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Penalty deleted where the assessment year was debatable

Assessee, a doctor, filed return. AO observed that assessee received Rs. 1 crore from M/s Cardiac Care & Allied Health (P) Ltd. towards non competition fees during assessment year but only Rs 29 lakhs was shown as income. AO made addition of Rs 70 lakhs u/s 28(Va)(a). AO allowed 10% depreciation where assessee had claimed 100% depreciation on temporary structure. CIT(A) deleted the penalty. Dismissing Revenues appeal, ITAT upheld CIT(A) order.-500087

1. The assessee is a Doctor by profession. He filed return on 01/11/2007 declaring total income of Rs. 1,12,30,630/-. The case was scrutinized U/s 143(3) of the Act. The ld Assessing Officer observed that the assessee had received Rs. 1 crore from M/s Cardiac Care & Allied Health (P) Ltd. towards non competition fees during year under consideration but only Rs. 29,26,667/- was computed income under the head income from business and profession for taxation, therefore, the Assessing Officer made addition of Rs. 70,83,333/- U/s 28(Va)(a) of the Act. Further there was a discrepancy in the depreciation claimed by the assessee in case of temporary structure. The assessee claimed 100% depreciation on temporary structure whereas the Assessing Officer allowed depreciation @ 10%. The total addition was made by the Assessing Officer at Rs. 1,53,693/- under the head depreciation on building.

2. The ld Assessing Officer held that the assessee had both concealed his income and had furnished inaccurate particulars of his income, therefore, she imposed penalty U/s 271(1)(c) of the Act at Rs. 24,12,540/-, which is 100% of tax sought to be evaded on concealed income.

3. CIT(A), who had deleted the penalty by observing that the Assessing Officer imposed penalty on two counts firstly he has not offered full amount of non-competition fees in the relevant assessment year and the addition in respect of above aspect is confirmed by the Hon'ble ITAT and secondly the addition made in respect of depreciation of building, which was partly confirmed by the CIT(A) and the assessee did not prefer any appeal in this regard.

4. On Revenues appeal, the ITAT heldas under:As per agreement between the assessee and M/s Cardiac Care & Allied Health (P) Ltd., the assessee was required to not to directly or indirectly compete with the business of the company for a period of 2 years from the date of change of the management. The assessee shall not own a business substantially similar to or competitive with present business of the company. These restrictions on competition would be operative only for two years from the date of change of management. If Dr. Ravindra Kumar Tongia fails to meet the obligation of his clause, he would pay Rs. 4 lacs per month for the balance period remaining out of agreed period of 2 years as penalty to the second party. The second party would pay Rs. 50 lacs per annum totaling Rs. 100 lacs in advance to the assessee, therefore, there was a restriction imposed in the agreement itself by the second party on the assessee. Accordingly, the assessee bifurcated non-competition fees proportionately in three years. The assessee has given note in computation of income about receipt of non-competition fees and proportionately income disclosed on account of this. Therefore, the assessee has not furnished any inaccurate particulars of income but the year of assessability was disputed between the revenue and the assessee, which has been decided by the Coordinate Bench i.e. year of the receipt U/s 28(Va)(a) of the Act. It is a fact that the issue was debatable and the ld DR has not controverted the finding given by the ld CIT(A). The case laws referred by the ld CIT(A) as well as the AR are squarely applicable on case of the assessee on non-competition fees. Further issue of depreciation is also debatable as it is allowed 100% depreciation or 10% depreciation but particulars of temporary shade and investment made therein has been disclosed by the assessee. Therefore, we uphold the order of the ld CIT(A).

5. In the result, the revenue's appeal is dismissed.

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Ravindra Kumar Tongia, Jaipur vs Department Of Income Tax on 14 December, 2015 IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM ITA No. 754/JP/2012 Assessment Year : 2007-08.Assistant Commissioner of Vs Ravindra Kumar Tongia,Income Tax, . Circle-7, Jaipur. Scheme, Jaipur.Revenue by : Shri O.P. Bhateja (Addl.CIT) Assessee by : Shri Rajiv Sogani (C.A.) Date of Hearing : 30/11/2015.Date of Pronouncement : 14/12/2015.ORDER PER T.R. MEENA, A.M.This is an appeal filed by the revenue against the order dated 06/06/2012 of the learned C.I.T.(A)-II Jaipur, for A.Y. 2007-08. The effective ground of appeal is as under:-"(i) The CIT(A) has erred in deleting the penalty under section 271(1)(c) of the I.T. Act, imposed on account of inaccurate particulars furnished in respect of the receipts of Rs. 1 crore towards non-competition fees in ITA No. 754/JP/2012 ACIT Vs Ravindra Kumar Tongia the facts and circumstances differentiated from the facts and circumstances in the decisions relied upon by the CIT(A)."2. The sole ground of revenue's appeal is against deleting the penalty imposed U/s 271(1)(c) of the Income Tax Act, 1961 (in short the Act) at Rs. 24,12,540/-. The assessee is a Doctor by profession. He filed return on 01/11/2007 declaring total income of Rs. 1,12,30,630/-. The case was scrutinized U/s 143(3) of the Act. The ld Assessing Officer observed that the assessee had received Rs. 1 crore from M/s Cardiac Care & Allied Health (P) Ltd. towards non competition fees during year under consideration but only Rs. 29,26,667/- was computed income under the head income from business and profession for taxation, therefore, the Assessing Officer gave reasonable opportunity of being heard, which was availed by the assessee. After considering the assessee's reply, the ld Assessing Officer made addition of Rs. 70,83,333/- U/s 28(Va)(a) of the Act. He further made addition on account of interest on mortgage loan which was pertained to loan taken from ICICI for the purpose of house construction. However, the interest was debited against the business income, therefore, addition of Rs. 7,85,660/- was made by the Assessing Officer. Further there was a discrepancy in the depreciation claimed by the assessee in case of temporary structure. The assessee claimed 100% depreciation on temporary structure whereas the Assessing Officer allowed depreciation @ 10%. The total addition was made by the Assessing Officer at Rs. 1,53,693/- under the head depreciation on building. The penalty proceeding U/s 271(1)(c) has been initiated by the Assessing Officer for furnishing inaccurate particulars of income. Before imposing penalty U/s 271(1)(c), the ld Assessing Officer gave reasonable opportunity of being heard, which has been reproduced by the Assessing Officer on page No. 3 and 4. After considering the assessee's reply, the ld Assessing Officer held that the assessee could not furnish accurate particulars of his income as under:(1) In respect of receipt from company on account of non-competition, the assessee had received the whole amount in the relevant previous year and hence the income on this account was liable to tax in the same relevant year. But the assessee had offered only Rs. 29,26,667/- out of the income of Rs. 1 Crore for taxation purpose. It becomes clear that the assessee had concealed his income by not offering the full amount in the relevant assessment year.(2) In respect of depreciation on building, the addition made by the Assessing Officer was confirmed by the ld CIT(A) by ITA No. 754/JP/2012 ACIT Vs Ravindra Kumar Tongia reduction in quantum of addition. In this case, the assessee had furnished inaccurate claim of depreciation for impugned building by claiming to be a temporary structure."The ld Assessing Officer held that the assessee had both concealed his income and had furnished inaccurate particulars of his income, therefore, she imposed penalty U/s 271(1)(c) of the Act at Rs. 24,12,540/-, which is 100% of tax sought to be evaded on concealed income.3. Being aggrieved by the order of the Assessing Officer, the assessee the matter before the ld CIT(A), who had deleted the penalty by observing that the Assessing Officer imposed penalty on two counts firstly he has not offered full amount of non-competition fees in the relevant assessment year and the addition in respect of above aspect is confirmed by the Hon'ble ITAT and secondly the addition made in respect of depreciation of building, which was partly confirmed by the CIT(A) and the assessee did not prefer any appeal in this regard. As the Assessing Officer was satisfied that the assessee has concealed the income on both counts, therefore, he imposed penalty of Rs. 24,12,540/-. The assessee has submitted all the detailed information and supporting documents in respect of claim made towards bifurcation of non-competition fees in different assessment years and depreciation claimed @ 100% on temporary structure. Thus, he held that the assessee has not filed any inaccurate particulars or concealed information on this account. The assessee did offer the entire non competition fees of Rs. 1 crore in three assessment years and taxes were also paid thereon. Thus, it was evident that the assessee has no intention to suppress his income or avoidance of tax, as such. The addition in this regard was resultant to the difference of opinion on the part of Assessing Officer and the assessee i.e. year of assessabilty. Therefore, there were two views on this issue and it is debatable, for which he relied upon the decision of Hon'ble Jurisdictional High court in the case of Harshvardhan Chemicals & Minerals Ltd. (259 ITR 212). The ld Assessing Officer imposed the penalty under this Section on the basis of finding given in the assessment order and no new material has brought on record while imposing penalty to establish that the explanation filed by the assessee were false or incorrect and simply relied upon the fact that such additions have been confirmed at the appeal stage. The assessment proceedings and penalty proceeding are different in nature as the consideration arises in the imposition of penalty and are different in the assessment order. Therefore, both are required to be dealt in different manner and any addition made in assessment proceedings may not by itself justified in imposing the penalty. The ld CIT(A) has relied on the decision of Hon'ble Rajasthan High Court in the case of Goswami Smt. Chandralata Bahuji (125 ITR 700). It is true that the discrepancy observed during the assessment proceedings were found sufficient to make addition towards the issue, as discussed above, if in this regard, it is held that the Assessing Officer has not spelt out any other additional or concrete grounds to justify the imposition of concealment penalty on such findings and imposed the penalty in rather brief and mechanical manner. He further relied on the decision in the case of Reliance Petro Products Pvt. Ltd. (322 ITR 158) wherein it has been held that merely rejection of any claim of the assessee, will not automatically entail to the concealment penalty, unless some inaccurate particulars are filed in this regard. He further relied on the decision of Hon'ble Supreme Court in the case of T.Ashok Pai (281 ITR 11), Hon'ble Rajasthan High Court decision in the case of Oriental Power Cable Ltd. (303 ITR 49) wherein it has been held that penalty cannot be simply imposed for the reasons that the addition made U/s 143(3) has been admitted or confirmed at appellate level. In case of Elilly Lilly & Company (312 ITR 225) the Hon'ble Supreme Court has held that penalty proceeding is not an automatic or mandatory fallout of the addition made during the assessment proceedings, therefore, the same should not be levied in routine manner. Some additional facts are required to be brought to the light for imposition of such concealment penalty. However, in the present case, the ld Assessing Officer simply relied upon the fact that the above additions have been upheld by the appellate authority and brought nothing on record to prove that the appellant has in fact submitted inaccurate particulars or concealed the income as such. He further relied on the decision of Hon'ble Supreme Court in the case of Dilip N Sharoff (291 ITR 520). After considering the legal as well as factual position on this issue, the ld CIT(A) deleted the penalty.4. Now revenue is in appeal before us. The ld DR vehemently supported the order of the Assessing Officer and argued that the addition made by the Assessing Officer has been confirmed by the Hon'ble ITAT, therefore, penalty levied by the Assessing Officer is justified. He relied on the decision in the case of Mahindra Intertrade Ltd. Vs DCIT (2011) 16 taxmann.com 77 (Mum) wherein the Hon'ble ITAT has held that the assessee declared loss in return but certain additions were made by the Assessing Officer U/s 143(3), which was confirmed by the ld CIT(A) and well as Hon'ble ITAT, held that the assessee has filed inaccurate particulars of income. The Hon'ble ITAT by delivering the decision has considered the decision of Hon'ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (supra) and Hon'ble Delhi High Court decision in the case of CIT ITA No. 754/JP/2012 ACIT Vs Ravindra Kumar Tongia Vs. Zoom communication Ltd. (2010) 327 ITR 510. He further relied on the decision of Hon'ble Gujarat High Court in the case of CIT Vs. Prakash S Vyas (2015) 58 taxmann.com 334 (Guj) wherein it has been held that the Tribunal was not justified in deleting the penalty because tax appeal is admitted and not make the issue debatable. Therefore, he prayed to confirm the penalty.5. At the outset, the ld AR of the assessee has submitted that the first appeal for quantum proceeding was allowed, which suggests that the stand taken by the assessee was plausible one. The Hon'ble ITAT directed the Assessing Officer by allowing the revenue's appeal in quantum proceeding to modify the subsequent two years income by reducing the amount disclosed by the assessee. It is shown that the assessee has not concealed any particulars of income and not concealed the income. The only difference in view point was the year of taxability. He further argued that the ld CIT(A) has examined all the factual and legal issue and allowed the appeal in the favour of the assessee. He again referred the case law considered by the ld CIT(A) in his order.6. We have heard the rival contentions of both the parties and perused the material available on record. As per agreement between the assessee and M/s Cardiac Care & Allied Health (P) Ltd., the assessee was required to not to directly or indirectly compete with the business of the company for a period of 2 years from the date of change of the management. The assessee shall not own a business substantially similar to or competitive with present business of the company. These restrictions on competition would be operative only for two years from the date of change of management. If Dr. Ravindra Kumar Tongia fails to meet the obligation of his clause, he would pay Rs. 4 lacs per month for the balance period remaining out of agreed period of 2 years as penalty to the second party. The second party would pay Rs. 50 lacs per annum totaling Rs. 100 lacs in advance to the assessee, therefore, there was a restriction imposed in the agreement itself by the second party on the assessee. Accordingly, the assessee bifurcated non-competition fees proportionately in three years. The assessee has given note in computation of income about receipt of non-competition fees and proportionately income disclosed on account of this. Therefore, the assessee has not furnished any inaccurate particulars of income but the year of assessability was disputed between the revenue and the assessee, which has been decided by the Coordinate Bench i.e. year of the receipt U/s 28(Va)(a) of the Act. It is a fact that the issue was debatable and the ld DR has not controverted the finding given by the ld CIT(A). The case laws referred by the ld CIT(A) as well as the AR are squarely applicable on case of the assessee on non-competition fees. Further issue of depreciation is also debatable as it is allowed 100% depreciation or 10% depreciation but particulars of temporary shade and investment made therein has been disclosed by the assessee. Therefore, we uphold the order of the ld CIT(A).7. In the result, the revenue's appeal is dismissed. Order pronounced in the open court on 14/12/2015.

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1. The assessee is a Doctor by profession. He filed return on 01/11/2007 declaring total income of Rs. 1,12,30,630/-. The case was scrutinized U/s 143(3) of the Act. The ld Assessing Officer observed that the assessee had received Rs. 1 crore from M/s Cardiac Care &amp; Allied Health (P) Ltd. towards non competition fees during year under consideration but only Rs. 29,26,667/- was computed income under the head income from business and profession for taxation, therefore, the Assessing Officer made addition of Rs. 70,83,333/- U/s 28(Va)(a) of the Act. Further there was a discrepancy in the depreciation claimed by the assessee in case of temporary structure. The assessee claimed 100% depreciation on temporary structure whereas the Assessing Officer allowed depreciation @ 10%. The total addition was made by the Assessing Officer at Rs. 1,53,693/- under the head depreciation on building. 2. The ld Assessing Officer held that the assessee had both concealed his income and had furnished inaccurate particulars of his income, therefore, she imposed penalty U/s 271(1)(c) of the Act at Rs. 24,12,540/-, which is 100% of tax sought to be evaded on concealed income.3. CIT(A), who had deleted the penalty by observing that the Assessing Officer imposed penalty on two counts firstly he has not offered full amount of non-competition fees in the relevant assessment year and the addition in respect of above aspect is confirmed by the Hon'ble ITAT and secondly the addition made in respect of depreciation of building, which was partly confirmed by the CIT(A) and the assessee did not prefer any appeal in this regard.4. On Revenues appeal, the ITAT heldas under:As per agreement between the assessee and M/s Cardiac Care &amp; Allied Health (P) Ltd., the assessee was required to not to directly or indirectly compete with the business of the company for a period of 2 years from the date of change of the management. The assessee shall not own a business substantially similar to or competitive with present business of the company. These restrictions on competition would be operative only for two years from the date of change of management. If Dr. Ravindra Kumar Tongia fails to meet the obligation of his clause, he would pay Rs. 4 lacs per month for the balance period remaining out of agreed period of 2 years as penalty to the second party. The second party would pay Rs. 50 lacs per annum totaling Rs. 100 lacs in advance to the assessee, therefore, there was a restriction imposed in the agreement itself by the second party on the assessee. Accordingly, the assessee bifurcated non-competition fees proportionately in three years. The assessee has given note in computation of income about receipt of non-competition fees and proportionately income disclosed on account of this. Therefore, the assessee has not furnished any inaccurate particulars of income but the year of assessability was disputed between the revenue and the assessee, which has been decided by the Coordinate Bench i.e. year of the receipt U/s 28(Va)(a) of the Act. It is a fact that the issue was debatable and the ld DR has not controverted the finding given by the ld CIT(A). The case laws referred by the ld CIT(A) as well as the AR are squarely applicable on case of the assessee on non-competition fees. Further issue of depreciation is also debatable as it is allowed 100% depreciation or 10% depreciation but particulars of temporary shade and investment made therein has been disclosed by the assessee. Therefore, we uphold the order of the ld CIT(A).5. In the result, the revenue's appeal is dismissed.

1. The assessee is a Doctor by profession. He filed return on 01/11/2007 declaring total income of Rs. 1,12,30,630/-. The case was scrutinized U/s 143(3) of the Act. The ld Assessing Officer observed that the assessee had received Rs. 1 crore from M/s Cardiac Care & Allied Health (P) Ltd. towards non competition fees during year under consideration but only Rs. 29,26,667/- was computed income under the head income from business and profession for taxation, therefore, the Assessing Officer made addition of Rs. 70,83,333/- U/s 28(Va)(a) of the Act. Further there was a discrepancy in the depreciation claimed by the assessee in case of temporary structure. The assessee claimed 100% depreciation on temporary structure whereas the Assessing Officer allowed depreciation @ 10%. The total addition was made by the Assessing Officer at Rs. 1,53,693/- under the head depreciation on building. 2. The ld Assessing Officer held that the assessee had both concealed his income and had furnished inaccurate particulars of his income, therefore, she imposed penalty U/s 271(1)(c) of the Act at Rs. 24,12,540/-, which is 100% of tax sought to be evaded on concealed income.3. CIT(A), who had deleted the penalty by observing that the Assessing Officer imposed penalty on two counts firstly he has not offered full amount of non-competition fees in the relevant assessment year and the addition in respect of above aspect is confirmed by the Hon'ble ITAT and secondly the addition made in respect of depreciation of building, which was partly confirmed by the CIT(A) and the assessee did not prefer any appeal in this regard.4. On Revenues appeal, the ITAT heldas under:As per agreement between the assessee and M/s Cardiac Care & Allied Health (P) Ltd., the assessee was required to not to directly or indirectly compete with the business of the company for a period of 2 years from the date of change of the management. The assessee shall not own a business substantially similar to or competitive with present business of the company. These restrictions on competition would be operative only for two years from the date of change of management. If Dr. Ravindra Kumar Tongia fails to meet the obligation of his clause, he would pay Rs. 4 lacs per month for the balance period remaining out of agreed period of 2 years as penalty to the second party. The second party would pay Rs. 50 lacs per annum totaling Rs. 100 lacs in advance to the assessee, therefore, there was a restriction imposed in the agreement itself by the second party on the assessee. Accordingly, the assessee bifurcated non-competition fees proportionately in three years. The assessee has given note in computation of income about receipt of non-competition fees and proportionately income disclosed on account of this. Therefore, the assessee has not furnished any inaccurate particulars of income but the year of assessability was disputed between the revenue and the assessee, which has been decided by the Coordinate Bench i.e. year of the receipt U/s 28(Va)(a) of the Act. It is a fact that the issue was debatable and the ld DR has not controverted the finding given by the ld CIT(A). The case laws referred by the ld CIT(A) as well as the AR are squarely applicable on case of the assessee on non-competition fees. Further issue of depreciation is also debatable as it is allowed 100% depreciation or 10% depreciation but particulars of temporary shade and investment made therein has been disclosed by the assessee. Therefore, we uphold the order of the ld CIT(A).5. In the result, the revenue's appeal is dismissed.

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Penalty deleted where the assessment year was debatable