Advocate Akhilesh Kumar Sah
Sushmita Sen recent appeal: Where the assessee made certain claim which had not been accepted by the Revenue, penalty under section 271(1)(c) thereon deleted
Very recently, in Sushmita Sen vs. ACIT [I.T.A. No.4351/Mum 2015 and 4352/Mum 2015, A.Y. 2004-05, decided on 14.11.2018], appeals by assessee for Assessment Year [in short referred to as ‘AY’] 2004-05 contested the orders of first appellate authority qua confirmation of certain addition as well as penalty under section 271(1)(c) of the Income Tax Act, 1961 (for short ‘Act’). Since the penalty arose out of quantum addition, both the appeals were disposed-off by way of the common order for the sake of convenience and brevity. In quantum appeal ITA No. 4352/Mum/2015 which contested the order of Commissioner of Income Tax (Appeals)-4, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-4/Tr-26/Appeal-(3)/
1. The learned CIT(A), has erred, in law and the fact and circumstances of the case in confirming certain additions of the order of the learned ACIT 11(1) Mumbai.
2. The learned CIT(A) has erred, in law and facts and circumstances of the case in considering the Capital receipt of Rs.95,00,000/- received from Coca Cola India Ltd. as income liable to tax. The appellant respectfully submits that the additions of his sum may kindly be deleted.
Facts & Decision in brief:
Facts germane to the issue were that the assessee [hereinafter referred to as ‘SS’] being resident individual is a film actress by profession. The assessee was assessed in scrutiny assessment under section 143(3) of the Act on 11/12/2006 by Assistant Commissioner of Income Tax Circle 11(1), Mumbai [in short referred to as ‘AO’] at Rs.258.91 Lacs after certain additions as against returned income of Rs.157.54 Lacs filed by the assessee on 01/11/2004. The assessee derived income by way of fees for acting assignment in films, stage shows and by way of endorsements. The addition of Rs.95 Lacs representing certain receipts from Coca Cola was the sole subject matter of dispute before ITAT, Mumbai.
During assessment proceedings, it transpired that the assessee received a sum of Rs.145 Lacs from a multi-national company namely Coca Cola India Limited [in Short referred to as CCIL / company] but offered only a part of the same i.e. Rs.50 Lacs to tax and claimed the balance Rs.95 Lacs to be capital receipts in nature in view of the fact that the same represented compensation received by assessee towards damages caused to assessee’s reputation. However, the failure to substantiate the same with sufficient documentary evidences and for want of proper justification thereof resulted into impugned addition in the hands of the assessee. The same upon confirmation by first appellate authority on 19/03/2008 came up for hearing before the Tribunal vide ITA No. 5132/Mum/2018 order dated 14/01/2011 wherein the matter was remitted back to the file.
The learned Members of the ITAT, Mumbai considered factual matrix and chain of events as narrated and found that the final settlement as arrived between the parties was not a simple settlement of commercial claims of the assessee arising out of contractual terms. Only an amount of Rs.50 Lacs was due to the assessee and as per the terms of the contract, the assessee had a right to receive only that much of amount in case of default by CCIL and nothing more. As against this, the assessee has received an amount of Rs.145 Lacs out of which Rs.50 Lacs had been offered to tax by the assessee. The balance amount of Rs.95 Lacs was stated to be received for loss of reputation etc. under the circumstances being capital in nature, claimed to be not taxable. The contract did not envisage any additional payment over and above the amount of Rs.150 Lacs to the assessee. The said compensation did not accrue / arise out of exercise of profession by the assessee and could not be construed to be the income of the assessee or profits and gains of profession within the meaning of Section 2(24) and Section 28 of the Act. The compensation could not be termed as any benefit, perquisites arising to the assessee out of exercise of profession. The learned Members of the ITAT opined that the first appellate authority fell in error to adjudicate the same on the threshold of impact of the compensation on profit making apparatus without understating the true nature of the receipts. The learned Members deleted the addition of Rs.95 Lacs.
In Assessee’s Appeal: ITA No. 4351/Mum/2013, against the aforesaid addition of Rs.95 Lacs, the assessee had been saddled with penalty of Rs.31.35 Lacs under section 271(1)(c) vide order dated 15/03/2010. The same, upon confirmation by first appellate authority vide order dated 27/03/2015, was under appeal before ITAT, Mumbai. The learned Members of the Mumbai ITAT held that since, we have allowed assessee’s appeal against quantum addition, the consequential penalty do not survive. Even otherwise, upon consideration of factual matrix, the learned Members were of the opinion that there was no concealment of income or furnishing of inaccurate particulars on the part of the assessee. It was the case where the assessee made certain claim which had not been accepted by the Revenue. Viewed from any angle, the penalty could not survive.
The appeals of the assessee were allowed.