PRAKSH JOY, Kota V. ACIT, Kota

ITA 585/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5427 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 30-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Wrong claim; Tax effect
• Section: 260A; 27

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NOS. 585/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2007-08 . SHRI PRAKASH JOY, PROP. M/S. VISION EDUCATIONAL SERVICES, 608-A, TALWANDI, KOTA. CUKE VS. THE ASSTT. COMMISSIONER OF INCOME - TAX, CIRCLE-1, KOTA. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. ABTPJ 3549 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NOS. 578/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2007-08 . THE ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTA. CUKE VS. SHRI PRAKASH JOY, PROP. M/S. VISION EDUCATIONAL SERVICES, 608-A, TALWANDI, KOTA. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. ABTPJ 3549 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY S BY : SHRI SIDDHARTH RANKA & SHRI M. IQBAL (ADVOCATES) JKTLO DH VKSJ LS@ REVENUE BY : SHRI AJAY MALIK (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 01.02.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 24/02/2016. 2 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THESE ARE TWO CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE ARISING FROM THE ORDER DATED 21.03.2013 PASSED BY THE LEARNED CIT (A ), KOTA FOR THE A.Y. 2007-08. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED LOWER AUTHORITIES GROSSLY ERRED IN HOLDING THE ASSE SSEE LIABLE FOR IMPOSITION OF PENALTY U/S 271(1)(C) OF THE INCOME T AX ACT 1.1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN IMPOSING/CONFIRMING PENALTY OF RS. 1,458,262/- U/S 271(1)(C) OF THE INCOME TAX ACT. 1.2. THAT THE ASSESSEE HAS NOT CONCEALED THE PARTICULARS OF INCOME NOR HAS HE DELIBERATELY FURNISHED INACCURATE PARTICULAR S OF SUCH INCOME THEREFORE THE IMPOSITION OF PENALTY IS UNJUSTIFIED, BAD IN LAW, DESERVES TO BE DELETED. 1.3. THAT THERE WAS NOT A DEFINITE CONCLUSION IN THE ASS ESSMENT ORDER AT THE TIME OF INITIATION OF PROCEEDINGS AND THERE BEI NG NO SATISFACTION AS TO ON WHAT BASIS THE PENALTY HAS BEEN IMPOSED NA MELY; WHETHER IT IS CONCEALMENT OF INCOME OR FURNISHING OF INACCU RATE PARTICULARS OF SUCH INCOME. SATISFACTION HAS TO BE AT THE TIME OF THE VERY INITIATION OF THE PROCEEDING, THERE BEING NO SUCH S ATISFACTION THE PENALTY IMPOSED BEING UNJUSTIFIED, BAD IN LAW, DESE RVES TO BE DELETED. 1.4. THAT THE APPELLANT HAVING FOLLOWED THE SYSTEM PREVA LENT IN THE MARKET, SUCH OTHER SIMILAR SITUATED INSTITUTIONS FO LLOWING THE SAME METHOD, THE FRANCHISEE LICENSE COULD NOT HAVE BEEN FOR A SINGLE YEAR, SUCH LICENSE FEE BEING FOR MINIMUM TO 3-4 YEA RS, SUCH RECEIPTS HAVING BEEN PROPERLY AND DULY SHOWN IN THE BOOKS OF ACCOUNT, THE LEARNED ASSESSING OFFICER GROSSLY ERRE D IN HOLDING IT OTHERWISE. 1.5. THAT IN QUANTUM PROCEEDINGS THERE BEING TWO VIEWS/D IFFERENCE OF OPINION IN BETWEEN THE LD. CIT (APPEALS) AND HONBL E INCOME TAX APPELLATE TRIBUNAL, THE ISSUE BEING HIGHLY DEBATABL E; IT DOES NOT TANTAMOUNT TO IMPOSITION OF PENALTY U/S 271(12)(C) OF THE INCOME TAX ACT. 3 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. 1.6. THE LD. LOWER AUTHORITIES GROSSLY ERRED IN NOT AWAI TING THE OUTCOME OF APPEAL FILED BY THE ASSESSEE BEFORE THE HONBLE RAJASTHAN HIGH COURT AGAINST THE ORDER OF THE HONBLE ITAT BEFORE IMPOSING PENALTY U/S 271(1)(C). THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT (A) HAS ERRED IN (I) RESTRICTING THE PENATY AMOUNT TO RS. 14,58,262/- AS AGAINST IMPOSED BY THE AO AT RS. 22,00,000/- U/S 271(1)(C) . 2. IN THE ASSESSMENT ORDER, THE AO HAS MADE AN ADDI TION OF RS. 63,77,229/- AS THE AO WAS OF THE OPINION THAT THE FRANCHISEE AGREEMENT ENTERED BETWEEN THE ASSESSEE AND OTHER FRANCHISEES WERE NOT FOR A PERIOD OF FOUR YEARS AND NO EVIDENCE WAS GIVEN THAT THE AGREEMENT IS VALID FOR FOUR YEARS AND FURT HER THE AO HAS HELD THAT THE ADVANCE LICENSE FEE SHOULD BE TREATED AS BUSINESS INCOME IN THE CURRENT YEAR RATHER THAN AMORTIZING IN THE SUBSEQUENT YEAR. 3. THE ASSESSEE BEING AGGRIEVED BY THE ORDER PASSED BY THE AO, HAS CHALLENGED THE ORDER BEFORE LD. CIT (A), WHO VIDE HIS ORDER DATED 15.03.2010 HAS NOT CONFIRMED THE ORDER PASSED BY THE AO AND HAS HELD THAT THE ADVANC E LICENSE FEE IS REQUIRED TO BE AMORTIZED AS PER THE ESTABLISHED PRACTICE OVER THE PERIOD OF TIME. THE FINDINGS OF THE LD. CIT (A) ARE GIVEN HEREIN BELOW :- THE ONLY QUESTION FOR CONSIDERATION IS THE YEAR I N WHICH ADVANCE LICENSE FEES SHOULD BE TAXED; WHILE IN MOST CASES T HE APPELLANT HAS WRITTEN OFF SUCH RECEIPTS OVER FOUR YEARS, THE ASSE SSING OFFICER DECIDED THAT ENTIRE ADVANCE LICENSE FEES RECEIVED F RO A FRANCHISEE SHOULD BE TAXED IN THE YEAR OF RECEIPT. SIGNIFICANT LY, THE ASSESSING OFFICER DID