ADIT, New Delhi V. Sh. Ravindra Bahl, New Delhi

ITA 1206/DEL/2011

• Counselvise Citation: 120620114 RSA 2011
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 16-07-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 08-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUNIL GANTUR
• Assessee Lawyers: KAUNAN KAPUR ADV HEARING ON
• Keywords: Salary income; Capital receipt
• Section: 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI T.S.KAPOOR, ACCOUNTANT MEMBER I.T.A. NO. 1206/DEL/2011 ASSESSMENT YEAR: 2000-01 ADIT SH. RAVINDRA BAHL, CIRCLE-1 (1) FLAT NO. 915, 9 TH FLOOR, NEW DELHI. VS. INDRA PRAKASH BUILDING, 21 BARAKHAMBA ROAD, NEW DELHI. (REVENUE) (ASSESSEE) REVENUE BY: SH. SUNIL GANTUR, SR. DR ASSESSEE BY: SH. KAUNAN KAPUR, ADV. HEARING ON : 16/07/2012 ORDER PRONOUNCED ON THE DATE: .. ORDER PER I.C.SUDHIR, JM: THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER WH EREBY THE LD. CIT (A) HAS DELETED THE PENALTY IMPOSED U/S 271 (1) (C) OF THE ACT BY THE AO. 2. WE HAVE HEARD AND CONSIDERED THE ARGUMENT ADVANCED BY THE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIA L AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. ITA NO. 1206/DEL/2011 2 3. THE RELEVANT FACTS ARE THAT THE ASSESSEE WAS EMPLOY ED WITH HCL DELUXE NV (HDX), A COMPANY INCORPORATED IN NETHERLA ND. HCL DELUXE PVT. LTD. WAS AN INDIAN SUBSIDIARY OF HDX. THE ASSE SSEE DERIVED SALARY INCOME FROM HCL DELUXE PVT. LTD. DELUXE CORPORATION OF USA, HELD 50% SHARE HOLDING IN HDX. THE OTHER 50% WAS HELD BY AN INDIAN HOUSE. DURING MARCH 1999, DELUXE CORPORATION USA ACQUIRED 50% HOL DING OF THE INDIAN BUSINESS PARTNER, AND RESTRUCTURED THE MANAGEMENT S ET UP OF HDX. BY A LETTER DATED 06.04.1999, DELUXE CORPORATION ALSO TE RMINATED THE SERVICES OF THE ASSESSEE BUT OFFERED HIM CONTINUED EMPLOYMENT F OR A LIMITED TENURE FROM 03.04.1999 TO 01.08.1999, ON SAME TERMS AND REMUNER ATION AS HE WAS PREVIOUSLY EMPLOYED. IN ADDITION, DELUXE CORPORATIO N ALSO OFFERED TO PAY THE ASSESSEE AN EXTRA ORDINARY COMPENSATION OF USD 10 LACS, FOR RETENTION AND SEVERANCE OF HIS SERVICES. 50% OF USD 10 LACS I .E. USD 5 LACS WERE PAID ON SIGNING AND AGREEING TO THE TERMS OF LETTER DATE D 06.04.1999. THE BALANCE USD 5 LACS WERE PAID IN AUGUST 1999, ON CONTINUED E MPLOYMENT OF THE ASSESSEE COMING TO AN END. 4. THE ASSESSEE, WHILE SUBMITTING HIS INCOME TAX RETUR N FOR THE A.Y. 2000-01 (UNDER CONSIDERATION) ATTACHED A NOTE DATED 08.05.2000 TO THE COMPUTATION OF INCOME, CLAIMING THAT NON COMPETE FEE OF USD 10 LACS RECEIVED BY HIM FROM DELUXE CORPORATION IS A CAPITA L RECEIPT NOT CHARGEABLE TO TAX. BEFORE DOING SO THE ASSESSEE HAD DETERMINED THE TAX PAYABLE ON ITA NO. 1206/DEL/2011 3 INCOME AFTER INCLUDING THE SUM OF USD 10 LACS AS PA RT OF HIS INCOME. THE ASSESSEE DEPOSITED THE TAX AMOUNT SO DETERMINED. HO WEVER, IN HIS RETURN OF INCOME THE ASSESSEE DID NOT INCLUDE THE USD 10 LACS AND CLAIMED REFUND OF THE SUM DEPOSITED. THE AO DID NOT AGREE WITH