The main legal point established in the judgment is that to impose a penalty under Section 271(1)(c) of the Income Tax Act, there must be a deliberate attempt to conceal the particulars of income or furnish inaccurate particulars. Mere disclosure of a debatable issue does not warrant the imposition of penalty.

JUDGMENT

Vivek Rusia, J. - The appellant/Commissioner of Income Tax - I has filed the present appeal under Section 260-A of the Income Tax Act, 1961 being aggrieved by the order dated 30.04.2003 passed by the Income Tax Appellate Tribunal in ITA Nos.284/IND/02 and 339/IND/02 for the Assessment Year, 1992-93.

2. The facts of the case in short are as under:-

2.1. Respondent/Company was established in the year 1985 and thereafter entered into the manufacturing of tyers and trading of fabrics. The respondent filed an IT return on 31/12/1992 showing the loss of Rs. 1,02,86,772/- with a Tax Audit Report both for the Tyer Division and Fabric Division. During the assessment proceedings, it was noticed that the respondent started its commercial production on 4/5/1988 with business losses claimed in the AY 1989-90. Letter on the respondent claimed that commercial production was started on 1/31992 but the Assessment Officer did not accept the claim of the petitioner in respect of capitalizing the amount of Rs.6,00,91,886/- in respect of expenses and loss incurred up to 01.03.1992. The assessment was completed on 28.02.1995 determining total income of Rs.2,42,17,558/- with following conditions: -

2.2. Being aggrieved by the aforesaid assessment order, respondent/assessee preferred an appeal before the Commissioner of Income Tax (A) and vide order dated 08.12.1995, the appellate authority confirmed the same with additions to the following extent:-

2.3. Thereafter the respondent/assessee approached the Income Tax Appellate Tribunal and vide order dated 03.01.1997, the aforesaid assessment has been confirmed to the extent indicated below:-

2.4. Later on, vide notice dated 13.07.1997 issued under Section 148 of the Income Tax Act certain income was found to escape from assessment. During the assessment proceedings, the respondent/assessee offered an income of Rs.4,64,164/- on account of power subsidy and addition of Rs.12,33,469/- on account of interest payable to the financial institution. The assessment Officer finalized the assessment vide order dated 28.02.1995. During this assessment proceeding, the Assessment Officer considered the disclosure made by the respondent/assessee about the receipt of the amount of US $ 11,18,000/- in two instalments paid due to the termination of the agreement. Since the respondent/assessee was maintaining the book of account on the mercantile basis in the Tax Audit report, hence, the first instalment of US $ 11,18,000/- received on 05.12.1991 was disclosed in the return of the Assessment Year, 1992 - 93 and the second instalment of US $ 8,00,000/- received on 13.11.1992 was disclosed in Assessment Year, 1993 - 94. That the entire receipts amount of compensation of Rs.5,18,02,396/- has been taxed as an income of Assessment Year, 1992 - 93.

2.5. Being aggrieved by the aforesaid order of the Assessment Officer, an appeal was filed before the Commissioner of Income Tax. In this appeal, the respondent/assessee contended that the amount received on termination of the agreement was not an account of the surrender of any right or relinquishment of any capital assets but was like reimbursement of the losses and accounts hence ought to have been shown as capital receipts but the Assessment Officer has wrongly construed the same as revenue receipts. The learned Commissioner did not accept the aforesaid contention and held that amount of Rs.5,18,02,396/- received under settlement on 21.11.1991 has rightly been taxed and business income by the Assessment Officer in the present Assessment Year i.e. 1992 - 93 and dismissed the appeal.

2.6. In pursuant to the aforesaid order, the Deputy Commissioner of Income Tax issued a revised notice of demand and challan. Thereafter, the appellant approached the Income Tax Appellate Tribunal along with an application for a stay. At the instance of the respondent /assessee, an Income Tax Reference was sent to the High Court on the issue of 'whether in the facts and circumstance of case, the Trib