NOT SHOW THAT THE ACCOUNTING PRACTICE F OLLOWED BY THE 4 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. APPELLANT WAS DETRIMENTAL TO REVENUE. ONLY BECAUSE ADVANCE LICENSE FEES WAS NOT REFUNDABLE, IN MY CONSIDERED VIEW, IT DOES NOT FOLLOW THAT IT SHOULD BE TAXED IN THE YEAR OF R ECEIPT. IT IS NOT DIFFICULT TO APPRECIATE THAT IT IS NOT MANDATORY TO REDUCE EVERY BUSINESS ARRANGEMENT INTO A WRITTEN AGREEMENT. THE ASSESSING OFFICER HAS SOUGHT TO DISTURB AN ESTABLISHED PRACTI CE WITHOUT SHOWING THAT IT WAS NOT BEING FOLLOWED AS CLAIMED. HE ALSO FAILED TO SHOW THAT THIS PRACTICE DID NOT REVEAL A TRUE PI CTURE OF INCOME OF THE APPELLANT. ON OTHER HAND, IN FACTS OF THE CASE THE CHOICE OF YEAR OF TAXATION OF ADVANCE LICENSE FEES IS REVENUE NEU TRAL AS IN ALL THE MATERIAL YEARS THE APPELLANT HAS PAID TAX AT THE MA XIMUM RATE. IN THIS VIEW OF THINGS, I DO NOT SEE ANY JUSTIFICAT ION TO DISTURB AN ESTABLISHED ACCOUNTING PRACTICE FOLLOWED BY THE APP ELLANT, PARTICULARLY WHEN IT HAS NOT BEEN SHOWN AS DETRIMEN TAL TO REVENUE. AS THERE IS NO EVIDENCE THAT THE RECEIPTS FROM ADVA NCE LICENSE FEE WERE NOT DISCLOSED FULLY, NOT WITHSTANDING SURRENDE R IN A RECENT SURVEY OF RS. 58,03,162/- OF ADVANCE LICENSE FEE TH AT WOULD HAVE BEEN OFFERED TO TAX IN SUBSEQUENT YEARS, I DO NOT C ONFIRM THE DECISION OF THE ASSESSING OFFICER TO ADD RS. 63,77, 229/- OF ADVANCE LICENSE FEE. GROUND 3 OF THE APPEAL IS ACCEPTED. 4. THE ORDER PASSED BY THE LD. CIT (A) WAS CHALLENG ED BY THE REVENUE BEFORE THIS BENCH. THIS TRIBUNAL VIDE ORDER DATED 26.11.2010 HA S SET ASIDE THE ORDER PASSED BY LD. CIT (A) AND HAS UPHELD THE ORDER PASSED BY THE AO. THE REASONING GIVEN BY THE TRIBUNAL IS AS UNDER :- 12. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT DEPARTMENT DESERVES TO SUCC EED IN THIS GROUND. WE HAVE GONE THROUGH THE REPLY FILED BEFOR E A.O. AND THE LD. CIT (A), COPIES OF WHICH ARE PLACED ON THE RECO RD. AFTER GOING THROUGH THESE REPLIES AND THE ORDERS OF THE AUTHORI TIES BELOW, IT IS SEEN THAT THE APPROACH OF THE ASSESSEE IS INCONSIST ENT IN OFFERING THE ADVANCE FEES IN SUBSEQUENT YEARS. FOR EXAMPLE, UPTO 31 ST MARCH, 2006 THE ADVANCE LICENSE FEE WAS SHOWN AT RS . 26,70,000/- AND ASSESSEE FOR A.Y. 2007-08 HAS OFFERED FOR TAXAT ION AT RS. 24,95,240/-. OUT OF THE RECEIPTS UPTO MARCH,2007 I .E. RS.62,02,469/-, THE ASSESSEE HAS SHOWN IN MARCH, 20 08 AT RS. 32,20,000/- AS INCOME. OUT OF THE RECEIPTS UPTO MA RCH, 2008 AT 5 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. RS.31,48,237/-, THE ASSESSEE HAS SHOWN IN MARCH, 20 09 RS. 5,02,306/- ONLY. FROM THESE FACTS IT IS CLEARLY EST ABLISHED THAT ASSESSEE IS NOT SHOWING THE RECEIPTS IN A CONSISTEN T MANNER BUT IS SHOWING THE RECEIPTS AS INCOME IN DISPROPORTIONATE MANNER. IF THE AGREEMENT WAS FOR FOUR YEARS, THEN THE ADVANCE LICE NSE FEE SHOULD HAVE BEEN SHOWN EQUALLY IN THE FOUR YEARS. THEREFO RE, THE CONTENTION OF THE ASSESSEE THAT ASSESSEE IS MAINTAI NING CONSISTENT METHOD IS NOT CORRECT. THE CONTENTION OF THE ASSES SEE THAT HIS INCOME IS IN HIGHEST BRACKET OF TAX, THEREFORE, NO DIFFERENCE WILL BE THERE IF THE RECEIPTS WILL BE SHOWN IN SUBSEQUENT Y EAR IS ALSO NOT ACCEPTABLE FOR THE REASON THAT THERE IS NO PROVISIO N IN LAW FOR DEFERMENT OF TAX LIABILITY AND TAX HAS TO BE PAID I N THE YEAR IN WHICH IT IS PAYABLE. THE ADVANCE LICENSE FEE ARE UNDISPU TEDLY NON REFUNDABLE AND, THEREFORE, THAT SHOULD HAVE BEEN SH OWN IN THE YEAR IN WHICH THEY WERE RECEIVED. THE REASONS ASSIGNED B Y AO FOR MAKING THE ADDITION IN THE CURRENT YEAR ARE REASONA BLE. THE AO HAS EXPLAINED THE REASONS THAT WHY THE RECEIPTS ON ACCOUNT OF ADVANCE LICENSE FEE ARE TAXABLE IN THE YEAR UNDER C ONSIDERATION AND THE REASONS GIVEN BY THE AO HAVE NOT BEEN COMMENTED BY THE LD. CIT (A) AT ALL. THE LD. CIT (A) HAS MERELY STATED THE CONTENTION OF THE ASSESSEE THAT ENTIRE AMOUNT OF LICENSE FEE RECE IVED IN THE CURRENT YEAR HAVE ALREADY BEEN SHOWN IN SUBSEQUENT YEARS. THIS CONTENTION OF LD. CIT (A) CANNOT BE ACCEPTED FOR TH E REASON THAT THE TAX HAS TO BE PAID IN THE YEAR IN WHICH IT RELA TES. THE ADVANCE LICENSE FEE RECEIVED BY THE ASSESSEE ARE RECEIPT OF THE YEAR AND ASSESSEE HAS NOT SHOWN THE LICENSE FEE IN SUBSEQUEN T YEAR IN PROPORTIONATE BASIS AS HE HAS SHOWN THESE RECEIPTS IN THE MANNER HE LIKES. SOME RECEIPTS ARE SHOWN @ 50% IN THE NEX T YEAR, SOME RECEIPTS ARE SHOWN AT LESS THAN 50% AND IN SOME OTH ER CASES THE RECEIPTS HAVE BEEN SHOWN @ 70%. THE LD. A/R HAS FA IRLY ACCEPTED THAT ASSESSEE HAS SHOWN THE RECEIPTS IN SUBSEQUENT YEARS IN A DISPROPORTIONATE PERCENTAGE. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE HOLD THAT ENTIRE RECEIPTS RECEIVE D DURING THE YEAR UNDER CONSIDERATION ARE LIABLE FOR TAXATION. THE ALTERNATIVE CONTENTION OF THE ASSESSEE IS ACCEPTED THAT THE ASS ESSEE HAS OFFERED THE RECEIPTS IN SUBSEQUENT YEARS AND IF IT IS HELD THAT THE RECEIPTS ARE LIABLE TO BE TAX FOR THE YEAR UNDER CO NSIDERATION, THEN IN SUBSEQUENT YEAR THE INCOME SHOWN BY ASSESSEE SHO ULD BE REMOVED. SINCE WE HAVE HELD THAT THESE RECEIPTS AR E LIABLE FOR TAXATION IN THE YEAR UNDER CONSIDERATION, THEREFORE , THE AO IS DIRECTED TO REMOVE THE INCOME OFFERED BY ASSESSEE O UT OF THIS AMOUNT IN SUBSEQUENT YEAR OTHERWISE IT WILL TANTAMO UNT TO DOUBLE TAXATION. WE ORDER ACCORDINGLY. 6 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. 5. IN BETWEEN, THE AO HAD ISSUED NOTICE FOR IMPOSIT ION OF PENALTY ON THE ASSESSEE. BEFORE WE DISCUSS THE NOTICE, IT IS NECESSARY TO RE PRODUCE THE CONCLUSION AND SATISFACTION DRAWN BY THE AO AT THE TIME OF PASSING THE ASSESSMENT ORDER. WE WOULD LIKE TO MENTION HERE THAT IN THE ASSESSMENT ORDER, THE AO HAS MENTIONED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) TO BE INITIATE D SEPARATELY. IN THIS BACK GROUND, THE NOTICE WAS ISSUED BY THE AO FOR IMPOSITION OF P ENALTY UNDER SECTION 271(1)(C). THE NOTICE DATED 29.12.2009 MENTIONED AS UNDER :- NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE INCOME TAX ACT, 1961 271(1)(C) ABTPJ 3549 B OFFICE OF THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-1, KOTA. DATE : 29/12/09. TO SHRI PRAKASH JOY 608-A, TALWANDI KOTA. WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE ASSESSMENT YEAR 2007-08 IT APPEARS TO ME THAT YOU :- XXXXXXXXXXX XXXXXXXXXXXX XXXXXXXXXXX XXXXXXXXXXXX HAVE CONCEALED THE PARTICULARS OF YOURS INCOME OR H AVE FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. YOU ARE HEREBY REQUESTED TO APPEAR BEFORE ME AT 11. 00 AM ON 25/1/2010 IN MY OFFICE AT C.R. BUILDING RAWATBHATA ROAD, KOTA AND SHOW CAUSE WHY AN ORDER IMPOSING A PENALTY SHOULD NOT BE MADE U/S 271 OF THE I.T. ACT, 1961. IF YOU DO NOT WISH TO AVAIL YOURSELF OF THIS OPPORTUNITY OF BEING 7 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. HEARD A PERSON OR THROUGH AN AUTHORISED REPRESENTAT IVE YOU MY SHOW CAUSE IN WRITING ON OR BEFORE THE SAID DATE WHICH W ILL BE CONSIDERED BEFORE ANY SUCH ORDER IS MADE U/S 271. SD/- ( P.P. MEENA ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-1, KOTA. (RAJ.) AFTER RECEIVING THE NOTICE, THE ASSESSEE HAS FILED THE REPLY TO THE AO AND HAS RESISTED THE IMPOSITION OF PENALTY ON THE ASSESSEE. IT WAS CONTENDED BY THE ASSESSEE THAT THE ASSESSEE HAS NOT SUBMITTED THE INACCURATE PARTICULA RS NOR THE ASSESSEE HAS CONCEALED ANY AMOUNT RATHER THE ASSESSEE HAS FURNISHED ALL TH E INFORMATION TRULY AND BONAFIDE AS ARE REQUIRED UNDER THE LAW ALONG WITH THE RETURN OF INCOME. THE AO WAS NOT CONVINCED WITH THE REPLY SUBMITTED BY THE ASSESSEE, AS A RESU LT THEREOF, THE AO IMPOSED THE PENALTY OF RS. 22,00,000/- ON THE ASSESSEE. 6. THE ASSESSEE FEELING AGGRIEVED BY THE ORDER PASS ED BY THE AO, CHALLENGED THE MATTER BEFORE LD. CIT (A) AND HAS FILED DETAILED WR ITTEN SUBMISSIONS IN SUPPORT OF THE CONTENTION, THE SAME HAS BEEN REPRODUCED BY LD. CIT (A) IN HIS ORDER COMMENCING FROM PAGES 4 TO 18. HOWEVER, THE LD. CIT (A) AFTER DISC USSING THE MATTER HAS HELD THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OF RS. 43,32,329/- AND, THEREFORE, HAS IMPOSED PENALTY OF RS.14,58,262/- AND HAS THUS GRAN TED A PART RELIEF TO THE ASSESSEE FOR RS. 7,41,738/-. 7. THE REVENUE HAS FILED THE APPEAL BEFORE US BEARI NG ITA NO. 578/JP/2013 AND THE ASSESSEE HAS FILED CROSS APPEAL BEARING ITA NO. 585 /JP/2013 AGAINST CONFIRMATION OF PENALTY OF RS. 14,58,262/-. 8 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. 7.1. BEFORE US THE LD. A/R OF THE ASSESSEE HAS TAKE N US TO THE ORDER PASSED BY THE AUTHORITIES BELOW AND ALSO TO THE DOCUMENTS MORE PA RTICULARLY THE FRANCHISEE AGREEMENTS ENTERED BETWEEN THE ASSESSEE AND THE FR ANCHISEES PLACED FROM PAGES 139 TO 209 OF THE PAPER BOOK. BY SHOWING THE AGREEMENT , IT WAS CONTENDED BY THE LD. A/R OF THE ASSESSEE THAT THE ADVANCE LICENSE FEES RECEI VED BY THE ASSESSEE IS REQUIRED TO BE AMORTIZED FOR SOME TIME AS THERE IS A CORRESPONDIN G OBLIGATION OF THE ASSESSEE TO BE DISCHARGED DURING THE TERM OF THE AGREEMENT. THERE IS RECURRING COST WHICH IS REQUIRED TO BE SPENT BY THE ASSESSEE TO THE TERM OF THE FRAN CHISEE AGREEMENTS AND, THEREFORE, THE INCOME IS ALSO REQUIRED TO BE ADJUSTED TOWARDS THE TERM OF THE AGREEMENT. THE LD. A/R HAS SUBMITTED THAT IN THE ASSESSMENT YEAR UNDER CONSIDERATION TOTAL AMOUNT OF RS.62,02,469/- WAS RECEIVED FROM VARIOUS FRANCHISEE S SCATTERED ACROSS THE COUNTRY AND ACCORDINGLY THE SUM OF RS. 24,95,240/- WAS CREATED AS LICENSE FEE IN THE PROFIT & LOSS ACCOUNT IN THE YEAR UNDER CONSIDERATION. HOWEVER, THE REMAINING AMOUNT WAS AMORTIZED IN THE SUBSEQUENT ASSESSMENT YEARS I.E. 2 008-09, 09-10 AND 10-11. IN THE A.Y. 2008-09 AN AMOUNT OF RS. 32,20,000/- WAS CREDI TED AS LICENSE FEE AND SIMILARLY AN AMOUNT OF RS. 5,02,304/- WAS CREDITED IN THE ACCOUN TS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2009-10. IT WAS ALSO SUBMITTED THA T THE ASSESSEE HAS SHOWN THE COMPLETE ADVANCE FEE, LICENSE FEE RECEIVED IN THE B ALANCE SHEET AS PER SCHEDULE A AND HAS FURTHER DISCLOSED FULLY AND TRULY THE SAID AMOU NT IN THE DULY AUDITED ACCOUNTS IN THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2007-08. ON THE BASIS OF THE ABOVE, IT WAS CONTENDED THAT THERE WAS NO CONCEALMENT OF INCOME N OR IT WAS THE CASE OF INACCURATE PARTICULARS BY THE ASSESSEE. LASTLY, IT WAS SUBMIT TED THAT SINCE THE AMOUNT OF RS. 9 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. 