Brief of the case:
New Delhi court held in PR. CIT Vs Control and Switch gear Contractors Ltd that if the assessee had disclosed the income in its return of income though wrongly disclosed it did not mean that the assessee had tried to hide its income so that wrongly disclosed income could not be considered as an undisclosed income and penalty u/s 271(1)( C) could not be levied.
Moreover as the assessee had consulted its tax advisor and acted accordingly so it meant that the intention of assesssee was not to hide the income so penalty u/s 271(1)( C) could not be levied
Facts of the case:
The assessee had given up its rights and received compensation, the Company has entered into a JV
settlement of all past, present and future claim/s made by the Company on the foreign collaborator, and in lieu of agreeing not to use the name after an interim period i. e. to give up the benefit over a period of time for that which it disclosed as a foot note in the ROI as a capital receipt which was non-taxable income which AO argued and considered the same under head profit and gains from business and profession as a taxable income. AO’s view was that as the assessee had wrongly claimed its income which should be treated as an undisclosed income and because of that undisclosed income AO levied penalty u/s 271(1)(C).
Contention of the assessee:
Assessee was of the view that as it had disclosed the income though as foot note in the computation, it could not be treated as an undisclosed income. Assessee relied on the decision held in CIT Vs Liquid investment & Trading Co ITA No 240 of 2009 and CIT vs Sardar Exhibitors 2015-TIOL-618-HC-Del-IT that if the question of the income to be treated as a taxable or non-taxable was already in appeal then the order for levying of penalty on that income could not be ordered. Moreover as he had not hidden his income, he had disclosed the income and penalty u/s 271(1)(c) could only be levied when the assessee had not disclosed his income.
Contention of the revenue:
Revenue was of the view that if the assessee had wrongly claimed the income in its return of income it would be treated as an undisclosed income irrespective of the fact that the assessee had disclosed income as a foot note and in the computation. If the assessee had furnished inaccurate particulars of the income in respect of its claim of capital gains or receipt of capital nature it should be treated as an undisclosed income. Moreover wrongly claim would be treated as an undisclosed income if the information was given or not.
Held by High Court:
High Court held that as the assessee had disclosed the income as a capital receipt nor as a transfer of capital asset after consulting its lawyer in its computation so it could not be treated as an undisclosed income and penalty u/s 271(1)(C) could not be levied. Penalty u/s 271(1)(C) could be levied when the assessee tried to hide his income and AO afterwards during assessment capture that income and put the same to tax. Here in the above case assessee had disclosed his income though the views of both the AO and assessee were different regarding the taxability which was disputed under an appeal. So it could not be said that the assessee had not disclosed his income.
With this the appeal of revenue was dismissed.