TMI Blog2016 (4) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... established that since the claim is bonafide and is also debatable and there is no concealment of income, therefore, in view of the decision of Hon’ble Supreme Court in the matter of CIT vs. Reliance Petroproducts (2010 (3) TMI 80 - SUPREME COURT) and also in accordance with the judgment passed in the case of CIT vs. H.M.A. Udyog Pvt. Ltd., [2006 (8) TMI 595 - DELHI HIGH COURT], wherein it has been held that in a case where the issue is debatable, no penalty under section 271(1)(c) of the Act is permissible. In the above said back ground, we are of the view that that the assessee has not furnished inaccurate particulars of income or concealed the income and there are no finding of the AO and the ld. CIT (A) that the details furnished in the return are inaccurate or erroneous or false. In these facts and circumstances, in our view, the penalty is totally unwarranted and deserves to be deleted - Decided in favour of assessee. - ITA Nos. 585/JP/2013, ITA Nos. 578/JP/2013 - - - Dated:- 24-2-2016 - S HRI T.R.MEENA, AM AND SHRI LALIET KUMAR, JM For The Assessee bys by : Shri Siddharth Ranka and Shri M. Iqbal (Advocates) For The Revenue : Shri Ajay Malik (Addl.CIT) ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT (A) has erred in (i) Restricting the penaty amount to ₹ 14,58,262/- as against imposed by the AO at ₹ 22,00,000/- u/s 271(1)(c) . 2. In the assessment order, the AO has made an addition of ₹ 63,77,229/- as the AO was of the opinion that the franchisee agreement entered between the assessee and other franchisees were not for a period of four years and no evidence was given that the agreement is valid for four years and further the AO has held that the advance license fee should be treated as business income in the current year rather than amortizing in the subsequent year. 3. The assessee being aggrieved by the order passed by the AO, has challenged the order before ld. CIT (A), who vide his order dated 15.03.2010 has not confirmed the order passed by the AO and has held that the advance license fee is required to be amortized as per the established practice over the period of time. The findings of the ld. CIT (A) are given herein below :- The only question for consideration is the year in which advance license fees should be taxed; while in most cases the appellant has written off such receipts over four years, the assessing officer decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upto March,2007 i.e. ₹ 62,02,469/-, the assessee has shown in March, 2008 at ₹ 32,20,000/- as income. Out of the receipts upto March, 2008 at ₹ 31,48,237/-, the assessee has shown in March, 2009 ₹ 5,02,306/- only. From these facts it is clearly established that assessee is not showing the receipts in a consistent manner but is showing the receipts as Income in disproportionate manner. If the agreement was for four years, then the advance license fee should have been shown equally in the four years. Therefore, the contention of the assessee that assessee is maintaining consistent method is not correct. The contention of the assessee that his income is in highest bracket of tax, therefore, no difference will be there if the receipts will be shown in subsequent year is also not acceptable for the reason that there is no provision in law for deferment of tax liability and tax has to be paid in the year in which it is payable. The advance license fee are undisputedly non refundable and, therefore, that should have been shown in the year in which they were received. The reasons assigned by AO for making the addition in the current year are reasonable. The AO has e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax, Circle-1, Kota. Date : 29/12/09. To Shri Prakash Joy 608-A, Talwandi Kota. Whereas in the course of proceedings before me for the assessment year 2007-08 it appears to me that you :- Xxxxxxxxxxx xxxxxxxxxxxx Xxxxxxxxxxx xxxxxxxxxxxx Have concealed the particulars of yours income or have furnished inaccurate particulars of such income. You are hereby requested to appear before me at 11.00 AM on 25/1/2010 in my office at C.R. Building Rawatbhata Road, Kota and show cause why an order imposing a penalty should not be made u/s 271 of the I.T. Act, 1961. If you do not wish to avail yourself of this opportunity of being heard a person or through an authorised representative you my show cause in writing on or before the said date which will be considered before any such order is made u/s 271. Sd/- (P.P. Meena ) Asstt. Commissioner of Income Tax Circle-1, Kota. (Raj.) After receiving the notice, the assessee has filed the reply to the AO and has resisted the imposition of penalty on the assessee. It was contended by the assessee that the assessee has not submitted the inaccurate particulars nor the assessee has concealed any amount rath ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 2009-10. It was also submitted that the assessee has shown the complete advance fee, license fee received in the Balance Sheet as per Schedule A and has further disclosed fully and truly the said amount in the duly audited accounts in the assessment year under consideration i.e. 2007-08. On the basis of the above, it was contended that there was no concealment of income nor it was the case of inaccurate particulars by the assessee. Lastly, it was submitted that since the amount of ₹ 24,95,240/- was shown in the accounts in the A.Y. 2007-08, therefore, the ld. CIT (A) was right in restricting the penalty to the extent of ₹ 7,41,738/-. 7.2. In lis it was submitted that the issue of treatment of advance license fee is a debatable issue and whether the advance license fee is required to be treated as Business income in one year or is required to be spread over the period of four years, is not settled. In various matters where the assessees are in the same business, the license fee has been permitted to be amortized for a period of four years. Therefore, the assessee has only followed the established practice in the trade. It was further submitted that the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be a case of imposition of penalty as the issue becomes debatable. In view of the above facts and circumstances the penalty is liable to be deleted. Further more against the order passed by the Id. Income Tax Appellate Tribunal, the assessee being not satisfied with the Hon'ble Rajasthan High Court u/s 260A of the Income Tax Act. The said appeal is still pending. 