DEPUTY COMMISSIONER OF INCOME TAX 10(2)(1), MUMBAI V. LYKA LABS LTD, MUMBAI

ITA 2934/MUM/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 1576 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2001-2002
• Appeal Filed On: 05-05-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Bonafide belief; Question of law; Wrong claim; Capital Gains
• Section: 271(1)(c); 10(14); 142(1); 14A; 250; 143(2); 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No. 2934/Mum/2019 (A.Y: 2001-02) DCIT – 10(2)(1) 5 th Floor, Room No. 509, Aayakar Bhavan, Churchgate, Mumbai -400020. Vs. M/s. Lyka Labs Ltd., Ground Floor, Spencer Bldg, 30, Forjett Street. Grant Road(West), Mumbai -400036. ./ज आइआर ./PAN/GIR No. : AAACL0820G Appellant .. Respondent Appellant by : Smt.Shailja Rai. CIT DR Respondent by : Shri .Jayesh Dadia. AR Date of Hearing 28.07.2022 Date of Pronouncement 29.08.2022 आद श / O R D E R PER PAVAN KUMAR GADALE, JM: The revenue has filed the appeal against the order of the Commissioner of Income Tax (Appeals) -17, Mumbai passed u/s 271(1)(c) and 250 of the Act. The revenue has raised the following grounds of appeal: 1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty amounting to Rs.9,12;47,500/- levied us 271(1)(c) of the ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 2 - Income-tax Act, 1961, ignoring the fact that nature of receipts received on account of Brand, Trade Mark, Marketing know-how is no more debatable äfter the amendment in section 55(2) of Income-tax Act, 1961 w.e.f.01-04-2002."?" 4. The appellant prays that the order of the Ld.CIT(A) on the above grounds be set aside and that of the AO be restored. 5. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary. 2. The brief facts of the case are that, the assessee company is engaged in the business of manufacturing and sale of bulk formulations of pharmaceutical products and has manufacturing units in various places. The assessee has filed the return of income for the A.Y 2001-02 disclosing a total income of Rs.Nil. Subsequently the case was selected for scrutiny and notice u/s 143(2) and 142(1) of the Act along with questionnaire were issued. In compliance to the notice, the Ld. AR of the assessee appeared from time to time and submitted the information supporting the return of income and the case was discussed. The Assessing Officer(A.O) on perusal of financial statements found that the assessee company has received the amounts for transfer of self generated ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 3 - capital assets to which no cost of acquisition could attributed and hence was claimed as not chargeable to capital gains tax. The consideration amount which was not offered to the tax is in respect of self generated technical know on transfer, self generated marketing knowhow transfer, self generated trade mark transfer, non-compete consideration, brand name of animal health division aggregating to Rs. 29.73 crores. Subsequently, the assessee has purchased / brought out trademarks and offered to tax of Rs. 9 crores. 3. The A.O has called for the additional information, receipts and found that the assessee has executed the agreements with the parties. The assessee has worked out the capital gains on the trade mark and offered to tax. Whereas(i) the A.O has relied on the various aspects of transfer and dealt on the provisions of law, judicial decisions in respect of all the transactions of transfer discussed above and is of the opinion that the transactions are taxable as business receipts u/s 28(iv) of the Act and made addition of Rs.29,63,42,500/-(ii) the depreciation claimed by the assessee of Rs.2,49,373/- was disallowed.(iii)Similarly the A.O has made disallowance u/s 14A of the Act ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 4 - which worked out of Rs. 17,56,637/-.(iv) the A.O has disallowed the interest claim of Rs. 13,50,000/- as the funds were not utilized for the business purpose and assessed the income of Rs. Nil after set off of brought forward loss of Rs,1,81,49,474/- and passed the order u/sec143(3) of the Act dated 30-03-2004. 4. Subsequently, the AO has initiated penalty proceedings and issued notice U/sec274 r.w.s 271(1)(c) of the Act . Whereas the assessee has filed the written submissions explaining the nature of transactions and business operations of the units. Further it was brought to the knowledge that the against the addition made by the AO in taxing the receipts on transfer of technical knowhow, Assignment of trademarks and allied rights treated as revenue receipts u/s 28(iv) of the Act. The assessee has filed an appeal before the CIT(A).Whereas the CIT(A) has partly allowed the assessee grounds of appeal and on further appeal before the ITAT against the order of the CIT(A). The Hon’ble ITAT has granted partial relief vide order dated 05.11.2004. Further,the assessee has filed explanations in respect of the transactions and the nature of the knowhow and intangible assets. But the ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 5 - A.O was not satisfied with the explanations and observed that the asseessee has furnished inaccurate particulars of income and levied a penalty of Rs.9,12,47,500/- and passed the order u/s 271(1)(c) of the Act dated 30.07.2015. 