. It offered renewed employment to Shri Ravinder Bahl for a period of 4 months only, i.e. for the period 06.04.99 to 01.08.99. For this period of four months. "HDX" offered to pay Shri Ravinder Bahl remuneration on the same terms, conditions and scale, as was previously paid to him under letter dated 22.06.98. Refer para 2 of letter dtd. 06.04.99. In addition, "HDX" offered to pay Shri R. Bahl a further sum of US $ 10,00,000.00 styled "Extraordinary compensation, "upon Shri Ravinder Bahl agreeing to sign in advance and return letter dated 06.04.99 and to carry out and also agreeing to refrain from carrying out certain acts specified under various paragraphs of the letter dated 06.04.99. This amount of US$ 10,00,000.00 was paid in two instalments as under:- (a) US $ 5,00,000 upon prior signature and return of letter dated 06.04.99 by Shri R. Bahl to "HDX". (Refer para 3 of letter dtd. 06.04.99). (b) The balance of US $ 50,00,00 on the final day as an employee of "HDX" (Refer same para of letter dtd. 06.04.99. 4. Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 01.08.99, or such earlier date as was to be established by "HDX", to co-operate fully with the Deluxe Management, at its direction, in its selection, appointment, orientation and transition to a successor chief executive officer, including personally introducing such person to personnel of "HDX" and all significant suppliers and customers know to Shri R. Bahl. (Refer para 4 of letter dtd. 06.04.99). 8.04 For a period of three years and four months from 06.04.99, Shri R. Bahl is not to divulge, communicate or pass on any confidential information of HDX or DELUXE or any of their respective subsidiaries of any person who is not in the employment of "HDX" or "DELUXE" or any of their respective subsidiaries and who does not have a need to know such information to perform the duties of his or her position. (Refer para 6 of letter dtd. 06.04.99). 8.05 For a period of one year and four months from 06.04.99, Shri R. Bahl is not to, directly or indirectly, (which shall include any actions taken on behalf of any third party), to recruit, hire or discuss employment with any person who is, or at any time on or after January 1, 1999 has been an employee of HDX or any of its subsidiaries or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective subsidiaries and each of their respective director officers, employees and representatives the ("Released Parties"). Shri R. Bahl also agreed not to commence any law suit or other legal proceeding or file or otherwise assert any complaint or other demand against the Released Parties based on any claim. "Claims" were defined to mean any rights that Shri R. Bahl presently had or which he may have thereafter to any compensation, reimbursement or other for of relief from the Released Parties whether or not Shri Ravinder Bahl knew about those rights, including but not limited to, claims for breach of contract, fraud or misrepresentation, violation of any anti-discrimination, disability, civil rights or other law or laws or regulations of any government or governmental authority, defamation, emotional distress, breach of any implied covenant, wrongful termination of employment and any other claim for unlawful employment practices. It also extended to other events and circumstances as defined in para 15, of letter dtd.06.4.99. (Refer para 8 of letter dtd. 06.04.99).' 7. The "facts" stated in the note are not undisputed. It is not the case of the revenue that the facts sated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned in Sub-clause 'B' are satisfied. The first condition of Sub-clause 'B' to Explanation 1 is that the assessee should have furnished facts and material relating to computation of his income. Quantum of payment and the terms and conditions on which the payment had been received were clearly disclosed in the note. In our opinion, therefore, the appellant assessee had stated full and correct facts and nothing was concealed or withheld from the revenue. The first requirement is therefore satisfied. 11. The second requirement of Sub-clause 'B' to the Explanation 1 is that the claim or grounds for making the claim should be bona fide i.e. the claim should have been made in good faith. This issue has been decided against the appellant as the receipt was revenue in nature and the contest/claim made was not bona fide or plausible. The explanation given by the appellant assessee that the receipt was capital receipt has not been accepted on legal grounds relying upon Section 17(3) sub-clauses (i) & (iii). 12. The note quoted above elucidates and highlights that the payment received included several promises and obligations accepted by the appellant post terminatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticulars. In terms of the Explanation, we have to examine whether the case falls within the two limbs viz. sub-clause (A) or (B) and the effect thereof. Clause A applies when an assessee fails to furnish any explanation or when an explanation is found to be false. In respect of the two additions being examined, the assessee had furnished an explanation and the explanation has not been found to be factually incorrect or false. The fact that the expenditure was incurred and spent by the assessee is not disputed or denied but the claim of the assesee that it should be treated as revenue expense has been held to be a wrong claim. It is a case where the assessee was not been able to substantiate the claim. The explanation given by him has not been accepted on legal grounds. Sub-clause (B) to the Explanation is applicable and we have to examine whether two conditions; (i) the assessee has been able to show his explanation was bona fide and (ii) he had furnished facts and material relating to the computation of his income had been disclosed. Onus on establishing that the assessee satisfies the two conditions is on him i.e. the assessee. We will examine the second condition first. We hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. We have quoted the relevant portion of the note above. Full and correct facts have been stated in the said note. The other question is whether the claim made was palpably wrong and legally untenable or a debatable and plausible claim on which the assessee did not succeed on legal interpretation. We have examined the nature of the claim made and the findings recorded by the High Court in their order dated 1st November, 2010. The claim made by the appellant may have been rejected, but it cannot be said that the same was not plausible or legally tenable. This aspect has been discussed above and it has been held that the claim made was bona fide. Regarding the legal opinion in writing, it is not mandatory for a person to obtain legal opinion in writing. Assessees do take legal opinion and in the present case the return of income was duly audited. Claim for depreciation is a technical claim based on interpretation of legal provision. Legal opinion, in such cases, is frequently given by Chartered Accountants to help the company to prepare its return of taxable income. In the present case, there is no allegation that the quantum of depreciation claim was incorrectly computed. The note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o amounts could be claimed as revenue expenditure. The assessee, in fact, outrightly conceded before the Assessing Officer that these amounts could not have been claimed as revenue deductions. The only plea taken by the assessee before the income-tax authorities was that it was due to oversight that the amount of income-tax paid by the asessee as well as the amount claimed as deduction on account of certain equipment being written off could not be added back in the computation of income." 15. In Devsons (P.) Ltd. v. CIT [2010] 329 ITR 483/8 taxman.com 87/[2011] 196 Taxman 21 (Delhi), it has been held that when a legal issue arises for consideration, which is debatable but the claim made by the assessee is not fully accepted, there is no justification to invoke the penalty provisions under Section 271(l)(c) of the Act. Divergent legal views on legal interpretation of a Statute are not known, and it is not necessary there that should be uniformity or consensus of opinion on the aspects of law and the assessee must accept adverse interpretation in absence of a favourable decision. Penalty cannot be imposed when an assessee has taken a legal stand, unless the assessee has not disclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saying that for applicability of section 271 (1 )(c), conditions stated therein must exist. Therefore, it is obvious that it must be shown that the conditions under section 271(l)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. In Dilip N. Shroff v. Joint CIT [2007] 6 SCC 329, this court explained the terms "concealment of income" and "furnishing inaccurate particulars". The court went on to hold therein that in order to attract the penalty under section 271(1)(c), mens rea was necessary, as according to the court, the word "inaccurate" signified a deliberate act or omission on behalf of the assessee. It went on to hold that clause (iii) of section 271(1)(c) provided for a discretionary jurisdiction upon the assessing authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as: Not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript. We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(l)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars'. 17. In view of the aforesaid discussion, we are satisfied that this is a fit case wherein the explanation offered by the assessee establis ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