24,95,240/- WAS SHOWN IN THE ACCOUNTS IN THE A.Y. 2 007-08, THEREFORE, THE LD. CIT (A) WAS RIGHT IN RESTRICTING THE PENALTY TO THE EXTENT OF RS. 7,41,738/-. 7.2. IN LIS IT WAS SUBMITTED THAT THE ISSUE OF TREA TMENT OF ADVANCE LICENSE FEE IS A DEBATABLE ISSUE AND WHETHER THE ADVANCE LICENSE FEE IS REQUIRED TO BE TREATED AS BUSINESS INCOME IN ONE YEAR OR IS REQUIRED TO BE SP READ OVER THE PERIOD OF FOUR YEARS, IS NOT SETTLED. IN VARIOUS MATTERS WHERE THE ASSESSEES ARE IN THE SAME BUSINESS, THE LICENSE FEE HAS BEEN PERMITTED TO BE AMORTIZED FOR A PERIOD OF FOUR YEARS. THEREFORE, THE ASSESSEE HAS ONLY FOLLOWED THE ESTABLISHED PRAC TICE IN THE TRADE. IT WAS FURTHER SUBMITTED THAT THE REASON FOR DISALLOWANCE BY THE T RIBUNAL IS ONLY ON ACCOUNT OF DISPROPORTIONATE AMORTIZATION OF LICENSE FEE IN THE SUBSEQUENT YEAR. HOWEVER, THE TRIBUNAL HAS NOT DEPRECATED THE PRACTICE OF AMORTIZ ATION OVER THE PERIOD OF TIE. THE PLEA OF THE ASSESSEE WAS TURNED DOWN BY THE TRIBUNAL ON ACCOUNT OF DISPROPORTIONATE OR UN- EQUAL DISTRIBUTION OF ADVANCE LICENSE FEE IN THE SU BSEQUENT YEAR. LASTLY, IT WAS SUBMITTED THAT THE NOTICE GIVEN BEFORE IMPOSITION O F PENALTY, IS AGAINST THE LAW LAID DOWN IN RESPECT OF ISSUANCE OF NOTICE. THE AO BEFO RE ISSUE OF NOTICE, HAS NOT APPLIED HIS MIND AND HAS NOT RECORDED HIS SATISFACTION. EVE N THE IN PRINTED PROFORMA NOTICE SENT FOR IMPOSITION OF PENALTY, THE RELEVANT CLAUSE HAS NOT BEEN SPELT OUT AND THE AO WAS NOT SURE WHETHER THE PENALTY WAS BEING IMPOSED ON ACCOUNT OF SUBMISSION OF INACCURATE PARTICULARS OR ON ACCOUNT OF CONCEALMENT OF INCOME. IN THIS REGARD, THE LD. A/R HAS DRAWN OUR ATTENTION TO THE LAW LAID DOWN BY HONBLE SUPREME COURT, HIGH COURTS AND THE TRIBUNAL. WE ARE HEREBY REPRODUCING THE SAME FOR COMPLETION OF THE RECORD :- 10 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. 1.15 THE HON'BLE INCOME TAX APPELLATE TRIBUNAL IN I TS ORDER DATED 26.11.2010 HAS MERELY SUSTAINED THE ADDITION MAINLY FOR THE REASON THAT IN SUBSEQUENT YEARS THE RECEIPTS FROM FRANCHISEES WERE NOT SHOWN IN THE SIM ILAR MANNER THOUGH SHOWN IN ALL THE SUBSEQUENT YEARS. MERELY BECAUSE IT WAS SHOWN IN AL L THE SUBSEQUENT YEARS, THE ID. INCOME TAX APPELLATE TRIBUNAL SUSTAINED THE ADDITIO N. IT IS AGAIN OUT OF PLACE TO MENTION THAT THE ASSESSEE FALLS IN THE HIGHEST BUCKET (OF T AX) AND THEREFORE NO DIFFERENCE WILL BE THERE IF THE RECEIPTS WILL BE SHOWN IN THE SUBSEQUE NT YEARS. THE ASSESSEE DOES NOT SAY THAT THE ADVANCE LICENSE FEES IS REFUNDABLE. THE AS SESSEE HAS RIGHTLY SHOWN AS INCOME THE ENTIRE FEES IS REFUNDABLE. THE ASSESSEE HAS RIG HTLY SHOWN AS INCOME THE ENTIRE ADVANCE LICENSE FEE IN THE SUBSEQUENT ASSESSMENT AS INCOME THE ENTIRE ADVANCE LICENSE FEE IN THE SUBSEQUENT ASSESSMENT YEARS. COPIES OF W RITTEN SUBMISSION DATED 25.10.2010 AND 03.11.2010 ARE ALSO ENCLOSED. WE SUBMIT THAT TH E ORDER OF THE ID. INCOME TAX APPELLATE TRIBUNAL IS UNJUSTIFIED, DECIDED IN A SUM MARY MANNER WHEN THE ID. COMMISSIONER OF INCOME TAX (APPEALS) HAD DECIDED TH E ISSUE AT LENGTH BY GIVING COGENT REASONS. EVEN OTHERWISE WHEN ONE APPELLATE AUTHORIT Y DELETES THE ADDITION AND ANOTHER APPELLATE AUTHORITY SUSTAINS THE ADDITION, IT CANNO T BE A CASE OF IMPOSITION OF PENALTY AS THE ISSUE BECOMES DEBATABLE. IN VIEW OF THE ABOVE F ACTS AND CIRCUMSTANCES THE PENALTY IS LIABLE TO BE DELETED. FURTHER MORE AGAINST THE O RDER PASSED BY THE ID. INCOME TAX APPELLATE TRIBUNAL, THE ASSESSEE BEING NOT SATISFIE D WITH THE HON'BLE RAJASTHAN HIGH COURT U/S 260A OF THE INCOME TAX ACT. THE SAID APPE AL IS STILL PENDING. 