THE AS SESSEE THAT THE AMOUNT USD 10 LACS RECEIVED BY THE ASSESSEE FROM DELUXE CO RPORATION IS A CAPITAL RECEIPT HENCE NOT CHARGEABLE TO TAX. HE FRAMED THE ASSESSMENT ON 28.03.2002 AND TAXED THE SUM OF USD 10 LACS (INR 4,34,36,250/- ). THE ASSESSEE WENT IN FIRST APPEAL. THE LD. CIT (A) HELD THAT 50% OF USD 10 LACS I.E. USD 5 LACS IS NON TAXABLE AND ALLOWED RELIEF TO THE ASSESSEE TO T HAT EXTENT. THE TRIBUNAL VIDE ORDER DATED 31 ST MARCH, 2009 REVERSED THE FIRST APPELLATE ORDER. IN RESULT THE ADDITION OF USD 10 LACS MADE TO THE INCOME OF T HE ASSESSEE BY THE AO WAS UPHELD. THE AO ISSUED NOTICE U/S 271 (1) (C) OF THE ACT AND VIDE ORDER DATED 29.01.2010 LEVIED PENALTY OF RS.1,43,33,963/- UNDER THE SAID PROVISION. LD. CIT (A) HAS DELETED THE PENALTY ON T HE BASIS THAT THERE WAS NO CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULAR THEREOF ON THE PART OF THE ASSESSEE SINCE THE ASSES SEE HAD DISCLOSED ALL THE NECESSARY AND MATERIAL FACTS REGARDING THE RECEIPT OF USD 10 LACS TO THE DEPARTMENT. THE LD. CIT (A) HAS HELD FURTHER THAT T HE EXPLANATION OFFERED BY THE ASSESSEE WAS NEITHER FOUND FALSE NOR IT REMAINE D UNSUBSTANTIATED. HE OBSERVED FURTHER THAT THE BONA FIDES OF THE ASSESSE E WERE PROVED BY THE ITA NO. 1206/DEL/2011 4 DISCLOSURE IN THE RETURN AND THE PAYMENT OF TAXES. THE REVENUE HAS QUESTIONED THIS ACTION OF THE LD. CIT (A). 5. IN SUPPORT OF THE GROUND THE LD. DR HAS BASICALLY P LACED RELIANCE ON THE PENALTY ORDER. HE SUBMITTED THAT THERE WAS NO A NY SCOPE OF DEBATE ON THE TAXABILITY OF THE AMOUNT RECEIVED SINCE THE AMOUNT WAS RECEIVED OUT OF THE CONTRACT FOR EMPLOYMENT. THE TRIBUNAL HAS ALSO UPHE LD THE ACTION OF THE AO IN HOLDING THAT THE AMOUNT IS A TAXABLE INCOME IN T HE HANDS OF THE ASSESSEE. THUS IT IS CLEAR CASE OF CONCEALMENT OF PARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS THEREOF ON THE PART OF THE A SSESSEE TO ATTRACT PENAL ACTION U/S 271 (1) (C) OF THE ACT. THE LD. DR SUBMI TTED FURTHER THAT HAD THERE NOT BEEN THE SCRUTINY ASSESSMENT U/S 143 (3) OF THE ACT THE ASSESSEE WOULD NOT HAVE COME FORWARD TO OFFER TAX ON THE AMOUNT RE CEIVED BY HIM. THE LD. DR PLACED RELIANCE ON THE FOLLOWING DECISIONS: - CIT VS. ECS LTD. (2011) 336 ITR 162 (DEL) - ITO VS. PANDIT VIJAY KANT SHARMA, ITA NO. 3709/DEL/2008 ORDER DATED 29.5.2009. - VLCC HEALTH CARE LTD. VS. ACIT ITA NO. 289/DEL/2009 ORDER DATED 12.2.2010 - RAYATA CORPORATION (P) LTD. VS. UNION OF INDIA (200 7) 161 TAXMAN 127 (MAD) ITA NO. 1206/DEL/2011 5 6. THE LD. AR ON THE OTHER HAND TRIED TO JUSTIFY THE F IRST APPELLATE ORDER. HE SUBMITTED THAT THERE WAS DISCLOSURE OF ALL THE N ECESSARY AND MATERIAL FACTS RELATING TO THE RECEIPT OF THE AMOUNT OF USD 10 LAC S AND TAXABILITY OF THE AMOUNT WAS A DEBATABLE ISSUE. THE ASSESSEE WAS UNDE R BONA FIDE BELIEF THAT THE RECEIPT WAS CAPITAL IN NATURE HENCE NOT CHARGEA BLE TO TAX AND AT THE SAME TIME THE ASSESSEE HAD DETERMINED THE TAX PAYABLE ON INCOME AFTER INCLUDING THE SUM OF USD 10 