KUSHAL SENGUPTA,KOLKATA V. ITO, WARD 25(1), , KOLKATA

ITA 508/KOL/2025

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The case revolves around an appeal by Kushal Sengupta against the penalty imposed by the Income Tax Officer for allegedly concealing income received as a one-time settlement from Kotak Mahindra Old Life Insurance. The assessee had declared this income in his tax return but claimed it as a capital receipt, which was not taxable. The Income Tax Officer, however, treated it as taxable income and imposed a penalty for concealment of income. The Tribunal, referencing decisions from the Supreme Court, concluded that the penalty was not justified as the assessee had disclosed all relevant details in his tax return, and the treatment of the income as a capital receipt was a matter of interpretation, not concealment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772411 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2006-2007
• Other Referred Cases: Oberoi Hotel (P.) Ltd. Vs. CIT, CIT vs. Reliance Petroproducts Pvt. Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAPIL MONDAL
• Assessee Lawyers: S. K. TULSIYAN; PUJA SOMANI; ARS
• Keywords: Set aside; Capital receipt
• Section: 144; 271(1)(c)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRIPRADIP KUMAR CHOUBEY, JM ITA No.508/KOL/2025 (Assessment Year:2006-07) Kushal Sengupta Urbana, Tower-4/1604, Anandapur, Kolkata-700107, West Bengal Vs. Income Tax officer Ward, 25(1), Aaykar Bhavan Dakshin,2, Gariahat Road (South), Kolkata-700068 (Appellant) (Respondent) PAN No. ALMPS0771P Assessee by : Shri S.K. Tulsiyan, & Ms. Puja Somani, ARs Revenue by : Shri Kapil Mondal, DR Date of hearing: 22.07.2025 Date of pronouncement: 26.08.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 03.02.2025 for the AY 2006-07. 02. The only issue raised in various grounds of appeal is against the order of the ld. CIT (A) confirming and upholding the penalty of ₹5,28,234/- as levied by the ld. AO u/s 271(1)(c) of the Income-tax Act, 1961 (the Act). 03. The facts in brief are that the assessee is an individual filed the return of income on 30.10.2006, declaring total income of ₹1,51,200/-, which was processed u/s 143(1) of the Act. The assessee during the Printed from counselvise.com Page | 2 ITA No. 508/KOL/2025 Kushal Sengupta; A.Y. 2006-07 year received a sum of ₹16,00,000/- being one time from Kotak Mahindra Old Life Insurance and this amount was claimed as exempt and non-taxable as this was compensation received from loss of source of income. The case of the assessee was selected for scrutiny and order u/s 144 of the Act was passed on 17.12.2008, wherein ₹16,00,000/- was added to the income of the assessee. The said order was challenged before the ld. CIT (A) and the ld. CIT (A) also upheld the order passed by the ld. AO u/s 144 of the Act. Thereafter, the appeal was preferred before the Tribunal and Tribunal restored the appeal to the file of the ld. AO for limited purposes to adjudicate the issue afresh. In the meantime, the ld. AO passed the penalty order u/s 271(1)(c) of the Act dated 01.01.2022, imposing the penalty of ₹5,28,234/- by stating in the penalty order that as per information available on ITBA portal in 360 degree till date, the assessee had not been preferred an appeal before the first appellate authority. The penalty was levied for concealing the particulars of income of ₹16 lacs. 04. In the appellate proceedings, the ld. CIT (A) affirmed the order of the ld. AO by holding that the amount shown as “settlement proceeds” represented taxable remuneration income of the assessee and that the assessee has consciously and deliberately concealed the income leading to non-taxability of the resultant income. 05. After hearing the rival contentions and perusing the materials available on record, we find that in this case the assessee was employed with Kotak Mahindra Old Life Insurance as an employee and he received one time settlement from said company as compensation towards loss of source of income. The assessee duly disclosed the said income in the return of income, however, same was claimed as exempt on account of being a capital receipt. The ld. AO imposed the Printed from counselvise.com Page | 3 ITA No. 508/KOL/2025 Kushal Sengupta; A.Y. 2006-07 penalty for the reason that the assessee has not filed any appeal before the ld. CIT (A) which is apparently wrong and against the facts on record. The ld. CIT (A) simply held that the settlement proceeds were taxable as remuneration in the hands of the assessee. Now the issue before is whether the money received as one time settlement of leaving job from the company is a capital receipt or revenue receipt. In our opinion, the compensation for loss of office is recorded as capital receipt. In this case, the assessee’s source of income is extinguished, therefore in our opinion, the said income is the capital receipt. The case of the assessee is squarely covered by the decision of Oberoi Hotel (P.) Ltd. Vs. CIT (1999) 103 Taxman 236 (SC), wherein the apex court has laid down the parameter as to how the receipt falls within the ambit of capital receipt. In this case, the assessee has given up its right to purchase and/ or to operate hotel, it being loss of source of income to assessee which was determined for consideration, amount received was a capital receipt. Moreover, the case of the assessee is squarely covered by the decision of the Hon'ble Apex Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. [2010] 189 Taxman 322 (SC) wherein the Hon’ble Apex Court has held that where the assessee has fully disclosed the particulars in the return of income, then the assessee is not liable for penalty proceedings on the ground that disclosures made by the assessee are not made as per the provisions of the Act or are not acceptable to the revenue. Since, the assessee has fully disclosed the particular of the onetime settlement received from Kotak Mahindra Old Life Insurance and not concealed anything, therefore, the mere fact that even if the treatment given by the assessee is not acceptable to the Revenue, even then the penalty u/s 271(1)(c) of the Act is not imposable. Printed from counselvise.com Page | 4 ITA No. 508/KOL/2025 Kushal Sengupta; A.Y. 2006-07 Consequently, we set aside the order of the ld. CIT (A) and direct the ld. AO to delete the penalty. 06. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 26.08.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated:26.08.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "