9911796707
TMI Blog2012 (12) TMI 486X X X X Extracts X X X X X X X X Extracts X X X X ..... e is hiding, covering up or camouflaging an income. Therefore, penalty is not leviable in case where assessee is able to provide a 'bona fide' explanation and made errors under bona fide beliefs. Appeal decides in favour of assessee - IT Appeal Nos. 991 (Pune) of 2008 - - - Dated:- 24-7-2012 - Shailendra Kumar Yadav And R.K. Panda, JJ. Farooq V. Irani and Ms. Manju Bhardwaj for the Appellant. Ms. Ann Kapthuama for the Respondent. ORDER 1. Issue in all these appeals pertain to Penalty u/s.271(1)(c) with regards to offering the additional income on account of reimbursement towards tax rationalization as a taxable perquisite in response to notice u/s.148 of the Act. So they are being disposed off by a common order for the sake of convenience. 2. In ITA.No.991/PN/2008 for A.Y. 2000-01, the assessee raised the following grounds: "1. That on the facts and in the circumstances of the appellant's case, the learned Commissioner of Income-tax(Appeals)[CIT(A)] erred in upholding the levy of penalty under section 271(1)(c) of the Income Tax act 1961 (the 'Act'). The CIT(A) ought to have held that no penalty was leviable, on the facts and in law. 2. That on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of Rs. 87,86,620/- not reported in original return of income. Assessment was completed by the Assessing Officer at total income of Rs. 1,23,34,570/-. Consequently, the penalty proceedings u/s. 271(1)(c) were also initiated. 4. During penalty proceedings, the explanation furnished by the assessee in response to a show cause notice issued by the Assessing Officer requiring the assessee to explain as to why penalty u/s. 271(1)(c) be not levied, did not find favour with the Assessing Officer who was of the view that additional income of Rs. 87,86,620/- has been disclosed by the assessee in return filed in response to notice u/s. 148 of the Act and same was not offered to tax in original return of income. Thus, according to the Assessing Officer, the intention of the assessee was to conceal the income received from Tetra Pak International S.A. The Assessing Officer, therefore, held that assessee was liable for imposition of penalty u/s. 271(1)(c) for concealment of particulars of income and accordingly levied penalty of Rs. 43,49,376/- being 150% of tax sought to be evaded. Matter was carried before the first appellate authority, who confirmed the same. Same has been opposed before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld any information. As a matter of fact this notice could be issued only on the basis of information furnished, alongwith details of taxes paid, by the employer. The evidence on record shows that the assessee's employer, rightly or wrongly, was actually of the view that the income not shown in the original return was not exigible to tax. In our considered view, on above facts, it was indeed not a fit case for imposition of penalty. 29. Hon'ble Supreme Court has, in the case of Dilip N. Shroff (supra), also approved the judgments of Hon'ble Delhi High Court in the cases of CIT v. Ram Commercial Limited (246 ITR 568) and Diwan Enterprises v. CIT (246 ITR 571) which require that the Assessing Officer must form his opinion and record his satisfaction before initiating the penalty proceedings. There is no such specific recording of satisfaction in this case. For this reason also, the impugned penalty order is vitiated in law. Outcome of the appeal: 30. In the light of the above discussions, we are of the considered view that the impugned penalty is fit to be quashed. We, therefore, direct the Assessing Officer to delete the same. The assessee gets the relief accordingly. 31. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson fails to offer an explanation or offers an explanation which is found by the AO or the Commissioner (Appeals) or the Commissioner to be false, then the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purpose of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed. The other circumstances for deeming concealment of particulars of income is when such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him. For a ready reference Explanation-1 to section 271(1)(c) is being reproduced hereunder:- Explanation- 1 - Where in respect of any facts material to the computation of the total income of any person under this Act, - (A) Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B) Such person offers an explanation which he is not able to substantiate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee for each of the above mentioned assessment years, total income reported by the assessee included remuneration received in India from SAL and emoluments received outside India from Sandvik AB, Sweden. Before being deputed to India, the assessee was assured by Sandvik AB, Sweden that any increase in over all tax liability of the assessee on account of different tax rates in India would be reimbursed to him. Such reimbursement was credited to his regular savings bank account. It was submitted that for the purpose of filing of return