1.16 THAT THE PENALTY PROCEEDINGS ARE QUASI-CRIMINA L IN NATURE AND MERELY BECAUSE ADDITION HAS BEEN MADE DOES NOT MEAN THAT PENALTY H AS TO BE AUTOMATICALLY LEVIED. THE ID. ASSESSING OFFICER IN THE PENALTY ORDER HAS SIMP LY MENTIONED THAT ONLY BECAUSE THE ADDITION HAS BEEN SUSTAINED THEREFORE, PENALTY IS B EING IMPOSED. WE SUBMIT THAT THIS IS NOT A BASIS FOR IMPOSING PENALTY TO THE EXTENT OF ` 22.00 LACS. THAT ID. ASSESSING OFFICER OUGHT TO HAVE SPELT OUT SOMETHING MORE IN THE PENAL TY ORDER. THE ENTIRE MATERIAL WAS SUBMITTED DURING THE COURSE OF THE ASSESSMENT PROCE EDING OF APPELLATE PROCEEDINGS IN THE SHAPE OF VARIOUS FRANCHISEE AGREEMENTS, CERTIFI CATES, SUBSEQUENT SHOWING OF THE VERY SAME RECEIPTS ON ACCOUNT OF FRANCHISEE RECEIPT S HAVING BEEN SHOWN IN SUCCEEDING YEARS OUGHT TO HAVE BEEN PROPERLY CONSIDERED BY THE ID. ASSESSING OFFICER AND SUCH MATERIAL NEEDS TO BE REAPPRAISED IN THE PENALTY PRO CEEDING. THE PENALTY IS NOT 11 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. AUTOMATIC. DIFFERENT CONSIDERATIONS COME TO PLAY IN A CASE OF IMPOSITION OF PENALTY, WHILE ADDITION MAY BE SUSTAINED FOR DIVERSE REASONS BUT PENALTY BEING NOT AUTOMATIC, SHOULD NOT BE LEVIED IN A ROUTINE MANNER, THE ASSES SEE CAN DISCHARGE BURDEN IN PENALTY PROCEEDINGS AND IN THE INSTANT CASE THE ASSESSEE-AP PELLANT HAS DISCHARGED HIS BURDEN BY SHOWING SAME VERY RECEIPTS ON ACCOUNT OF FRANCHISEE AGREEMENTS IN SUCCEEDING ASSESSMENT YEARS, PARTICULARLY THIS FACT IS MORE IM PORTANT THAT RATE OF INCOME TAX IN SUCCEEDING ASSESSMENT YEARS IS SAME THEREFORE NO BE NEFIT WAS THERE. HAD IT BEEN A CASE THAT IN SUCCEEDING ASSESSMENT YEARS THE RATE OF INC OME TAX WOULD NOT HAVE BEEN SAME THEN POSSIBLY ONE COULD CAME TO THE CONCLUSION THAT THE ASSESSEE HAS GAINED MORE RATHER ON PERUSAL OF THE FACTS HEREINABOVE AND ON R ECORD, IS THAT THE ASSESSEE HAS NOT GAINED ANYTHING EVEN BY SHOWING THE INCOME IN SUCCE EDING ASSESSMENT YEAR RATHER ON PERUSAL OF A CHART QUOTED IN PARA 1.12 HEREINABOVE EXTRA INCOME TO THE TUNE OF ` 0.63 LACS HAS BEEN ADDED IN THE CASE OF THE ASSESSEE AND THIS CANNOT BE THE SCHEME OF LAW AND PERMISSIBLE UNDER THE INCOME-TAX ACT. IT IS SUR PRISING THAT EVEN AFTER THE FINDING OF THE HON'BLE INCOME TAX APPELLATE TRIBUNAL THAT CRED IT SHOULD BE ALLOWED IN SUCCEEDING ASSESSMENT YEARS BUT NO CREDIT HAS BEEN GIVEN IN TH E SUCCEEDING ASSESSMENT YEARS, RATHER EVEN APPEAL EFFECT HA SNOT BEEN GIVEN WHEN I D. INCOME TAX APPELLATE TRIBUNAL HAS CLEARLY DECIDED TO REDUCE IN SUBSEQUENT YEARS. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, THERE IS NOT JUSTIFICATION FOR IMPOSITION OF PENALTY ; THE SAID PENALTY DESERVES TO BE DELETED. ON VARIOUS PROPOSITION WE, RELY ON THE FOLLOWING AUTHORITIES:- 1.17 AS SUBMITTED HEREINABOVE, EVEN THE ID. ASSESSI NG OFFICER WAS NOT SURE AND SATISFIED AS TO ON WHAT COUNT THE PENALTY PROCEEDIN G WERE INITIATED. HE SHOULD HAVE BEEN SATISFIED HIMSELF AS TO WHETHER IS INITIATING THE PROCEEDING FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR FOR CONCEALMENT OF PARTICU LARS OF INCOME. HAS THIS BEEN CLARIFIED THE ASSESSEE APPELLANT WOULD HAVE FURNISHED A FURTH ER DETAILED REPLAY IN REBUTTAL. THAT THE ASSESSING OFFICE SHOULD HAVE SPELT OUT THE BASI S FOR INITIATION OF THE PROCEEDINGS. WE REPLY ON THE FOLLOWING AUTHORITIES :- 12 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. 211 ITR 35 217 ITR 208 122 ITR 306 282 ITR 642 110 ITR 54 31 TTJ 40 291 ITR 519 1.18 IT HAS BEEN CONSISTENTLY HELD THAT PENALTY SHO ULD NOT BE IMPOSED AUTOMATICALLY MERELY BECAUSE SOME ADDITION HAS BEEN SUSTAINED. AD DITION MAY HAVE BEEN SUSTAINED FOR VARIOUS REASONS AND CONSIDERATION BUT SOMETHING MORE HAS TO BE BROUGHT RECORD WHILE IMPOSING PENALTY U/S 27 (1) (C) OF THE INCOME TAX ACT. IN THE CASE OF ACIT V VIP INDUSTRIES 122 TTJ 289 (M UM) IT WAS HELD THAT, WHERE ADDITIONS IS MADE THE PENALTY SHALL NOT AUTOMATICALLY FOLLOW. IN A CASE OF GENUINE DIFFERENCE BETWEEN A AND 'A' PENALTY CANNOT BE LIVED, SAME VIE W HAS BEEN TAKEN BY PUNE BENCH IN THE CASE OF KANBAY SOFTWARE INDIA 122 TJ 721. IN THE CASE OF CIT V SIDHARTHA ENTERPRISES 184 TAXM AN 460 PH IT WAS HELF THAT IS NOT NECESSARY THAT IN EVERY CASE WHERE PARTICULARS ARE INACCURATE, PENALTY MUST FOLLOW. PENALTY IS IMPOSED ONLY WHEN THERE IS SOME ELEMENT OF DELIBERATE DEFAULT AND NOT WHEN THERE IS MERELY A MISTAKE OR BON FIDE CLAIM. WE FURTHER RELY ON THE FOLLOWING AUTHORITIES :- 178 ITR 590 123/457 119 ITR 36 (BORN) 312 ITR 225 1.19 THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE O F GOSWAMI SMT. CHANDRALATA BAHUJI REPORTED IN (1980) 125 ITR 700 HAS HELD THAT IT IS A SETTLED LAW THAT THE ASSESSMENT PROCEEDING AND THE PENALTY PROCEEDING AR E DIFFERENT IN NATURE, AS THE CONSIDERATION ARISING IN THE IMPOSITION OF PENALTY ARE DIFFERENT MANNER. 13 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. IN THE INSTANT CASE IT IS TRUE THAT SOME DISCREPANC Y HAS BEEN OBSERVED DURING THE ASSESSMENT PROCEEDING, MAY BE THEY WERE SUFFICIENT TO MAKE ADDITION/DISALLOWANCE. EVEN THE ISSUE IS DEBATABLE ONE APPELLATE AUTHORITY DISALLOWED. HOWEVER, NOTHING HAS BEEN SPELT OUT BY THE ID. ASSESSING OFFICER IN CONC RETE GROUND TO JUSTIFY LEVY OF PENALTY TOWARDS SUCH DISALLOWANCE/ADDITION. 