No penalty can be levied under s 271(1)(c) when there was only the CBDT Circular on the taxation of ESOP shares and where the assessee offered certain income in a particular year and paid taxes bona fidely and the AO taxed the same in another year.
ACIT Vs Vijay Kumar Jindal (ITAT Delhi)- There was no law on taxation of Esop shares for A.Y. 1999-2000. Only CBDT Circular no. 710 was there clause (iv) of the same provided that where shares have been offered only to the employees, the value of perquisite will be the difference between the market price of the shares on the date of acceptance of the offer by the employee and the price at which the shares have been offered. In this regard, assessee’s contention is that offer & acceptance of shares took place on 1.2.1999. Assessee in its bonafide belief that the same was taxable in the assessment year 1999-2000 has offered the same for taxation. In assessment year 1999-2000, he already paid taxes also on the same.
On different interpretation of law Assessing Officer has considered the accessibility of the income for A.Y. 2000-01. As such, the perquisites value has also been enhanced, which was totally dependent on the market value of the shares at the stock exchange on the date of exercising of option. Assessing Officer ‘s action has been rejected by the Ld. Commissioner of Income Tax (Appeals) but confirmed by the ITAT that the same is to be taxed in assessment year 2000-01. However, this would not lead to a conclusion that assessee has made any concealment or the explanation given by the assesseeis not bonafide. Thus, we find that issue was controversial and existence of two opinions cannot be ruled out, at the relevant time.
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH “E” NEW DELHI
Asst. Commissioner of Income Tax, Vs Sh. Vijay Kumar Jindal
I.T.A. No. 4237/Del/2009
A.Y. : 2000- 01
ORDER
This appeal by the Revenue is directed against the order of the Ld. Commissioner of Income Tax (Appeals) dated 06.8.2009 pertaining to assessment year 2000-01.
2. The issue raised is that Ld. Commissioner of Income Tax (Appeals) has erred in deleting the levy of penalty u/s. 271(1)(c) of the IT Act.
The assessee is an individual, who at the relevant time was working with M/s Zee Telefilms Ltd. While in service, he was given an option (ESSOP) to acquire 2,00,000 equity shares of M/s Zeee Telefilms Ltd. @ 212 per share. This offer was made vide letter dated 1.2.99 by his employer. As per the letter of offer ofwarrants, the assessee could not have converted the warrants into shares before 31.3.1999, as the same was to be exercised within the period of 3 months from the announcement of financial results of the company for the year ending 31.3.1999. As per the letter of offer, it was also obligatory, on the part of the assessee to make full payment for conversion of warrants into shares. The assessee exercised his option on 30.4.1999 and was allotted the shares, accordingly. However, the assessee declared a perquisite of 7.72 crores for assessment year 1999-2000 at 386 per share, being the difference between the market value of 598 per share as on 1.2.1999 and 212 being the cost paid for the said 2,00,000 shares. In the order issued under section 143(3), the Assessing Officer assessed the perquisite at 916.25 shares being the difference between the market value of 1128.25 per share as on 30.4.1999 (date of exercise of option) and 212. In other words, while the assessee declare the transaction in the assessment year 1999-2000, the Assessing Officer considered the transaction and the resultant income in the assessment year 2000-01. Secondly, the Assessing Officer enhanced the perquisite value of 916.25 per share in the assessment year 2001-01, instead of 598, declared by the assessee for the assessment year 1999-2000. Eventuality, after travelling through the Ld. Commissioner of Income Tax (Appeals), who deleted the addition, the matter was considered by the Honourable ITAT. In ITA No. 1668/Del/2003, in an order dated 29th August, 2008, the Honourable ITAT, ‘G’ Bench, restored the order of the Assessing Officer.
