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Facts
The assessee, a branch of Oxford University Press, UK, filed its return of income declaring itself as a domestic company and paid tax at 30%. The Assessing Officer (AO) held that the assessee should have been treated as a non-resident and reopened the assessment. Consequently, the AO levied a penalty under Section 271(1)(c) for furnishing inaccurate particulars.
Held
The CIT(A) deleted the penalty, finding that the issue of residential status was debatable and that the assessee had provided explanations and documents which were bonafide. The Tribunal upheld the CIT(A)'s order, agreeing that there was no furnishing of inaccurate particulars and that the penalty was not leviable.
Key Issues
Whether penalty under Section 271(1)(c) is leviable for furnishing inaccurate particulars regarding the residential status of the assessee when the issue is debatable and the assessee has acted bonafide.
Sections Cited
271(1)(c), 148, 147, 143(3), 144C(3), 2(42)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “I” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SUNIL KUMAR SINGH
This appeal by the Revenue is directed against order dated 28.08.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – 57, Mumbai [in short ‘the Ld. CIT(A)’] for AY 2015-16 , in relation to penalty u/s 271(1)(c) of the Income-tax Act, 1961 (in short ‘the Act’) levied by the Assessing Officer. The grounds raised t ‘the Act’) levied by the Assessing Officer. The grounds raised t ‘the Act’) levied by the Assessing Officer. The grounds raised by the Revenue are reproduced as under: by the Revenue are reproduced as under:
Whether on the facts and circumstances of the case and in Whether on the facts and circumstances of the case and in Whether on the facts and circumstances of the case and in law. Ld.CIT(A) has erred in deleting the penalty of INR law. Ld.CIT(A) has erred in deleting the penalty of INR law. Ld.CIT(A) has erred in deleting the penalty of INR 1,28,46,270 levied under Section 1,28,46,270 levied under Section 271(1)(c) of the Act for 271(1)(c) of the Act for furnishing v inaccurate particulars of income as per the furnishing v inaccurate particulars of income as per the furnishing v inaccurate particulars of income as per the provision of Company Act 2013 effective from 01.04.2014. provision of Company Act 2013 effective from 01.04.2014. provision of Company Act 2013 effective from 01.04.2014.
Whether on the facts and circumstances of the case and in Whether on the facts and circumstances of the case and in Whether on the facts and circumstances of the case and in law, Ld.CIT(A) has erred in deleting the levying of penalty for law, Ld.CIT(A) has erred in deleting the levying of penalty law, Ld.CIT(A) has erred in deleting the levying of penalty furnishing inaccurate particulars when assessee himself furnishing inaccurate particulars when assessee himself furnishing inaccurate particulars when assessee himself submitted tax resident certificate (TRC) issued by the HM submitted tax resident certificate (TRC) issued by the HM submitted tax resident certificate (TRC) issued by the HM Revenue & Customs, UK confirmed that the assessee is Tax Revenue & Customs, UK confirmed that the assessee is Tax Revenue & Customs, UK confirmed that the assessee is Tax resident for the purpose of UK resident for the purpose of UK-India tax Treaty and thus India tax Treaty and thus nonresident for India nonresident for India 3. Whether on the facts and circumstances of the case and in hether on the facts and circumstances of the case and in hether on the facts and circumstances of the case and in law, Ld.CIT(A) has erred in deleting the levying of penalty for law, Ld.CIT(A) has erred in deleting the levying of penalty for law, Ld.CIT(A) has erred in deleting the levying of penalty for furnishing inaccurate particulars when assessee himself furnishing inaccurate particulars when assessee himself furnishing inaccurate particulars when assessee himself submitted annual accounts in which auditors remarked that submitted annual accounts in which auditors remarked that submitted annual accounts in which auditors remarked that pursuant to the comme pursuant to the commencement of Companies Act 2013, the ncement of Companies Act 2013, the branch is covered under the definition of a foreign company branch is covered under the definition of a foreign company branch is covered under the definition of a foreign company as defined under section 2(42) of the Act with effect from as defined under section 2(42) of the Act with effect from as defined under section 2(42) of the Act with effect from 01.04.2014.The Appellant craves leave to amend or alter any 01.04.2014.The Appellant craves leave to amend or alter any 01.04.2014.The Appellant craves leave to amend or alter any ground or add a new ground which may be ne ground or add a new ground which may be necessary, cessary, 2. Briefly stated, facts of the case are that the assessee filed Briefly stated, facts of the case are that the assessee filed Briefly stated, facts of the case are that the assessee filed return of income on 01.04.2016 declaring total income of return of income on 01.04.2016 declaring total income of return of income on 01.04.2016 declaring total income of Rs.12,84,62,680/-. The return of income filed by the assessee in . The return of income filed by the assessee in . The return of income filed by the assessee in the capacity of a domestic the capacity of a domestic company (i.e. Resident status) company (i.e. Resident status) and paid the tax at the rate of at the rate of 30% of the total income. The assessee being . The assessee being branch office, of Oxford Press, UK office, of Oxford Press, UK according to the Assessing Officer according to the Assessing Officer the return should have been filed in the the return should have been filed in the status of non of non-resident. Therefore, the case of the assessee was reopene he case of the assessee was reopened by way of notice d by way of notice u/s 148 of the Act dated 07.03.2020. In response the assessee filed u/s 148 of the Act dated 07.03.2020. In response the assessee filed u/s 148 of the Act dated 07.03.2020. In response the assessee filed return of income and assessment u/s 147 of the Act was completed return of income and assessment u/s 147 of the Act was completed return of income and assessment u/s 147 of the Act was completed on 17.09.2021 wherein the penalty proceedings u/s 271(1)(c) of the on 17.09.2021 wherein the penalty proceedings u/s 271(1)(c) of the on 17.09.2021 wherein the penalty proceedings u/s 271(1)(c) of the Act were initiated for furnishing ina Act were initiated for furnishing inaccurate particulars of the ccurate particulars of the income. The Assessing Officer levied penalty @ 100% of the tax income. The Assessing Officer levied penalty @ 100% of the tax income. The Assessing Officer levied penalty @ 100% of the tax sought to be evaded which was worked out to Rs.1,48,26,270/- by sought to be evaded which was worked out to Rs.1,48,26,270/ sought to be evaded which was worked out to Rs.1,48,26,270/ way of impugned penalty order. way of impugned penalty order.
On further appeal, the Ld. CIT(A) deleted the penalty observing On further appeal, the Ld. CIT(A) deleted the penalty observing On further appeal, the Ld. CIT(A) deleted the penalty observing as under:
“5.3 The facts recorded & finding of the AO in the penalty 5.3 The facts recorded & finding of the AO in the penalty 5.3 The facts recorded & finding of the AO in the penalty order and the submission made by the appellant has order and the submission made by the appellant has order and the submission made by the appellant has been considered. been considered. The facts of the case of the appellant are that the Return of The facts of the case of the appellant are that the Return of The facts of the case of the appellant are that the Return of income was filed on 01.04.2016 declaring total income of income was filed on 01.04.2016 declaring total income of income was filed on 01.04.2016 declaring total income of Rs.12,84,62,680/ Rs.12,84,62,680/- for AY.2015-16. The Return was filed 16. The Return was filed in the capacity of domestic company and offered tax @ in the capacity of domestic company and offered tax @ in the capacity of domestic company and offered tax @ 30%. In the re 30%. In the re- assessment order, the AO considered t order, the AO considered status of the appellant company as non status of the appellant company as non- resident and resident and taxed the income @ 40% instead of 30% offered by the taxed the income @ 40% instead of 30% offered by the taxed the income @ 40% instead of 30% offered by the appellant. During the appellate proceedings, the appellant has filed a During the appellate proceedings, the appellant has filed a During the appellate proceedings, the appellant has filed a submission on various aspects of levy of penalt submission on various aspects of levy of penalt submission on various aspects of levy of penalty u/s.271(1)(c). u/s.271(1)(c). u/s.271(1)(c). The The The appellant appellant appellant has has has filed filed filed a a a lengthy lengthy lengthy submission covering all aspects of penalty u/s.271(1)(c). submission covering all aspects of penalty u/s.271(1)(c). submission covering all aspects of penalty u/s.271(1)(c). However, the submission of the appellant regarding (i) However, the submission of the appellant regarding (i) However, the submission of the appellant regarding (i) penalty in respect of inaccurate claim, (ii) penalty for penalty in respect of inaccurate claim, (ii) penalty for penalty in respect of inaccurate claim, (ii) penalty for misrepresentation or suppression misrepresentation or suppression of facts, (iii) penalty of facts, (iii) penalty provisions not to be strictly construed, etc. are not provisions not to be strictly construed, etc. are not provisions not to be strictly construed, etc. are not relevant to the facts of the case of the appellant. relevant to the facts of the case of the appellant. relevant to the facts of the case of the appellant. The AO has levied penalty u/s.271(1)(c) of the Act. The AO The AO has levied penalty u/s.271(1)(c) of the Act. The AO The AO has levied penalty u/s.271(1)(c) of the Act. The AO has referred to explanation 1(A) to section 271(1)(c) of the has referred to explanation 1(A) to section 271(1)(c) of the has referred to explanation 1(A) to section 271(1)(c) of the Act. As per explanation 1(A), if a person fails to offer an Act. As per explanation 1(A), if a person fails to offer an Act. As per explanation 1(A), if a person fails to offer an explanation or explanation offered is found to be false by explanation or explanation offered is found to be false by explanation or explanation offered is found to be false by the AO or an explanation is not substantiated by the the AO or an explanation is not substantiated by the the AO or an explanation is not substantiated by the assessee and fails to prove that such explanation was assessee and fails to prove that such explanation was assessee and fails to prove that such explanation was bonafide and all the facts bonafide and all the facts relating to the same are and relating to the same are and material to computation of total income has been material to computation of total income has been material to computation of total income has been disclosed, then the amount added or disallowed in disclosed, then the amount added or disallowed in disclosed, then the amount added or disallowed in computing total income of such person deemed to computing total income of such person deemed to computing total income of such person deemed to represent the income in respect of which particulars have represent the income in respect of which particulars have represent the income in respect of which particulars have been concealed. The been concealed. The fact remains that the AO has fact remains that the AO has initiated penalty u/s.271(1)(c) in respect of furnishing of initiated penalty u/s.271(1)(c) in respect of furnishing of initiated penalty u/s.271(1)(c) in respect of furnishing of inaccurate particulars of income. The AO has also levied inaccurate particulars of income. The AO has also levied inaccurate particulars of income. The AO has also levied penalty u/s.271(1)(c) in respect of furnishing of inaccurate penalty u/s.271(1)(c) in respect of furnishing of inaccurate penalty u/s.271(1)(c) in respect of furnishing of inaccurate particulars of income. The issue regarding fu particulars of income. The issue regarding furnishing of rnishing of inaccurate particulars of income is with respect to inaccurate particulars of income is with respect to inaccurate particulars of income is with respect to residential status of the appellant company; resident or residential status of the appellant company; resident or residential status of the appellant company; resident or non-resident. The AO has referred to explanation 1(A) to resident. The AO has referred to explanation 1(A) to resident. The AO has referred to explanation 1(A) to section 271(1)(c), it does not imply that the levy of penalty section 271(1)(c), it does not imply that the levy of penalty section 271(1)(c), it does not imply that the levy of penalty was in respec was in respect of concealment of particulars of that t of concealment of particulars of that income. Mere reference to explanation 1(A) to section income. Mere reference to explanation 1(A) to section income. Mere reference to explanation 1(A) to section 271(1)(c) 271(1)(c) 271(1)(c) does does does not not not invalidate invalidate invalidate the the the penalty penalty penalty levied levied levied u/s.271(1)(c) for furnishing of inaccurate particulars of u/s.271(1)(c) for furnishing of inaccurate particulars of u/s.271(1)(c) for furnishing of inaccurate particulars of income. The facts of the case of the appellant fo The facts of the case of the appellant for AYs.1994 r AYs.1994-95 to 2015-16 are that from AY.1994 16 are that from AY.1994-95, the AO relying upon 95, the AO relying upon CBDT’s order dated 31.07.1994 held the company as CBDT’s order dated 31.07.1994 held the company as CBDT’s order dated 31.07.1994 held the company as Non-resident in India. From AY.1995 resident in India. From