AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (4) TMI 748
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.... particulars of income nor has he deliberately furnished inaccurate particulars of such income therefore the imposition of penalty is unjustified, bad in law, deserves to be deleted. 1.3. That there was not a definite conclusion in the assessment order at the time of initiation of proceedings and there being no satisfaction as to on what basis the penalty has been imposed namely; whether it is concealment of income or furnishing of inaccurate particulars of such income. Satisfaction has to be at the time of the very initiation of the proceeding, there being no such satisfaction' the penalty imposed being unjustified, bad in law, deserves to be deleted. 1.4. That the appellant having followed the system prevalent in the market, such other similar situated institutions following the same method, the franchisee license could not have been for a single year, such license fee being for minimum to 3-4 years, such receipts having been properly and duly shown in the books of account, the learned Assessing officer grossly erred in holding it otherwise. 1.5. That in quantum proceedings there being two views/difference of opinion in between the ld. CIT (Appeals) and....
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....icture of income of the appellant. On other hand, in facts of the case the choice of year of taxation of advance license fees is 'revenue neutral' as in all the material years the appellant has paid tax at the maximum rate. In this view of things, I do not see any justification to disturb an established accounting practice followed by the appellant, particularly when it has not been shown as detrimental to revenue. As there is no evidence that the receipts from advance license fee were not disclosed fully, not withstanding surrender in a recent survey of Rs. 58,03,162/- of advance license fee that would have been offered to tax in subsequent years, I do not confirm the decision of the assessing officer to add Rs. 63,77,229/- of advance license fee. Ground 3 of the appeal is accepted." 4. The order passed by the ld. CIT (A) was challenged by the Revenue before this Bench. This Tribunal vide order dated 26.11.2010 has set aside the order passed by ld. CIT (A) and has upheld the order passed by the AO. The reasoning given by the Tribunal is as under :- "12. After considering the submissions and perusing the material on record, we find that department deserves to s....
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....es. Some receipts are shown @ 50% in the next year, some receipts are shown at less than 50% and in some other cases the receipts have been shown @ 70%. The ld. A/R has fairly accepted that assessee has shown the receipts in subsequent years in a disproportionate percentage. In view of the above facts and circumstances, we hold that entire receipts received during the year under consideration are liable for taxation. The alternative contention of the assessee is accepted that the assessee has offered the receipts in subsequent years and if it is held that the receipts are liable to be tax for the year under consideration, then in subsequent year the income shown by assessee should be removed. Since we have held that these receipts are liable for taxation in the year under consideration, therefore, the AO is directed to remove the income offered by assessee out of this amount in subsequent year otherwise it will tantamount to double taxation. We order accordingly." 5. In between, the AO had issued notice for imposition of penalty on the assessee. Before we discuss the notice, it is necessary to reproduce the conclusion and satisfaction drawn by the AO at the time of passing the a....
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....culars of income of Rs. 43,32,329/- and, therefore, has imposed penalty of Rs. 14,58,262/- and has thus granted a part relief to the assessee for Rs. 7,41,738/-. 7. The revenue has filed the appeal before us bearing ITA No. 578/JP/2013 and the assessee has filed cross appeal bearing ITA No. 585/JP/2013 against confirmation of penalty of Rs. 14,58,262/-. 7.1. Before us the ld. A/R of the assessee has taken us to the order passed by the authorities below and also to the documents more particularly the franchisee agreements entered between the assessee and the franchisees placed from pages 139 to 209 of the paper book. By showing the agreement, it was contended by the ld. A/R of the assessee that the advance license fees received by the assessee is required to be amortized for some time as there is a corresponding obligation of the assessee to be discharged during the term of the agreement. There is recurring cost which is required to be spent by the assessee to the term of the franchisee agreements and, therefore, the income is also required to be adjusted towards the term of the agreement. The ld. A/R has submitted that in the assessment year under consideration total amount o....
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.... has not been spelt out and the AO was not sure whether the penalty was being imposed on account of submission of inaccurate particulars or on account of concealment of income. In this regard, the ld. A/R has drawn our attention to the law laid down by Hon'ble Supreme Court, High Courts and the Tribunal. We are hereby reproducing the same for completion of the record :- "1.15 The Hon'ble Income Tax Appellate Tribunal in its order dated 26.11.2010 has merely sustained the addition mainly for the reason that in subsequent years the Receipts from franchisees were not shown in the similar manner though shown in all the subsequent years. Merely because it was shown in all the subsequent years, the Id. Income Tax Appellate Tribunal sustained the addition. It is again out of place to mention that the assessee falls in the highest bucket (of Tax) and therefore no difference will be there if the Receipts will be shown in the subsequent years. The assessee does not say that the advance license fees is refundable. The assessee has rightly shown as income the entire fees is refundable. The assessee has rightly shown as income the entire advance license fee in the subsequent assess....
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.... Had it been a case that in succeeding assessment years the rate of income tax would not have been same then possibly one could came to the conclusion that the assessee has gained more rather on perusal of the facts hereinabove and on record, is that the assessee has not gained anything even by showing the income in succeeding assessment year rather on perusal of a Chart quoted in para 1.12 hereinabove extra income to the tune of Rs. 0.63 lacs has been added in the case of the assessee and this cannot be the scheme of law and permissible under the Income-tax Act. It is surprising that even after the finding of the Hon'ble Income Tax Appellate Tribunal that credit should be allowed in succeeding assessment years but no credit has been given in the succeeding assessment years, rather even appeal effect ha snot been given when Id. Income Tax Appellate Tribunal has clearly decided to reduce in subsequent years. In view of the above facts and circumstances, there is not justification for imposition of penalty ; the said penalty deserves to be deleted. On various proposition we, rely on the following authorities:- 1.17 As submitted hereinabove, even the Id. Assessin....
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....ound to justify levy of penalty towards such disallowance/addition. 1.20 The Hon'ble supreme court in the case of CIT v. Reliance Petro Products Pvt. Ltd. reported in (2010) 322 ITR 158 (SC) has observed as under :- "A Glance at the provision of section 271 (1) (c) of the Income tax Act, 1961, suggests that order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly , the assessee must have furnished inaccurate particulars of his Income. The meaning of the word "Particulars" used in section 27 (1) (c) would embrance the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars, In order to expose the assessee to penalty, unless the case in strictly covered by the provisions, the penalty provision cannot be invoked. By No stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particul....
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.... which were not include in the turnover were found incorporated in the appellant's accounts books. Where certain item which are not include in the turnover are disclosed in the dealer's own accounts books and the assessing authorities include these item in the dealer's turnover disallowing the exemption, penalty cannot be imposed. The penalty lived stands set aside. Thus in the instant case everything is recorded/mentioned in the Profit & Loss account and Balance-Sheet and other enclosures 1.23 We also rely on the judgment of the Hon'ble Rajasthan High Court in the case of Chadnrapal Bagga V. ITAT (2003) 261 ITR 67 (Raj.) where it has been held that if the assessee has claimed any exemption/deduction after disclosing the relevant facts of the transaction of income and any ignorance of the provision of the Act of 1961, has not offered that amount for Tax, even in such cases penalty should not be imposed automatically. In the instant case the assessee has shown the rental income and claimed 30% of Statutory deductions, the id. Commissioner of Income Tax (Appeals) held that since rental income is business income therefore as a natural corollary standa....
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.... 7.3. The ld. D/R for the revenue has submitted that the order passed by the Tribunal is conclusive, binding and the penalty has been imposed by the AO in accordance with the final conclusion drawn by the Tribunal. It was further submitted that there was deliberate attempt on the part of the assessee to avoid the payment of fair tax to the revenue and as such the conduct of the assessee falls within the realm of concealment of income. Further, the ld. D/R, in support of the appeal filed by the revenue bearing ITA No. 578/JP/2013, it was contended that in view of the CBDT Circular dated 10.12.2015 the appeal has become infructuous and the same is required to be withdrawn. 7.4. It was further submitted that the assessee has already been granted the relief much beyond permissible in law and, therefore, it was submitted that the appeal of the assessee is required to be dismissed by this Tribunal. 7.5. In view of the CBDT Circular No. 21of 2015 dated 10.12.2015 (F.No.279/Misc. 142/2007-ITJ(Pt) the appeal of the revenue bearing no. 578/JP/2013 is dismissed. Under the powers vested by Sec. 268A(1) of the I.T. Act, CBDT has recently issued Ci rcular No.21 of 2015 dated 10.12.2015(....
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....he following advice, assistance, services, information and materials for the purpose contemplated in this Agreement, namely to establish, maintain, conduct and operate the "VISION". 1.1. Allowing the affiliate to use the Brand Name of the company. 1.2. Grant of License 1.3. Course ware developed by the Company and other material at additional cost for the courses as stipulated in Annexure-A hereto 1.4. Technical know-how to run the courses 1.5. Faculty support 1.6. Marketing support If we look into the nature of obligation of the assessee, it is clear that the obligations required to be discharged by the assessee were not restricted to the year of entry into the agreement, rather it was spread over for a period of three years. Like the assessee was required to provide the material for the courses by technical know how, faculty support and marketing support. The detailed company's obligations are given at pages 140, 141 and 142 of the paper book. The assessee has charged the affiliate fees from the licensee for the rights granted in the agreement. As per the jurisprudence, rights and obligation go together. If a person has a r....