2022 (3) TMI 1075 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - Assessee(s) has entered into an international transaction(s) - affirmed the charging of tax @20% on receipts from all the contract - HELD THAT - We observe that more or less the claim of the Assessee is that the Assessee on the basis of bonafide belief to the effect, as the Assessee do not have PE in India qua projects on the basis of which income has been earned, therefore offered its income for tax on presumptive basis u/s 44BBB of the Act which prescribe the tax payable @ 10%. The said claim of the Assessee was declined by the Assessing officer and income of the Assessee was taxed @ 20%, and subsequently penalty under consideration was imposed which stands sustained by the Ld. Commissioner in appeal. The retuned income and assessed income is the same, which in our considered view favors the Assessee‟s case and respectively following the judgmentsreferred above, we are of the considered view that simply because the Assessee may be on bonafide belief or misconceptionthat the Assessee do not have PE‟ in India and/or on the basis of certificate dated 19.05.2004 issued u/s 197 of the Act by the revenue department, chosen to compute the tax payable on its income u/s 44BBB of the Ac, that itself cannot entail imposition of penalty. Hence, we are inclined to delete the penalty imposed by the ld. AO and affirmed by the ld. Commissioner vide impugned order. Consequently the appeal filed by the Assessee is allowed.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act 1961 for assessment years 2004-05 and 2005-06.

Analysis:
The appeals were filed against the order upholding the penalty imposed by the Assessing Officer. The Assessee challenged the penalty on the grounds that the return of income and assessed income were the same, and the penalty under section 271(1)(c) should not apply as there were no international transactions involved. The Assessee contended that the income was offered for tax on a presumptive basis under section 44BBB of the Act at 10%, but the Assessing Officer taxed it at 20%, leading to the penalty imposition.

The Assessee argued that there was no deliberate attempt to contravene the Act or evade tax, and all explanations provided were substantiated. The Assessee maintained that the penalty should not be imposed merely at the discretion of the Assessing Officer. The Tribunal considered the Assessee's claim that it did not have a Permanent Establishment (PE) in India for the projects in question, and therefore, offered the income for tax at 10% under the India-Germany Tax Treaty.

Referring to legal precedents, including the case of Reliance Petro Products Pvt. Ltd, the Tribunal noted that a mere unsustainable claim does not automatically lead to a penalty. Citing a similar case, the Tribunal emphasized that differences in tax computation did not warrant a penalty. Ultimately, the Tribunal found that the Assessee's genuine belief and the similarity between the returned and assessed income favored the Assessee's case. Consequently, the penalty imposed by the Assessing Officer was deleted, and the appeal by the Assessee was allowed for both assessment years.

The Tribunal pronounced the order in favor of the Assessee, allowing both appeals and deleting the penalty.