1.20 THE HON'BLE SUPREME COURT IN THE CASE OF CIT V . RELIANCE PETRO PRODUCTS PVT. LTD. REPORTED IN (2010) 322 ITR 158 (SC) HAS OBSERVED AS UNDER :- 'A GLANCE AT THE PROVISION OF SECTION 271 (1) (C) O F THE INCOME TAX ACT, 1961, SUGGESTS THAT ORDER TO BE COVERED BY IT, THERE HAS TO BE CON CEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY , THE ASSESSEE MUS T HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS' USED IN SECTION 27 (1) (C) WOULD EMBRANCE THE DETAILS OF THE CLAIM MADE. W HERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS, IN ORDER TO EXPO SE THE ASSESSEE TO PENALTY, UNLESS THE CASE IN STRICTLY COVERED BY THE PROVISIONS, THE PEN ALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT C LAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THA T EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE O NLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME, WHEN SUCH PA RTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NO ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE I S NO QUESTION IF INVITING THE PENALTY UNDER SECTION 271 (1) (C). A MERE MAKING OF A CLAIM , WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT ABOUT TO FURNISHING INACCURATE PAR TICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AM OUNT TO FURNISHING INACCURATE PARTICULARS. 14 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. THUS IN THE INSTANT CASE T IS SUBMITTED THAT ENTIRE INFORMATION WAS AVAILABLE WITH THE ASSESSING OFFICER ALONGWITH RETURN ITSELF. THE TRIB UNAL HAS MERELY HELD THAT ALL ADVANCE RECEIPTS SINCE THEY WERE IN THE NATURE OF NON-REFUN DABLE, THEREFORE, HAS HELD THAT IT IS TO BE TAXED IN THE YEAR OF RECEIPT. BY NO STRENGTH OF IMAGINATION IT CAN BE SAID THAT THE ASSESSEE MADE INCORRECT CLAIM AND TANTAMOUNT TO FUR NISHING INACCURATE PARTICULARS. A CLAIM HAS SIMPLY BEEN MADE BY THE ASSESSEE, HAVING BEEN FOLLOWED BY OTHER SIMILAR SITUATED ASSESSEE AND CLAIM WHICH IS COMING FROM TH E PAST YEARS WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS, REGARDING THE IN COME OF THE ASSESSEE PARTICULARLY WHEN ID. COMMISSIONER IF INCOME TAX (APPEALS) ALLOW ED IT. 1.21 THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE O F CIT V. ORIENTAL POWER CABLE LTD. REPORTED IN (2008) 303 ITR 49 (RAJ.) HELD THAT THE TRIBUNAL HAS SPECIFICALLY RECORDED THAT THERE WAS NO FINDING OF THE INCOME TAX AUTHORITIES THAT THE ASSESSEE HAD DELIBERATELY MAD FALSE CLAIM FOR CLAIMING DEDICATION, THE CASE O F THE ASSESSEE THAT IT HAS NOT INCLUDED THE PARTICULARS ITEM IN THE TAXABLE ITEM UNDER A BO NA FIDE BELIEF WAS ACCEPTED. 1.22 THE HON'BLE SUPREME COURT IN THE CASE OF SREE KRISHNA ELECTRICALS V/S STATE OF TAMIL NADU (2009) 23 VST 249 (SC) WHICH PERTAINS TO THE PENALTY PROCEEDINGS IN TAMIL NADU GENERAL SALES TAX ACT, THE COURT HAD FOUND THA T TEH AUTHORITIES BELOW HAD FOUND THAT THERE WERE SOME INCORRECT STATEMENT MADE IN TH E RETURN, HOWEVER, THE SAID TRANSACTIONS WERE REFLECTED IN THE ACCOUNTS OF THE ASSESSEE. THE COURT, THEREFORE, OBSERVED (PAGE 251); 'SO FAR AS THE QUESTION OF PEN ALTY IS CONCERNED THE ITEM WHICH WERE NOT INCLUDE IN THE TURNOVER WERE FOUND INCORPO RATED IN THE APPELLANT'S ACCOUNTS BOOKS. WHERE CERTAIN ITEM WHICH ARE NOT INCLUDE IN THE TURNOVER ARE DISCLOSED IN THE DEALER'S OWN ACCOUNTS BOOKS AND THE ASSESSING AUTH ORITIES INCLUDE THESE ITEM IN THE DEALER'S TURNOVER DISALLOWING THE EXEMPTION, PENALT Y CANNOT BE IMPOSED. THE PENALTY LIVED STANDS SET ASIDE. THUS IN THE INSTANT CASE EVERYTHING IS RECORDED/MEN TIONED IN THE PROFIT & LOSS ACCOUNT AND BALANCE-SHEET AND OTHER ENCLOSURES 1.23 WE ALSO RELY ON THE JUDGMENT OF THE HON'BLE RA JASTHAN HIGH COURT IN THE CASE OF CHADNRAPAL BAGGA V. ITAT (2003) 261 ITR 67 (RAJ.) W HERE IT HAS BEEN HELD THAT IF THE 15 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. ASSESSEE HAS CLAIMED ANY EXEMPTION/DEDUCTION AFTER DISCLOSING THE RELEVANT FACTS OF THE TRANSACTION OF INCOME AND ANY IGNORANCE OF THE PROV ISION OF THE ACT OF 1961, HAS NOT OFFERED THAT AMOUNT FOR TAX, EVEN IN SUCH CASES PEN ALTY SHOULD NOT BE IMPOSED AUTOMATICALLY. IN THE INSTANT CASE THE ASSESSEE HAS SHOWN THE RENTAL INCOME AND CLAIMED 30% OF STATUTORY DEDUCTIONS, THE ID. COMMISSIONER O F INCOME TAX (APPEALS) HELD THAT SINCE RENTAL INCOME IS BUSINESS INCOME THEREFORE AS A NATURAL COROLLARY STANDARD DEDUCTION/STATUTORY ALLOWANCE U/S 24 (1) WAS DISALL OWED. 1.24 WE ALSO RELY ON THE JUDGMENT OF THE HON'BLE SU PREME COURT IN THE CASE OF T. ASHOK PAI 292 ITR 11 WHERE IT HAS BEEN THAT ACTED O N THE BASIS OF WRONG LEGAL ADVICE- NO PENALTY EXPLANATION CANNOT BE INVOKED. HERE IT MAY BE STATED THAT THE ASSESSEE IS NOT TECHNICALLY SOUND TO KNOW THE TAXATION LAWS AND HE WAS DEPENDENT UPON THE AUTHORIZED REPRESENTATIVE/CHARTERED ACCOUNTANT WHO OPINED THAT INCOME HAS TO BE SEGREGATED IN DIFFERENT YEARS. 1.25 THE HON'BLE ITAT JAIPUR BENCH, JAIPUR IT ITS L ATEST ORDER DATED 25.05.2012 IN THE CASE OF AISWARIYA JEWELLERS P LTD. VS THE DY. C.I.T . HAS HELD AS UNDER :- 'IT IS FOR THESE REASONS THAT THE HIGHER COURTS OF LAW HAVE DISAPPROVED OF THE LEVY OF PENALTY WHERE THE ISSUE, THOUGH DECIDED AGAINST THE ASSESSEE IN QUANTUM PROCEEDING, IS DEBATABLE OR CONTENTIONS. THAT THE ASSESSEE'S CLAIM BEARS A LOWER INCIDENCE OF TAX IS A MATTER INCIDENTAL, AND BY ITSELF OF NO CONSEQUENCE, WHAT IS MATERIAL IS WHETHER THE CLAIM SUPPORTED BY A BONA FIDE EXPLANATION, I.E., A GENUINE GROUNDS, WITH THE MATERIAL FACTS HAVING BEEN DISCLOSED, AND WHICH WE FIND AS S O. IN FACT, TO THE EXTENT THE CLAIM IS FOR STANDARD DEDUCTION AGAINST RENTAL INCOME, THE S AME RAISES NO QUESTION OF SUBSTANTIATION, I.E., IS SELF CORROBORATIVE. IT IS AT BEST A CASE OF AN INCORRECT CLAIM, WITH ALL THE MATERIAL FACTS ON RECORD. THE RATIO OF TEH DECI SIONS IN THE CASE OF CIT V. RELIANCE PETROPRODUCTION (P) LTD. (2010) 322 ITR 158 (SC) AN D CHANDRA PAL BAGGA V. ITAT, 261 ITR 67 (RAJ.) RELIED UPON BY ASSESSEE, WOULD, AMONG OTH ERS, APPLY IN THE FACTS AND CIRCUMSTANCE OF THE CASE.' 1.26 WE FURTHER RELY ON THE FOLLOWING AUTHORITIES O N DIFFERENT PROPOSITION :- NO PRESUMPTION THAT EVERYONE KNOWS LAW 16 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. 118 ITR 326 (SC) 102 STC 102 3 ITD 221 AIR 1979 SC 621 INDEPENDENT EVIDENCE OF POSITIVE INCOME IS NECESSAR Y 116 ITR 893 147 ITR 204 147 ITR 133 278 ITR 630 132 ITR 241 (P&H) INDEPENDENT EVIDENCE OF POSITIVE INCOME IS NECESSAR Y 263 ITR 484 86 ITR 557 246 ITR 568 246 ITR 571 275 ITR 303 271 ITR 519 36 TW 15 7.3. THE LD. D/R FOR THE REVENUE HAS SUBMITTED THAT THE ORDER PASSED BY THE TRIBUNAL IS CONCLUSIVE, BINDING AND THE PENALTY HAS BEEN IMP OSED BY THE AO IN ACCORDANCE WITH THE FINAL CONCLUSION DRAWN BY THE TRIBUNAL. IT WAS FURTHER SUBMITTED THAT THERE WAS DELIBERATE ATTEMPT ON THE PART OF THE ASSESSEE TO A VOID THE PAYMENT OF FAIR TAX TO THE REVENUE AND AS SUCH THE CONDUCT OF THE ASSESSEE FAL LS WITHIN THE REALM OF CONCEALMENT OF INCOME. FURTHER, THE LD. D/R, IN SUPPORT OF THE APPEAL FILED BY THE REVENUE BEARING ITA NO. 578/JP/2013, IT WAS CONTENDED THAT IN VIEW OF THE CBDT CIRCULAR DATED 17 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. 10.12.2015 THE APPEAL HAS BECOME INFRUCTUOUS AND TH E SAME IS REQUIRED TO BE WITHDRAWN. 7.4. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS ALREADY BEEN GRANTED THE RELIEF MUCH BEYOND PERMISSIBLE IN LAW AND, THEREFORE, IT W AS SUBMITTED THAT THE APPEAL OF THE ASSESSEE IS REQUIRED TO BE DISMISSED BY THIS TRIBUN AL. 7.5. IN VIEW OF THE CBDT CIRCULAR NO. 21 OF 2015 DATED 10.12.2015 (F.NO.279/MISC. 142/2007-ITJ(PT) THE APPEAL OF THE REVENUE BEARING NO. 578/JP/2013 IS DISMISSED. UNDER THE POWERS VESTED B Y SEC. 268A(1) OF THE I.T. ACT, CBDT HAS RECENTLY ISSUED CIRCULAR NO.21 OF 2015 DAT ED 10.12.2015(F.NO.279/MISC. 142/2007-ITJ(PT) INSTRUCT ING THE AUTHORITIES BELOW THAT DEPARTMENTAL APPEAL SHOULD NOT BE FILED BEFORE ITAT WHERE THE DEMAND/TAX EFFECT DOES NOT EXCEED RS.10 LACS. THE C IRCULAR SPECIFICALLY MENTIONS THAT IT WILL BE APPLICABLE TO ALL PENDING APPEALS ALSO. SUBJECT TO SOME EXCEPTIONS, IT IS FURTHER DIRECTED BY CBDT THAT ALL THE DEPARTMENTAL APPEALS PENDING BEFORE ITAT WHERE THE DEMAND/TAX EFFECT IS NOT EXCEEDING RS. 10 LACS SHOULD BE EITHER WITHDRAWN OR NOT PRESSED BY THE DEPARTMENTAL REPRESENTATIVES AT THE TIME OF HEARING. 7.6. WE HAVE HEARD THE PARTIES AND PERUSED THE RECO RD AND WRITTEN SUBMISSIONS FILED BY THE LD. A/R. IN OUR VIEW, THE ASSESSEE HAS FILE D THE PARTICULARS OF THE ADVANCE LICENSE FEE RECEIVED BY HIM IN THE AUDIT REPORT FOR THE YEAR UNDER CONSIDERATION I.E. 2007-08 AND HAS ALSO GIVEN THE DETAILS OF THE ADVAN CE LICENSE FEE IN SCHEDULE A TO THE 18 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. AUDIT REPORT. FURTHER, THE ASSESSEE HAS ALSO MENTIO NED IN THE RETURN OF INCOME THAT OUT OF THE SAID AMOUNT OF RS. 62,02,469/-, THE ASSESSEE IS ONLY TREATING THE INCOME OF RS. 24,95,240/- IN THE CURRENT ASSESSMENT YEAR. IN OUR VIEW, ONCE ALL THESE FACTS HAVE BEEN DULY DISCLOSED BY THE ASSESSEE IN THE RETURN O F INCOME, AUDIT REPORT ETC., THE NOTICE SHOULD NOT HAVE BEEN ISSUED EITHER FOR SUBMI TTING INACCURATE PARTICULARS OF INCOME OR FOR CONCEALMENT OF INCOME. ONCE THE ADVAN CE LICENSE FEE HAS BEEN DULY DISCLOSED, THEREFORE, THERE CANNOT BE ANY CONCEALME NT OF INCOME OR SUBMISSION OF INACCURATE PARTICULARS OF INCOME. IT IS ONE THING T O SAY THAT HOW THE ADVANCE LICENSE FEE IS REQUIRED TO BE TREATED IN THE LIGHT OF THE AGREE MENT ENTERED BY THE PARTIES. THE TRIBUNAL, WHILE ADJUDICATING THE ISSUE OF TREATMENT OF ADVANCE LICENSE FEE IN THE QUANTUM APPEAL, WITH RESPECT, HAS NOT GONE INTO THE OBLIGATION TO BE DISCHARGED BY THE ASSESSEE IN VIEW OF THE AGREEMENT. IF THE LICENSEE IS REQUIRED TO DISCHARGE STATUTORY AND LEGAL OBLIGATION UNDER THE AGREEMENT, THE LIBERTY S HOULD HAVE BEEN GIVEN TO THE ASSESSEE TO TREAT THE PRO-RATA INCOME IN THE ASSESS MENT YEAR UNDER CONSIDERATION. THE PERUSAL OF THE FRANCHISEE AGREEMENT SHOWS THAT THE TERM OF THE LICENSE GRANTED TO THE AFFILIATE WAS FOR THREE YEARS (PAGE 140 OF PAPER BO OK). SIMILARLY THE ASSESSEES OBLIGATIONS ARE MENTIONED IN THE AGREEMENT UNDER AR TICLE-1 AS UNDER :- COMPANY HEREBY AGREES TO PROVIDE, RENDER, MAKE AVA ILABLE AND FURNISH THE FOLLOWING ADVICE, ASSISTANCE, SERVICES, INFORMA TION AND MATERIALS FOR THE PURPOSE CONTEMPLATED IN THIS AGREEMENT, NAMELY TO ESTABLISH, MAINTAIN, CONDUCT AND OPERATE THE VISION. 1.1. ALLOWING THE AFFILIATE TO USE THE BRAND NAME OF THE COMPANY. 1.2. GRANT OF LICENSE 19 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. 1.3. COURSE WARE DEVELOPED BY THE COMPANY AND OTHER MATE RIAL AT ADDITIONAL COST FOR THE COURSES AS STIPULATED IN ANNEXURE-A HERETO 1.4. TECHNICAL KNOW-HOW TO RUN THE COURSES 1.5. FACULTY SUPPORT 1.6. MARKETING SUPPORT IF WE LOOK INTO THE NATURE OF OBLIGATION OF THE ASS ESSEE, IT IS CLEAR THAT THE OBLIGATIONS REQUIRED TO BE DISCHARGED BY THE ASSESSEE WERE NOT RESTRICTED TO THE YEAR OF ENTRY INTO THE AGREEMENT, RATHER IT WAS SPREAD OVER FOR A PERI OD OF THREE YEARS. LIKE THE ASSESSEE WAS REQUIRED TO PROVIDE THE MATERIAL FOR THE COURSE S BY TECHNICAL KNOW HOW, FACULTY SUPPORT AND MARKETING SUPPORT. THE DETAILED COMPAN YS OBLIGATIONS ARE GIVEN AT PAGES 140, 141 AND 142 OF THE PAPER BOOK. THE ASSESSEE H AS CHARGED THE AFFILIATE FEES FROM THE LICENSEE FOR THE RIGHTS GRANTED IN THE AGREEMENT. AS PER THE JURISPRUDENC E, RIGHTS AND OBLIGATION GO TOGETHER. IF A PERSON HAS A RIGH T, IT ALSO HAS OBLIGATION TO DISCHARGE. A RIGHT WITHOUT CORRESPONDING OBLIGATION DOES NOT E XIST. MERELY BECAUSE THE RIGHT HAS BEEN GRANTED TO THE AFFILIATE UNDER THE AGREEMENT, THE LICENSEE, THE ASSESSEE CANNOT SHY TO DISCHARGE HIS OBLIGATION UNDER THE AGREEMENT WHICH ARE REQUIRED TO FULFILL DURING THE TERM OF AGREEMENT IN THE LIGHT OF THE ABOVE, TH E DECISION OF THE TRIBUNAL IN THE QUANTUM APPEAL IS ONE POSSIBLE VIEW WHICH WAS TAKEN . WHEREAS THE OTHER POSSIBLE VIEW COULD ALSO BE TAKEN BY THE TRIBUNAL, AS MENTIO NED ABOVE. THUS THE TREATMENT OF THE ADVANCE LICENSE FEE IN THE ASSESSMENT YEAR OR T HAT OF THE THREE SUBSEQUENT YEAR, IS VEXED POINT AND IS HIGHLY DEBATABLE. WE FIND FORCE IN THE ASSESSEES ADVOCATES ARGUMENT THAT THE CLAIM OF THE ASSESSEE IS BONAFIDE AND THERE IS NO REVENUE LOSS TO THE DEPARTMENT. FROM THE ABOVE, IT IS ESTABLISHED THAT SINCE THE CLAIM IS BONAFIDE AND IS 20 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. ALSO DEBATABLE AND THERE IS NO CONCEALMENT OF INCOM E, THEREFORE, IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE MATTER OF CIT VS. RELIANCE PETROPRODUCTS (2010) 322 ITR 158 (SC) AND ALSO IN ACCORDANCE WITH THE JUDGMENT PASSED IN THE CASE OF CIT VS. H.M.A. UDYOG PVT. LTD., 211 CTR 543, WHE REIN IT HAS BEEN HELD THAT IN A CASE WHERE THE ISSUE IS DEBATABLE, NO PENALTY UNDER SECT ION 271(1)(C) OF THE ACT IS PERMISSIBLE. IN THE ABOVE SAID BACK GROUND, WE ARE OF THE VIEW THAT THAT THE ASSESSEE HAS NOT FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED THE INCOME AND THERE ARE NO FINDING OF THE AO AND THE LD. CIT (A) THAT T HE DETAILS FURNISHED IN THE RETURN ARE INACCURATE OR ERRONEOUS OR FALSE. IN THESE FACTS AN D CIRCUMSTANCES, IN OUR VIEW, THE PENALTY IS TOTALLY UNWARRANTED AND DESERVES TO BE D ELETED. ACCORDINGLY, WE DELETE THE PENALTY OF RS. 14,58,262/-. 7.6. EVEN OTHERWISE, ON TECHNICAL GROUND, THE NOTICE ISSUED BY THE AO IS VAGUE, CRYPTIC AND SHOWS TOTAL NON APPLICATION OF MIND. IN THE IDENTICAL SCENARIO, THE COORDINATE BENCH IN THE MATTER OF SUVAPRASANNA BHAT TACHARYA VS. ACIT IN ITA NO.1303/KOL/2010, AFTER RELYING UPON THE JUDGMENT O F HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 (KARN.) HAS HELD THAT THE NOTICE WHICH IS CRYPTIC AND STEREOTYP E AND DOES NOT DISCLOSE THE APPLICATION OF MIND, THE SHOW CAUSE NOTICE IS REQUI RED TO BE SET ASIDE AND IS BAD IN LAW. FOR THE SAKE OF BREVITY, WE ARE NOT REPRODUCING THE JUDGMENT REFERRED BY THE LD. A/R FOR THE ASSESSEE BEFORE THIS COURT FROM PAGES 254 TO 26 0. THE RELEVANT PORTION IS MENTIONED IN PARA 6 TO 8 (PAGES 254 TO 261). IN TH E LIGHT OF THE ABOVE, THE APPEAL OF 21 ITA NO. 585 & 578/JP/2013 A.Y. 2007-08. SHRI PRAKASH JOY VS. ACIT, KOTA. THE ASSESSEE IS ALLOWED AND THE PENALTY IS DELETED WHEREAS THE APPEAL OF THE REVENUE IS DISMISSED. 8. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/02/2016. SD/- SD/- VH-VKJ-EHUK YFYR DQEKJ (T.R. MEENA) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 24/02/2016. DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI PRAKASH JOY, KOTA. 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CIRCLE-1, KOTA. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 585 & 578/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR