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2020 (6) TMI 50 - AT - Income TaxPenalty u/s 271(1)(c) - bona fide view of the assessee - Income in relation to the New Mangalore Port Trust (NMPT) project - permanent establishment (PE) in relation to the NMPT project - India Netherlands Treaty - HELD THAT:- None of the conditions is fulfilled in favour of the Revenue for imposing penalty. As it appears on record that at the very onset of filing of return the assessee explained the reasons for not including the amount in question being 3.79 crores received as “arbitration award” in its taxable income by annexing Note 7 relying upon the content of the India-Netherlands Treaty. Such Explanation has not been found to be false by the authorities below neither there is any finding to that effect as on record. Even assuming the assessee fails to substantiate the explanation, he has been able to demonstrate that the explanation is bona fide. All the details and justification of claim have been set out in said Note 7 annexed to the return of income filed by the assessee giving rational and computation which is evident from the statement showing gross total income as annexed to the Paper Book before us. Question of bona fides cannot be decided against the assessee either. The conduct of the assessee is bona fide or not is essentially a question of fact and the related facts are always in the exclusive knowledge of the assessee. The Revenue may or may not agree with this understanding of law of the assessee but the fact that there can be a bona fide view to that effect cannot be ruled out. The human probabilities favour acceptance of this explanation for bona fides. It cannot always be feasible to prove the claim of bona fides to the hilt, nor, in our considered opinion, the assessee cannot be expected to do so. As long as the explanation given by the assessee in the light of the human probabilities, there are no factual errors or inconsistencies, and it is supported by rational supporting evidences regarding factual evidences embedded therein, if any, the bonafides should be taken as proved. We observe that the assessee’s explanation regarding bonafides of the claim does not suffer from any apparent inconsistencies or factual errors and it is quite in tune with the human probabilities. We, therefore, find no reason to reject the reason as unacceptable. In that view the matter the case of the assessee is not even hit by the mischief of any of the three eventualities envisaged by the deeming fiction under Explanation 1 to Sec. 271(1)(c) - Decided in favour of assessee.
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