{"id":3667,"date":"2011-09-13T23:05:57","date_gmt":"2011-09-13T17:35:57","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=3667"},"modified":"2011-09-13T23:05:57","modified_gmt":"2011-09-13T17:35:57","slug":"acit-vs-ms-khanna-annadhanam-itat-delhi-despite-disclosure-legal-opinion-high-court-appeal-on-merits-s-2711c-penalty-valid-if-issue-not-debatable","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/acit-vs-ms-khanna-annadhanam-itat-delhi-despite-disclosure-legal-opinion-high-court-appeal-on-merits-s-2711c-penalty-valid-if-issue-not-debatable\/","title":{"rendered":"ACIT vs. M\/s. Khanna & Annadhanam (ITAT Delhi)"},"content":{"rendered":"\n\n
Click here to download the judgement (khanna_annadanam_271_1_c_penalty.pdf) <\/strong> <\/a><\/p><\/td>\n<\/tr>\n<\/table>\n


\nDespite disclosure, legal opinion, favourable CIT(A) order & High Court appeal on merits, s. 271(1)(c) penalty leviable if issue not “debatable” in Tribunal’s view
\n<\/strong><\/p>\n

The assessee, a firm of Chartered Accountants, was one of the “associate members” of Deloitte Haskins & Sells pursuant to which it was entitled to practice in that name. Deloitte desired to merge all the associate members into one firm. As this was not acceptable to the assessee, it withdrew from the membership and received consideration of Rs. 1.15 crores from Deloitte<\/em>. The said amount was credited to the partners’ capital accounts & claimed to be a non-taxable capital receipt<\/em> by the assessee. The AO rejected the claim though the CIT (A) accepted<\/em> it on the ground that it had “great force<\/em>“. The Tribunal reversed the CIT (A). The AO levied s. 271(1)(c) penalty which the CIT(A) deleted<\/em>. On appeal by the department to the Tribunal, the assessee argued that penalty was not leviable because (i) there was a disclosure of the facts<\/em> in the computation & the balance sheet, (ii) the opinion of 3 tax experts<\/em> had been taken, (iii) the issue was debatable<\/em> & (iv) the assessee’s appeal<\/em> on the merits had been admitted<\/em> by the High Court. HELD allowing the appeal:<\/p>\n

(i) S. 271(1)(c) imposes “strict civil liability<\/strong>“. It is not understandable how a CA firm can have any doubt about the receipt being clearly a professional receipt. If it is so, it is not understandable how the assessee can discharge its role as a professional consultant<\/strong>. It is unimaginable that a professional firm will have any doubt on such a simple proposition of professional receipt<\/strong>. The advance tax payment<\/strong> is an indication of the mindset<\/strong> of the assessee;<\/p>\n

(ii) The fact that the legal opinions were not furnished during the assessment proceedings<\/strong> (but were furnished only during the CIT(A) penalty proceedings<\/em>) indicates that the assessee realized the ineffectiveness<\/strong> of these opinions and still ventured into making the non-allowable claim;<\/p>\n

(iii) Though there was disclosure in the computation and balance sheet<\/strong>, in order to minimize disclosure, the assessee took the “smart route” of directly crediting the receipt in the capital accounts of partners to evade tax<\/strong>;<\/p>\n

(iv) The fact that a substantial question of law<\/strong> on the merits was admitted by High Court does not mean penalty is not leviable (Rupam Mercantiles<\/strong> 91 ITD 237 (Ahd) (TM) not followed);<\/p>\n

\nNote<\/strong>: Dharmendra Textiles<\/a><\/strong> 306 ITR 277 (SC) was followed; Reliance Petroproducts<\/a><\/strong> 322 ITR 158 (SC) was referred. See also Nayan Builders<\/a><\/strong> (ITAT Mumbai)\n<\/div>\n","protected":false},"excerpt":{"rendered":"

S. 271(1)(c) imposes “strict civil liability<\/strong>“. It is not understandable how a CA firm can have any doubt about the receipt being clearly a professional receipt. If it is so, it is not understandable how the assessee can discharge its role as a professional consultant<\/strong>. It is unimaginable that a professional firm will have any doubt on such a simple proposition of professional receipt<\/strong>. The advance tax payment<\/strong> is an indication of the mindset<\/strong> of the assessee<\/p>\n

Read more ›<\/a><\/div>\n

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