Loading judgment…
No AI summary yet for this case.
Before: Shri H.S. Sidhu & Shri L.P. Sahu
ORDER Per L.P. Sahu, A.M.: This is an appeal filed by the Revenue against the order of ld. CIT(A)-43, New Delhi dated 22.05.15 for the assessment year 2010-11 on the following solitary grounds : “1. The ld. CIT(A) has erred in quashing the penalty u/s. 271(1)(c) imposed by the Assessing Officer.
The brief facts of the case are that the assessee is a Australia based company. It claimed to have opened a project office (PO) in India. The assessee is engaged in the business of providing engineering and consultancy services in India. During the year, the assessee entered into a contract with GAIL and total amount received during the year on the services rendered were at Rs.2,03,29,890/- and other income of Rs.39,63,202/-. On this entire receipt, the assessee did not pay any tax. On completion of assessment proceedings, penalty was imposed by the Assessing Officer u/s. 271(1)(c). The Assessing Officer observed that there was project office in India during the disputed year, which constituted PE of assessee for the purpose of Income-tax Act and as per DTAA between India and Australia, he offered its income for taxation on net basis. During the assessment proceedings, the assessee had submitted that in order to buy peace of mind and avoid any litigation, it offered its revenue to tax at 10% on gross basis consistent with the assessment made in assessment year 2009-10 which was accepted by the assessee. The assessee accepted the decision of the Assessing Officer and did not file any objection before the ld. DRP or before the CIT(A). The Assessing Officer concluded that the assessee has accepted the fact that there was PE in India for the Income-tax purpose and further its income would be taxable in India on gross basis as FTS and not on net basis. The assessee made written submissions in support and relied on many case laws before the Assessing Officer. The Assessing Officer concluded that the assessee has made incorrect disclosure of his income and furnished inaccurate particulars in the return leading eventually to concealment of income. Therefore, he imposed penalty u/s. 271(1)(c) of the Act of Rs.24,29,309/-. Feeling aggrieved from the order of the Assessing Officer, the assessee appealed before the ld. CIT(A) who after considering all the submissions of the assessee deleted the penalty. Aggrieved, the Revenue is in appeal before the Tribunal.
None is present on behalf of the assessee despite notice issued for hearing. Therefore, the appeal is being disposed of exparte qua assessee after hearing the ld. DR. The ld. DR submitted that the assessee had filed incorrect return of income whereas the assessee had accepted in previous assessment year regarding taxability on receipt in India and no appeal was filed against the order of the Assessing Officer. Therefore, there is PE in India, which is taxable in India on gross basis. Therefore, the Assessing Officer was justified to impose penalty u/s. 271(1)(c) of the Act.
After hearing the ld. DR, we observe that the ld. CIT(A) has done good reasoned order. The findings of the ld. CIT(A) are as under : 5.1. “I have duly considered various contentions raised by the appellant and the material placed on record. The relevant facts are that the non-resident appellant has executed 3 projects in India during the year under consideration. These projects are for providing project management consultancy services to GAIL (India) Limited for laying of cross-country natural gas pipelines in India. Entire scope of work was sub- contracted by the appellant and the entire services were provided by sub-contractor in India at. GAIL premises. The appellant took a position that on facts and circumstances of the case, there exists in India a fixed place PE, supervisory PE and service PE under Indo-Australia DTAA and therefore in its return of income, offered the contract revenue for tax purpose as business receipts on net basis. During the course of assessment, the assessee suo-moto, in order to buy peace and avoid litigation, filed revised computation of income during assessment proceedings and offered its gross revenues to tax @ 10% on gross basis (as done by AO in previous year assessment). The AO accepted the same and held that there exist no PE in India and hence assessed the contract revenue as FTS taxable on gross basis @ 10%. The appellant did not file appeal against the assessment order. The AO levied penalty u/s 271(1)(c) at Rs 24,29,309/- being 100% of the tax sought to be evaded holding that the appellant has concealed and furnished wrong particulars of its income. 5.2 It is seen that the appellant has entered into 3 contracts with GAIL and these have been sub-contracted by the appellant as under:
Name of contract entered into by the Sub-contractor agreement appellant.