AY.1995-96, the AO in the 96, the AO in the assessment order mentioned the status of the company assessment order mentioned the status of the company assessment order mentioned the status of the company as Resident. The position as Resident. The position continued till AY.2003 continued till AY.2003-04. For AY.2004-05, the appellant filed the Return of income in the 05, the appellant filed the Return of income in the 05, the appellant filed the Return of income in the capacity of non capacity of non-resident, however, in the assessment resident, however, in the assessment order, the AO considered the status as Resident and order, the AO considered the status as Resident and order, the AO considered the status as Resident and initiated penalty proceedings. Penalty proceedings were initiated penalty proceedings. Penalty proceedings were initiated penalty proceedings. Penalty proceedings were dropped by the AO. On 19.07.2006, the appellant dropped by the AO. On 19.07.2006, the appellant dropped by the AO. On 19.07.2006, the appellant company accepted the status of company as resident in company accepted the status of company as resident in company accepted the status of company as resident in India, under protest, w.e.f. 1995 India, under protest, w.e.f. 1995-96. For AYs.2012 96. For AYs.2012-13 and 2013-14, the AO considered the appellant company as 14, the AO considered the appellant company as 14, the AO considered the appellant company as resident. However, for AY.2015 resident. However, for AY.2015-16, the appellant filed llant filed Return of income in the capacity of resident in India, which Return of income in the capacity of resident in India, which Return of income in the capacity of resident in India, which was accepted in order u/s.143(3). However, in the order was accepted in order u/s.143(3). However, in the order was accepted in order u/s.143(3). However, in the order u/s.143(3) r.w.s. 147 r.w.s. 144C(3), the status was u/s.143(3) r.w.s. 147 r.w.s. 144C(3), the status was u/s.143(3) r.w.s. 147 r.w.s. 144C(3), the status was considered as non considered as non-resident by the AO and hence the AO resident by the AO and hence the AO levied penalty u/s.2 levied penalty u/s.271(1)(c) of the Act. The facts show that the appellant has been consistently The facts show that the appellant has been consistently The facts show that the appellant has been consistently filing Return of income in the capacity of non filing Return of income in the capacity of non- -resident. From AY.1995 From AY.1995-96 onwards, the AO has been considering 96 onwards, the AO has been considering the status of the appellant as resident instead of non the status of the appellant as resident instead of non the status of the appellant as resident instead of non- resident. For resident. For AY.2004-05, the appellant filed Return of 05, the appellant filed Return of income as non income as non-resident. The AO in the assessment order resident. The AO in the assessment order considered the status of the appellant as resident and considered the status of the appellant as resident and considered the status of the appellant as resident and initiated penalty proceedings. However, the penalty initiated penalty proceedings. However, the penalty initiated penalty proceedings. However, the penalty proceedings were dropped by the AO. On 19.07.2006, proceedings were dropped by the AO. On 19.07.2006, proceedings were dropped by the AO. On 19.07.2006, the appellant, under protest, filed a letter to the AO accepting appellant, under protest, filed a letter to the AO accepting appellant, under protest, filed a letter to the AO accepting its status as resident in India w.e.f. 1995 its status as resident in India w.e.f. 1995-96. The AO has 96. The AO has not rejected the letter filed by the appellant. For AY.2015 not rejected the letter filed by the appellant. For AY.2015 not rejected the letter filed by the appellant. For AY.2015- 16, the appellant filed status of the company as resident, 16, the appellant filed status of the company as resident, 16, the appellant filed status of the company as resident, which was acc which was accepted by the AO in the order u/s.143(3) of epted by the AO in the order u/s.143(3) of the Act, however, in the order u/s.147 of the Act, the AO the Act, however, in the order u/s.147 of the Act, the AO the Act, however, in the order u/s.147 of the Act, the AO changed the status of the company from resident to non changed the status of the company from resident to non changed the status of the company from resident to non- resident and taxed the income @ 40% instead of 30% resident and taxed the income @ 40% instead of 30% resident and taxed the income @ 40% instead of 30% offered by the appellant. Penalty for AY.2015 offered by the