TMI Blog2015 (4) TMI 1262X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue is a debatable one and two views are possible, penalty for concealment cannot be levied. It was held by the Rajasthan High Court in the case of CIT vs. Harshvardhan Chemicals & Minerals Ltd, reported [2002 (5) TMI 15 - RAJASTHAN HIGH COURT] that where the wrong deduction has been claimed by the assessee but the issue is debatable, it could not be said that there was concealment of income. The claim of deduction made by the assessee can be described as inaccurate computation of income for which penalty for concealment cannot be levied. The above decisions are in line with that of the Supreme Court in the case of CIT vs. Reliance Petroproducts Ltd. [2010 (3) TMI 80 - SUPREME COURT] where it was held that where the claim of deduction of interest was disallowed, it would be insufficient for levy of penalty for concealment as an incorrect claim does not amount to furnishing inaccurate particulars. Where a claim is made in the return of income it is up to the authorities to accept the claim when all particulars had been furnished. To conclude in the present case, the assessee has disclosed all the material facts before the AO and also the explanation offered by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the aforesaid order u/s 147 r.w.s. 143(3) of the Act, assessee preferred appeal before the ld CIT (A) and before the ITAT Hyderabad. The ITAT had held that unless the income being the difference between FMV and grant price of the shares has been recognized under sub section (2) of section 17 of the Act, one cannot consider the FMV as cost of acquisition as stipulated in section 49(2AA) of the Act. 7. Against the order of the ITAT, assessee has filed appeal before the Hon'ble Andhra Pradesh High Court and the Hon'ble High Court has admitted the assessee s appeal on this issue. 8. The AO in the meantime, passed penalty order dated 28.02.2011 levying penalty of ₹ 95,73,807 u/s 271(1)(c) of the Act, being 100% of the tax impact of increase in the amount of long term capital gains on sale of Microsoft shares acquired under ESOP by alleging that the assessee had furnished inaccurate particulars of income in respect of capital gains computed in the return of income. 9. Before the CIT (A), the assessee furnished all facts and material to computation of capital gains and explanations offered being bonafide, the penalty proceedings u/s 271(1)(c) of the Act are not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceedings, assessee submitted the transaction detail statements vide submission dated 17.12.2007 as documentary proof of FMV of US$ 88,047 on 5.11.1996 and FMV of US$ 4,49,603 on 30.06.1999 respectively. In the said statements, the details of federal taxes withheld/paid by the assessee on said dates on the difference between FMV and grant price were also given. The transaction detail statements contain all details which are required to compute the capital gains and there is no allegation from the AO that there are any incorrect particulars/facts submitted by the assessee. 15. During the course of proceedings before the CIT (A), assessee reiterated his bonafide understanding/explanation, vide submission dated 24.12.2007 to explain as to why FMV on the date of exercise was considered as cost of acquisition for the computation of long term capital gains in the return of income filed for the relevant A.Y. The ld AR submitted that the issue whether the difference between grant price and exercise price is to be subjected to tax as employment/salary income or as capital gains on subsequent sale of shares has been controversial and the provisions in respect of the same has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant A.Y. Also there was no failure on the aprt of the assessee to offer any necessary bonafide explanations in respect of the said transaction before the AO during the course of assessment proceedings. In this regard reliance was placed on the judicial pronouncements of Hon'ble Supreme Court in the following cases: Reliance Petro Products (P) Ltd (322 ITR 158), it has been held as under: the assessee had furnished all the details of the expenditure as well as income in its return, which details, in themselves were not found to be inaccurate nor could be viewed as concealment of income on its part. It was upto the authorities to accept its claim in the return or not. If we accept the contention of the revenue, then in cae of every return where the claim made is not accepted by the AO for any reason, the assessee will invite penalty under section 271(1)(c). That is certainly not the intendment of the Legislature In the case of Cement Marketing Company of India Ltd vs. Asstt. CST (124 ITR 15 (1980) it has been observed that: where the assessee does not include a particular item under a bonafide belief that he is not liable so to include it, it would not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 10.08.2011. 23. In view of the above, it was submitted that admission of an appeal by the Hon'ble jurisdictional High Court confirms that the matter whether the cost of acquisition of shares in the instant case should be either FMV on the date of exercise (as considered by the assessee based on his bonafide understanding) or the grant price (as considered by the AO) has two debatable view, which will be adjudicated by the Hon'ble High Court eventually. 24. It was further submitted before the CIT (A) that no tax sought to be evaded by the assessee in the instant case for levy of penalty u/s 271 (1)(c) of the Act. 25. In view of the above and without prejudice to the assessee s contention for non levy of penalty, it was submitted that after considering the relief u/s 90 of the Act r.w. Article 25(2) (a) of the DTAA between India and USA, in respect of foreign tax credit of federal taxes paid by the assessee at the time of exercise of stock options on 5.11.1996 and 30.06.1999 respectively, the tax sought to be evaded for levy of penalty u/s 271(1)(c) of the Act is nil. In other words, as per the explanation 4(e) to section 271(1)(c) of the Act, there is no differenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o give explanations which were not given in the assessment proceedings. Merely because an addition has not been contested, it cannot be presumed that the addition represents concealed income. It has been held by the Supreme Court in the case of Sir Shadilal Sugar General Mills Ltd. reported at 168 ITR 705 that from the assessee agreeing to additions to his income, it does not follow that the amount agreed to be added was concealed income. There may be a hundred and one reasons for such admission. Hence in the present case, even though the Hon ble ITAT has confirmed the appeal on merits (though admitted by the Hon ble High Court) the penalty proceedings stand under a different footing and is not automatic. 29. Penalty for concealment is not imposable where there are two views on the issue: If the issue is a debatable one and two views are possible, penalty for concealment cannot be levied. It was held by the Rajasthan High Court in the case of CIT vs. Harshvardhan Chemicals Minerals Ltd, reported at 259 ITR 212 that where the wrong deduction has been claimed by the assessee but the issue is debatable, it could not be said that there was concealment of income. Similar view has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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