Jagoti to Pithampur Pipeline Project dated - J P Kenny Truine Engineering Pvt. Ltd. 06.10.2005 . (LOA/ GAIL/JP / 087/ 44 / - J P Kenny Ltd. dated 30.11.2005 560000171/ II SB) Chainsa-Jhajjar-Bamnoli Pipeline project -Wood Group Engineering India Pvt. Ltd. - J P Kenny Ltd. dated 15.05.2008 dated 25.04.2008 (LOA/ GAIUND/C&P / PROPPMC/ CJBPL / 07- 017/01/ C-08 / 07) Annual Rate Contract for GAIL's spur/ small - Wood Group Engineering India. Pvt. Ltd. Dated 06.05.2008 pipeline project, dated 11.03.2008 036/0 l/C-07/48) (LOA GA.IL/ND/C&P/PROPPMC / 07
5.3 It is noted that on similar set of facts, my predecessor had in his order for AY 2009-10, in Appeal No. 59/2012-13, vide order dated 03.10.2013, deleted the penalty levied u/s 271(l)(c). The Id. CIT(A) while granting relief to the appellant had noted as follows:- “It is pertinent to mention that entire scope of work under the above 3 contracts has been sub-contracted by the appellant. There is a force in appellant's contention that though the entire scope of work has been sub-contracted. the contracts belong to the appellant. The appellant is responsible for all the obligations under the contracts and. revenue arising out of the contracts belongs to the appellant. Sub-contractor is providing services to GAIL in India for and on behalf of the appellant. Therefore, a view can be taken that there exist fixed place PE in India inform of office of the sub contractor in India. The appellant has also submitted that under Indo-Australia DTAA, ‘make available' requirement has to be satisfied before services can be characterized as technical services under Article 12 of said DTAA. However, the AO has nowhere in the assessment order given the finding that 'make available' requirement has been satisfied in the present case. The appellant took view that since services provided, are not in nature of technical services within the meaning of Article 12 of relevant DTAA, there exist in India service PE under Article 5(3)(c) of relevant DTAA as period of contract exceeded 90 days in each case. This view taken by the appellant is also one of the plausible views regarding existence of PE in India. Since entire services have been provided by the sub-contractors in India, it is possible to take a view that since services are effectively connected with PE in India, these are taxable in India on net basis u/s 44DA even if it is assumed, that services are in nature of technical services within meaning of Article 12 of DTAA because all the agreements are dated beyond 31.03.2003. Therefore, it cannot be said that view taken by the appellant in its return of income is not plausible one. ” 5.4. The ld.CTT(A) had further at para 5.4 of his order noted as follows:-
“There is a force in argument of the appellant that it has neither concealed nor furnished, inaccurate particulars of its income. Entire contract revenue was declared in the return of income though offered for tax on net basis. If difference in position taken by the appellant and the AO is regarding characterization of income only, it cannot be said that inaccurate particulars of income have been furnished, by the appellant, as held, by Hon'ble Delhi High Court, in case of C1T vs Amit Jain 351 1TK 74. Further, Hon'ble. Supreme Court in case of Reliance Petroproducts P. Ltd. [(.2010) 230 CTR 320] has held that if a claim made by the assessee is not found sustainable by the AO, it does not automatically lead, to concealment of income. ” 5.5. The AO has also not established how provisions contained in Explanation 1 to section 271 (1 ){c) are applicable in this case. The present case does not fall under clause (A) of Explanation 1 as the appellant has offered an explanation and it has not found by the AO to be false. Further, even clause (B) of Explanation 1 does not apply as the appellant has been able to substantiate his explanation and also could prove that explanation is bonafide and all the facts material to computation of income have been disclosed. 5.6. It is established principle of law that assessment and penalty proceedings are entirely different & independent and standard of evidence which may be good for assessment purpose may not be good for levying penalty u/s 271(l)(c). It is also settled principle of law that where two views are possible, taking of one of the plausible views does not amount to furnishing of inaccurate particulars of income. 5.7. In view of discussion supra, and in view of order of Id. CIT(A) for AY 2009- 10 as referred above, I hold that none of the pre-conditions for levying penalty as mentioned in section 271 (1)(c) and explanation 1 to section 271(1)(c) are satisfied in the present case. According the impugned penalty order u/s 271(1)(c) is quashed. The AO is directed to grant relief accordingly. Since all the grounds of appeal raised by the appellant contain only one issue, these are disposed off accordingly.”
We do not find any infirmity in the above order. The assessee accepted during the course of assessment proceedings, that he is chargeable to tax in India on the receipts of services rendered. Therefore, he accepted the receipts as income and paid taxes thereon in the computation of income filed. We uphold the order of the ld. CIT(A). The ld. CIT(A) has rightly deleted the penalty after relying on various case laws cited by the assessee. The assessee has explained all the objections of the Assessing Officer in the appellate proceedings. We, therefore, do not find any material on record to interfere with the impugned order.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 31st October, 2018.