in India, the assessee was assisted by well-known tax consultants appointed by Sandvik Group. Such tax consultant computed the taxable income of assessee by analyzing various salary components received by him and determined the taxability of these components. The assessee based on the bona fide belief that reimbursement of incremental tax liability in India from Sandvik AB, Sweden being part of a tax rationalization measure is not a separate component of income liable to tax in India did not include this reimbursement while reporting his total income in the return of income filed for various years during his Indian assignment. During the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee to conceal or under report his overseas salary income. The further plea of the Ld. AR before us also remained that the related law was complicated and possibility of mistake even on the part of an expert cannot be ruled out. In this regard he has placed reliance on the decision of Mumbai Bench of the Tribunal in the case of Sunil Chandra Vohra v. ACIT [2009] 32 SOT 365 (Mumbai). Considering these material facts in totality, we do not find reason to doubt the bona fide of above stated explanation furnished by the assessee during the course of penalty proceedings. The ld. CIT (A) has denied the explanation of the assessee on the basis that the assessee brought nothing on record to substantiate his claim of bona fide belief regarding non taxability of tax perquisite and in the light of judgment of Hon'ble Supreme Court in the case of UOI v. Dharmendra Textile Processors [2007] 295 ITR 244 (SC). So far as applicability of the said decision in the case of Dharmendra Textile Processors (supra) is concerned, we will discuss it in succeeding paras. 10. Regarding the first objection of ld. CIT (A) that assessee brought nothing on record to substantiate his claim of bona fide belief reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each of the above mentioned sections has also under gone changes at various points of time. The Finance Act, 2002 introduced section 10(10CC) of the Act which provided an exemption from tax on non monetary perquisite. Under these circumstances we do not find reason to doubt the explanation of the assessee that mistake has happened only because of grossing-up principle embedded in the Act. The concept of grossing-up is of a technical nature and can certainly be treated as out of the scope of common knowledge of the tax payers. The very conduct of the assessee in the present case is also worth noting to decide the veracity of the claimed bona fide on the part of the assessee in not reporting tax on tax reimbursement. During the assessment year 2004-05 when assessment proceedings were initiated under section 143(3) and by issuance of notices under section 143(2) and 142(1), the assessee was specifically required to inform if there was any source of income excluding the income shown in the return of income and whether income arose in consequence of the services rendered in India to the employer and any other company, the assessee learned that the reimbursement towards tax rationalizati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racted and the authority had no discretion in the matter. One of us (Aftab Alam, J) was party to the decision in Dharmendra Textile and we see no reason to understand or read that decision in that manner .... .... From the above, we fail to see how the decision in Dharamendra Textile can be said to hold that section 11AC would apply to every case of non-payment or short payment of duty regardless of the conditions expressly mentioned in the section for its application." In this regard it is also very pertinent to refer over here the recent decision of Hon'ble Supreme Court in the case of CIT v. Reliance Petro Products Pvt. Ltd. (supra) wherein the Hon'ble Court has been pleased to observe as under :- "However, it must be pointed out that in Union of India v. Dharmendra Textile Processors (cited supra), no fault was found with the reasoning in the decision in Dilip N. Shroff v. Joint Commissioner of Income Tax, Mumbai Am. (cited supra), where the Court explained the meaning of the terms "conceal" and inaccurate". It was only the ultimate inference in Dilip N. Shroff v. Joint Commissioner of Income Tax, Mumbai Am. (cited supra) to the effect that mens rea was an essential i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon." In the case of Dilip N. Shroff v. CIT (supra), the Hon'ble Supreme Court has again been pleased to refer that the expression "conceal' is of great importance. According to Law Lexicon, the word "conceal" means: to hide or keep secret. The word "conceal" is con+celare which implies to hide. It means to hide or withdraw from observation: to cover or keep from sight; to prevent the discovery of; to withhold knowledge of. The offence of concealment is, thus a direct attempt to hide an item of income or a portion thereof from the knowledge of the income tax authorities. The Hon'ble Supreme Court has further observed that it signifies a deliberate act or omission on the part of the assessee. In the case of T. Ashok Pai v. CIT (supra), the Hon'ble Supreme Court has been pleased to hold that " Concealment of income' and 'furnishing of inaccurate particulars' carry different connotations. Concealment refers to deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of suppressio veri or suggestio falsi." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to the case of the assessee in a situation where income has inadvertently been under reported under a bona fide belief that salary as reported in the return of income is correct since the same has been determined by well-known tax advisers and hence penalty is not leviable on the assessee for the concealment of income. We thus while setting aside the orders of the lower authorities, direct the AO to delete the penalty in question levied under section 271(1)(c) of the Act. The grounds are accordingly allowed. 12. In the result, appeals are allowed. 7. In this regard Ld. Authorised Representative pointed out that Revenue opposed the decision in Hans Christian Gass (supra) before the jurisdictional High Court wherein the Hon'ble High Court was pleased to dismiss the appeal of Revenue in IT Appeal No.2290 of 2010 and others by observing as under: "1. Heard learned Counsel for the appellant. None present for the respondent. 2. In all these appeals, the revenue is aggrieved by the order of the ITAT whereby the penalty levied under section 271(1)(c) of the Income Tax Act, 1961 has been deleted. 3. The assessee was working as a Managing Director of Sandvik Asia Ltd. (SA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d taxes hereon were disbursed to the expatriates to be deposited directly by the respective expatriates into the Indian Government treasury. 8. In early 2005, there was a change in Daimler Ag's tax advisor. The new tax advisor (M/s. S.R. Batliboi Co.) commenced the work of collecting information for the purpose of preparation of the income-tax returns for the expatriate employees of Daimler Ag for A.Y. 2005-06 which was due for filing by 31-7-2005. In the course of collecting this information, it was discovered that in respect of the expatriate employees of Daimler AG deputed to India, all the taxable components of their overseas compensation may potentially not have been completely reported in their Indian tax returns for certain earlier assessment years. Based on this, Daimler AG in July 2005, commenced the process of discussions with the tax advisor for evaluating whether salary income for the earlier years in respect of its expatriates deputed to India has been inadvertently underreported. Daimler AG confirmed to its tax advisor in July 2005 itself that in case there was any underreporting of salary income and consequential under payment of taxes in the past years, then Dai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposited on 20-3-2006. Pursuant to the copies of computation of income of the assessee for all relevant assessment years the assessee filed an application in June 2006 with CIT - V along with copy of form no. 16 issued by Daimler AG. Subsequently in response to notice issued by the A.O u/s 148 the assessee filed revised return of income with A.O. the income disclosed by the assessee in this revised return is the same as earlier voluntarily disclosed income as mentioned above. The income disclosed by the assessee in the revised return was not disputed by the A.O. However, along with the assessment order u/s 147 of the Act the A.O issued one notice to the assessee for levying penalty u/s 271(1)(c) which is not justified. The A.O has levied penalty despite the fact that the payment of tax and filing of revised computation with CIT - V was done voluntarily without a finding in this regard by the A.O or in the proceedings being initiated against the assessee. In the assessment year under consideration, the penalty has been levied without appreciating the fact that the assessee was entitled to net pay from Daimler AG and Indian tax on salary received by the assessee from Daimler AG. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nitiated and penalty of Rs. 43,49,376/- was levied which was confirmed by the CIT(A) as discussed above. The stand of the assessee is that the position taken by the company and consequently by the assessee in original return of income was bonafide and was based on judicial precedent. Accordingly, it did not amount to concealment of income. At relevant point of time, two views were possible regarding liability to Indian taxation of the additional income in question. The penalty was leviable as declaration made by tax payer was voluntary and was not compelled and was made without detection by Department and there was no mens rea on the part of the assessee. Moreover, in case of Hans Christian Gass (supra), the Tribunal had occasion to deal a similar penalty which was deleted by the Tribunal and deletion of the penalty has been confirmed by the jurisdictional High Court vide its order dated 22.06.2011. In similar set of facts, Tribunal has decided similar issue of the assessee in ITAT Pune 'A' Bench in ITa.No.662/PN/2010 in case of Alaxender Reuss (supra) and others as discussed above. Facts being similar, following the same reasoning the order of the CIT(A) should be set aside and pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause notice issued by Assessing Officer, he levied penalty after rejecting the contentions raised on behalf of the assessee because additional income of Rs. 87,86,620/- was disclosed by the assessee in return filed in response to notice u/s.148 and same was not offered to tax in original return of income. Thus, the intention of the assessee was to conceal income received from Tetra Pak International S.A. Accordingly penalty was levied which was confirmed by the CIT(A), as discussed above. Matter was carried before the ITAT who deleted the penalty in question as discussed in para 5 of this order. Subsequently, matter was carried before the jurisdictional High Court by Revenue wherein Hon'ble High Court was pleased to restore the matter vide order dated 23.11.2009 as discussed in para 6 of this order. Thus earlier order of ITAT in assessee's case stand set aside. We find that ITAT Pune Bench 'B' in case of Hans Christian Gass in ITA.No.1583/PN/2008 and 505 to 509/PN/2008 had occasion to decide a similar issue wherein similar penalty was deleted by the ITAT as discussed in para 6 of this order. Revenue preferred appeal before the jurisdictional High Court wherein the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to assessee for tax deducted at source by Tetra Pak International S.A. This fact has also not been disputed on behalf of Revenue. Subsequently, Tetra Pak International S.A. communicated the fact of payment of taxes to the concerned Revenue authorities, inter alia requested that penalty proceedings should not be initiated because of voluntary disclosure by Tetra Pak International S.A. Thus, facts emerged that Assessing Officer has levied penalty inspite of the fact that payment of tax and filing of revised computation of income was done as discussed above. The issue as to whether there was concealment of particulars of income on the part of the assessee in not offering tax on the reimbursement towards tax rationalization as a taxable perquisite to attract penalty under section 271(1)(c) depends on the acceptability of the explanation of the assessee that the mistake in this regard was inadvertent due to his ignorance of Indian Income-tax Law, hence there was bona fide reason for the same. Explanation 1 to section 271(1)(c) states that where in respect of any facts material to the computation of total income of any person under this Act, such person fails to offer an explanation or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed by him. The ld. CIT (A) has basically upheld the penalty levied by the AO in the present case on the basis that the assessee brought nothing on record to substantiate his claim of bona fide belief regarding non taxability of the tax perquisite. Thus the issue revolve around the fact as to whether in the present case the assessee was able to substantiate his explanation of bona fide belief regarding non taxability of tax perquisite, or not. So far as applicability of the decision of Hon'ble Supreme Court in the case of UOI v. Dharamendra Textile Processors [2007] 295 ITR 244 is concerned, we after having gone through the decisions relied upon by the Ld. AR find substance in his argument that the Hon'ble Judges in the case of UOI v. Rajasthan Spinning Weaving Mills [2009] 13 SCC 448 have been pleased to clarify that the principles laid down in the case of Dharamendra Textile Processors (supra) needs to be interpreted to mean that every case of levy of penalty needs to be examined based on the facts of each case and the conditions specified in the law in this regard. For a ready reference the relevant extract of the decision in the case of Rajasthan Spinning Weaving Mills (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been found false then penalty will not be leviable. On the basis of the decision relied upon, we gather strength to form a view that penalty is not an automatic consequence of addition to income; penalty under section 271(1)(c) of the Act can come into play only when the conditions laid down under that section are satisfied; concealment of income cannot be a passive situation and it implies that the person concealing the income is hiding, covering up or camouflaging an income; penalty is not leviable in case where assessee is able to provide a 'bona fide' explanation; and penalty is not leviable in cases where assessee made errors ,under bona fide beliefs. 13. In view of the above, Assessing Officer was not justified in levying penalty u/s. 271(1)(c) of the Act and same is directed to be deleted following the decision of coordinate Bench as discussed above. 14. Similar issue arose in respect of other employees for other years of the same employer placed in similar situation, facts being similar so following same reasoning, penalty in question in all other assessee's similarly placed assessee for different years is also directed to be deleted. 15. As a result, the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