LACS AS PART OF HIS INCOME. HE HA D DEPOSITED THE TAX AMOUNT SO DETERMINED. HE SUBMITTED FURTHER THAT THE EXPLANATION OF THE ASSESSEE ABOUT THE AMOUNT RECEIVED WAS NEITHER FOUN D FALSE NOR UNSUBSTANTIATED. THE LD. AR ALSO REFERRED CONTENTS OF PARA NOS. 6 TO 13 OF THE APPOINTMENT LETTER DATED 6.4.1999 MADE AVAILABLE AT PAGE NOS. 8 TO 12 OF THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. HE POIN TED OUT THAT AS PER THE CONDITION IMPOSED UPON, THE ASSESSEE WAS NOT TO DIV ULGE, COMMUNICATE OR PASS ON ANY CONFIDENTIAL INFORMATION OF HDX OR DELU XE OR ANY OF THEIR RESPECTIVE SUBSIDIARIES TO ANY PERSON WHO IS NOT IN THE EMPLOYMENT OF HDX OR DELUXE OR ANY OF THEIR RESPECTIVE SUBSIDIARIES A ND WHO DOES NOT HAVE A NEED TO KNOW SUCH INFORMATION, FOR A PERIOD OF 3 YE ARS AND 4 MONTHS FROM THE DATE OF THE SAID LETTER. THE ASSESSEE WAS ALSO RESTRAINED FOR AN AGREED PERIOD FOR NOT TO DIRECTLY OR INDIRECTLY RECRUIT, H IRE OR DISCUSS EMPLOYMENT WITH PRESCRIBED PERSON ETC. ALL THESE SHOWS THAT TH E PAYMENT WAS MADE AS A NON-COMPETE FEE. HE SUBMITTED FURTHER THAT THE DECI SIONS RELIED UPON BY THE ITA NO. 1206/DEL/2011 6 LD. DR HAVING DISTINGUISHABLE FACTS ARE NOT HELPFUL TO THE REVENUE. IN SUPPORT OF THE FIRST APPELLATE ORDER ON THE ISSUE THE LD. A R CITED FOLLOWING DECISIONS: (I) KARAN RAGHAV EXPORTS P. LTD. VS. CIT ITA NO. 1152/2011 ORDER DATED 14.3.2012 (DELHI HIGH COURT ) (II) CIT VS. RELIANCE PETROPRODUCTS LTD. (2010) 322 ITR 158 (SC) 7. WE FIND THAT IN THE PRESENT CASE THE ASSESSEE TR IED TO ESTABLISH HIS BONA FIDE IN NURTURING A BELIEF THAT AMOUNT RECEIVED IS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX. HE ALSO TRIED TO ESTABLISH HIS B ONA FIDE IN NOT OFFERING THE TAX IN HIS RETURN OF INCOME ON THE CLAIMED CAPITAL RECEIPT BY STATING THAT THE ASSESSEE HAD CALCULATED THE TAX ON THE CAPITAL RECE IPT AND PAID IT TO THE REVENUE AND WHILE NOT SHOWING IT AS INCOME OF THE A SSESSEE IN HIS RETURN OF INCOME HE HAD CLAIMED THE TAX PAID AS REFUND. WE AR E OF THE VIEW THAT THERE IS SCOPE OF NURTURING A BONA FIDE BELIEF THAT TAX I S NOT PAYABLE ON A RECEIPT WHERE TWO VIEWS ARE POSSIBLE REGARDING IT. NO SUCH CASE IS THERE IN THE PRESENT APPEAL BEFORE US. THE PROVISIONS LAID DOWN U/S 17 (3) OF THE ACT ARE VERY CLEAR THAT PROFITS IN LIEU OF SALARY INCLUDES THE AMOUNT OF ANY COMPENSATION DUE TO OR RECEIVED BY AN ASSESSEE FROM HIS EMPLOYER OR FORMER EMPLOYER AT OR IN CONNECTION WITH THE TERMINATION O F HIS SELF EMPLOYMENT OR THE MODIFICATION OF THE TERMS AND CONDITIONS RELATI NG THERETO. FOR A READY ITA NO. 1206/DEL/2011 7 REFERENCE CLAUSES (I) AND (II) TO SUB-SECTION (3) T O SECTION 17 ARE BEING REPRODUCED HEREUNDER: 3. PROFITS IN LIEU OF SALARY INCLUDES- (I) THE AMOUNT OF ANY COMPENSATION DUE TO RECEIVED BY A N ASSESSEE FROM HIS EMPLOYER OR FORMER EMPLOYER AT OR IN CONNECTION WITH THE TERMINATION OF HIS EMPLOYMENT O R THE MODIFICATION OF THE TERMS AND CONDITIONS RELATI NG THERETO; (II) ANY PAYMENT (OTHER THAN