The DCIT, Circle 1, RAJKOT-GUJARAT V. Shri H H M Jyotindrasinhji V Jadeja, GONDAL

ITA 1098/RJT/2010

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9065 (ITAT-RAJKOT)
• Duration Of Justice: 6 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-02-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 11-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARVIND N SONTAKKE D M RINDANI

Judgement Text

ITA NO . 1098 / RJT/201 0 A.Y S . 20 04 - 05 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (CONDUCTED THROUGH E - COURT AT AHMEDABAD) [CORAM: PRAMOD KUMAR AM AND S.S. GODARA JM ] ITA NO. 1098 /RJT/201 0 ASSESSMENT YEAR 20 04 - 05 DY. COMMISSIONER OF INCOME TAX CIRCLE - 1 , RAJKOT . ... .. . .....APPELLANT VS. H.H.M. JYOTINDRASINHJI V. JADEJA, .. ..................RESPONDENT DARBARGADH PALACE,GONDAL. [PAN: A A XPJ 8631 R ] APPEARANCES BY: ARVIND N. SONTAKKE , F OR THE A PPELLANT D.M. RINDANI , FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 1 4 .02.2017 DATE OF PRONOUNCING THE ORDER : 27 .0 4 .2017 O R D E R PER PRAMOD KUMAR AM: 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 28.05.2010, PASSED BY THE LEARN ED CIT(A), DELETING PENALTY OF RS.22,40,613/ - U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 200 4 - 05 . 2. GRIEVANCES OF THE APPELLANT IS AS FOLLOWS : - T HE LEARNED CIT(A) - I, RAJKOT, HAS ERRED IN LAW AND ON FACTS IN DELETING PENALTY OF RS.22,40,613/ - LEVIED U/S.271(1 ) (C) OF THE IT ACT, ON THE INCOME OF RS.67,89,737/ - RELATING TO THE THREE TRUSTS LOCATED IN USA. ITA NO . 1098 / RJT/201 0 A.Y S . 20 04 - 05 PAGE 2 OF 4 3. THE ISSUE IN APPEAL IS IN A VERY NARROW COMPASS OF MATERIAL FACTS. DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE HAD REC EIVED HAD RECEIVED CERTAIN AMOUNTS, AGGREGATING TO US $ 1,49,979.30 - WHICH WAS EQUIVALENT TO RS 67,89,737 AT THE MATERIAL POINT OF TIME, ON DISTRIBUTION FROM THREE TRUSTS IN USA. THERE IS NO DISPUTE THAT THESE TRUSTS WERE DISCRETIONARY SETTLEMENTS AND THAT THE ASSESSEE COULD BE TAXED THE MONIES AT THE POINT OF DISTRIBUTION . WHILE THE ASSESSEE DID NOT OFFER THE SAID INCOME TO TAX ON HIS OWN, THE ASSESSEE DID DISCLOSE THE REQUISITE PARTICULARS BASED ON WHICH THIS INCOME CAME TO LIGHT WAS EVENTUALLY TAXED. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER DID BRING THIS INCOME OF RS 67,89,737 TO TAX, AND THE ASSESSING OFFICER ALSO INITIATED THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C). THE ASSESSING OFFICER DID NOTE THE CONTENTION OF THE A SSESSEE TO THE EFFECT THAT THE ADDITION MADE .IN THE QUANTUM PROCEEDINGS IS BASED ENTIRELY ON THE VOLUNTARY DISCLOSURE MADE BY THE ASSESSEE HIMSELF AND HENCE THERE IS NO QUESTION OF CONCEALMENT OR FURNISHING OF ANY INACCURATE PARTICULARS WHATSOEVER BUT R EJECTED THE SAME BY OBSERVING THAT THE CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED AS THOUGH THE INCOME FROM THE US TRUST WAS SHOWN BY THE ASSESSE, THE SAME WAS NOT OFFERED FOR TAXATION AND THAT IT IS TO BE NOTED THAT INACCURACY IN INCOME PARTICULARS IS THERE AS THE INCOME WAS TREATED AS EXEMPT AND NOT OFFERED FOR TAXATION . IT WAS IN THIS BACKDROP THAT A PENALTY OF RS 22,40,613, BEING 100% OF TAX SOUGHT TO BE EVADED BY NOT OFFERING THE INCOME FROM US TRUSTS TO TAX, WAS IMPOSED. AGGRIEVED, ASSESSEE CA RRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER (APPEALS). THE STAND OF THE ASSESSING OFFICER DID NOT FIND FAVOUR WITH THE LEARNED COMMISSIONER (APPEALS) WHO DELETED THE IMPUGNED PENALTY BY OBSERVING AS FOLLOWS: 6. I AM UNABLE TO ACCEPT THE CONTENTION OF THE A.O. THE BONAFIDES OF THE ASSESSEE IS NOT IN DOUBT AT ALL AND NO DISCREPANCIES OR INCONSISTENCIES OR INSUFFICIENCIES HAVE BEEN POINTED OUT BY THE AO IN THE COMPLETE FACTUAL DISCLOSURE MADE BY THE ASSESSEE BY WAY OF A NOTE ALONG WITH HIS RETURN OF I NCOME WHICH NOTE HAS ALSO BEEN REPRODUCED BY THE AO AT PARA - 10 OF TH E ORDER PASSED U/S.143(3) OF THE ACT. EVERY ASSESSEE IS ENTITLED TO HARBOUR A BELIEF WITH REGARD TO WHETHER HIS INCOME IS LIABLE TO BE TAXED OR NOT AND SIMPLY BECAUSE SUCH A BONAFIDE BELI EF IS ULTIMATELY NOT SUSTAINABLE WILL BY ITSELF NOT INVITE THE LEVY OF PENALTY. WHAT IS IMPORTANT IS THE CONDUCT OF THE ASSESSEE AND THE DISCLOSURES BEING MADE BY HIM. AS TH E FACTS ABOVE SHOW THAT THE ASSESSEE WAS GUIDED BY THE OBSERVATIONS OF THE HON BL E SUPREME COURT ITSELF SO MADE IN HIS OWN CASE AS SO STATED ABOVE. THE HON BLE SUPREME COURT IN CIT VS. RELIANCE PET RO PRODUCTS PVT . LTD . (322 ITR 158) HAS HELD THAT WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY U/S.271(1)(C). THE MERE MAKING OF A ITA NO . 1098 / RJT/201 0 A.Y S . 20 04 - 05 PAGE 3 OF 4 CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF TH E ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. PLACING RELIANCE ON THE ABOVE REFERRED DECISION AND THE FACTS STATED ABOVE AND THAT THE AO HAS NOT BROUGHT ON RECORD ANY DISCREPANCIES OR INCONSISTENCIES IN THE DISCLOSURE, I DIRECT THAT THE PENALTY OF RS.22 , 40 , 613 / - SO LEVIED BY THE AO BE DELETED. 4. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GRANTED BY THE COMMISSIONER (APPEALS) AND IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 6. WE FIND THAT THE ASSESSEE S EXPLANATION FOR NOT OFFERING THE SAID INCOME TO TAX IS THAT AT THE POINT OF TIME WHEN THESE MONIES WERE RECE IVED BY THE ASSESSEE, IT WAS NOT CLEAR WHETHER THESE AMOUNTS WERE SUBJECTED TO TAX IN THE UNITED STATES OR NOT, AND THE ASSESSEE WAS UNDER BONAFIDE IMPRESSION THAT THESE AMOUNTS MUST HAVE BEEN TAXED IN THE UNITED STATES AT THE POINT OF TIME WHEN INCOME ACC RUED TO THE ASSESSEE WHICH WILL PROTECT HIM FROM TAXATION IN INDIA IN VIEW OF HON BLE SUPREME COURT S JUDGMENT IN IN THE CONTEXT OF THESE VERY TRUSTS AND IN ASSESSEE S OWN CASE , REPORTED AS JYOTENDRASINHJI VS S I TRIPATHI & ORS [(1993) 201 ITR 611 (SC)], T O THE EFFECT SO FAR AS THE PLEA OF DOUBLE TAXATION IS CONCERNED, THE OBSERVATION MADE BY THE COMMISSION IN THAT BEHALF IS QUITE ADEQUATE. IT HAS STATED THAT IN CASE APPELLANT PROVES THAT ANY INCOME HAS BEEN TAXED IN U.S. OR U.K., THE SAME INCOME SHALL NOT BE TAXABLE OVER AGAIN IN INDIA . OBVIOUSLY, AS HAS BEEN DEMONSTRATED BY THE SUBSEQUENT DEVELOPMENTS, THIS UNDERSTANDING OF THE ASSESSEE WAS INCORRECT, THERE IS NO EVIDENCE TO SUGGEST THAT THESE TRUSTS WERE NOT SUBJECTED TO TAXED IN THE UNITED STATES, AND , THEREFORE, THE ASSESSEE DID HAVE TAX LIABILITY IN RESPECT OF THESE RECEIPTS. AS ON THE POINT OF TIME WHEN ASSESSEE FILED THE RETURN OF INCOME, RELEVANT CONFIRMATION ABOUT CORRECT POSITION ABOUT TAXATION WERE AWAITED, AND IT WAS FOR THIS REASON THAT THE ASSESSEE IS SAID TO HAVE NOT INCLUDED US RECEIPTS IN TAXABLE INCOME. THE SITUATION, AT THIS POINT OF TIME, W A S NOT CLEAR. ACCORDINGLY, THE RECEIPTS WERE NOT INCLUDED IN TAXABLE INCOME. THIS STAND EVENTUALLY TURNED OUT TO BE INCO RR ECT. HOWEVER, SO FAR AS PENALTY PROCEEDINGS ARE CONCERNED, IT IS NOT REALLY NECESSARY THAT THE EXPLANATION OF THE ASSESSEE HAS TO BE ITA NO . 1098 / RJT/201 0 A.Y S . 20 04 - 05 PAGE 4 OF 4 CORRECT; ALL THAT IS REQUIRED IS THAT THE EXPLANATION SHOULD BE A REASONABLE EXPLANATION WHICH IS ACCEPTABLE AS SUCH TO THE AUTHORITIES . THAT TE ST IS CLEARLY SATISFIED IN THE PRESENT CASE, AND THE ASSESSEE HAS ALSO ACTED IN A FAIRLY TRANSPARENT MANNER. IN VIEW OF THESE DISCUSSIONS, AND AGREEING WITH THE WELL REASONED STAND OF THE COMMISSIONER (APPEALS), WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE LEARNED COMMISSIONER (APPEALS) AND DECLINE TO INTERFERE IN THE MATTER. 7. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 27 TH DAY OF APRIL, 2017. SD/ - SD/ - S.S. GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD , DATED THE 27 TH DAY OF APRIL , 201 7 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME T AX APPELLATE TRIBUNAL RAJKOT B ENCH, RAJKOT