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2016 (10) TMI 246 - ITAT DELHI

2016 (10) TMI 246 - ITAT DELHI - TM - Penalty imposed u/s 271(1)(c) - additions made on account of attribution of business profits to assessee’s alleged PE in India - Held that:- The issue in respect of additions made on account of attribution of business profits to assessee’s alleged PE in India has been restored back to the file of AO. Therefore, the ld. CIT(A) has rightly observed that the ld. AO should have himself modified the penalty order by deleting the amount of penalty imposed upon the .....

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with the order of ld. CIT(A). It is borne out on record that the assessee had made true and complete disclosure in its return of income that it was following cash system of accounting with respect to FTS. Further there was no concealment of income. The penalty is imposed keeping in view the tax sought to be evaded. In the instant case the assessee had duly offered the income pertaining to the invoices raised by it during the year in subsequent years as and when the fee was received by assessee .....

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of the Act unless it is proved that the assessee has concealed the particulars of income or has furnished inaccurate particulars of such income. Hon’ble jurisdictional High Court has held, in the case of CIT vs Globe Sales Corporation [2005 (1) TMI 697 - DELHI HIGH COURT ] that merely because certain additions/ adjustments are made in the assessment, it does not necessarily follow that penalty is to be levied. - In the instant case, there is no an iota of evidence to prove that the assesse .....

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s. Even if the claim of the assessee was found wrong upto the stage of Tribunal, such incorrect claim in the return, in the peculiar facts of the present case, cannot be said to prove furnishing of inaccurate particulars of income where the assessee had furnished complete details in respect of the claim so made in the return of income itself. For this, we stand fortified by the decision in CIT vs. Reliance Petroproduct (P) Ltd.,(2010 (3) TMI 80 - SUPREME COURT ). Therefore, for want of any contr .....

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by the Revenue against the common order dated 31.10.2011 of ld. CIT(A)-XXIX, New Delhi for the assessment years 2001-02 to 2004-05 respectively challenging the cancellation of penalties, imposed by the AO u/s. 271(1)(c) of the IT Act in each of these cases. The grounds raised in all these four appeals are altogether common, therefore, the grounds of appeal taken in appeal No. 862/Del./2012 are reproduced hereunder : 1. Whether on facts and circumstances of the case, the CIT (A) has erred in del .....

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rom FTS for taxation on accrual basis, an issue which stands accepted by the assessee and confirmed by the Hon'ble ITAT and Delhi High Court. 3. Whether on the facts and circumstances of the case the CIT(A) has erred in holding that there was no default on the part of the assessee for furnishing inaccurate particulars of income when receipts from invoices raised by it were not offered to tax on mercantile basis as per Income Tax Act 1961, and, that the said claim besides being incorrect in l .....

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Supreme Court in the case of Union of India and others V/s Dharmendra Textiles Processors and others(306 ITR 227) in which it was held that the element of mens rea is not required to be established in the case of penalty for civil liability. 2. Since common issue is involved in all these appeals and the grounds and arguments advanced by both the parties are also common, hence, all these appeals are being disposed of by this consolidated order for the sake of convenience and brevity and to avoid .....

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of such equipment. During the period relevant to assessment year, the assessee was following cash system of accounting in India and accordingly, the assessee filed its return of income on 31.12.2003 declaring income from FTS of ₹ 26,07,430/- u/s. 115A of the Act based on actual receipt of such fees and services. The income of the assessee was assessed at ₹ 2,36,15,880/- as profits attributable to the permanent establishment (PE) in India against supply to Indian customers and ₹ .....

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upheld the order of the CIT(A) regarding taxability of FTS on accrual basis. The Tribunal, however, reduced the attribution of profit from 25% to 10%. The order of the Tribunal was challenged before the Hon ble High Court by the assessee as well as Revenue, challenging the existence of PE and attribution of profit thereto. The assessee, however, did not challenge the order of the ITAT on the issue of taxability of FTS on accrual basis or cash basis. The Hon ble High Court set aside the issue rel .....

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in India. Details of the penalty levied on the above grounds are as under: A.Y. Penalty levied on account of FTS (Rs) Penalty levied on account of PE (Rs) Total penalty levied 2001-02 6,83,836 10,11,067 16,94,903 2002-03 9,29,437 21,00,148 30,29,585 2003-04 20,27,326 11,81,458 32,08,784 2004-05 12,49,221 50,72,996 63,22,217 4. Being aggrieved, the Assessee appealed before the first appellate authority, who vide impugned order deleted the penalty imposed by the AO on both the accounts. The ld. CI .....

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s also deleted by the ld. CIT(A) after appraisal of various submissions of the assessee. Being aggrieved, the Revenue has come up in these appeals, wherein the cancellation of penalty imposed in relation to addition on FTS only has been challenged and from the grounds of Revenue it appears that the Department has not appealed against the order of CIT(A), deleting the penalty in relation to tax on profit attributable to the PE. 5. The ld. DR submitted that since the assessee furnished inaccurate .....

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ee, where the element of mens rea need not to be proved and penal provisions are strictly applied irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not. For this proposition the AO had relied on the decisions of Hon ble Supreme Court in Union of India and Ors. Vs. Dharmendra Textile Processors and others, 306 ITR 227 (SC) and SEBI v. Shriram Mutual Fund (2006) 5 SCC 361. It was also submitted that the impugned addition on FTS stood confirme .....

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In fact, there was no loss of revenue to the government on account of such timing difference. In fact, due to this reason the Assessee has not appealed further against the order of Tribunal, upholding taxability of FTS on accrual basis. It was submitted that on such debatable issues, it can hardly be said that the assessee had furnished inaccurate particulars of income. For this, reliance is placed on the following decisions : (i). M/s Siemens Aktiengesellschaft in ITA No 124 of 2010 (ii). Pizz .....

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ull disclosure in the return of income. In the computation of income filed with the return of income it was clearly disclosed that the assessee is maintaining its books of accounts on cash basis. Therefore, there are no sundry debtors and sundry creditors as on March 31, 2000 . The assessee has made complete disclosure and nothing has been concealed. It was submitted that it is another matter that the ITAT held that the FTS should have been taxed on accrual basis, but the assessee had disclosed .....

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p; Developers (P.) Ltd. v. ITO [IT Appeal No. 2379/Mum/2009, Order dated 18-3-2011, ITAT- Mumbai]; (iv). Yugal Kishore Jajoo v. Dy. CIT [IT Appeal No. 272/lnd./2011, Order dated 12 2-2013, ITAT Indore]; (v). Smt. Ramilaben Ratilal Shah v. Asstt. CIT [1998] 60 TTJ 171 (Ahd). (vi). Advaita Estate Development (P.) Ltd. v ITO [2013] 40 taxmann.com 142 (Mumbai - Trib.) 6.2 It was also submitted that the assessee had maintained all the details of receipts and the income in respect of fee from technica .....

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alty can be imposed : i). CIT vs. Nagri Mills Co. Ltd. (1958) 33 ITR 681 (Bom). (ii). CIT v Triveni Engineering & Industries Ltd. (2011) 336 ITR 374, (ii(i). CIT v Shriram Pistons & Rings Ltd., judgement dated 5.5.2008 in appeal number: ITR 133 / 1991 (iv). CIT v Vishnu Industrial Gases P. Ltd.: judgement date 06/05/2008 in appeal number: ITR No. 229/1988 (v). In the case of CIT v. Excel Industries Ltd. [2013] 358 ITR 295 (SC) 6.3 It was also submitted that mere making mere making an inc .....

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xports (P.) Ltd. v. CIT [2012] 349 ITR 112 (Delhi) (Mag.) 6.4 The ld. AR further submitted that it is well established principle of law that penalty proceedings are separate and independent from assessment proceedings, and the consideration in penalty proceedings are distinct from the merits under quantum proceedings. It is submitted that it has been held that penalty cannot be an automatic consequence of the additions in the quantum proceedings. Reliance for this proposition is placed on the fo .....

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follow that penalty is to be levied. Similarly, in Devsons Pvt. Ltd. vs CIT [2010] 329 ITR 483 (Del), the Delhi High Court has held that merely because tax department does not concur with the legal stand adopted by the assessee, it will not be enough reason to hold that assessee is guilty of concealment of income or of furnishing inaccurate details. In view of these arguments, the ld. AR urged for dismissal of Revenue s appeals. 7. We have considered the rival submissions and have gone through .....

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sent back to the AO for fresh adjudication, as per provisions of section 275(1A) of the Act. Moreover, the penalty deleted by ld. CIT(A) on this count has not been challenged by the Revenue in any of the grounds of appeal before us. We, therefore, need not to address much on this part of penalty deleted by the ld. CIT(A). 8. As regards the deletion of penalty with respect to addition on account of FTS, we further do not find any good reason to interfere with the order of ld. CIT(A). It is borne .....

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s to the Revenue or evasion of tax. The issue whether income from FTS is taxable on accrual basis or cash basis is a debatable issue and therefore, where two views are possible, penalty is not leviable if the assessee has adopted one of the two possible views. In this context, the reliance placed by assessee in catena of decisions goes to support the case of the assessee. It is notable that every addition/adjustment does not entail penalty u/s. 271(1)(c) of the Act unless it is proved that the a .....

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