ANY PAYMENT REFERRED TO IN CLAUSE (10) CLAUSE (10A) CLAUSE (10B) CLAUSE (11), CLAUSE (12) CLAUSE(13) OR CLAUSE (13A) OF SECTION 1 0, DUE TO OR RECEIVED BY AN ASSESSEE FROM AN EMPLOYER OR A FORMER EMPLOYER OR FROM A PROVIDENT OR OTHER FUND T O THE EXTENT TO WHICH IT DOES NOT CONSIST OF CONTRIBU TIONS BY THE ASSESSEE OR INTEREST ON SUCH CONTRIBUTIONS O R ANY SUM RECEIVED UNDER A KEYMAN INSURANCE POLICY INCLUDING THE SUM ALLOCATED BY WAY OF BONUS ON SUCH POLICY. EXPLANATION FOR THE PURPOSES OF THIS SUB-CLAUSE, THE EXPRESSION KEY MAN INSURANCE POLICY SHALL HAVE T HE MEANING ASSIGNED TO IT IN CLAUSE (10D) OF SECTION 10;] ITA NO. 1206/DEL/2011 8 IN THE APPEALS PREFERRED BY THE PARTIES BEFORE THE TRIBUNAL RAISING THE ISSUE ON THE TAXABILITY OF THE RECEIPT THE TRIBUNAL VIDE ITS ORDER DATED 31.3.2009 IN ITA NOS. 3365 & 2629/DEL/2004 HAS HELD THAT THE AMO UNT PAID TO THE ASSESSEE WAS BECAUSE OF TERMINATION OF EMPLOYMENT I N TERMS OF LETTER DATED 6.4.1991, THEREFORE, THE PAYMENT OF USD 10 LAC RECE IVED BY THE ASSESSEE IS CHARGEABLE TO TAX AS PROFIT IN LIEU OF SALARY U/S 1 7 (3) (I) OF THE ACT. THE TRIBUNAL HAS DISCUSSED THE ISSUE IN DETAIL AND DECI DED IT IN VIEW OF SEVERAL DECISIONS RELIED UPON BY THE PARTIES BEFORE IT. THE ASSESSEE HAD PLACED RELIANCE ON SEVERAL DECISIONS LIKE CIT VS. SHYAM SU NDER CHHAPRIA 305 ITR 181 (MP); ROHITASAV CHAND VS. CIT 306 ITR 242 AND SOURABH SRIVASTAVA VS. DCIT (2008) 111 ITD 287 (DEL) (SB). THE TRIBUNA L HAS DISTINGUISHED THESE DECISIONS ON FACTS WITH THIS OBSERVATION THAT IN THESE CASES THE ASSESSEE WAS PAID NON-COMPETE FEE WHEREAS IN THE CASE OF THE PRESENT ASSESSEE THE PAYMENT HAS BEEN MADE FOR TERMINATION OF SERVICES. WE ARE THUS OF THE VIEW THAT WHEN PROVISIONS U/S 17 (3) OF THE ACT WERE CLE AR AND THE AMOUNT WHATEVER NOMENCLATURE CAN BE ATTACHED TO IT WAS ADM ITTEDLY PAID TO THE ASSESSEE DUE TO TERMINATION OF EMPLOYER -EMPLOYEE R ELATION, THERE WAS NO SCOPE OF ANY DEBATE THAT THE AMOUNT RECEIVED WAS NO T PROFITS IN LIEU OF SALARY WITHIN THE MEANING OF THE SAID PROVISIONS OF U/S 17 (3) OF THE ACT. WE ARE THUS OF THE VIEW THAT THERE WAS NO ANY REASON AVAIL ABLE WITH THE ASSESSEE FOR NURTURING A BELIEF THAT THE AMOUNT RECEIVED IS A CA PITAL RECEIPT NOT CHARGEABLE ITA NO. 1206/DEL/2011 9 TO TAX. MERELY BY DEPOSITING THE DUE TAX ON THE AMO UNT RECEIVED THE BONA FIDE OF THE ASSESSEE IN NOT DECLARING THE RECEIPT A S INCOME IN ITS RETURN OF INCOME IS NOT ESTABLISHED. THE BENEFIT OF EXPLANATI ON 1 TO SECTION 271 (1) (C) OF THE ACT FOR THE EXEMPTION OF LEVY OF PENALTY IS AVAILABLE TO AN ASSESSEE WHEN ASSESSEE IS ABLE TO ESTABLISH THAT THE EXPLANA TION FURNISHED BY HIM FOR NON-DISCLOSURE OF PAYMENT OF THE RECEIPT AS INCOME IN HIS RETURN OF INCOME IS BONA FIDE. THE REQUIREMENT FOR AVAILING THE BENEFIT U/S 271 (1)(C) EXPLANATION 1 OF THE ACT FOR EXEMPTION FROM PENAL A CTION UNDER THE SAID PROVISIONS ARE AVAILABLE ONLY IF THE ASSESSEE IS AB LE TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS REL ATING TO THE INCOME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAV E BEEN DISCLOSED BY HIM. FOR A READY REFERENCE THE RELEVANT EXTRACT OF SECTI ON 271 (1) (C ) OF THE ACT ARE BEING REPRODUCED HEREUNDER: 271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1). IF THE ASSESSING OFFICER OR THE COMMISSIONER ( APPEALS) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) [********] (B) HAS FAILED TO COMPLY WITH A NOTICE [UNDER SUB-S ECTION (2) OF SECTION115 WD OR UNDER SUB-SECTION (2) OF SECTION 1 15 WE OR] ITA NO. 1206/DEL/2011 10 UNDER SUB-SECTION (1) OF SECTION 142 OR SUB-SECTION (2) OF SECTION 143 [OR FAILS TO COMPLY WITH A DIRECTION IS SUED UNDER SUB-SECTION (2A) OF SECTION 142], OR (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. (D) HAS CONCEALED THE PARTICULARS OF THE FRINGE BEN EFITS OR FURNISHED INACCURATE PARTICULARS OF SUCH FRINGE BEN EFITS,] HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY,- [***] (II) IN THE CASES REFERRED TO IN CLAUSE (B), [IN AD DITION TO TAX, IF ANY, PAYABLE] BY HIM, [A SUM OF TEN THOUSAND RUP EES] FOR EACH SUCH FAILURE;] (III) IN THE CASES REFERRED TO IN CLAUSE (C ) [OR C LAUSE (D)], [IN ADDITION TO TAX, IF ANY, PAYABLE] BY HIM, A SUM WHI CH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED [THREE TIM ES],THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME [OR FRINGE BENEFITS] OR THE FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME [OR FRINGE BENEFITS]. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. EXPLANATION 1.- WHERE IN RESPECT OF ANY FACTS MATER IAL TO ITA NO. 1206/DEL/2011 11 THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON U NDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AN D MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCL OSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUT ING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHA LL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUBSECTION, BE DEEME D TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED. IT IS VERY MUCH CLEAR FROM THE PERUSAL OF THE PROVI SIONS LAID DOWN U/S 271 (1) (C) OF THE ACT THAT FOR SEEKING EXEMPTION FROM PENA L ACTION REGARDING AN INCOME NOT DECLARED IN THE RETURN INCOME, THE ASSES SEE IS REQUIRED NOT ONLY TO ESTABLISH THAT ALL THE FACTS RELATING TO THE SAME A ND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM BUT HE HAS TO ESTABLISH ALSO THAT THE EXPLANATION FOR NOT SHOWING THIS INCOME IN HIS RETURN OF INCOME WAS BONA FIDE. IN THE PRESENT CASE BEFORE US THOUGH THE CONTENTION ITA NO. 1206/DEL/2011 12 OF THE ASSESSEE THAT HE HAD DISCLOSED ALL THE FACTS RELATING TO THE RECEIPT BY APPENDING A NOTE TO THE RETURN OF IN THIS REGARD HA S NOT BEEN DISPUTED BUT THE DISPUTE BEFORE US IS ON THE ISSUE OF BONA FIDE OF T HE ASSESSEE IN NURTURING A BELIEF THAT THE AMOUNT RECEIVED IS A CAPITAL RECEIP T NOT CHARGEABLE TO TAX. IN THE PRECEDING PARAGRAPHS WE HAVE DISCUSSED THE FACT S