TMI Blog2016 (10) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... sclosure 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 from M/s. ONGC and hence, there was no loss 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 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notices u/s 148, a matter restored for verification by High Court to AO. 2. Whether on the facts and circumstances of the case the CIT (A) has erred in holding that the assessee could not be held liable for furnishing inaccurate particulars of income even when, having itself raised the invoices, it did not offer said income from 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 law was also malafide and, would attract Explanation 1 to Section 271(1) a view upheld by jurisdictional High Court in the case of Kanchenjunja Advertising (P) Ltd in ITA No. 944 of 2011 vide order DT. 13 Jan 2011. 4. Whether in the facts and circumstances of the case the CIT(A) had erred in deleting the penalty imposed u/s 271(1)(c) by holding that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 relating to the existence of PE in India and attribution of profits and restored the same to the AO for fresh adjudication. Subsequently, pursuant to the order of the ITAT, the AO passed appeal effect orders dated May 2, 2010 and initiated penalty proceedings, and thereafter, levied penalty under section 271(1)(c)of the Act, keeping in view the amount of income taxable as FTS on accrual basis as against income offered to tax on cash basis and the amount of profit attributable to the PE of Assessee 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 30,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TS stood confirmed up to the stage of Tribunal and was not challenged before the Hon ble High Court by the assessee, hence, imposition of penalty is liable to be sustained. 6. On the other hand, the ld. Counsel for the assessee submitted that During the relevant assessment year, the Assessee was under bonafide belief that, as per law, the Assessee was correctly following cash system of accounting for taxation of FTS and thereby rightly offering such receipts for taxation, as and when they were actually received. 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). Pizza Hut International LLC [2012] 54 SOT 425 (Delhi) (iii). CSC Technology Singapore Pte. Ltd. v. Asst. [2012] DIT 50 SOT 399 (ITAT Delhi) (iv). Johnson Johnson v. Asst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 incorrect claim in the return cannot be said to have furnished inaccurate particulars where Assessee had furnished complete details in respect of the claim made. Reliance in this regard is placed on following decisions: (i). CIT v. Reliance Petro Product (P.) Ltd. [2010] 322 ITR 158 (SC) (ii). ShervanJ .Hospitalities Ltd. v. CIT [2013] 261 CTR 449 (Delhi) . (iii). CIT v. Dharampal Premchand Ltd. [2011] 329 ITR 572 (Delhi) (iv). CIT v. Societex [2013] 212 Taxman 73 (Delhi) (Mag.) (v). Karan Raghav Exports (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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 from M/s. ONGC and hence, there was no loss 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 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] 196 CTR 187 (Del), that merely because certain additions/ adjustments are made in the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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