appellant. Penalty for AY.2015-16 has been has been levied for furnishing of inaccurate particulars of income in levied for furnishing of inaccurate particulars of income in levied for furnishing of inaccurate particulars of income in respect of residential status of the company. The appellant respect of residential status of the company. The appellant respect of residential status of the company. The appellant has submitted that during the re has submitted that during the re-assessment proceedings, assessment proceedings, the AO was informed about the letter dated 19.07.2016 the AO was informed about the letter dated 19.07.2016 the AO was informed about the letter dated 19.07.2016 that under prot that under protest, the appellant has accepted the status est, the appellant has accepted the status of the company as resident in India and filed Return of of the company as resident in India and filed Return of of the company as resident in India and filed Return of income in the capacity of resident in India. Thus, from the income in the capacity of resident in India. Thus, from the income in the capacity of resident in India. Thus, from the chronology of events and the evidences/documents chronology of events and the evidences/documents chronology of events and the evidences/documents furnished to the AO during the penalty proceedin furnished to the AO during the penalty proceedin furnished to the AO during the penalty proceedings, it is seen that all the material facts relevant to computation of seen that all the material facts relevant to computation of seen that all the material facts relevant to computation of total income, i.e. the status of the company as resident, total income, i.e. the status of the company as resident, total income, i.e. the status of the company as resident, were furnished to the AO during the re were furnished to the AO during the re-assessment assessment proceedings as well as penalty proceedings. Mere change proceedings as well as penalty proceedings. Mere change proceedings as well as penalty proceedings. Mere change of residential status of residential status of the company from resident to non of the company from resident to non- resident could not lead to a case of furnishing of resident could not lead to a case of furnishing of resident could not lead to a case of furnishing of inaccurate particulars of income. The appellant has offered inaccurate particulars of income. The appellant has offered inaccurate particulars of income. The appellant has offered an explanation, which was substantiated by relevant an explanation, which was substantiated by relevant an explanation, which was substantiated by relevant documents and the explanation offered by the appellant documents and the explanation offered by the appellant documents and the explanation offered by the appellant was bonafide, therefore, penalty could not be levied as bonafide, therefore, penalty could not be levied as bonafide, therefore, penalty could not be levied u/s.271(1)(c) in respect of change of status of appellant u/s.271(1)(c) in respect of change of status of appellant u/s.271(1)(c) in respect of change of status of appellant company from resident to non company from resident to non-resident. Further, the AO has been considering the status of Further, the AO has been considering the status of Further, the AO has been considering the status of appellant company as resident from AYs.1995 appellant company as resident from AYs.1995 appellant company as resident from AYs.1995-96 till 2004-05. The CIT(A) for AYs.1995 05. The CIT(A) for AYs.1995-96 and 1996 96 and 1996-97 has also upheld the status of the company as resident. The also upheld the status of the company as resident. The also upheld the status of the company as resident. The appellant company vide letter dated 19.07.2006 appellant company vide letter dated 19.07.2006 appellant company vide letter dated 19.07.2006 accepted the status taken by the AO and considered it as accepted the status taken by the AO and considered it as accepted the status taken by the AO and considered it as resident in India and filed the Return of inc resident in India and filed the Return of inc resident in India and filed the Return of income, accordingly. Thus, the appellant has been consistently accordingly. Thus, the appellant has been consistently accordingly. Thus, the appellant has been consistently filing the Return of income in the capacity of resident in filing the Return of income in the capacity of resident in filing the Return of income in the capacity of resident in India and the AO has been accepting that position from India and the AO has been accepting that position from India and the AO has been accepting that position from AYs.1995-96 onwards. For AYs.1995 96 onwards. For AYs.1995- 96 and 1996 96 and 1996-97, CIT(A) has also upheld the s CIT(A) has also upheld the status of the appellant as tatus of the appellant as resident company. Thus, following the rule of consistency, resident company. Thus, following the rule of consistency, resident company. Thus, following the rule of consistency, no penalty u/s.271(1)(c) is leviable. no penalty u/s.271(1)(c) is leviable. Further, the argument of the appellant that when two Further, the argument of the appellant that when two Further, the argument of the appellant that when two views are possible, then no penalty could be levied is also views are possible, then no penalty could be levied is also views are possible, then no penalty could be levied is also acceptable in t acceptable in the case of the appellant. Considering the above facts, the appellant company has Considering the above facts, the appellant company has Considering the above facts, the appellant company has not furnished inaccurate particulars of income in respect not furnished inaccurate particulars of income in respect not furnished inaccurate particulars of income in respect of status of the company as resident. Therefore, the of status of the company as resident. Therefore, the of status of the company as resident. Therefore, the penalty of Rs.1,28,46,270/ penalty of Rs.1,28,46,270/- levied by the AO u/s.271(1)(c) levied by the AO u/s.271(1)(c) is deleted. Accordingly, the ground of appeal nos. 1 to 4 are Allowed. Accordingly, the ground of appeal nos. 1 to 4 are Allowed. Accordingly, the ground of appeal nos. 1 to 4 are Allowed.”
4. We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused the relevant materials on record the relevant materials on record. We find that the Ld. CIT(A) has . We find that the Ld. CIT(A) has deleted the penalty, firstly, , firstly, for the reason that in the earlier year the the earlier year the assessee was filing return of income in the capacity of the non- assessee was filing return of income in the capacity of the non assessee was filing return of income in the capacity of the non resident however, the Assessing Officer turned the status into resident however, the Assessing Officer turned the status into resident however, the Assessing Officer turned the status into resident and thereafter the assessee started filing return in the resident and thereafter the assessee started filing return in the resident and thereafter the assessee started filing return in the status of resident under protest. status of resident under protest. The assessee fully explained ssee fully explained to the Assessing Officer in respect of residential status in respect of residential status, therefore, the ld , therefore, the ld CIT(A) concluded that CIT(A) concluded that no inaccurate particulars have been filed. no inaccurate particulars have been filed. Secondly, the issue that issue that status of the assessee should be resident status of the assessee should be resident or non-resident has been resident has been debated in preceding years and no penalty in preceding years and no penalty is leviable on the debatable issue. Thirdly, before us the Ld. counsel is leviable on the debatable issue. Thirdly, before us the Ld. counsel is leviable on the debatable issue. Thirdly, before us the Ld. counsel for the assessee submitted that in the return of income filed in for the assessee submitted that in the return of income filed in for the assessee submitted that in the return of income filed in response to notice u/s notice u/s 148 of the Act, the assessee filed assessee filed return of income in status of non tatus of non-resident and paid the tax @ 40% liable to resident and paid the tax @ 40% liable to non-residents and therefore there is no furnishing of inaccurate residents and therefore there is no furnishing of inaccurate residents and therefore there is no furnishing of inaccurate particulars on the part of the assessee. In view of the above, we do particulars on the part of the assessee. In view of the above, we do particulars on the part of the assessee. In view of the above, we do not find any infirmity in the order of the Ld. CIT(A) in deleting the not find any infirmity in the order of the Ld. CIT(A) in deleting t not find any infirmity in the order of the Ld. CIT(A) in deleting t penalty and we accordingly uphold the same. The grounds of appeal penalty and we accordingly uphold the same. The grounds of appeal penalty and we accordingly uphold the same. The grounds of appeal of the Revenue are dismissed. of the Revenue are dismissed.
In the result, the appeal of the Revenue is dismissed. In the result, the appeal of the Revenue is dismissed. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open Court on nounced in the open Court on 31/01/2025. /01/2025.