2014 (1) TMI 1304 - AT - Income Tax

Penalty u/s 271(1)(c) of the Act Re-opening of Assessment - Held that - Section 271(1)( c) does not envisage levy of penalty in respect of the issues where there is possibility of more than one interpretation and the additions made by the revenue are on account of difference of opinion about the provisions of the Act or in this case the treaty - Further, the fact that the appellant has not challenged the assessment order passed u/s 147 should not influence the decision while deciding that whether the appellant was liable for penalty u/s 271(1)( c) of the Act - The income of the assessee during re-assessment proceedings was not enhanced as is apparent from the assessment order and it was only the rate of tax which has been increased from 15% TO 20% - Since there is no change in the income declared and income assessed by the Assessing Officer, it cannot be said that there were any concealment of income the order of the CIT(A) upheld Decided against Revenue.

Summary

Issues:
1. Whether CIT(A) erred in holding that the assessee did not conceal or furnish inaccurate particulars of its income.
2. Whether CIT(A) erred in ignoring the penalty imposition calculation based on tax sought to be evaded.
3. Whether CIT(A) failed to appreciate the default in disclosing correct tax liability under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
1. The appeal involved the question of whether the CIT(A) erred in deciding that the assessee did not conceal or furnish inaccurate particulars of income. The revenue contended that the penalty was justified due to the increase in tax rate from 15% to 20% during re-assessment. However, the CIT(A) found that there was no concealment as the income declared and assessed remained the same, with only the tax rate being altered. The CIT(A) concluded that since there was no change in the income figures, there was no concealment of income, leading to the deletion of the penalty.

2. The second issue revolved around whether the CIT(A) erred in overlooking the calculation of penalty based on the tax sought to be evaded. The revenue argued that the penalty was warranted as the tax rate was increased, resulting in a higher tax liability. However, the CIT(A) emphasized that the penalty under section 271(1)(c) should not be levied when there are multiple interpretations possible, and the additions were due to a difference of opinion on tax provisions or treaty interpretations. The CIT(A) highlighted that the penalty is not applicable in cases where there is a possibility of different views, ultimately leading to the deletion of the penalty.

3. The third issue dealt with whether the CIT(A) failed to recognize the default in disclosing the correct tax liability under section 271(1)(c) of the Income Tax Act, 1961. The revenue argued that the assessee should be penalized for not revealing the accurate tax liability. However, the CIT(A) observed that the issue was complex, requiring a detailed examination of facts and legal principles related to Permanent Establishment (PE) and treaty provisions. The CIT(A) concluded that since there were differing interpretations possible and no deliberate concealment of income, the penalty under section 271(1)(c) was unwarranted.

In conclusion, the appellate tribunal upheld the CIT(A)'s decision to delete the penalty imposed by the revenue, emphasizing that there was no concealment of income, the issues involved allowed for multiple interpretations, and the tax liability was not inaccurately disclosed.