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TMI Blog2016 (10) TMI 536X X X X Extracts X X X X X X X X Extracts X X X X ..... w cannot tantamount to furnishing of inaccurate particulars. The assessee has given an explanation which is found to be bonafide, thus, in our opinion the Explanation -1 to the section 271(1)(c) of the Act is not attracted in the case of the assessee and, therefore, no penalty is leviable. Disallowance of long-term capital gain - Authorized Representative submitted that the long-term capital gain (LTCG) was claimed as exempt by the assessee at the time of filing the return, inasmuch as, the assessee was of bonafide view that STT would be paid in the due course once the BSE would get the issue clarified from the CBDT - Held that:- Since the assessee failed to get the same clarified until the last date of revision of return of income i.e. 31/03/2008, the assessee during the course of assessment proceeding, without any show cause notice issued by the Assessing Officer, offered the long-term capital gain (LTCG) for taxation which was accepted by the Assessing Officer and he adjusted long-term capital loss (LTCL) from the long-term capital gain (LTCG) so offered. This explanation offered by the assessee has not been found false by the Assessing Officer. Further, the assessee substantiat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- as against the returned income of ₹ 3,55,15,180/-. The assessing officer also initiated penalty proceedings under section 271(1)(c) of the Act .The additions/disallowances made by the Assessing Officer was confirmed by the learned Commissioner of Income Tax (Appeals) vide his order dated 26/07/2010. The Assessing Officer issued a show cause for levy of penalty on the additions disallowances confirmed by the learned Commissioner of Income Tax (Appeals). The submission made by the assessee that the assessee was not liable for levy of penalty, were not considered by the Assessing Officer and he levied the penalty of ₹ 18,68,590/- under section 271(1)(c) of the Act on 29/03/2012 equivalent to the 100% of the tax sought to be evaded by the assessee. Aggrieved, the assessee filed appeal before the learned Commissioner of Income-tax (Appeals), who vide the impugned order dated 15/01/2014 allowed the appeal of the assessee deleting the penalty under section 271(1)(c) of the Act on all the issues of addition/disallowances. Aggrieved, by the order of the learned Commissioner of Income-tax (Appeals), the Revenue is in appeal raising the grounds as reproduced above. The Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s purchased plant and machinery from time to time. The machines purchased by the assessee were not working at the optimum level and therefore on complaint by the assessee, the supplier of machine sent its engineer to provide the process training. The assessee has not deducted tax on this payment as according to it, it is a payment of business profit under Article 7 of DTAA with Germany and since the nonresident has no PE in India, no income has accrued or arisen in India. The AO observed that the payment made by the assessee to the nonresident is in respect of fees for technical services under Article 12 of DTAA with Germany and since assessee has not deducted tax at source, the expenditure is disallowed u/s 40(a)(i). The Ld. CIT(A) confirmed the disallowance which was upheld by the Hon'ble ITAT vide Para 5.7 of its order only for the reason that reliance of assessee on Article 7 of Indo-German Treaty is not tenable in as much as assessee has failed to demonstrate that non-resident was conducting any business in India. 2. The assessee in terms of Technical and Research Agreement dated 01.09.2006 with Dr. U. K. Thiele paid ₹ 4,44,690/- towards devolvement and production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment Therefore, it could not be said that assessee had claimed expenses which were false or not genuine. Assessee had furnished all the relevant facts concerning the claim made by it in the return filed. It was held that the AO had levied penalty in respect of said amount merely because said claim of the assessee was disallowed u/s 40(a)(ia) of the Act as assessee failed to deduct TDS thereon. In the case of CIT vs. Reliance Petro products P. Ltd., 322 ITR 158(SC) it was held that a mere making of the claim which was not sustainable in the law, by itself will not amount to furnishing inaccurate particulars of income. It was held that, in the present case, admittedly, assessee made a claim but the same was rejected and disallowed not for the reason that the claim was not genuine or was fabricated but in view of provisions of law that assessee did not deduct TDS thereon. It was opined that the ratio of judgment in the case of Reliance Petro products Ltd (supra) squarely applied to the facts of the present case and, therefore, levy of penalty was not justified. It was also observed that similar issue had also been considered in the case of ACIT vs. Mazda Ltd (2012) 33 CCH 047 (Ahd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that "assessee has willfully furnished inaccurate particulars of income." The Ld. Commissioner of Income Tax (Appeals) held that the assessee has furnished all the required details and that hence no penalty can be levied on technical/legal disallowances u/s 14A or u/s 40(a)(ia). We on the facts of this case agree with these findings of the Ld. Commissioner of Income Tax (Appeals). We find no infirmity in the conclusions drawn by the Ld. CIT(A) on this issue. In the result this ground of Revenue is dismissed." 4. The only reason given by the AO for levy of penalty is that no tax was deducted at all at any point of time, even at a later date and thus no tax could be realized from the recipient being a foreign national thus causing loss to the revenue. This cannot be a reason for levy of penalty as once the tax along with interest is recovered from the assessee by raising demand by disallowing the expenditure, no loss is caused to the revenue. Gujarat High Court in case of CIT Vs. LG Chaudhary 215 Taxman 95 (Magz.) where AO imposed penalty on assessee u/s 271(l)(c) for not deducting and depositing TDS on time, held that where there was no concealment of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) and Hon'ble ITAT up held the addition. The Hon'ble ITAT observed that the payment to Dr. U. Thele was for rendering technical services not falling under Article 14 of the DTAA. 5.15. I shall now discuss whether penalty will be imposable on these amounts. All the particulars had been furnished by the appellant. All facts relating to the computation of his total income had been disclosed by him. The explanation give by the appellant appears to be bonafide. 5.16. As per the views of the AO, the Ld. CIT(A) and the Hon'ble ITAT the appellant was in default for not deducting TDS. However, there is no concealment of income or furnishing of inaccurate particulars of income. The explanation given by the appellant stating that no inaccurate particulars were filed has merit. The explanation of the appellant is bonafide. 5.17. To conclude it was seen that in respect of all the issues, all particulars had been furnished by the appellant. The AO also has not stated that particulars furnished were not correct or inaccurate. 5.18. The bonafides of the appellant can be seen from the fact that details of all the expenditure which was claimed were furnished. The AO has nowh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the DTAA with Germany whereas the Tribunal has held that the Article-7 was not applicable in the case of the assessee. Similarly, in respect of payment of ₹ 4,44,690/- to Dr. UK Thiele, the assessee claimed that the payment was towards independent scientific activity which fall under Article 14 of DTAA with Germany, whereas the Tribunal held that the assessee failed to demonstrate that the services rendered by Dr UK Thiele are independent scientific services. The Assessing Officer has nowhere stated that the assessee has furnished false and fabricated bills or claimed expenditure which was not related to the business of the assessee. The Hon'ble Supreme Court in the case of CIT Vs. Reliance Petroproducts Private Limited has observed that making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars. The assessee has given an explanation which is found to be bonafide, thus, in our opinion the Explanation -1 to the section 271(1)(c) of the Act is not attracted in the case of the assessee and, therefore, no penalty is leviable. The Tribunal in the case of Sh. Vishal Neeraj Aggarwal (supra) after taking into account the decision of the Hon'ble Guja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case for disallowances towards non-deduction of tax at source. 3. Third disallowance of ₹ 26,138/- under section 40(a)(i) has already been deleted by the Tribunal and, therefore, no penalty was leviable corresponding to the disallowance of ₹ 26,138/-. In view of above discussion, we find that order of the learned Commissioner of Income-tax (Appeals) on the issue in dispute is well reasoned and no interference is required on our part and accordingly we uphold the same. The grounds of the Revenue on the issue are dismissed. 4. The second issue contested before us is in respect of penalty levied under section 271(1)(c) of the Act in respect of disallowance of long-term capital gain of ₹ 41,62,154/-. The facts in respect of the issue in dispute are that in the return of income the assessee shown long-term capital gain (LTCG) on sale of shares of M/s. Mayuka Investment Ltd. and claimed the same as exempt under section 10(38) of the Act. Before the Assessing Officer, the assessee explained that at the time of filing of return, the assessee was expecting that the CBDT would clarify to the BSE on the matter of STT but no such clarification was issued and as a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he BSE in this respect was also filed before the Assessing Officer. However, since the assessee failed to get the same clarified until the last date of revision of return of income i.e. 31/03/2008, the assessee during the course of assessment proceeding, without any show cause notice issued by the Assessing Officer, offered the long-term capital gain (LTCG) for taxation which was accepted by the Assessing Officer and he adjusted long-term capital loss (LTCL) from the long-term capital gain (LTCG) so offered. This explanation offered by the assessee has not been found false by the Assessing Officer. Further, the assessee substantiated the explanation with necessary evidence and explanation filed is bonafide and all the facts relating to the explanation and material to the computation of income on the issue have been disclosed by the assessee. In view of these facts, the Explanation-1 to the section 271(1)(c) of the Act is not attracted in the case of the assessee. We may like to repeat the findings of the Hon'ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (supra) that making an incorrect claim in law cannot tantamount to furnish of inaccurate particulars. Thus, in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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