2022 (11) TMI 387

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....vision and Fabric Division. During the assessment proceedings, it was noticed that the respondent started its commercial production on 4/5/1988 with business losses claimed in the AY 1989-90. Letter on the respondent claimed that commercial production was started on 1/31992 but the Assessment Officer did not accept the claim of the petitioner in respect of capitalizing the amount of Rs.6,00,91,886/- in respect of expenses and loss incurred up to 01.03.1992. The assessment was completed on 28.02.1995 determining total income of Rs.2,42,17,558/- with following conditions: - 1 Disallowance of depreciation Rs.0,67,58,503/- 2 Disallowance of expenses under the head (verification & valuation) Rs.0,06,46,956/- 3 Wrong claim of exps. Under the head Publicity Rs.0,08,50,530/- 4 Addition towards shrinkage of cloth Rs.0,00,71,808/- 5 Compensation received-from Michelin Rs.5,18,02,396/- 6 Additional on account of receipt of power subsidy Rs.0,04,66,116/- 2.2. Being aggrieved by the aforesaid assessment order, respondent/assessee preferred an appeal before the Commissioner of Income Tax (A) and vide order dated 08.12.1995, the appellate a....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....r of Income Tax. In this appeal, the respondent/assessee contended that the amount received on termination of the agreement was not an account of the surrender of any right or relinquishment of any capital assets but was like reimbursement of the losses and accounts hence ought to have been shown as capital receipts but the Assessment Officer has wrongly construed the same as revenue receipts. The learned Commissioner did not accept the aforesaid contention and held that amount of Rs.5,18,02,396/- received under settlement on 21.11.1991 has rightly been taxed and business income by the Assessment Officer in the present Assessment Year i.e. 1992 - 93 and dismissed the appeal. 2.6. In pursuant to the aforesaid order, the Deputy Commissioner of Income Tax issued a revised notice of demand and challan. Thereafter, the appellant approached the Income Tax Appellate Tribunal along with an application for a stay. At the instance of the respondent /assessee, an Income Tax Reference was sent to the High Court on the issue of "whether in the facts and circumstance of case, the Tribunal was justified in concluding the computation of Rs.5,18,02,396/- received by assessee constituted revenue ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

..../- is made out ?" 03. Ms Veena Mandlik, learned counsel for the appellant argued that penalty proceedings were rightly initiated against the respondent/assessee as there was a concealment of particular income as well as furnishing inaccurate particulars. The First Appellate Authority has rightly imposed the penalty @ 100%. Merely the issue that was debatable in the appeal cannot be a ground for avoiding the penalty under Section 271(1)(2) of the Income Tax Act. In support of the aforesaid contention, she placed reliance upon the judgment delivered in the cases of Commissioner of Income Tax v/s Prakash S. Vyas reported in (2014) 272 CTR (Guj) 353 and Commissioner of Income Tax v/s Dharamshi B. Shah reported in (2014) 366 ITR 140 (Guj). 04. Per contra, Shri P. M. Choudhary, learned Senior Counsel appearing for the respondent/assessee contended that once this Court has given a finding that on a question referred by the Income Tax Department that Rs.5,18,02,396/- was revenue receipt and the respondent/assessee has been subjected to the tax, the High Court itself found that there is a debatable issue and adjudicated it, therefore, it cannot be held that the assessee concealed the ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....396/- from Michelin Foreign Collaborator. According to the assessee the amount was received on extinguishment of rights and claims from a foreign collaborator and hence declared in ITR as capital receipt. According to the appellant, the respondent deliberately shown these receiving of the amount of Rs.5,18,02,396/- as capital receipt. It is further submitted by the learned counsel for the appellant the respondent was having knowledge of the real nature of the transaction i.e. nature of such damage and the receipt, therefore ought to have correctly shown in the returns, thus the assessee furnished inaccurate particulars of such income by attempting to categorise them as a capital receipt which had been confirmed by this Court vide judgment dated 06.07.2009 passed in ITR No.62/1997, therefore, the assessment officer as well as Joint Commissioner of Income Tax have rightly held respondent for penalty under Section 271 (1) (c) on this issue. 07. Learned Income Tax Appellate Tribunal has examined the provision of section 271 (1) (c) under which penalty was levied on receipt of Rs. 2,88,51,613/- and Rs.2,29,50,782/-. It has been held that the company treated the aforesaid amount as pa....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ction 34 and proves that he has no income liable to tax, the penalty imposable under this sub-section shall be a penalty not exceeding twenty-five rupees; (c) no penalty shall be imposed under this sub-section upon any person assessable under Section 42 as the agent of a person not resident in 5[the taxable territories] for failure to furnish the return required under Section 22 unless a notice under sub-section (2) of that section or under Section 34 has been served on him;] ^6[(d) ^7[when the person liable to penalty is a registered firm or an unregistered firm which has been assessed under clause (b) of subsection (5) of Section 23, then, notwithstanding anything contained in the other provisions of this Act, the amount of income-tax and supertax payable by the firm itself shall be taken to be] an amount equal to the tax which would have been payable by an unregistered firm on an income equal to the firm's total income, and, in the cases referred to in clauses (b) and (c), the amount of the income-tax and super-tax which would have been avoided if the income as returned had been accepted as the correct income, shall be taken to be the difference between the amo....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ed in the assessment year 1993-94, therefore, there was no occasion to disclose the receipt in the return of the assessment year 1992-93. To attract the provision of Section 271 (1)(c) the satisfaction is to be recorded that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. In the present case, the respondent disclosed the source of income as a capital receipt. The source of receipt of the amount of Rs.5,18,02,396/- from Michelin Company was correctly disclosed. It might be on the basis of the opinion given the by tax consultant or Charted Accountant, it was shown in the capital receipt in the return however, that was a debatable issue, therefore, the reference was sent to High Court. 10. The Apex Court in the case of Commissioner of Income Tax v. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC) has held that to attract this provision of section 271 (1) (c), there has to be concealment of the particulars of the income of the assessee, the particular means the details of the claim made, hence, where the information given in the return is found to be incorrect or inaccurate, the assessee can be held guilty of furni....