TMI Blog2019 (7) TMI 740X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Petroproducts Ltd [ 2010 (3) TMI 80 - SUPREME COURT] wherein it was held that when no information given in the return was found to be incorrect or inaccurate or the details supplied by the assessee was found to be factually incorrect, then primafacie, the assessee cannot be held guilty of furnishing inaccurate particulars. It may at best result in making incorrect claim in law. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. It held that merely because a claim made by the assessee is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Accordingly we hold that the CIT-A had rightly deleted the penalty in respect of denial of exemption u/s 47(xiv) on self generated Goodwill portion partially. Accordingly, we do not find any infirmity in the order of the CIT-A. Penalty u/s 271(1) (c) - denial of deduction u/s 54 - AR argued that it was a bonafide belief on the part of the assessee that since the last payment for purchase of new house was made within the prescribed limitation period by the assessee i.e within one year prior to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proprietary concern into a Public Limited Company i.e. M/s. Overseas Plastic Moulder India Limited (OPMIL). Thus the business of the proprietary concern was succeeded by a public limited company. On succession of business, the assessee transferred all the assets (including self generated goodwill) and liabilities of the proprietary concern and in consideration for the said transfer received 33,59,064 fully paid up equity shares of face value of ₹ 10/- each of the public limited company. The assessee had entered into an Assignment Deed with the public limited company dated 17.09.2008 wherein the assessee had recorded the terms and conditions of succession of business from proprietary concern into public limited company. The succession of business from a proprietary concern to a public limited company resulted in transfer of all the assets of the business including Plant and Machinery, Goodwill and also Leasehold rights of a factory land situated at Pune. The said transfer was liable for capital gains tax under section 45 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'). However, the said transfer was also eligible for exemption as per provisions of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empts transfer of assets and liabilities of the proprietary concern to the company subject to the conditions stipulated therein. That goodwill which is transferred from the assessee to the company is not covered by the exemption under section 47(xiv) of the Act. c ) The assessee got allotment of shares of ₹ 2,29,84,701/- without actually subscribing to it in any form, money or otherwise except for transferring self generated goodwill. d) The shares have to be allotted only to the extent of amount lying to the credit of the proprietor. 3.3. This action of the ld AO was upheld upto the level of tribunal on merits. Accordingly, the ld AO levied penalty u/s 271(1)( c) of the Act for filing inaccurate particulars of income read with Explanation 1 thereon. 3.4. The ld CITA observed that the proprietory concern of the assessee was carried on for the past 30 years and considerable Goodwill has been earned thereon. The ld CITA observed that merely because there was no balance mentioned towards the Goodwill in the balance sheet of the proprietory concern, it cannot be brushed aside that there was no Goodwill at all i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w were even framed by the Hon ble High Court u/s 260A(3) of the Act. The assessee s SLP was dismissed by the Hon ble Supreme Court. It is not in dispute that the ld AO had levied penalty on the ground that the assessee had furnished inaccurate particulars of income with regard to his claim of exemption u/s 47(xiv) of the Act. In this background, it has to be seen whether the denial of exemption u/s 47(xiv) of the Act to the extent of Goodwill which was self generated in the books of the proprietory concern, would amount to furnishing of inaccurate particulars of income. We find that the assessee had given reasonable explanation as to why there was no value reflected in his balance sheet of proprietory concern in respect of self-generated Goodwill. It is not in dispute that the assessee was in business for the past 30 years which had earned substantial Goodwill to the assessee. Even the ld AO had accepted this fact and had partially granted exemption in respect of the same u/s 47(xiv) of the Act in the assessment. The assessee also had a bonafide belief that since there was no value for the self-generated Goodwill in terms of section 55(2) of the Act, the allotment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld AO. No explanation furnished by the assessee was found to be false by the ld AO. It was only a genuine difference of opinion between assessee and the ld AO in not allowing the claim of exemption u/s 47(xiv) of the Act. 3.5.2. We find that the ld CITA had also given the finding that the explanation given by the assessee was bonafide and in that regard had observed as under which are crucial for determining the penalty dispute before us. These findings are not controverted by the revenue. The observations of the ld CITA in this regard are as under:- A claim of deduction can be said to be bonafide if a legally sustainable view on its allowability exists in the given facts. Such a view need not be necessarily cent percent foolproof. If chances are there that a person, properly instructed in law, can form an opinion about his deduction, then it will be considered as bonafide. A claim shall lack bonafide if the facts are manufactured to give a colour of genuineness to the deduction, or if there is not even a far flung possibility of forming a legally sustainable opinion about the deduction, either because of the facts prevailing in a particular cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnishing inaccurate particulars regarding the income of the assessee. Accordingly, by placing reliance on the said decision of Hon ble Supreme Court in 322 ITR 158 (SC) supra, we hold that the ld CITA had rightly deleted the penalty in respect of denial of exemption u/s 47(xiv) of the Act on self generated Goodwill portion partially. Accordingly, we do not find any infirmity in the order of the ld CITA. 4. The next issue on which penalty u/s 271(1) (c ) of the Act was levied by the ld AO was on account of denial of deduction u/s 54 of the Act. 4.1. The brief facts as narrated in the order of the ld CITA are that the assessee sold a house property for a sum of ₹ 2,40,00,000/- and claiming long term capital gains of ₹ 2,32,12,393/- after reducing cost of acquisition. The assessee claimed deduction u/s 54 of the Act to the tune of ₹ 92,80,083/-. The ld AO observed from the details filed, that purchase of new property was entered into on 26.5.2006 while original property was sold vide agreement dated 11.9.2008. Thus it was clear that purchase was outside the period stipulated in section 54 of the Act and further per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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