Shri Piyush T. Patel, RAJKOT-GUJARAT V. The Income Tax Officer, International Taxation, RAJKOT-GUJARAT

ITA 112/RJT/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0490 (ITAT-RAJKOT)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 27-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIMAL I MEHTA
• Keywords: Salary income; Double taxation relief; Source of fund

Judgement Text

I.T.A. NO .1 12 /RJT/201 5 ASSESSMEN T YEAR: 20 0 9 - 10 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CORAM: PRAMOD KUMAR AM AND RAJPAL YADAV JM ] I.T.A. NO. 1 12 /RJT/201 5 ASSESSMENT YEAR: 20 09 - 10 PIYUSH T. PATEL . .APPELLANT C/O. KAL PESH S. DOSHI & CO. CHARTERED A CCOUNTANTS, 411, C O SMO COMPLEX, MAHILA COLLEGE CIRCLE, RAJKOT. [PAN A LPPP 6013 Q ] VS. INCOME TAX OFFICER (INTERNATIONAL TAXATION) .. .. . RESPONDENT RAJKOT. APPEARANCES BY: KALPESH DOSHI FOR THE APPELLANT VIMAL I. MEHTA FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : OCTOBER 8 TH , 2015 DATE OF PRONOUNCING THE ORDER : OCTOBER 29 TH , 2015 O R D E R PER PRAMOD KUMAR : 1. THE SHORT ISSUE THAT WE ARE REQUIRED TO ADJUDICATE IN THIS APPEAL IS WHETHER OR NOT THE LEARNED CIT(A) WAS JUSTIFIED IN UPHOLDING THE PENALTY OF RS.18,330/ - IMPOSED ON THE ASSESSEE UNDER SECTION 271(1)(C) OF THE INCOME T AX ACT, 1961. THE ASSESSMENT YEAR INVOLVED IS 2009 - 10 A ND THE IMPUGNED ORDER WAS PASSED BY THE LD . CIT(A) ON 30 TH JANUARY, 2015. 2. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE L I KE THIS. THE ASSESSEE BEFORE US I S AN INDIVIDUAL, ORIGINALLY AN INDIAN BY BIRTH AND DOMICILE , WHO HAD SHIFTED TO USA IN 1984. HOWEVER, SINC E 2004, HE STARED VISITING INDIA S O FREQUENTLY THAT HE IS NOW, I.T.A. NO .1 12 /RJT/201 5 ASSESSMEN T YEAR: 20 0 9 - 10 PAGE 2 OF 4 FOR INCOME TAX PURPOSE , A RESIDENT IN INDIA. HE HAS HIS SOURCES OF INCOME AND FAMILY IN THE UNITED STATES A S WELL. THE INCOME TAX RETURN HE FILED IN INDIA DISCLOSED HIS INCOME EARNED IN INDI A . THE ASSESSING OFFICER, DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS , HELD THAT SINCE HE IS A RESI DENT HIS ENTIRE GLOBAL INCOME MUST BE BROUGHT TO TAX IN INDIA. IT WAS IN THIS BACKDROP THAT HE CALLED FOR HIS INCOME TAX RETURN FILED IN THE UNI TED STATES. IT WAS FOUND THAT THE ASSESS EE HAD FILED AN INCOME T AX RETURN JOINTLY W IT H HIS WIFE, AS IS THE SC HEME OF LAW IN THE UNITED STATES, WHICH DISCLOSED A N INTERE S T INCOME OF US$ 9, 289 AND DIVIDEND INCOME OF US $ 4,043 IN THE HANDS OF HIS WIFE MRS. SHREYA PATEL. WHILE THE ASSE S SING OFFICER BROUGHT THIS INCOME TO TAX IN THE HANDS OF THE ASSESSEE, LEARNED CI T ( A ) , IN QUANTUM PROCEEDINGS, REDUCED THE ADDITION TO 20% OF INCOME ON THE BASIS OF REASONING AS FOLLOWS : - AS FAR AS INTEREST AND DIVIDEND ARE CONCERNED, IT IS OBSERVED THAT TH E ASSESSEE WAS NOT OBLIGED TO KEEP HIS ACCOUNTS SEPARATE FROM HIS WIFE BECAUSE THE US LAW TAX ES THE INCOME OF THE COUPLE TOGETHER . AS THE FUNDS HAVE BEEN CLUBBED SO IT IS NOT POSSIBLE TO FIND THE EX A CT S HARE OF INCOME OF TH E HUSBAND FROM THE TOTAL INCOME OF HUSBAND AND WIFE. IT IS SE E N THAT TH E SALARY INCOME OF WIFE IS SUBSTANTIAL LY HIGHER THAN THE HUSBAND I.E. THE ASSESSEE. I HAD CALLED FOR THE DETAILS OF LAST 5 YEARS IN RESPECT OF SALARY INCOME OF THE APPELLANT AND HIS WIFE IN THE USA. THE DETAILS SUBMITTED ARE AS U NDER : - PARTICULARS SHRI PIYUSHBHAI PATEL SMT. SHREYBEN PATEL RATIO OF APPELLANT S SHARE IN THE FAMILY INCOME 2008 2040 21060 9 2007 2480 24400 9% 2006 NIL 25000 0 2005 2800 30000 9% 2004 4500 30000 13% THE APPELLANT HIMSELF HAS OFFERED TO TAKE 20% OF THE TOTAL INTEREST AND DIVIDEND AS PER THE US RETURN AS HI S SHARE OF THE INCOME. THE PROPOS AL SEEMS TO BE FAIR AND REASONABLE IN VIEW OF THE RATIO OF SALARIES AS REPRODUCED ABOVE AND IS DIRECTED TO BE ADOPTED TO DETERMINE HIS SHARE OF THESE INCOME. HOWEVER, THE DETAILS WERE CALLED TOWARDS THE END OF THE APPELLA TE PROCEEDINGS AND THE APPELLANT HAS NOT BEEN ABLE TO PRODUCE THE SUPPORTING COPIES OF RETURN. THE AO IS DIRECTED TO VERIFY THE FIGURES OF SALARIES , FROM COPIES OF RETURN AT THE TIME OF GIV ING EFFECT TO THIS ORDER AND THE APPELLANT IS DIRECTED TO CO - OPERA TE WITH THE AO. IN CASE, THE AVERAGE SALARY OF THE ASSESSEE IN TH E LA S T 5 YEARS IS FOUND TO BE I.T.A. NO .1 12 /RJT/201 5 ASSESSMEN T YEAR: 20 0 9 - 10 PAGE 3 OF 4 HIGHER THAN 20% OF THE TOTAL ALARY OF THE TWO, THEN THIS HIGHER FIGURE IS DIRECTED TO BE ADOPTED FOR WORKING OUT THE APPELLANT S SHARE OF INTEREST A ND DIVID E ND. THE LAST ISSUE TO BE DECIDED IS THE APPELLANT S CLAIM THAT THE INTEREST AND D IVIDEND ALREADY TAXED IN USA SHOULD NOT BE BROUGHT TO T AX IN INDIA IN VIEW OF THE DTAA. HOWEVER, THE CONTENTION IS NOT LEGALLY CORRECT. THE INTEREST INCOME IS TAXABLE IN THE S TATE OF RESIDENCE AS P E R ARTICLE 11 OF THE DTAA WHICH IS INDIA. THE INTEREST COULD BE TAXED IN THE OTHER COUNTRY ALSO A S PER THE TREATY ITSELF. SIMILAR IS THE POSITION OF DIVIDEND AS PER ARTICLE 10 OF THE DTAA. BOTH AR E TAXABLE IN INDIA AND THE ASSESSEE WOULD RECEIVE NO TAX CREDIT IN RESPECT OF TAXES PAID IN US ON THESE INCOMES. 3. THE MATTER DID NOT REST THERE. THE ASSESSING OFFICER ALSO IMPOSED PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE GROUND THAT THE ASSESSEE CONCEALED PARTICULARS OF HIS E NTIRE INCOME, AND THUS ATTEMPTED TO EVADE TAXES. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD . C IT ( A ) BUT WITHOUT ANY SUCCESS. THE ASSESS E E IS NOW IN SECOND APP E AL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED T HE MA T ERIAL ON REC ORD AND DULY CONSIDERED FACTS OF THE CASE IN T HE LIGHT OF APPLICABLE LEGAL POSITION. 5. WE FIND THAT, AS IS CLEAR, FROM LEARNED CIT(A) S ORDER IN QUANTUM PROCEEDINGS, THE INTEREST INCOME WAS EARN E D BY ASSESSEE S WIFE MRS. SH REYA PATEL. HOWEVER, IT WAS PA RTIALLY TAXED IN THE HANDS OF THE ASSESSEE IN USA DUE TO THE US LAWS. UNDER THESE CIRCUMSTANCES, THE ASSESSEE S EXPLANATION, THAT HE HAD BONAFIDE REASONS TO BELIEVE THAT HE WAS NOT TAXABLE IN RESPECT OF THE SAME IN INDIA, CANNOT BE SIMPLY BRUSHED AS I DE. 6. IN OUR CONSIDERED VIEW, THE AUTHORITIES BELOW OUGHT TO HAVE ACCEPTED EXPLANATION OF THE ASSESSEE. IN ANY CASE, GIVEN THESE PECULIAR FACTS, IT WAS CERTAINLY NOT A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. I.T.A. NO .1 12 /RJT/201 5 ASSESSMEN T YEAR: 20 0 9 - 10 PAGE 4 OF 4 7. FOR THE RE AS O NS SE T OU T ABOVE, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE. THE IMPUGNED PENALTY IS DIRECTED TO BE DELETED. 8 . IN THE RESULT, THE APPEAL IS ALLOWED . PR ONOUNCED TODAY ON 29 TH D AY OF OCTOBER, 2015 . SD/ - SD/ - RAJPAL YADAV PRAMOD KUMAR ( JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: 29 TH DAY OF OCTOBER 2015 PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDE R ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT