₹5.28 Lakh Penalty u/s 271(1)(c) on One-Time Settlement: ITAT Deletes, Holds It Capital in Nature and Fully Disclosed [Read Order]
Relying on Supreme Court rulings in Oberoi Hotels (P.) Ltd. and Reliance Petroproducts Pvt. Ltd., the ITAT observed that full disclosure prevents penalty even if the tax authorities disagreed with the treatment, and set aside the CIT(A) order
Penalty
Penalty
The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) held a one-time settlement from Kotak Mahindra Old Life Insurance as capital in nature and fully disclosed, and deleted a penalty of ₹5.28 lakh imposed under section 271(1)(c) of Income Tax Act,1961.
Kushal Sengupta, appellant-assessee, filed his income tax return on 30.10.2006, declaring ₹1,51,200 as total income. During the year, he received ₹16,00,000 from Kotak Mahindra Old Life Insurance, which he claimed as exempt compensation for loss of income. The case was selected for scrutiny, and the Assessing Officer (AO) added the ₹16,00,000 to his income under section 144 on 17.12.2008.
The Commissioner of Income Tax(Appeals)[CIT(A)] upheld the addition, and the Tribunal later remanded the matter to the AO for fresh consideration. Meanwhile, the AO imposed a penalty of ₹5,28,234 under section 271(1)(c), stating that the assessee had concealed income and had not filed an appeal as per ITBA records.
Your Ultimate Guide to India’s Latest Income Tax Laws, Click Here
The two member bench comprising Pradip Kumar Choubey (Judicial Member) and Rajesh Kumar (Accountant Member) noted that the assessee, employed with Kotak Mahindra Old Life Insurance, received a one-time settlement as compensation for loss of income. He disclosed the amount in his return, claiming it as a capital receipt.
The AO imposed a penalty under section 271(1)(c), wrongly stating that no appeal had been filed before the CIT(A), who treated the settlement as taxable remuneration. The tribunal held that the settlement represented a capital receipt since the assessee’s source of income was extinguished.
Relying on the Supreme Court decisions in Oberoi Hotels (P.) Ltd. and Reliance Petroproducts Pvt. Ltd., the bench observed that full disclosure of income prevents penalty, even if the Revenue disagrees with the treatment.
The appellate tribunal therefore set aside the CIT(A) order and directed the AO to delete the penalty.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