5. Aggrieved by the penalty order, the assessee has filed an appeal with the CIT(A), whereas the appellate authority considered the grounds of appeal, findings of the A.O and dealt elaborately on the submissions of the assessee at page 3 Para 3 of the order and the provisions of the Act and relied on the catena of judicial decisions and directed the Assessing officer to delete the penalty and allowed the assessee appeal. Aggrieved by the CIT(A) order, the revenue has filed an appeal before the Honble Tribunal. 6. At the time of hearing, the Ld. DR submitted that the CIT(A) has erred in deleting the penalty irrespective of the facts that assessee has claimed depreciation on the goodwill and the CIT(A) has overlooked the transfer transactions and provisions of Sec.271(1)(c) of the Act in deleting the penalty and relied on the order of the A.O. ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 6 - 7. Contra, the Ld.AR submitted that the CIT(A) considered the facts, judicial decisions, explanations of the assessee and the assessee’s own case in the quantum appeal where the Hon’ble Tribunal has treated the consideration in the ratio 75% pertaining to the trademark and balance 25% towards goodwill taxable as capital gains. The Ld. AR supported the submissions with the judicial decisions and paper book and prayed for dismissal of the revenue appeal. 8. We heard the rival submissions and perused the material on record. Prima-facie the sole grievance of the Ld. DR that the CIT(A) erred in deleting the penalty levied u/s 271(1)(c) of the Act for furnishing in accurate particulars of income. The Ld. AR contentions are that the Tribunal in the assessee’s own case has made bifurcation of trademark and goodwill in the ratio of 75% and 25%. The AO has not accepted the facts with respect to the transactions/ transfer and made additions. Whereas the CIT(A) has partly allowed the appeal of the assessee and on further appeal the Hon’ble ITAT has granted the relief to the assessee. The Ld. AR submitted that the CIT(A) having knowledge of this factual aspects dealt on the penalty provisions ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 7 - and judicial decisions. At this juncture we consider it appropriate to refer to the findings of the CIT(A) in deleting the penalty dealt at page 5 Para 10 to 11 of the order read as under: 4. Decision: 4.1 I have carefully considered the submissions of the appellant in the form of statement of facts, written submission in paper book and arguments of the AR of the appellant. I have also carefully gone through the facts and circumstances referred by the AO in the assessment order and also in the penalty order. The case laws relied by the Authorized Representative of the appellant company as well as other relevant case firs salarys have been perused and considered. 4. 2 2the only ground of appeal are against the imposition of penalty. 4.3.The Appellant has also submitted that the as per the provisions of Sec.55(2) the value of self generated Goodwill should be treated as NIL and while calculating the Capital Gains on transfer the same should be treated as NIL. The appellant has submitted that if the value of any item is considered as NIL then how same can be reflected in Balance Sheet, since Balance sheet includes only items with Balances. 4 .4 The appellant has also submitted that it is not the case of AO that the valuation of Goodwill is either high or low or the method of calculation is right or wrong. The appellant has submitted that out of total consideration for ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 8 - Transfer of Business of Rs. 3.35.90.640/- the AO has allowed the deduction of Rs. 1,6,05,939/- u/s 47(xiv) on the ground that the same was reflected as Capital Account balance of the appellant. 4.5 The appellant has submitted that the penalty is levied for furnishing of inaccurate particulars of income and with the above facts and submissions it cannot be treated as furnishing of inaccurate particulars of income. The appellant has also relied on the decision of Hon'ble Apex Court in the case of Reliance Petro Products Pvt. Ltd. 4.6 The AO has invoked explanation 1 of Sec. 271(1) (c) of the Act and now let us analyze the provisions of the sec. 271(1) (c) : "Failure to furnish returns, comply with notices, concealment of income etc. 271. (1) If the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner in the course of any proceedings under this Act, is satisfied that any person........... (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or... he may direct that such person shall pay by Way of penalty, (Hi) in the cases referred to in clause (c) or clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, 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. ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 9 - Explanation 1.