TaxTMI 
TaxTMI 
2024 (12) TMI 371
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.... of initiating penalty i.e. I. furnishing inaccurate 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 l....
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....of Rs. 25,47,52,538/- i.e. equivalent 100% of the tax sought to be evaded. On further appeal by the assessee, the Ld. CIT(A) deleted the penalty on the additional 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 proce....
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....cannot be taxed in its hand as revenue receipt. During the course of argument the assessee was called upon to produce the evidence regarding loss incurred by it due to accidental fire which the assessee has not 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 ....
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....considered rival submissions and perused materials on record. It is an undisputed fact that there is no approval by the competent authority in Form no. 3CM in respect of the expenditure incurred towards the R&D facility. Section 35(2AB) of the Act mandates furnishing of approval 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....
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....-; (ii) Disallowance of deduction u/s 35(2AB) and u/s 35(1)(iv) of the Act respect of Chennai unit and (iii) Disallowance of depreciation on capital expenses of R&D unit - Rs. 38,62,993/-, is hereby deleted. 10. Now, the only issue where the quantum addition has been upheld by the ITAT (supra) is in relation 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 ca....
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.... misplaced. 35. Furthermore, the provisions contained under section 28(ii)(c) are very categoric in giving the treatment of compensation received from the termination of any agency business which has been further clarified from the new provisions contained under section 28(va)(a) w.e.f. 1-4-2003, wherein it is specifically included 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....
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....45,50,688/-consisting of Rs. 5,68,88,000/- being amount received for instruments and Rs. 92,76,62,688/- for termination of the agreement. Accordingly, Rs. 5,68,88,000/- has been reduced from the block of plant & machinery for the purpose of calculating Depreciation as per IT Act / Rules. As regards Rs. 92,76,62,688/-, received in lieu of termination of right to carry-on 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 C....
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.... in law cannot tantamount to furnishing inaccurate particulars. In CIT v. Atul Mohan Bindal [2009] 9 SCC 589, where this Court was considering the same provision, the Court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This Court referred to another decision of this Court in Union 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 inc....
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.... section 271(1)(c) and section 276C of the Act was lost sight of in case of Dilip N. Shroff (supra). However, it must be pointed out that in Dharamendra Textile Processors' case (supra), no fault was found with the reasoning in the decision in Dilip N. Shroff's case (supra), where the Court explained the meaning of the terms "conceal" and "inaccurate". It was only the ultimate inference in Dilip N. Shroff'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 capita....