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TMI Blog2019 (12) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... and hence was bona-fide, while the fact is that the assessee had not considered the same as taxable at all without any basis in the note filed with the return of income. 3. On the facts and circumstances of the case and in law, whether the Ld. CIT(A) erred in holding that the explanation provided by the assessee in its note to the return of income as bona-fide when in fact the same is against the decision of Hon'ble Delhi High Court in the case of M/s. Zoom Communication Pvt. Ltd. (327 ITR 510) in which it was held that submitting claim which is incorrect in law would not be bona-fide specially when only a minuscule percentage of return filed are selected for scrutiny." 3. The brief facts of the case are that the assessee filed its return of income on 30.09.2008 declaring total income to the tune of Rs. 41,31,73,442/-. The assessee has shown the income under the following head: - Sr. No. Income from other sources-sub head Amount 1 Interest income 15,90,22,500 2 Advisory fees 22,11,85,691 3 Management cost recharges 1,60,01,941 4 IT Cost Re charges 1,60,63,310 Total 41,31,73,442 4. The assessee is Foreign Institutional Investor registered wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fact, these receipts were treated as 'Fee for Technical Service. The claim of the assessee was that the same was not taxable in India but the same was found taxable in India, therefore, the penalty was initiated and levied. The Ld. Representative of the revenue has argued that the CIT(A) has wrongly deleted the penalty, therefore, finding of the CIT(A) is not justifiable, hence, is liable to be set aside. However, the Ld. Representative of the assessee has strongly relied upon the order passed by the CIT(A) in question. Before going further, we deem it necessary to advert the finding of the CIT(A) on record.: - "5. I have considered the facts of the case. In this case, the assessee filed the return of income on 30.09.2008 declaring a total income of Rs. 41,31,73,442/-. In the return of income, firstly, the assessee claimed a sum of Rs. 15,80,80,000/- under the head Underwriting Commission considered by the assessee as not taxable. Secondly the gains on the transfer of debt securities of Rs. 18,86,80,359/- were also considered by the assessee as not taxable. The case was selected for scrutiny and the Assessing Officer assessed the total income of Rs. 75,99,33,801/- taking the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offering underwriting commission and levied penalty of Rs. 1,58,08,000/- u/s.271(1)(c) of the I.T.Act,1961. Aggrieved by the action of the AO, the assessee filed appeal before the CIT(A) raising the grounds of appeal. During the course of appellate proceedings, the assessee made detailed submissions. The gist of the submissions is with regard to 1st issue i.e. claiming of exemption from tax in respect of capital gains on transfer of debt securities and treating the underwriting fee as not taxable in India. From the plain reading of sec. 271(1)(c) of the Income-Tax Act, 1961 the following facts emerge. If the (assessing) officer or the [commissioner (Appeals)) [or the principal commissioner] [or the commissioner] in the course of any proceedings under this Act, is satisfied that any person. (c) has concealed the particulars of his income or furnished inaccurate particular of [such income or] He may direct that such person shall pay by way of penalty: - Explanation 1 - Where in respect of any facts material to the computation of the total income of any person under this Act- (A) Such person fails to offer an explanation or offers an explanation which is found by the [As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable. The CIT(A) decided that Underwriting Commission is taxable as 'fees for Technical Services @ 10% on gross basis under Article 12 of the DTAA and gains on transfer of debt securities is assessable as capital gains and not business income and the same as exempt under Article 13(b) of the DTAA. The Hon'ble ITAT upheld the order of CIT(A). The department has not gone in appeal before the High Court. Now only Question of additions being confirmed against which the assessee had not gone in appeal before the ITAT was Underwriting Commission. The point which is important and needs mention is this addition on Underwriting Commission is that AO has treated it as business income and CIT(A) has treated it as 'fees for technical services'. The appellant submits that initiation of penalty proceedings made by the AO was on treating Underwriting Commission as business income which was changed to 'fees for technical services by the CIT(A) and hence penalty u/s. 271(1)(c) is not attracted under this set of circumstances. In the light of above discussion penalty u/s. 271(1)(c) imposed by the AO is deleted." 6. On appraisal of the above mentioned finding, we noticed th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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