-Where in respect of any facts material to the computation of the total income of any person under this Act, (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this Sub- section, be deemed to represent the income in respect of which particulars have been concealed certain other measures the by means of such wrong concealment of incur lead to evasion of A bare perusal of section 271(1)(c) reveals that the concealment of particulars of income or furnishing of inaccurate particulars of such income by the assessee is the qua non for the imposition of penalty under this section. These two expressions have not been defined in the Act. Albeit these are different in their connotation, ambit and purview, yet their consequence is one, i.e. the withholding of income by the assessee. First expression, that is, concealment of particulars of income contemplates that same income earned has not been offered for taxation. It is a direct attempt to hide an item of income or a portion thereof. It may reflect a situation like the assessee making sale or earning same income but not showing it in the return of income. Thus, it would apply only qua the items of income and not of expenses. On the other hand the second expression being the furnishing of inaccurate particulars of such income ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 10 - envisages that though the income earned was offered for taxation but some other means were employed by the assessee which resulted into withholding of income. It is the indirect way of keeping back some part of income. It may take place under different circumstances, such as making a wrong claim of expenses or deduction or exemption etc. In such a situation although the income earned is properly reflected but by adopting certain other measures the overall income does not come to surface and is sliced away by means of such wrong claims. However, it is fundamental that both the situations, VIz. concealment of income or furnishing inaccurate particulars of such income, ultimately lead to evasion of tax which is intended to be curbed by the penalty provision. 4.7. Explanation 1 to Section 271(1) (c) :- It is important to note that main provision of clause (c) of Section 271 (1) covers the cases of concealment of income and furnishing of inaccurate particulars of such income in a general way. Apart from that there have been enshrined certain Explanations, some of which contain the Cases of deemed concealment. These include the situation in which there may not be concealment etc. within the parameters of main provision but by the legal fiction contained in such Explanations, it is deemed as concealment of income. A cursory look at the mandate of this Explanation transpires that the following element must be present in order to bring a case within the charge of concealment of income :- (a) The person fails to offer an explanation, OR (b) He offers an explanation which is found by the concerned authority to be false. OR ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 11 - (c) The person offers an explanation which he is not able to substantiate and further fails to prove that such explanation is valid and that all the facts relating the same have been disclosed by him. Whereas the above (a) and (b) are covered within clause (A) of the Explanation, (c) is enclosed in clause (B). If the case falls in any of these three categories, then the deeming provision is activated and the amount added or disallowed in computing the total income is considered as the income in respect of which particulars have been concealed as per clause (c) of Section 271(1), only in such circumstances the penalty follows. If however, the assessee succeeds in proving that none of these three Conditions are satisfied in his case, then obviously the addition made by the Assessing Officer shall not constitute income in respect of which particulars have been concealed for the purpose of Section 271 (1)(c). 4,3. Clause (B) of Explanation 1 to Section 271(1)(c) :- Third category consists of cases where the assessee offers explanation which he wait is not able to substantiate and fails to prove that such explanation is bona fide and that "all the facts relating to the same were disclosed by him. There, it is relevant to mention that the above bracketed portion of clause (B) of the Explanation was inserted en bloc by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986 with effect from 10.09.1986. On reading of the clause (B) of the Explanation 1, it is clear that in order to encompass a case within its purview, the following two conditions must be satisfied:- (i) Assessee offers explanation which he is notable to substantiate, and He fails to prove that such ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 12 - explanation is bona fide and all the facts relating to the same have been disclosed by him. At this juncture it would be relevant to take note that conjunction 'and' has been used by the Legislature between these two essential conditions of clause (B) of Explanation 1 to Section 271(1) (c). It shows that both the above referred conditions must be cumulatively satisfied so as to bring a case within the mischief of this clause. If only one Condition is satisfied and the other is not the penalty would not follow. In other words if the person offers an explanation which is not able to substantiate being condition (i) above) but succeeds in proving that such explanation is bona fide and that all the material facts relating to the same were disclosed by him being condition (li) above), the penalty would not be attracted. 4.9. Bonafide Explanation :- The Second condition has further two elements viz., (la) bona fide explanation and (lib) adequate disclosure of all the material facts. It is important to examine element (la) first as to whether the explanation of the assessee for claim of deduction was bonafide or not. In simple words the term 'bonafide' means: in good faith or without fraud or deception and honestly as distinguished from bad faith. A claim of deduction can be said to be bonafide if a legally sustainable view on its allowability exists in the given facts. Such a view need not be necessarily cent per cent foolproof. It chances are there that a person, properly instructed in law, can form an Opinion about is deduction, then it will be considered as bonafide. A claim shall lack bona fide if the facts are manufactured to give a color of genuineness to the deduction ;or if there is not even a far flung possibility of forming a legally sustainable opinion ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 13 - about the deduction; either because of the facts prevailing in a particular case or because no judicial precedent in favour of allowability of such deduction or if an issue is still virgin and had not received attention of the Courts so far, then simple and plain interpretation of the provision leaves no chance to a reasonably prudent person to form an opinion -that such a deduction is allowable. 4.10 Judicial precedents with regards to section 271 (1)(c) of the Act are analyzed - 4.10.1. In the case of CIT vs. International Audio Visual (2007) 288 IT 570 (Del), the Hon'ble Delhi High Court has held that there is nothing to suggest that the assessee was in any manner trying to mislead the AO. It appears that he had a bona fide belief that by selling dubbing rights to a foreign company, he was selling goods or merchandise within the meaning of s. 80HHC. The AO did not agree with this contention and concluded that the payment received by the assessee was towards royalty and not sale of goods or merchandise. The contention urged by the assessee may have been incorrect but there does not appear to be anything to suggest that it reflected on particulars of the income of the assessee or any concealment of his true income. Under the circumstances, since there was no concealment of primary facts, it cannot be said that the assessee was liable to suffer a penalty under the provisions of s. 271(1)(c). There is no error in the view taken by the Tribunal in concluding that the assessee was not liable to be penalised for raising a contention which was not acceptable to the AO. 4.10.2 Further in the case of Dr. Velayudhan Nair vs.TO (2003) 84 ITD 227 (Bang), it was held by the Hon'ble Tribunal :hat the word "concealment" is to be given its proper meaning before the provisions of s. 271(1) (c) can be applied. To conceal means to hide or to withhold, or ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 14 - not to disclose. This requires some positive action on the part of the person concerned. Looking to the facts of the case this action of concealing is absent on the part of the assessee. The assessee always paid correct taxes based on the salary certificate issued to him. When the salary certificate did not include the reimbursement of expenses he filed returns accordingly. When the reimbursement of expenses is included as part of his salary income he offered the same for taxation. It is not the case of Department that the reimbursement of expenses were claimed as exempt under s. 10(14) and the assessee was unable to produce any evidence in support of the claim. The expenses in fact had been incurred. For the purpose of performance of his duties the assessee is required to travel 700 kms. This is not possible without incurring traveling expenses, conveyance expenses and necessary food expenses. Even though the assessee has conceded in the assessment proceedings that certain receipts are taxable, yet in the penalty proceedings he cannot be deprived of his right to argue that the amount offered is not his income or it is exempt from tax. Penalty cannot be levied only because the assessment order taxes the amount as the income. The conclusion in the assessment proceedings does not become binding in penalty proceedings and the assessee can still argue that income is exempt. It is true that the employer and employee- assessee considered the fact after the survey was conducted under s. 133A. However, this action is limited for the purpose of assessment proceedings only. The assessee is still free to demonstrate in penalty Tarila, proceedings that the amount received is not truly his income or it is exempt from tax. The assessee has amply demonstrated that he had incurred the expenses wholly and exclusively in performance of his duties. The assessee was under bona fide belief based on the ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 15 - employer's certificate that income was exempt under s. 10(14). There is * no collusion between the employer and employee which has been the main ground for levy and sustaining the penalty in the assessment years under consideration. The assessee, though filed returns of income disclosing the additional income, yet the explanation offered by him for not including the income in the original returns is substantiated by the facts. There is no finding given by the AO that the explanation offered by the assessee is either false or is not substantiated. On the contrary, the assessee was under bona fide belief that the income is not taxable as per the provisions of s. 10(14) of the Act which has been amply demonstrated. A return cannot be false' unless there is an element of deliberateness in it. It is possible that even assessee and there is no reasonable explanation forthcoming from the assessee for such want of care, the Court may, in a given case, infer deliberation and the return may be liable to be branded as a false return. But where the assessee does not include a particular item in the taxable income under a bona fide belief that he is not liable so to include it, it would not be right to condemn the return as a "false" return inviting imposition of penalty. The assessee is not liable for penalty under s. 271(1) (c). Therefore, as the assessee did not include certain receipts in taxable income under bona fide belief that it is exempt under s. 10(14), penalty under s. 271(1)(c) was not leviable. Similarly in the case of CIT vs. Lakhani India Ltd. (2010) 324 ITR 73, it was held by the Hon'ble Punjab and Haryana High Court that in view of concurrent finding recorded by the CIT(A) and the Tribunal that there was no concealment or misrepresentation by the assessee, impugned order setting aside the levy of penalty under s. 271 (1)(c) cannot be held to be erroneous and no substantial question of law arises. ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 16 - 4.10.3. In CIT vs. Reliance Petroproducts (P) Ltd. (2010) 322 IT 158 (SC), the Hon'ble Supreme Court observed that as per Law Lexicon, the meaning of the word "particular" is a detail or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word "particulars" used in the s. 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. Therefore, it is obvious that it must be shown that the conditions under s. 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. Merely because the assessee claimed deduction of interest expenditure which has not been accepted by the Revenue, penalty under s. 271(1)(c) is not attracted; mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing in accurate particulars regarding the income of the assessee. The court further held that reading the words "inaccurate" and "particulars" in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. In this case, there is no finding that any details supplied by the assessee in its return were found ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 17 - to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under S. 271(1)(c). A mere making of the claim, which is not sustainable in law, by itself, will "a sir not gmount to furnishing inaccurate particulars regarding the income of the assessee Such claim made in the return cannot amount to the inaccurate particulars. The assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not attract the penalty under s. 271(1)(c). If the contention of the Revenue is accepted then in case of every return where the claim made is not accepted by AO for any reason, the assessee will invite penalty under s. 271 (1)(c). That is clearly not the intendment of the legislature. 4.10.4 It is a settled position of law that even though the tax may be justifiably recovered with interest on the difference between the income returned and income assessed, the penalty cannot be levied mandatorily. The power to levy penalty in each case is a matter of discretion to be exercised carefully by the quasi judicial authority in judicious use of such power. No penalty is leviable unless there is mens rea and it is proved that the assessee had acted wilfully, deliberately and dishonestly to defraud the Revenue and to avoid legitimate tax payable by resorting to subterfuges or other illicit transactions not accounted for by him. The judicial guidelines for levy of penalty have been laid down by the Supreme Court in Hindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR 26 (SC), and followed in large number of ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 18 - cases. The fact that no penalty for concealment is leviable in cases of two views being possible has been well-settled by some of the judgments of Courts including Durga Kamal Rice Mills vs. CIT (2003) 183 CTR (Cal) 