TaxTMI 
TaxTMI 
2024 (12) TMI 371
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....te particulars 2. concealing the particulars of income And in addition to above, initiating penalties for excess claims / losses etc. Hence the penalty order passed by the AO is justified in each and every way. 2.1 The assessee has raised cross-objections which are reproduced as under: CROSS-OBJECTION I: 1. On the facts and circumstances of the case and in law, the ld. Assessing Officer ("AO") erred in levying penalty amounting to Rs. 25,47,52,538/- u/s 271(1)(c) of the Income-tax Act, 1961 ("the Act"). 2. The Cross objector prays that the Id. AO be directed to delete the penalty levied u/s 271(1)(c) of the Act. WITHOUT PREJUDICE TO THE ABOVE: CROSS-OBJECTION II: 1. On the facts and circumstances of the case and in law, the Id. AO erred in levying 100% penalty u/s 271(1)(c) of the Act on compensation received on termination of agency rights by treating it as business income. 2. The Cross objector prays that the ld. AO be directed to levy penalty u/s 271(1)(c) of the Act, if any, only on the differential tax rate between business income and long-term capital gains before setting off the brought forward capital loss. 3. The cross-objection has been filed by the a....
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....l ground raised by the assessee that the notice u/s 274 r.w.s. 271(1)(c) dated 27.12.2007 of the Act issued was defective as particular limb i.e. concealment of income or furnishing of inaccurate particulars of the income was not stricken off by the Assessing Officer while issuing notice for initiation of penalty, relying on the decision of the Hon'ble Bombay High Court in the case of Mohd. Farhan Shaikh v. DCIT (2021) 125 taxmann.com 253 (Bombay). 8. Aggrieved, the assessee is in cross-objection submitting that even otherwise on merit also penalty is not leviable in the case of the assessee. 9. We have heard rival submission of the parties and perused the relevant material on record. Before us, the Ld. counsel for the assessee referred to the Paper Book which is running from page 1 to 294. The Ld. counsel submitted that subsequent to the impugned order of the Ld. CIT(A), the ITAT in order dated 11/01/2024 in ITA No. 3706/Mum/2010 and ITA No. 5091/Mum/2024, has decided the additions/disallowances made in quantum proceedings. He submitted a chart of the finding of ITAT (supra) qua each issue on which AO had levied penalty, which is extracted as under: Sr. No. Ground of Appeal H....
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....brought on record. Moreover all the four policies purchased by the assessee was for plant & machinery. The Ld. A.R.s for the parties to the appeals unanimously contended that the issue be remitted back to the AO to decide afresh on verifying the actual loss incurred by the assessee due to accidental fire. In view of the matter for cause of substantive justice the issue is remitted back to the AO to decide afresh within six months from the date of receipt of the order on filing actual loss suffered due to accidental fire. So ground No. 11 is decided in favour of the assessee for statistical purposes." 9.2 Regarding the penalty for disallowance of deduction u/s 35(2AB) and section 35(1)(iv) of the Act in respect of Mulund Unit and Ennore Unit, Chennai, also the ITAT(supra) has restored the issue back to the file of the Assessing Officer, observing as under: "54. The assessee has claimed research and development expenses incurred during the year under consideration for Mulund unit, Mumbai and Ennore unit, Chennai as under: (in Lakhs) "(i) R&D - revenue exp. u/s 0.35(2AB) Rs.4140.62 (ii) R&D - capital exp. (building) u/s 0.35(1)(iv) Rs.3196.96 (iii) R&D - capital exp....
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....val in Form no. 3CM for the purpose of availing deduction. It is the contention of the assessee that though, it has made application seeking approval in Form no. 3CM, however, it is still awaited. As held by the Tribunal, Mumbai Bench, in case of PCP Chemicals Pvt. Ltd. (supra), approval by the competent authority in Form no. 3CM is mandatory for claiming deduction under section 35(2AB) of the Act. The same view has also been expressed in Vivimed Labs Ltd. (supra). However, considering the contention of the learned Sr. Counsel that the assessee has applied for approval in Form no. 3CM which is still pending, we are inclined to restore the issue to the Assessing Officer for providing an opportunity to the assessee to furnish the approval of the competent authority in the prescribed manner for claiming deduction under section 35(2AB) of the Act. This ground is allowed for statistical purposes." 58. Since the issue is identical the same is restored to the AO to decide after providing opportunity of being heard to the assessee in view of the directions given by the Tribunal extracted above. Consequently ground No. 6 is allowed for statistical purposes." 9.3 As far as penalty related....
