2015 (5) TMI 1109 - AT - Income Tax

Penalty u/s.271(1)(c) - 50% of revenues attributable to India-Royalty income 25% of revenues attributable to India-FTS and 70% of revenues attributable to India- Business Income - Held that - Assessment has been made on the basis of difference of opinion regarding the interpretation of law on the question of PE existence of agency PE royalty and FTS. There is no concealment of any fact nor have any additional facts been discovered proving the earlier disclosure in the return to be false or wrong. The findings recorded by the CIT(A) are just and proper and after consideration of various judicial pronouncements. Respectfully following the order of the Tribunal in assessee s own case which has been upheld by the Hon ble Bombay High Court as well as the judgment of the Hon ble Supreme Court in the case of Reliance Petroproducts Ltd. (2010 (3) TMI 80 - SUPREME COURT ) we see no reason to interfere in the findings of the CIT(A) deleting the penalty so levied by the AO. - Decided against revenue

Summary

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.
2. Determination of the taxability of the assessee's income in India.
3. Interpretation of legal provisions and judicial precedents regarding concealment of income and furnishing of inaccurate particulars.

Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c):
The core issue was whether the assessee had concealed particulars of income or furnished inaccurate particulars, thereby attracting penalty under Section 271(1)(c) of the Income Tax Act. The assessee, a company incorporated in the Netherlands and part of the DHL Group, had filed returns disclosing income from other sources and NIL income from business. The assessment was completed with a significant increase in the assessed income, leading to penalty proceedings for alleged concealment and furnishing of inaccurate particulars.

2. Determination of Taxability of Income:
The CIT(A) had determined the revenues attributable to India as follows:
- 5% as Royalty income
- 25% as Fees for Technical Services (FTS)
- 70% as Business Income

The assessee's income was thus assessed at a higher amount than declared, leading to the initiation of penalty proceedings. The CIT(A) directed the deletion of the entire penalty, observing that the assessee had made full disclosures and the assessment was based on a different interpretation by the AO.

3. Interpretation of Legal Provisions and Judicial Precedents:
The CIT(A) and the Tribunal relied on several judicial precedents to conclude that the penalty was not warranted. Key observations included:

- The assessee had disclosed all facts and made a bonafide claim based on its interpretation of the law.
- The assessment was based on a difference of opinion rather than concealment or furnishing of inaccurate particulars.
- The Tribunal referred to the Supreme Court's judgment in CIT vs. Reliance Petroproducts Ltd., which held that merely making an incorrect claim does not amount to furnishing inaccurate particulars.
- The Tribunal also noted that the issue was debatable and had been referred to a Special Bench, indicating its complexity.

The Tribunal upheld the CIT(A)'s decision to delete the penalty, emphasizing that the assessee had made a bonafide claim, and the Revenue's rejection of the claim was based on a different legal interpretation.

Conclusion:
The Tribunal dismissed the Revenue's appeals, affirming that the penalty under Section 271(1)(c) was not justified as the assessee had made full disclosures and the issue was a matter of legal interpretation. The Tribunal's decision was supported by the Hon'ble Bombay High Court, which dismissed the department's appeal, reinforcing that the claim was made under a bonafide belief and did not attract penalty.