223 in which the assessee pleaded that-"First, the amount shown in the opening balance of the next previous year can be treated to be an income for the next previous year. Though it could be treated as income of the earlier previous year by reason of the addition, yet the finding with regard to the quantum proceedings will not conclusively determine the case for the seems that two views are possible, viz., the income could be that of the following previous year or it could also be that of the re evant previous year. When two views are possible then penalty cannot be imposed on account of concealment in respect of the relevant previous year when the amount could be disclosed in the following previous year. Secondly, that this amount was claimed to be the amount at the hands of the partners as it was shown in the capital accounts of the partners. At the same time, the partners in their revised returns had shown this amount in their account. Such returns Have since been accepted by the Revenue. Therefore, the income did not belong to y, the assessee but to the partners. Though on identical grounds, yet the decision in the quantum proceeding cannot be treated to have reached finality for the purpose of penalty proceedings. The question has to be determined independent of the said finding and decided accordingly. Again he submits when it cannot be conclusively determined whether this amount is an income of the assessee or at the hands of the partners included in their capital account, therefore, when two views are possible, no penalty could be imposed. Thirdly, the amount admittedly has been added as income of the assessee for the previous year. At the same time, this was shown in ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 19 - the return filed by the partners as their income and such returns have since been accepted. The Department itself had treated the same amount once as income of the assessee and again as income at the hands of the partners. Unless the amount is owned by the assessee in view of section 69A, there cannot be any question of concealment. When the Department itself had accepted the same in both ways, there cannot be any conclusive proof that this amount was owned by the assessee. Therefore, no penalty can be imposed in such a case. 4.10.5 In Union of India vs. Dharamendra Textile Processors & Ors. (2008) 219 CTR (SC) 617, it was held that (i) tne Explanation appended to section 271 (1)(c) indicates element of strict liability on the assessee for concealment or for giving inaccurate particulars of income while filing the return, (il) said provision has been enacted to provide for a remedy for loss of revenue, (ili) penalty under that provision is a civil liability, (iv) wilful concealment or mens rea is not an essential ingredient for attracting said civil liability as in the case of prosecution under section 276C, (v) earlier decision in Dilip N. Shroff vs. Jt. CIT (2007) 210 CTR (SC) 228 does not lay down correct law insofar as it declares that penalty is not automatic and there is discretion in its imposition and mens rea was necessary. Justice Aftab Alam was one of the three Judges on the Bench in the case of Dharamendra Textile (supra) and he observed in a subsequent case which soon came up for hearing, vide Union of India s. Rajasthan Spinning & Weaving Mills (2009) 224 CTR (SC) 1 that "In almost every case relating to penalty the decision (in Dharamendra Textile) is referred to on behalf of Revenue as if it laid down that in every case of non-payment or short payment of dut the penalty clause would automatically get attracted and the authority had no discretion in the matter. One of us (Aftab ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 20 - Alam, J.) was a party to the decision in Dharamendra Textile (supra) and we see no reason to understand or read that decision in that manner." 4.10.6. After explaining the reasoning in Dharamendra Textile (supra), the Supreme Court in Rajasthan Spinning & Weaving Mills (supra) observed that said decision does not hold that section 11AC of Central Excise Act would apply to every case of non- payment or short payment of duty regardless of the conditions expressly mentioned in that section for its application. Application of said section would depend on existence of those conditions is established that said section would apply and once that section applies the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of section 11A. The Supreme Court has stated that it was not expressing any opinion by Ca way of explanation what it had decided in relation to other statutory provisions including section 271 (1) (c)]. However, reasoning adopted by it in explaining earlier decision relation to section 11AC of Central Excise Act cannot be ignored in relation to section 271(1) (c) of the Income-tax Act. By way of analogy it can be safely stated without inviting any controversy that as far as section 271(1) (c) was concerned the first step to be taken was to determine whether conditions mentioned for its application therein were satisfied. If the relevant conditions of applicability of section 271(1)(c) are satisfied, then only imposition of penalty becomes automatic. Mere fact that assessed income is more than returned income does not by itself attract penal provisions of section 271(1) (c). 