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2023 (9) TMI 215 - AT - Income TaxPenalty u/s 271(1)(c) - difference in returned income and assessed income - difference is in view of royalty income not offered to tax in Return of Income which was accepted later in MAP resolution - CIT(A) deleted the penalty - HELD THAT - We find that the authorities for the purpose of settling the cases under MAP proceeded on assumption that the assessee has PE in India and the business profits earned from those contracts are deemed to be attributed to the assumed PE and taxed in India at 30% of the profits arrived. We observe that even in the MAP proceedings it is only by way of an assumption that the authorities have concluded that the assessee has PE and on such assumption of PE the business profits were attributed to the PE for the purpose of settling the issues. No corroborative evidence is brought on record by the Revenue Authorities to suggest that the assessee has PE in India. Further the CIT(A) in all these assessment years in fact deleted the additions holding that Assessee does not have a PE in India. We also find that the CIT(A) while deleting the penalty levied u/s 271(1)(c) held that the assessee has not concealed any particulars of income and has disclosed all material facts during the assessment as well as MAP proceedings. CIT(A) has considered all the aspects of the material and concluded that the assessee has disclosed all material facts during the assessment as well as MAP proceedings and has not concealed any particulars of income. We see no infirmity in the order passed. We further observe that at best it is only a difference of opinion as to whether there exists PE in India for Assessee or not. There is no conclusive proof that the assessee has PE in India. In the penalty proceedings the AO simply relied on the MAP proceedings in holding that the assessee has PE in India which in fact is not correct. As we said earlier it is only on assumption that the assessee has PE in India and by way of deeming fiction the profits were attributed for such assumed PE by the authorities in the MAP proceedings. Thus we hold that there is no concealment of income or furnishing inaccurate particulars of such income by the assessee in any of these assessment years and thus, we sustain the order of the CIT(A) - Decided against revenue.
Issues Involved:
1. Concealment of particulars of income and quashing of penalty u/s 271(1)(c) due to differences in returned and assessed income. 2. Reliance on the Supreme Court decision in Engineering Analysis. 3. Application of the principle that taking one of the plausible views does not amount to concealment. 4. Primary onus of ascertaining tax liability for non-residents. 5. Interpretation of MAP orders as adjustments rather than annulments. Summary: Issue 1: Concealment of particulars of income and quashing of penalty u/s 271(1)(c) The Revenue challenged the deletion of penalties levied u/s 271(1)(c) of the Act by the Ld. Commissioner of Income Tax (Appeals) for various assessment years, arguing that there was a difference between returned income and assessed income due to royalty income not offered to tax initially but accepted later in MAP resolution. The Tribunal observed that the assessee filed returns declaring NIL income and the assessments were completed by treating amounts received for various services as royalty due to the existence of a PE in India. However, the Ld.CIT(A) deleted the additions, holding that there was no PE in India. Issue 2: Reliance on the Supreme Court decision in Engineering Analysis The Revenue argued that the Ld.CIT(A) erred by relying on the Supreme Court decision in Engineering Analysis, which was not available during the filing of the Return of Income. The Tribunal noted that the Supreme Court held that the supply of software and documentation did not constitute royalty, supporting the assessee's position. Issue 3: Application of the principle that taking one of the plausible views does not amount to concealment The Tribunal emphasized that the Ld.CIT(A) correctly applied the settled principle that taking one of the plausible views does not amount to concealment of particulars of income. The Tribunal found that the authorities assumed the existence of a PE in India during MAP proceedings without corroborative evidence, and the Ld.CIT(A) deleted the penalty, holding that the assessee disclosed all material facts. Issue 4: Primary onus of ascertaining tax liability for non-residents The Revenue argued that the primary onus of ascertaining tax liability lies with the non-resident payee, and the penalty u/s 271(1)(c) was applicable as the assessee initially filed a nil Return of Income. The Tribunal observed that the Ld.CIT(A) deleted the penalty, holding that the assessee did not conceal any particulars of income and disclosed all material facts during assessment and MAP proceedings. Issue 5: Interpretation of MAP orders as adjustments rather than annulments The Revenue cited the Karnataka High Court decision in Toyota Kirloskar Motor Private Limited, arguing that MAP orders are adjustments to assessment orders and do not annul them. The Tribunal noted that the High Court held that Explanation 7 does not automatically empower authorities to levy penalties for transactions where MAP proceedings are applied, and the onus lies on the assessee to establish that the addition is not due to concealment of income. Conclusion: The Tribunal upheld the Ld.CIT(A)'s orders for the assessment years 2004-05 to 2011-12 and 2014-15 to 2016-17, concluding that there was no concealment of income or furnishing of inaccurate particulars by the assessee. All appeals by the Revenue were dismissed.
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