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TMI Blog2018 (3) TMI 1700X X X X Extracts X X X X X X X X Extracts X X X X ..... y the High Court as involving substantial questions of law which is beyond any shadow of doubt that the addition in the instant case was made in respect of an issue which is highly debatable. Therefore, we are of the considered view that a penalty u/s 271 (1)(c) is not exigible in the instant case. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... e filed its return of income on 31.5.2004 declaring nil income. The Assessing Officer on examination of the facts and circumstances of the case observed that the assessee was having a business connection in India under Section 9 of the I.T. Act, 1961 as well as permanent establishment (PE) under Article 5 of the DTAA between India and United Kingdom. The business connection and permanent establishment were found to be in existence in India in the form of Rolls Royce India Limited, which is a United Kingdom incorporated subsidiary company of the assessee. It was observed by the Assessing Officer that the assessee had carried out its business activities through the PE situated in India including marketing and sale of goods to Indian customers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further appeal, the Hon'ble Delhi High Court vide order dated 30.8.2011 also held that the office of Rolls Royce India Limited at New Delhi constituted a permanent establishment of the assessee under Article 5 of the double taxation avoidance agreement between India and United Kingdom. The Hon'ble High Court also upheld the order of the Tribunal regarding the attribution of profit to 35 per cent profits arising out of the sale of goods to Indian Customers in India. 10. Thereafter, the Assessing Officer issued notice under Section 271 (1)(c) to the assessee and levied penalty for concealment of income of ₹ 3,71,56,555/- in the assessment year 1998-99, ₹ 8,34,05,256/- in the 1999-2000, ₹ 7,97,24,456/- in assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndian customers in India was a highly debatable issue which has travelled up to the Hon'ble Supreme Court, therefore, the levy of penalty under Section 271 (1)(c) of the act is not exigible to the assessee. 12. On the other hand, the learned DR vehemently argued and supported the orders of the lower authorities. 13. We have heard the submissions and perused the orders of the lower authorities and materials available on record. In the instant case, penalty under Section 271 (1)(c) of the Act was levied by the AO at ₹ 3,65,45,057/- in assessment year 1997-98, ₹ 3,71,56,555/- in assessment year 1998-99, ₹ 8,34,05,256/- in assessment year 1999-2000, ₹ 7,97,24,456/- in assessment year 2000-01, ₹ 3,41,97,448/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceedings under Section 147/148 of the Income Tax Act, 1961 were valid? 2. Whether the office of Rolls Royce India Limited at New' Delhi constituted a permanent establishment of the assessee under Article 5 of the Double Taxation Avoidance Agreement between India and the United Kingdom? 3. If the answers to questions No. 1 and 2 are against the assessee, then what would be the appropriate amount of profits attributable to the permanent establishment of the assessee in India? 4. Whether the findings of the Income Tax Appellate Tribunal with regard to the existence of the permanent establishment of the assessee in India are perverse? 16. The Hon'ble High Court vide its judgment dated 30.8.2011 dismissed the appeal of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Rupam Mercantiles Limited vs. DCIT 91 ITD 237 (Ahd) (TM) held as under: "No penalty was exigible under Section 271 (1)(c) once the High Court had held that the issue of addition / disallowance represented a substantial questions of law." 23. Further the Hon'ble Calcutta High Court in the case of Jiyajeerao Cotton Mills vs. Income Tax Officer, 'C' Ward Companies Distt. I, Calcutta & Others (1981) 130 ITR 710 (Cal) has held as under:- "The law is laid down or a provision in a statute is interpreted by the Supreme Court only when there is a debate or doubt on the interpretation of any provision of a statute requiring interpretation by the Supreme Court or when there is a conflict of judicial opinion o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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