4.10.7. Bona fide error or bona fide claim constitutes valid defence against charge of concealment of particulars of income c furnishing of inaccurate particulars of income. ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 21 - This legal position is not affected by the decision of Dharamendra Textile (supra) to the effect that (i) there was element of strict liability, (li) that liability is civil liability, (ili) the enactment is to provide remedy for loss of revenue, (iv) wilful concealment or mens rea was not essential. This is because as explained in the case of Rajasthan Spinning & Weaving Mills (supra) section itself is not attracted if the conditions for its applicability are not satisfied and bona fide error and bona fide claim certainty prevent applicability of the section. Reference may be made to recent decision of the Supreme Court in CIT vs. Reliance Petroproducts (P) Ltd. (2010) 230 CTR (SC) 320 in which it has been held that (i) merely because the assessee claimed deduction of interest expenditure which has not been accepted by the Revenue, penalty under section 271(1)(c) is not attracted; (l) mere making of the claim which is not sustainable will not amount to furnishing TEA (377) Taccurate particulars regarding the income of the assessee. 4.10:8. In CIT vs. Escorts Finance Ltd. (2009) 226 CTR (Del) 105 assessee made three claims which were disallowed. Of these three claims, one was found to be a claim which was ex facie untenable. The assessee pleaded that said claim was made on the basis of opinion of a chartered accountant. The Court held that it was inconceivable that such opinion could be given by a chartered accountant in the face of plain language of the provision and hence penalty in relation to that item was imposable under section 271(1)(c). Regarding other two claims, the Court found them to be bona fide and as such penalty was not leviable. Further in the case of CIT vs. Haryana Warehousing Corporation (2009) 226 CTR (P&H) ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 22 - 124, the Hon'ble High Court has held that the essential pre-requisites of section 271 (1)(c) before a penalty can be imposed are : the assessee should have either "concealed the particulars of his income", or alternatively the assessee should have "furnished inaccurate particulars" of his income. The clear and categorical finding at the hands of the Tribunal in the impugned order was that the assessee had disclosed the entire facts without having concealed any income There is no allegation against the assessee that it had furnished inaccurate particulars of its income. The aforesaid determination at the hands of the Tribunal has not been controverted even in the grounds raised in the instant appeal. Additionally, the Revenue has not been able to controvert the aforesaid finding of fact. Concealment of particulars of income, or furnishing incorrect particulars of income, have been confused by the Revenue, with an unacceptable plea for exemption of tax-liability. Sec. 271(1)(6) can be invoked for imposing a penaly on an assessee, only if there is a "concealment of particulars of income" or alternatively if an assessee furnishes "incorrect particulars of income". The assessee in the present controversy is guilty of neither of the above. Accordingly, in the absence of the two pre-requisites postulated under s. 271(1)(c) it was not open to the Revenue to inflict any penalty on the assessee. capital receipts. By quoting this reference, the argument that the taxability of issues under ompany has also relied on the CIT(A)'s or penalty was deleted on the assessee. 4.11 Bonafide in appellant's case: Adverting to the facts of this case, the appellant is a listed company and during the year under reference, it ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 23 - had received a sum of Rs.49,80,00,000/- from Lyka Hetero Healthcare Ltd. (LHHL) on transfer of domestic activities of the company. Out of this sum, the sum received on transfer of trademark were shown as short- term capital gain, marketing information and consultancy fee was shown as business income. The amount received on account of non-compete fee, scientific know how and technical information was claimed as non-taxable. This fact was clearly mentioned in the audited reports and also in the notes attached in the computation of income. In the assessment, the A.O. has treated consideration towards non-compete fee, technical know how as revenue receipt. The CIT(A) upheld the order of the A.O. However, the Hon'ble ITAT, Mumbai, has allowed a partial relief and treated the consideration towards the non-compete fee as not taxable. Thereafter, the A.O. has imposed penalty u/s 271 (1)(c) of the Act placing the reliance on the decision of Dharamendra Textile (supra), Zoom Communications (supra) and