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TMI Blog2012 (7) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... on the one hand, gives certificate for 100% tax relief and on the other hand, treats the same to be provisional in nature, cannot frame the charge of concealment of income or furnishing of inaccurate particulars of income - nowhere it has been found that the assessee was not acting bonafidely - no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false as mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars - in favour of assessee. - IT Appeal NOs. 851 (MUM.) OF 2009 and 209 & 210 (mum.) of 2010 - - - Dated:- 27-6-2012 - P.M. JAGTAP, AMIT SHUKLA, JJ. ORDER Amit Shukla, Judicial Member These are bunch of three appeals filed by the department relating to penalty proceedings under Section 271(1)(c) for the assessment year 2001-2002 2000-2001. Since the common issues are involved in all the three appeals, therefore, for the sake of convenience, all the three appeals are being disposed off by this consolidated order. 2 . ITA No. 851/Mum/2009 (AY. 2001-02) :- Brief facts of the case are that the assessee "R Liners Limited (In short 'RL') i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1996-1997 and 1997-1998 and held that effective management of the RL is not in Mauritius but in India and accordingly it is not entitled for benefit of Article 8 of Indo-Mauritius DTAA. However, he held that levy of interest under Section 234B is not justified. The said order of the CIT(A) has been accepted by the RL and no appeal was preferred before the ITAT. The revenue was, however, aggrieved by the deletion of interest under Section 234B, preferred second appeal before the ITAT, wherein the Tribunal vide order dated 17-6-2008, passed in ITA No. 5383/M/2005, dismissed the revenue's appeal by holding that interest under section 234B cannot be levied in the case of the assessee as the exemption certificate was valid upto 31-3-2001 and the assessee could validly assume that there is no tax liability in respect of interest earn upto 31-3-2001. 3. On this background, the Assessing Officer issued the show cause notice u/s 274 for levy of penalty under section 271(1)(c). In the case of RL the show cause notice though issued under the name of agent but simultaneously the Assessing Officer issued similar notice in the case of agent JMCPL also for levy of penalty. In the course of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this contention has been appreciated by the CIT(A) and the ITAT while deleting the levy of interest under Section 234B. Further the Assessing Officer had earlier accepted the assessee's claim of non-taxability in India at the time of issuance of DTR certificate. Learned CIT(A) duly appreciated the explanation and the submission given by the assessee and after giving detail reasoning and analyzing the various case laws, has held that penalty cannot be imposed in the case of RL as well as JMPCL. He, therefore, deleted the penalty by two separate orders dated 11-11-2008 in the case of RL and dated 22-10-2009 in the case of JMCPL. 6 . Now, the revenue has come up in the appeal in the case of principal, RL, bearing ITA No. 851/Mum/2009 and in the case of JMCPL bearing ITA No. 209/Mum/2010. Learned Senior DR had filed written submission wherein various contentions and arguments have been put forth to justify the levy of penalty. The sum and substance of the revenue's arguments are as under :- ( i ) The contention the assessee that effective control and management of the company was in Mauritius has been found to be incorrect by the Assessing Officer, wherein it was found that 50% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no provision under the Income Tax Act to issue such a certificate by the Assessing Officer as the same is subjective to the fulfilment of condition that the assessee files return of income in pursuance of the same. The Assessing Officer issuing the certificate could have formed any basis to conclude that the assessee will not be liable to tax during that period. The reliance placed by the assessee on the findings given on the issue relating to levy of interest under Section 234B is wholly misplaced. ( viii ) Lastly, the tax resident certificate of Mauritius filed by the assessee will not make any difference as the assessee has not been denied the benefit of India Mauritius Treaty under the Article 8 of the DTAA. In this case, exemption from tax has been denied because the assessee failed to fulfil the condition of the said Article. In support of all his contention, learned DR placed reliance on the decision of Delhi High Court in the case of CIT v. Zoom Communication (P) Ltd. , reported in 327 ITR 510, that wrong claim of deduction amounts to concealment within the meaning of Explanation 1 to section 271(1)(c). 7. Per Contra , learned counsel on behalf of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , vide order dated 17-6-2008. ( v ) There was a difference of opinion among the two Assessing Officer with regard to the effective place of management is situated in Mauritius or not. The Assessing Officer earlier after examining the residential status and also the effective place of management had issued DTR certificate to the assessee and it was on this bonafide belief that tax exemption was sought for. There is no concealment of particulars of income on furnishing of inaccurate particulars of income as all the details have duly been furnished in the return of income. The explanation given before the Assessing Officer during the course of the penalty proceedings was thus wholly bonafide. The reliance in this regard has been placed on the decision of Hon'ble Supreme Court in the case of CIT v. Reliance Petro Product Limited , reported in 322 ITR 158. ( vi ) It has been submitted that the assessment has been completed by invoking the provisions of Section 44B, which cannot be held to be applicable in the case of assessee as the Assessing Officer has held that the assessee is resident in India, under Section 6(3)(ii) and provision of section 44B is applicable for taxing non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Section 44B and worked out the tax at Rs. 9,97,938/-, i.e. the same amount which was claimed as exempt by the assessee in the return of income. Not only this, similar substantive assessment has been made in the case of the agent JMCPL also. This, action of the Assessing Officer in taxing the same income in the hands of the principal as well as the agent was legally not correct as the department can only tax in one hand either the principal or the agent. Section 160(1)(i) provides that in respect of income of the non-resident, the agent of such non-resident is to be treated as representative assessee. Thus, the assessment should have been either made in the case of the representative assessee i.e. the agent or to non-resident itself. The department cannot make the assessment on both the persons on agent as well as principal. Similarly, the penalty under Section 271(1)(c) for the same income cannot be levied in the case of both the persons. From the perusal of the penalty order of RL, it is seen that the Assessing Officer himself has very categorically held that the penalty if any, should be levied in the hands of the principal and not on the agent, which is eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was under a bonafide belief in not offering the income for tax. 9.1 From the facts of the case which have been elaborately discussed in the foregoing paragraphs, it is borne out that RL is a tax resident of Mauritius and in support of this, tax residency certificate has been furnished. This fact has also been accepted by the learned DR in the written submission. It is also undisputed fact that, based on this tax residency certificate, the RL has applied for exemption certificate for grant of 100% DIT relief, which was granted by the Assessing Officer vide certificate dated 9-6-2000 upto the period of 31-3-2001 i.e. upto AY 2001-2002 (copy of which has been placed in the assessee's paper book at page 5 filed on 8-11-2009). It was based on this certificate, that the assessee had sought tax relief in the return of income. For the purpose of penalty proceedings under Section 271(1)(c), one has to see what was stance and belief entertained by the assessee at the time of filing of the return, because that is a starting point from where it can be seen whether the assessee had furnished any inaccurate particulars or has concealed any particulars of income. In the return of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied on the ground that the assessee has 'furnished inaccurate particulars', which cannot be upheld on the ground firstly, the assessee has disclosed all the freight receipts in respect of its Indian operation in the return of income and has also shown the income at the rate of 7.5% as per the provision of Section 44B of Rs. 20,79,038/- and also the tax payable at the rate of 42% at Rs. 9,97,938/-, and secondly, no discrepancy has been found in such particulars. Thus, there cannot be a case of furnishing of inaccurate particulars in this case. Only the claim of the assessee has not been found to be acceptable to the Assessing Officer on the applicability of Article 8 of the Treaty. Thus, on these facts, the judgment of the Hon'ble Supreme Court in the case of Reliance Petro Product Limited ( supra ), squarely gets applicable, wherein their Lordships have observed and held as under :- "A glance at this provision would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The present is not a case of concealment of the income. That is not th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility would arise. In Dilip N. Shroff v. Joint CIT [2007] 6 SCC 329#, this court explained the terms "concealment of income" and "furnishing inaccurate particulars". The court went on to hold therein that in order to attract the penalty under section 271(1)(c), mens rea was necessary, as according to the court, the word "inaccurate" signified a deliberate act or omission on behalf of the assessee. It went on to hold that clause (iii) of section 271(1)(c) provided for a discretionary jurisdiction upon the assessing authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term "inaccurate particulars" was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. It was further held that the Assessing Officer must be found to have failed to prove that his explanation is not only not bona fide but all the facts relating to the same and material to the computation of his income were not discl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars." 10. The finding and the conclusion drawn by the CIT(A) that the assessment has been made on the basis of difference of opinion on the same sets of the facts which have been fairly disclosed by the assessee and therefore, not covered by Explanation 1 , and further the assessee had made necessary disclosers by way of notes in the return of income that it is based on bonafide belief due to DIT relief certificate and tax residency certificate, does not am ..... X X X X Extracts X X X X X X X X Extracts X X X X
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