2018 (8) TMI 1356 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - assessee contended that, (a) mere addition to income, ipso facto, cannot lead to imposition of penalty, (b) not challenging the addition during assessments does not tantamount to acceptance of wrong doing. - Held that - In the facts of the present case assessee was under the belief that due to the make available Clause in Article 12 (4) (b) of India Singapore DTAA, the consideration paid by the Indian customers to assessee cannot be regarded as fees for technical services and further since there was no transfer of technology involved in the services extended by assessee, the consideration for such services could not be taxed under Article 12(4)( b) of the DTAA. In the facts of the present case assessee had offered explanation and the submissions as to why receipts were not offered to tax for the year under consideration, by relying on the legal position. Thus assessee had acted in a bona fides manner and had also furnished all material facts and particulars in respect of the same. - No penalty - Decided in favor of assessee.

Summary

Issues:
1. Deletion of penalty under section 271(1)(c ) of the Act.

Detailed Analysis:
The appeal was filed against the order passed by the Ld.CIT (A)-43 for Assessment Year 2010-11 regarding the deletion of penalty under section 271(1)(c) of the Income Tax Act. The grounds of appeal included arguments against the imposition of the penalty, questioning the justification and legality of the penalty levied by the Ld. Assistant Director of Income Tax. The appellant contended that there was no concealment or furnishing of inaccurate particulars of income, and the penalty should be quashed. The appellant also argued that the services provided were not technical services under the India-Singapore Double Taxation Avoidance Agreement, hence the penalty should not be imposed.

Detailed Analysis:
The brief facts of the case revealed that the assessee had filed its income tax return declaring total income as nil for the relevant year. The Assessing Officer (AO) determined the income after scrutiny, and subsequently initiated penalty proceedings under section 271(1)(c) for concealment of income. The penalty was confirmed by the Ld.CIT(A), leading the appellant to appeal before the ITAT Delhi. The appellant contended that there was complete disclosure of income, and the claim was based on a bona fide belief regarding the taxability of receipts under the Double Taxation Avoidance Agreement. The appellant argued that no concealment or inaccurate particulars were involved, citing legal precedents and explanations.

Detailed Analysis:
Upon considering the submissions, the ITAT Delhi observed that the failure to challenge the addition made by the AO did not automatically warrant the imposition of a penalty for concealment or furnishing inaccurate particulars. The tribunal noted that the element of mens rea is essential for concealment, whereas furnishing inaccurate particulars has a wider scope. The tribunal emphasized the importance of bona fide belief at the time of filing the return, and the possibility of adopting a legal position perceived as beneficial. In this case, the appellant's belief regarding the taxability of receipts under the DTAA was considered genuine, supported by legal interpretations and explanations provided.

Detailed Analysis:
The ITAT Delhi concluded that the appellant's belief regarding the non-taxability of receipts under the DTAA was based on a valid interpretation of the 'make available' clause, supported by legal precedents. The tribunal found that there were genuine grounds for not imposing a penalty for concealment, as the appellant had acted in good faith and provided all relevant facts and explanations. Therefore, considering the entirety of the facts and the explanation offered by the appellant, the ITAT Delhi ruled in favor of the appellant, allowing the appeal and deleting the penalty under section 271(1)(c) of the Income Tax Act.