2019 (7) TMI 28 - HC - Income Tax

Court upholds Tribunal's decision on penalty under Income Tax Act, emphasizing no deliberate concealment

The Commissioner of Income Tax, Chennai. Versus Shri. Soundarrajan Parthasarathy

The High Court upheld the Tribunal's decision to delete the penalty under Section 271(1)(c) of the Income Tax Act, 1962, in a case where there was a ... Penalty u/s 271(1)(c) - furnishing of income under an incorrect head - assessee shown stock appreciation rights (ESOP) and gain as capital gain in place of perquisites under salary - concealment of income or furnishing of inaccurate particulars of income - Tribunal deleted penalty - HELD THAT:- The assessee, who is a salaried employee, had disclosed the value of the stock appreciation rights and gain thereof and claimed the same as capital gain. However, the Assessing Officer treated the gain as a revenue receipt and levied tax. In such circumstances, whether it could have been stated that there was concealment of income or whether the assessee furnished inaccurate particulars of income. In our considered view, the Tribunal rightly held that it is nobody's case that the assessee concealed the allotment of stock appreciation rights or gain arising out of such appreciation. In fact, there had been a difference of opinion or difference in interpretation of the manner, in which, the assessee interpreted the returns. Therefore, when there were two opinions possible, it cannot be stated that the conduct of the assessee amounted to deliberate concealment of income with certain mala fide intentions. Revenue has not made out any case to interfere with the order passed by the Tribunal - Decided against revenue. Issues:1. Whether the Tribunal was right in deleting the penalty levied under Section 271(1)(c) of the Income Tax Act, 1962Rs.2. Whether furnishing income under an incorrect head and short payment of taxes amounts to concealment of income or furnishing inaccurate particulars of incomeRs.Analysis:Issue 1:The appeal was filed by the Revenue challenging the Tribunal's order deleting the penalty under Section 271(1)(c) of the Income Tax Act, 1962. The Tribunal's decision was based on the assessee's argument that there was no deliberate concealment or non-disclosure of income. The Assessing Officer had imposed a penalty of Rs. 54,53,840, which was confirmed by the CIT(A) but overturned by the Tribunal. The Tribunal examined the conduct of the assessee, who disclosed the stock appreciation rights as capital gains, while the Assessing Officer treated it as a revenue receipt. The Tribunal found that there was no deliberate concealment by the assessee, considering the difference in interpretation between the assessee and the Assessing Officer.Issue 2:The Tribunal also considered whether furnishing income under an incorrect head and short payment of taxes amounted to concealment or furnishing inaccurate particulars of income. The Tribunal held that the assessee did not conceal the stock appreciation rights or gains, and there was a difference in interpretation between the parties. The Tribunal referenced the decision in the case of CIT Vs. Zoom Communication (P) Ltd., where it was emphasized that incorrect claims need to be bona fide to avoid penalty under Section 271(1)(c). In the present case, the Tribunal found no mala fide intentions on the part of the assessee and noted the difference of opinion between the assessee and the Assessing Officer.Conclusion:The High Court dismissed the Revenue's appeal, upholding the Tribunal's decision to delete the penalty under Section 271(1)(c) of the Income Tax Act, 1962. The Court found that the Tribunal's reasons were correct, and the Revenue failed to establish a case for interference. The Court also discussed relevant legal precedents to support the decision.