OF THE PRESENT CASE AND WHEN IT IS CONSIDERED IN TOTALITY KEEPING IN MIND T HAT THE PROVISIONS LAID DOWN U/S 17 (3) (1) OF THE ACT WERE CLEAR TO BRING THE RECEIPT AS TAXABLE AND THERE WAS NO SCOPE OF DEBATE REGARDING ITS TAXABILI TY, THE BONA FIDE OF THE EXPLANATION OF THE ASSESSEE THAT HE WAS UNDER A BEL IEF THAT THE AMOUNT RECEIVED IS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX IS NOT ACCEPTABLE. IN THIS REGARD WE FIND STRENGTH FROM THE RECENT DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION (P) LTD. (SUPRA) WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT OF DELHI AFTE R DISCUSSING SEVERAL DECISIONS INCLUDING THE DECISIONS OF HONBLE SUPREM E COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P), HAS BEEN PLEASE D TO HOLD THAT IF A VIEW IS TAKEN THAT THE CLAIM WHICH IS WHOLLY UNTENABLE I N LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHICH IT COULD BE MADE, THE ASSESS EE WOULD NOT BE LIABLE TO IMPOSITION OF PENALTY EVEN IF HE WAS NOT ACTING BON A FIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LICENCE TO UNSCRUPULOUS ASSESSEES TO MAKE WHOLLY UNTENABLE AND UNSUSTAINABLE CLAIMS WITH OUT THERE BEING ANY BASIS FOR MAKING THEM, IN THE HOPE THAT THEIR RETUR N WOULD NOT BE PICKED UP ITA NO. 1206/DEL/2011 13 FOR SCRUTINY AND THEY WOULD BE ASSESSED ON THE BASI S OF SELF-ASSESSMENT U/S 143 (1) OF THE ACT AND EVEN IF THEIR CASE IS SELECT ED FOR SCRUTINY, THEY CAN GET AWAY MERELY BY PAYING THE TAX, WHICH IN ANY CASE WA S PAYABLE BY THEM. FOR A READY REFERENCE PARA NO. 16 TO 21 OF THE SAID DEC ISIONS ARE BEING REPRODUCED HEREUNDER: '16. THE PROPOSITION OF LAW WHICH EMERGES FROM THIS CASE. WHEN CONSIDERED IN THE BACKDROP OF THE FACTS OF THE CASE BEFORE THE COURT, IS THAT SO LONG AS THE ASSES SEE HAS NOT CONCEALED ANY MATERIAL FACT OR THE FACTUAL INFORMATION GIVEN BY HIM HAS NOT BEEN FOUND TO BE INCORRECT, HE WILL NOT BE LIABLE TO IMPOSITION OF P ENALTY UNDER SECTION 271(1)(C) OF THE ACT EVEN IF THE CLAI M MADE BY HIM IS UNSUSTAINABLE IN LAW PROVIDED THAT HE EIT HER SUBSTANTIATES THE EXPLANATION OFFERED BY HIM OR THE EXPLANATION, EVEN IF NOT SUBSTANTIATED IS FOUND TO BE BONA FIDE. IF THE EXPLANATION IS NEITHER SUBSTANTIATED N OR SHOWN TO BE BONA FIDE. EXPLANATION 1 TO SECTION 271(1)(C) WOULD COME IN TO PLAY AND THE ASSESSEE WILL BE LIABLE TO FOR THE PRESCRIBED PENALTY. 19. IT IS TRUE THAT MERE SUBMITTING A CLAIM WHICH I S INCORRECT IN LAW WOULD NOT AMOUNT TO GIVING INACCUR ATE PARTICULARS OF THE INCOME OF THE ASSESSEE, BUT IT C ANNOT BE DISPUTED THAT THE CLAIM MADE BY THE ASSESSEE NEEDS TO BE BONA FIDE. IF THE CLAIM BESIDES BEING INCORRECT IN LAW IS MALA FIDE, EXPLANATION 1 TO SECTION 271 (1) WOULD C OME INTO PLAY AND WORK TO THE DISADVANTAGE OF THE ASSES SEE. 20. THE COURT CANNOT OVERLOOK THE FACT THAT ONLY A SMALL PERCENTAGE OF THE INCOME-TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF THE ASSESSEE MAKES A CLAIM WHICH IS NO T ONLY INCORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BAS IS AND THE EXPLANATION FURNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BONA FIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIABLE TO PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IF WE TAKE THE VIEW THAT A CL AIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO ITA NO. 1206/DEL/2011 14 FOUNDATION ON WHICH IT COULD BE MADE, THE ASSESSEE WOULD NOT BE LIABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT ACTING BONA FIDE WHILE MAKING A CLAIM OF TH IS NATURE, THAT WOULD GIVE A LICENCE TO UNSCRUPULOUS ASSESSEES TO MAKE WHOLLY UNTENABLE AND UNSUSTAINABL E CLAIMS WITHOUT THERE BEING ANY BASIS FOR MAKING THE M, IN THE HOPE THAT THEIR RETURN WOULD NOT BE PICKED UP F OR SCRUTINY AND THEY WOULD BE ASSESSED ON THE BASIS OF SELF-ASSESSMENT UNDER SECTION 143(1) OF THE ACT AND EVEN IF THEIR CASE IS SELECTED FOR SCRUTINY, THEY CAN GE T AWAY MERELY BY PAYING THE TAX, WHICH IN ANY CASE, WAS PA YABLE BY THEM. THE CONSEQUENCE WOULD BE THAT THE PERSONS WHO MAKE CLAIMS OF THIS NATURE ACTUATED BY A MALA FIDE INTENTION TO EVADE TAX OTHERWISE PAYABLE BY THEM WO ULD GET AWAY WITHOUT PAYING THE TAX LEGALLY PAYABLE BY THEM, IF THEIR CASES ARE NOT PICKED UP FOR SCRUTINY. THIS WOULD TAKE AWAY THE DETERRENT EFFECT, WHICH THESE PENALTY PROVISIONS IN THE ACT HAVE. 21. WE FIND THAT THE ASSESSEE BEFORE US DID NOT EXP LAIN EITHER TO THE INCOME-TAX AUTHORITIES OR TO THE INCO ME-TAX APPELLATE TRIBUNAL AS TO IN WHAT CIRCUMSTANCES AND ON ACCOUNT OF WHOSE MISTAKE, THE AMOUNTS CLAIMED AS DEDUCTIONS IN THIS CASE WERE NOT ADDED, WHILE COMPU TING THE INCOME OF THE ASSESSEE-COMPANY. WE CANNOT LOSE SIGHT OF THE FACT THAT THE ASSESSEE IS A COMPANY WH ICH MUST BE HAVING PROFESSIONAL ASSISTANCE IN COMPUTATI ON OF ITS INCOME, AND ITS ACCOUNTS ARE COMPULSORILY SUBJE CTED TO AUDIT. IN THE ABSENCE OF ANY DETAILS FROM THE AS SESSEE, WE FAIL TO APPRECIATE HOW SUCH DEDUCTIONS COULD HAV E BEEN LEFT OUT WHILE COMPUTING THE INCOME OF THE ASS ESSEE- COMPANY AND HOW IT COULD ALSO HAVE ESCAPED THE ATTENTION OF THE AUDITORS OF THE COMPANY.' 8. IN VIEW OF THE AFORESAID DISCUSSION ON THE ISSUE, W E COME TO THE CONCLUSION THAT WHILE NOT DECLARING THE CAPITAL REC EIPT IN QUESTION AS HIS INCOME IN HIS RETURN OF INCOME FILED BY THE ASSESSE E, THE ASSESSEE IN THE PRESENT CASE HAD FURNISHED INACCURATE PARTICULARS O F INCOME ATTRACTING THE ITA NO. 1206/DEL/2011 15 PENAL ACTION PROVIDED U/S 271 (1) (C) OF THE ACT. W E THUS WHILE SETTING ASIDE FIRST APPELLATE ORDER IN THIS REGARD RESTORE THE OR DER PASSED U/S 271 (1) ( C ) OF THE ACT IMPOSING THE PENALTY OF RS.1,43,33,963/-. T HE GROUND INVOLVING THE ISSUE IS THUS ALLOWED. 9. CONSEQUENTLY APPEAL IS ALLOWED. 10. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON THE DA Y OF 15/10/2012. SD/- SD/- ( T.S. KAPOOR ) (I.C.SU DHIR) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15 /10/2012 *AK VERMA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR