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2016 (10) TMI 536 - AT - Income TaxPenalty under section 271(1)(c) - Non deduction of tds u/s 195 - Held that - The explanation furnished by the assessee in support of its claim of non-deduction of tax at source though has not been found correct however same was not malafide. According to the assessee the payment of 4, 43, 363/- paid to an entity M/s. Coperion Werner 4, 44, 690/- to Dr. UK Thiele the assessee claimed that the payment was towards independent scientific activity which fall under Article 14 of DTAA with Germany whereas the Tribunal held that the assessee failed to demonstrate that the services rendered by Dr UK Thiele are independent scientific services. The Assessing Officer has nowhere stated that the assessee has furnished false and fabricated bills or claimed expenditure which was not related to the business of the assessee. The Hon ble Supreme Court in the case of CIT Vs. Reliance Petroproducts Private Limited 2010 (3) TMI 80 - SUPREME COURT has observed that making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars. The assessee has given an explanation which is found to be bonafide thus in our opinion the Explanation -1 to the section 271(1)(c) of the Act is not attracted in the case of the assessee and therefore no penalty is leviable. Disallowance of long-term capital gain - Authorized Representative submitted that the long-term capital gain (LTCG) was claimed as exempt by the assessee at the time of filing the return inasmuch as the assessee was of bonafide view that STT would be paid in the due course once the BSE would get the issue clarified from the CBDT - Held that - Since the assessee failed to get the same clarified until the last date of revision of return of income i.e. 31/03/2008 the assessee during the course of assessment proceeding without any show cause notice issued by the Assessing Officer offered the long-term capital gain (LTCG) for taxation which was accepted by the Assessing Officer and he adjusted long-term capital loss (LTCL) from the long-term capital gain (LTCG) so offered. This explanation offered by the assessee has not been found false by the Assessing Officer. Further the assessee substantiated the explanation with necessary evidence and explanation filed is bonafide and all the facts relating to the explanation and material to the computation of income on the issue have been disclosed by the assessee. In view of these facts the Explanation-1 to the section 271(1)(c) of the Act is not attracted in the case of the assessee. We may like to repeat the findings of the Hon ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (supra) that making an incorrect claim in law cannot tantamount to furnish of inaccurate particulars. Thus in our opinion in such circumstances no penalty under section 271(1)(c) of the Act is leviable on the issue in dispute. Revenue appeal dismissed.
Issues Involved:
1. Penalty under section 271(1)(c) of the Income-tax Act, 1961 for disallowance under section 40(a)(i) amounting to ?9,14,191. 2. Penalty under section 271(1)(c) of the Income-tax Act, 1961 for disallowance of long-term capital gain (LTCG) amounting to ?41,62,154. Detailed Analysis: Issue 1: Penalty under section 271(1)(c) for disallowance under section 40(a)(i) amounting to ?9,14,191 Facts: - The penalty was levied on three amounts: ?4,43,363 paid to M/s. Coperion Werner & Pfleiderer, ?4,44,690 paid to Dr. U.K. Thiele, and depreciation of ?26,138 on payment of ?1,74,254 to M/s Henchel Industrietichik. - The assessee did not deduct tax at source, arguing that payments were covered under Article 7 and Article 14 of the DTAA with Germany. Assessing Officer’s Observations: - The AO noted that since no tax was deducted, the amounts were never allowable. - The AO levied a penalty of ?18,68,590, equivalent to 100% of the tax sought to be evaded. Assessee’s Arguments: - The assessee contended that the payments were business profits or independent scientific activities, not liable for TDS under the DTAA. - The assessee provided all relevant details and claimed there was no concealment or furnishing of inaccurate particulars. Commissioner of Income-tax (Appeals) Findings: - The CIT(A) found that all particulars were furnished by the assessee, and the explanation was bona fide. - The CIT(A) noted that the AO did not claim the particulars were incorrect or inaccurate. - The CIT(A) concluded there was no intention to conceal income or evade tax. ITAT’s Observations: - The ITAT upheld the CIT(A)’s decision, noting that the explanation was bona fide and there was no malafide intention. - The ITAT referenced the Supreme Court's decision in CIT Vs. Reliance Petroproducts Private Limited, which held that making an incorrect claim does not amount to furnishing inaccurate particulars. - The ITAT also cited the Gujarat High Court’s decision in CIT-IV Vs. LG Chaudhary, which held that disallowance due to non-payment of TDS is a technical default and does not justify penalty. Conclusion: - The ITAT concluded that no penalty was leviable for the disallowance under section 40(a)(i) as the explanation was bona fide and there was no concealment of income or furnishing of inaccurate particulars. Issue 2: Penalty under section 271(1)(c) for disallowance of long-term capital gain (LTCG) amounting to ?41,62,154 Facts: - The assessee claimed LTCG on the sale of shares of M/s. Mayuka Investment Ltd. as exempt under section 10(38). - The assessee later offered the LTCG for taxation during the assessment proceedings, adjusting it against brought forward long-term capital loss (LTCL). Assessing Officer’s Observations: - The AO levied a penalty, stating the addition was not contested in appeal. Assessee’s Arguments: - The assessee argued that the LTCG was initially claimed as exempt based on a bona fide belief that a clarification from CBDT would be issued. - The assessee offered the LTCG for taxation voluntarily during the assessment proceedings. Commissioner of Income-tax (Appeals) Findings: - The CIT(A) held that no inaccurate particulars were filed, and there was no concealment of income. - The CIT(A) found the explanation bona fide and concluded that penalty under section 271(1)(c) was not attracted. ITAT’s Observations: - The ITAT noted that all particulars regarding the sale of shares were duly filed, and the explanation was bona fide. - The ITAT referenced the Supreme Court’s decision in Reliance Petroproducts Pvt. Ltd., emphasizing that an incorrect claim does not amount to furnishing inaccurate particulars. - The ITAT upheld the CIT(A)’s decision, finding no basis for penalty as the explanation was bona fide and there was no concealment of income. Conclusion: - The ITAT concluded that no penalty under section 271(1)(c) was leviable for the disallowance of LTCG, as the explanation was bona fide and there was no concealment or furnishing of inaccurate particulars. Final Decision: The appeal of the Revenue was dismissed, and the decision was pronounced in the open court on 5th October, 2016.
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