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2016 (5) TMI 857 - ITAT MUMBAI

2016 (5) TMI 857 - ITAT MUMBAI - TMI - Levy of penalty u/s. 271(1)(c) - Held that:- There was neither furnishing of inaccurate particulars of income nor concealing the particulars of income. The assessee had filed all the details of transaction in the return of income itself. There was difference of opinion between the AO and the assessee as to under which head the sale proceeds of transaction should be taxed. The assessee had offered income under the head ‘capital gain’ whereas the AO taxed the .....

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the penalty notice. After going through the explanation filed by the assessee, we are of the opinion that it was one of the plausible explanation. The issue of taxing a particular income under the head business income or income arising of capital gains is a debatable issue. In our opinion no penalty should be levied in such circumstances. Therefore, upholding the order of the FAA, we decide the effective ground of appeal against the AO. - Decided in favour of assessee - I.T. A. 3055/Mum/2010 - .....

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1. 2004, declaring total income at ₹ 1. 12 crores. The assessment u/s. 143(3) of the Act, was completed on 28. 12. 2006 determining the total income of the assessee at ₹ 56. 19 crores. Effective ground of appeal is about deletion of penalty, levied by the AO, u/s. 271(1)(c)of the Act. Brief facts: During the year under appeal, the assessee had transferred the international air cargo business to a company, namely DHL Banzar Lumier Pvt. Ltd. wherein 51% shares were held by the partners .....

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ct. He further held that income was taxable under the head profit and gains of business/profession. An addition of ₹ 5473 crores was made as compensation for non-compete fee and closure of the business under the head business income. He also initiated penalty proceedings u/s. 271(1)(c)of the Act for furnishing inaccurate particulars of income. In the meanwhile the quantum proceedings were contested before the First Appellate Authority(FAA), who restricted the non compete fee to ₹ 4. .....

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compete fee in the amt recd by the assessee. 5. Aggrieved by the penalty order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA). Before him, the assessee argued that it has neither concealed any particulars of income not furnished any inaccurate particulars, that full and true disclosure was made about sale proceeds of ₹ 54. 37 crores under the head capital gains , that there was difference of opinion between the assessee and the AO, that in such a case .....

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had accepted the contention of the assessee that the amount received by it was for transfer of goodwill, that the calculation of non-compete fee was based on an estimate, that the issue was a debatable issue, that penalty could not be levied in respect of a legal claim irrespective of the fact that the same was decided against the assessee. 6. In our opinion, whether a receipt/expense is capital or revenue is a legal issue. Non acceptance of such a legal claim cannot be considered as concealment .....

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, that addition could be due to difference in opinion and difference in perception to the same issue, that on merits the assessee had submitted a bona fide explanation as to the deduction claimed by it though not accepted by the AO, that penalty could not be levied on additions made on account of difference of opinion, that mere rejection of an explanation of an assessee would not lead to a conclusion that explanation was false, that the AO had not been able to establish that explanation of the .....

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d the rival submissions and perused the material before us. We find that during the year under consideration the assessee had sold its business and had received a sum of ₹ 54. 73 crores, that the sale proceeds were invested in bonds and it claimed an exemption u/s. 54EC of the Act, that the AO held that the transaction fell under the head business income, that he made the addition of ₹ 54. 73 to the income of the assessee treating the same as non-compete fee, that in the appellate pr .....

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elf. There was difference of opinion between the AO and the assessee as to under which head the sale proceeds of transaction should be taxed. The assessee had offered income under the head capital gain whereas the AO taxed the same as business income . In our opinion, in such cases, no penalty should be levied u/s. 271(1)(c ) of the Act. We would like to refer to the case of Anant Overseas(P) Ltd. (supra) of the Delhi High Court. In that case the assessee had declared STCG on sale of shares howe .....

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the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. Present is not the case of concealment of the income. That is not the case of the Revenue either. However, the learned counsel for the Revenue suggested that by making incorrect claim for the expenditure on interest, the assessee has furnished inaccurate particulars of the income. As per Law Lexicon, the meaning of the word "particular" is a detail or details (in plural sense); the details of .....

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s. 11. The learned counsel argued that "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". We do not think that such can be the interpretation of the words concerned. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cann .....

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sthan Spg. & Wvg. Mills [(2009) 13 SCC 448] and reiterated in para 13 that: (Atul Mohan Bindal case [(2009) 9 SCC 589] , SCC p. 597, para 13) "13. It goes without saying that for applicability of Section 271(1)(c), conditions stated therein must exist. " 12. Therefore, it is obvious that it must be shown that the conditions under Section 271(1)(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 .....

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ignified a deliberate act or omission on behalf of the assessee. It went on to hold that clause (iii) of Section 271(1) 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 that the term "inaccurate particulars" was not defined anywhere in the Act and, there .....

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