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Income Tax Appellate Tribunal, DELHI BENCHES: BENCH “C” NEW DELHI
Before: SRI R.S.SYAL & SMT. BEENA A PILLAI
ORDER PER BEENA A PILLAI, JUDICIAL MEMBER Present appeal has been filed by assessee against order dated 30/06/16 passed by Ld.CIT (A)-43 for Assessment Year 2010-11 on the following grounds of appeal:
1. Deletion of penalty under section 271(1)(c ) of the Act. 1.1 That on the facts and in the circumstances of the case, the Learned CIT(Appeals) erred in not quashing the penalty levied by the Ld. Assistant Director of Income Tax (Ld. ADIT), the same being grossly erroneous, unjustified and bad in law.
Inspectorate Singapore Pte Ltd. vs. ADIT 1.2 That on the facts and in the circumstances of the case, the penalty under section 271(1)(c) cannot be levied where the appellant has neither concealed particulars of income nor furnished inaccurate particulars of such income. 1.3 That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) erred in holding that bona fides of the appellant have not been established, even though accepting that: (a) mere addition to income, ipso facto, cannot lead to imposition of penalty, b) not challenging the addition during assessments does not tantamount to acceptance of wrong doing. 1 .4 That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) erred in acknowledging that the services in question were not technical services under the India-Singapore Double taxation avoidance agreement and accordingly cannot infer levy of penalty. 1.5 That on the facts and in the circumstances of the case, the penalty levied by Ld. DCIT under section 271(1)(c) ought to be quashed. The Appellant craves leave to add, alter, amend, amplify or modify any or all of the above grounds of appeal at or before the time of hearing of the appeal.”
2. Brief facts of the case are as under: The assessee filed its return of income for the year under consideration on 27/09/10 declaring total income at ‘nil. The case was selected for scrutiny and notice under section 143(2) along with a detailed questionnaire and notice under section 142(1) of the Income Tax Act, 1961 (the Act) was issued to assessee. In response to the Inspectorate Singapore Pte Ltd. vs. ADIT statutory notices, Representatives of the assessee appeared before the Ld.AO and filed requisite details as called for. 2.1. Ld.AO observed that assessee provided import and export commodity inspection, testing analysis, evaluation and consultation services to customers of assessee in India. Ld.AO passed order under section 144C read with 143(3) of the Act, determining income at Rs.54,44,180/-. Ld.AR submitted that assessee though not in agreement with addition made by Ld.AO, did not file appeal before Ld.CIT (A) to avoid litigation. Ld.AO subsequently initiated penalty proceedings under section 271(1) (c) of the Act for concealment of particulars of income and/or furnishing of inaccurate particulars of such income. He accordingly levied penalty of Rs.5,44,418/-in the hands of assessee. 2.2. Aggrieved by penalty order passed by Ld.AO assessee preferred appeal before Ld.CIT(A) who confirmed penalty in the hands of assessee. 2.3. Aggrieved by the order of Ld. CIT (A) assessee is in appeal before us now.
3. Ld.AR submitted that assessee had made complete disclosure and entire income under consideration was duly disclosed thereby submitting that no act of concealment/inaccurate particulars has been made out by Ld.AO. He submitted that the claim made by assessee was based on the bona fide belief that its receipts from Indian customers were not taxable under Article 12 of India Singapore Double Taxation Avoidance Agreement, as assessee’s services do not “make available”, technical knowledge/experience etc to Inspectorate Singapore Pte Ltd. vs. ADIT customers in India. Ld.AR submitted that the submissions regarding non applicability of Article 12 due to “make available” Clause along with judicial precedents relied by assessee were not considered by authorities below. He submitted that assessee had not hidden any income relating to its receipts and therefore it cannot be said to have concealed the income for the year under consideration. Ld.AR submitted that neither assessee failed to offer explanation, nor explanation offered by assessee has been found to be malafide or false by Ld.AO. He placed reliance upon the decision of Hon’ble Supreme Court in the case of CIT vs Reliance Petroproducts Pvt.Ltd reported in 322 ITR 158.
We have perused the submissions advanced by both the sides in the light of the records placed before us.
Admittedly, assessee has not challenged addition made by Ld.AO in quantum proceedings. But in our considered opinion it does not ipso facto follow that penalty for concealment or furnishing of inaccurate particulars could be imposed. It is apparent from the language of Explanation 1 to section 271 (1)(c) of the Act, that the word ‘conceal’ inherently and per se refers to element of mens rea, albeit the expression ‘furnishing of inaccurate particulars’ which is much wider in scope. In the present case, Ld.AO levied penalty for concealment. The issue that arises for consideration is whether the conduct of assessee was bona fide. The test of bona fide has to be applied keeping in mind the position as it existed, when the return of income was filed. The issue involved may be based on interpretation and assessee to adopt a legal position which they perceived as most beneficial or suitable. This would not be construed as lack of Inspectorate Singapore Pte Ltd. vs. ADIT bona fides as long as the legal position so adopted is not per se contrary to the language of the statute or and under beatable legal position not capable of a different connotation and understanding.
In the facts of the present case assessee was under the belief that due to the ‘make available’ Clause in Article 12 (4) (b) of India Singapore DTAA, the consideration paid by the Indian customers to assessee cannot be regarded as ‘fees for technical services’ and further since there was no transfer of technology involved in the services extended by assessee, the consideration for such services could not be taxed under Article 12(4)( b) of the DTAA. Assessee relied upon various decisions of Jurisdictional High Court as well as Authority of Advance Ruling in the case of CIT vs De Bears India Minerals Pvt.Ltd., reported in 346 ITR 467 and Perfetti van Melle in Holding BV AAR 869 of 2010 respectively. Thus two legal interpretations were possible and there was genuine and credible plea of not imposing penalty for concealment. In the facts of the present case assessee had offered explanation and the submissions as to why receipts were not offered to tax for the year under consideration, by relying on the legal position. Thus assessee had acted in a bona fides manner and had also furnished all material facts and particulars in respect of the same.
Thus in our considered view keeping the entirety of the facts, and in view of explanation offered by assessee, penalty for concealment of income under section 271(1)( c ) of the Act should not be imposed.
Inspectorate Singapore Pte Ltd. vs. ADIT
Accordingly the grounds raised by assessee stand allowed.
In the result appeal filed by assessee stands allowed. Order pronounced in the Open Court on 06th June, 2018.