Kushal Sengupta Vs ITO (ITAT Kolkata)
ITAT Kolkata allowed the assessee’s appeal and deleted ₹5.28 lakh penalty under Section 271(1)(c), holding that the one-time settlement received from Kotak Mahindra Life Insurance was a capital receipt and fully disclosed in the return.
The Income Tax Appellate Tribunal (ITAT), Kolkata Bench, has quashed a penalty of ₹5,28,234 levied under Section 271(1)(c) of the Income-tax Act, 1961, against Kushal Sengupta for the Assessment Year 2006-07. The penalty was imposed by the Assessing Officer (AO) and upheld by the National Faceless Appeal Centre (NFAC) for alleged concealment of income. The central issue of the case was the tax treatment of a ₹16 lakh one-time settlement received by the assessee from his former employer, Kotak Mahindra Old Life Insurance.
The assessee, a retired individual, had received this amount as compensation for the loss of his source of income. He declared the amount in his income tax return, but claimed it as an exempt, non-taxable capital receipt. The AO, however, treated the amount as taxable income and passed an assessment order under Section 144, adding the entire ₹16 lakh to the assessee’s income. This addition was subsequently confirmed by the CIT(A). Separately, the AO imposed a penalty for concealment of income, asserting that the assessee had not filed an appeal with the first appellate authority—a claim later found to be factually incorrect. The NFAC affirmed the penalty, holding that the “settlement proceeds” were taxable as remuneration and that the assessee had “consciously and deliberately concealed the income.”