1.16 That the penalty proceedings are quasi-criminal in nature and merely because addition has been made does not mean that penalty has to be automatically levied. The Id. Assessing Officer in the penalty order has simply mentioned that only because the addition has been sustained therefore, penalty is being imposed. We submit that this is not a basis for imposing penalty to the extent of ₹ 22.00 lacs. That Id. Assessing Officer ought to have spelt out something more in the penalty order. The entire material was submitted during the course of the assessment proceeding of appellate proceedings in the shape of various Franchisee Agreements, Certificates, subsequent showing of the very same receipts on account of franchisee receipts having been shown in succeeding years ought to have been properly considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 211 ITR 35 217 ITR 208 122 ITR 306 282 ITR 642 110 ITR 54 31 TTJ 40 291 ITR 519 1.18 It has been consistently held that penalty should not be imposed automatically merely because some addition has been sustained. Addition may have been sustained for various reasons and consideration but something more has to be brought record while imposing penalty u/s 27 (1) (C) of the Income Tax Act. In the case of ACIT v VIP Industries 122 TTJ 289 (Mum) it was held that, where additions is made the penalty shall not automatically follow. In a case of genuine difference between A and 'A' penalty cannot be lived, same view has been taken by Pune bench in the case of Kanbay Software India 122 TJ 721. In the case of CIT v sidhartha Enterprises 184 Taxman 460 PH it was helf that is not necessary that in every case where particulars are inaccurate, penalty must follow. Penalty is imposed only when there is some element of deliberate default and not when there is merely a mistake or bon fide claim. We further rely on the following authorities :- 178 ITR 590 123/457 119 ITR 36 (Born) 312 ITR 225 1.19 The Hon'ble Rajasthan high ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return cannot amount to furnishing inaccurate particulars. Thus in the instant case t is submitted that entire information was available with the Assessing Officer alongwith return itself. The Tribunal has merely held that all advance receipts since they were in the nature of non-refundable, therefore, has held that it is to be taxed in the year of receipt. by No strength of imagination it can be said that the assessee made incorrect claim and tantamount to furnishing inaccurate particulars. A claim has simply been made by the assessee, having been followed by other similar situated assessee and claim which is coming from the past years will not amount to furnishing inaccurate particulars, regarding the income of the assessee particularly when Id. Commissioner if Income Tax (Appeals) allowed it. 1.21 The Hon'ble Rajasthan High Court in the case of CIT V. Oriental Power Cable Ltd. reported in (2008) 303 ITR 49 (Raj.) held that the Tribunal has specifically recorded that there was no finding of the income Tax authorities that the assessee had deliberately mad false claim for claiming dedication, The case of the assessee that it has not included the particulars item in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld as under :- It is for these reasons that the higher courts of law have disapproved of the levy of penalty where the issue, though decided against the assessee in quantum proceeding, is debatable or contentions. That the assessee's claim bears a lower incidence of tax is a matter incidental, and by itself of no consequence, What is material is whether the claim supported by a bona fide explanation, i.e., a genuine grounds, with the material facts having been disclosed, and which we find as so. In fact, to the extent the claim is for standard deduction against rental income, the same raises no question of substantiation, i.e., is self corroborative. It is at best a case of an incorrect claim, with all the material facts on record. The ratio of teh decisions in the case of CIT V. Reliance Petroproduction (P) Ltd. (2010) 322 ITR 158 (SC) and Chandra Pal Bagga V. ITAT, 261 ITR 67 (Raj.) relied upon by assessee, would, among others, apply in the facts and circumstance of the case. 1.26 We further rely on the following authorities on different proposition :- No Presumption that everyone knows law 118 ITR 326 (SC) 102 STC 102 3 ITD 221 AIR 1979 SC 621 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule A to the audit report. Further, the assessee has also mentioned in the return of income that out of the said amount of ₹ 62,02,469/-, the assessee is only treating the income of ₹ 24,95,240/- in the current assessment year. In our view, once all these facts have been duly disclosed by the assessee in the return of income, audit report etc., the notice should not have been issued either for submitting inaccurate particulars of income or for concealment of income. Once the advance license fee has been duly disclosed, therefore, there cannot be any concealment of income or submission of inaccurate particulars of income. It is one thing to say that how the advance license fee is required to be treated in the light of the agreement entered by the parties. The Tribunal, while adjudicating the issue of treatment of advance license fee in the quantum appeal, with respect, has not gone into the obligation to be discharged by the assessee in view of the agreement. If the licensee is required to discharge statutory and legal obligation under the agreement, the liberty should have been given to the assessee to treat the pro-rata income in the assessment year under consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there is no concealment of income, therefore, in view of the decision of Hon ble Supreme Court in the matter of CIT vs. Reliance Petroproducts (2010) 322 ITR 158 (SC) and also in accordance with the judgment passed in the case of CIT vs. H.M.A. Udyog Pvt. Ltd., 211 CTR 543, wherein it has been held that in a case where the issue is debatable, no penalty under section 271(1)(c) of the Act is permissible. In the above said back ground, we are of the view that that the assessee has not furnished inaccurate particulars of income or concealed the income and there are no finding of the AO and the ld. CIT (A) that the details furnished in the return are inaccurate or erroneous or false. In these facts and circumstances, in our view, the penalty is totally unwarranted and deserves to be deleted. Accordingly, we delete the penalty of ₹ 14,58,262/-. 7.6. Even otherwise, on technical ground, the notice issued by the AO is vague, cryptic and shows total non application of mind. In the identical scenario, the coordinate Bench in the matter of Suvaprasanna Bhattacharya vs. ACIT in ITA No.1303/Kol/2010, after relying upon the judgment of Hon ble Karnataka High Court in the case of C ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