Rakesh Suri 232 CTR (AU) 4. The penalty has been imposed for furnishing of inaccurate particulars leading to concealment but question arises has the company really concealed particulars of income. The appellant company has clearly disclosed all the related facts in its audited accounts rather the disclosure of income in computation of income was supported by certain case laws. The A.O. has relied on the Hon'ble Pune Tribunal in the case of Kanbay Software India Pvt. Ltd. (supra) where the expression "particulars" has been explained. According to the Hon'ble Tribunal, if all the particulars are available in the return of income and none of such particulars are false or misleading, then it cannot be considered as furnishing of inaccurate particulars of income. Similarly, the Hon'ble Supreme Court in the case of Reliance Petro products Ltd. (supra), held that when all the factual details of income furnished by the assessee ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 24 - were found to be correct, then simply penalty cannot be imposed on the basis of allowance or disallowance of a particular claim. 4.12 Moreover, there is a bonafide belief of the appellant company that consideration under reference are in the nature of capital receipts and as such not taxable. The bonafide is also established from the fact that there are number of case laws in support dear rofigur claim of capilal recelpt. The appellant company has also refered the appeliale proceeding in its own appeal for A. Y. 1999- 2000 where the Hon'ble Tribunal has held that consideration received on transfer of trademark, brand, technical know how etc. are capital receipts. By quoting this reference, the appellant has tried to buttress its argument that the taxability of issues under reference are debatable. The appellant company has also relied on the CIT(A)'s order in case of penalty for A.Y. 1998-99, the penalty was deleted holding – "Facts of the case, order of the AO and submission of the Ld. AR have been considered carefully. It is not in dispute that the assessee has made disclosure of full facts in the return by way of a note. The disclosure made in the return by way of note has not been found to be false or misleading or inaccurate. It cannot be denied that there is no failure on the part of the assessee to make full and true disclosure of all material facts and any explanation of assessee has not been found to be false. Therefore, this is a case where penalty for concealment u/s 271(1)(c) of the Act cannot be levied. Hence, penalty levied is hereby directed to be deleted. ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 25 - 4.13 Thus, from the above discussion it is clear that the appellant has provided all the necessary facts and information in the audited accounts as well as computation of income filed along with the return of income. It has also claimed that the said receipt as capital receipt out of bonafide belief and thus in the background of above judicial ratios, particularly, the principles laid down in the case of Reliance Petroproducts Ltd. (supra), every disallowance of claim of appellant does not automatically attract penalty until and unless furnishing of inaccurate particulars is proved and therefore, in the facts and circumstances of the totality, I am of the considered opinion that this is not a fit case for levy of penalty and hereby direct the Assessing Officer to delete the penalty of Rs 9,12 47,500/-. 9. The Ld. AR has been emphasizing the fact that the consideration received on self generated trade mark was made taxable from A.Y.2002-03 and the bifurcation of trademark and goodwill was accepted. Finally we find that the CIT(A) has accepted the facts, provisions of law and judicial decisions and relied on the order of the ITAT in assessee’s own case and the quantum addition where the proportion of ratio at 75:25 was considered for Trademark and goodwill. The assessee has made fair disclosure in the financial statements therefore there is no furnishing of inaccurate particulars of income within the meaning of the Sec. 271(1)(c) of the Act and every addition in the ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 26 - assessment order shall not be gateway for levying a penalty and the CIT(A) has passed a reasoned order. The LD. DR could not controvert the findings of the CIT(A) on the disputed issue with any new cogent material or information to take different view. Accordingly, we do not find any infirmity in the order of the CIT(A) in deleting the penalty levied u/s 271(1)(c) of the Act and uphold the same and dismiss the grounds of appeal of the revenue. 10. In the result, the appeal filed by the revenue is dismissed. Order pronounced in the open Court on 29.08.2022 Sd/- Sd/- ( PRAMOD KUMAR) (PAVAN KUMAR GADALE) VICE PRESIDENT JUDICIAL MEMBER Mumbai, Dated 29.08.2022 KRK, PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. Concerned CIT 5. DR, ITAT, Mumbai 6. Guard file. ITA No. 2934/Mum/2019 Lyka Labs Ltd., Mumbai. - 27 - आदेशान ु सार/ BY ORDER, //True Copy// 1. ( Asst. Registrar) ITAT, Mumbai