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.... to compensation amounting to Rs. 92,76,62,688/- received from Roche Diagnostics Gmbh (RDG) on termination of agreement of agency, distribution and manufacturing rights. 10.1 We have heard rival submissions and perused the relevant material on record. The assessee company was granted exclusive rights to distribute market and sale various products in India and also to manufacture certain products under the agreement with Boehringer Mannheim GMBH (Roche Diagnostics GMBH) agreement dated 03.06.1997. This agreement was subsequently, terminated vide Settlement Agreement dated 20.10.2004. The assessee submitted that it had received a sum of Rs. 92,76,62,688/- from Roche Diagnostics GMBH (RDG) of Germany towards termination of the agency, distribution and manufacturing rights granted to it by RDG vide agreement dated 03.06.1997. According to the assessee, it lost its rights of carrying out business of distributing, marketing and selling due to extinguishment of those rights, which were a capital asset. The Ld. counsel for the assessee submitted that relinquishment of asset and extinguishment of right thereon is in relation to capital asset under the provision of section 2(47) of the Act ....
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.... within the purview of profit and gains of business "any sum whatever received or receivable in cash or kind under any agreement for guarantee any activity in relation to any business". 36. The contentions raised by the Ld. A.R. for the assessee inter-alia qua the provisions contained under section 28(va) that the existing provisions of clause (ii) of section 28(a) is restrictive in its scope as far as taxation of compensation is concerned; a large segment of compensation received in connection with business and employment is within the purview of taxation, is not sustainable because it is nowhere case of the assessee before the AO or the Ld. CIT(A) that because of settlement agreement qua the termination of agency and distribution business the compensation is in respect of business loss and employment. Rather in the preceding para it is discussed that after termination of the agency and distribution assessee's business has been increased considerably. 37. Moreover, when the assessee and the RDG were entered into agreement to do business and any settlement arrived at between them for termination of the business would be business income. The assessee has also raised one addi....
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.... a business, the same is subject to Long Term Capital Gains u/s. 45, (refer Schedule 3). Cost of acquisition for the same is adopted as Nil in accordance with Section 55(2)." 10.3 Further, the assessee referred to paper book page 186, which is note No. 5 to Schedule 22 of the balance sheet. The assessee also explained the nature of the payment received during the course of the assessment proceedings, therefore, in our opinion, the assessee has filed all particulars material to the issue in dispute. Therefore, no penalty could be levied merely for the reason that claim of the assessee has not been accepted, as held by the Hon'ble Supreme Court in the case of Reliance Petroproducts Ltd. (supra). The relevant part of the decision of Hon'ble Supreme Court is reproduced as under: "7. As against this, learned Counsel appearing on behalf of the respondent pointed out that the language of section 271(1)(c) had to be strictly construed, this being a taxing statute and more particularly the one providing for penalty. It was pointed out that unless the wording directly covered the assessee and the fact situation herein, there could not be any penalty under the Act. It was pointed out that ....
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....of India v. Dharamendra Textile Processors [2008] 13 SCC 369, as also, the decision in Union of India v. Rajasthan Spg. & Wvg. Mills [2009] 13 SCC 448 and reiterated in para 13 that :- "13. It goes without saying that for applicability of section 271(1)(c), conditions stated therein must exist." 8. Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the Return filed because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. In Dilip N. Shroff v. Jt. CIT [2007] 6 SCC 329, this Court explained the terms "concealment of income" and "furnishing inaccurate particulars". The Court went on to hold therein that in order to attract the penalty under section 271(1)(c), mens rea was necessary, as according to the Court, the word "inaccurate" signified a deliberate act or omission on behalf of the assessee. It went on to hold that Clause (iii) of section 271(1) provided for a discretionary jurisdiction upon the Assessing Authority, inasmuch....
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....'s case (supra) to the effect that mens rea was an essential ingredient for the penalty under section 271(1)(c) that the decision in Dilip N. Shroff's case (supra) was overruled." 10.4 Further, the Hon'ble jurisdictional High Court in the case of Bennett Coleman & Co ltd in (2013) 33 taxmann.com 227(Bombay) have deleted the penalty on account of change of head of income by the assessing officer particularly when he could not establish concealment of income or furnishing of inaccurate particulars of income by stating incorrect facts by the assessee. The relevant finding of Hon'ble Bombay high Court is reproduced as under: "3. So far as question (ii) is concerned, the respondent-assessee had claimed premium on redemption of debentures as income from capital gains. Whereas the assessing officer held that the redemption of debentures is revenue receipt assessable to tax under the head income from other sources. The CIT(A) confirmed the order of the assessing officer. The respondent-assessee did not file any further appeal on the quantum proceedings. Thereafter, the assessing officer levied penalty under Section 271(1)(c) of the Act on the respondent-assessee. The CIT(A) also....