DDIT(IT) 1(2), MUMBAI V. DHL OPERATIONS BV THE NETHERLANDS, MUMBAI

ITA 3985/MUM/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92522 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2015
• Appeal Filed By: Department
• Bench Allotted: L
• Next Hearing Date: 16-02-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 17-05-2010
• Court: TRIBUNAL
• Department Lawyers: S D SHRIVASTAVA
• Assessee Lawyers: P J PARDIWALA
• Keywords: Business income; Double taxation relief; Bonafide belief; Question of law; Wrong claim; Difference of opinion; Revised return
• Section: 143(3); 27; 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL L , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI AMIT SHUKLA , J M ./ ITA NO S . 6076, 6099 & 3981 TO 3985 / MUM/20 1 0 ( / ASSESSMENT YEAR S : 2 003 - 04 & 200 4 - 0 5 AND 2000 - 01 TO 2002 - 03 &2005 - 06 & 2006 - 07 ) DDIT(INTERNATIONAL TAXATION) - 1(2), MUMBA VS. M/S DHL OPERATION BV THE NETHERLANDS (NOW DHL INTERNATIONAL GMBH GERMANY ) C/O. PRICEWATERHOUSE COOPER PVT. LTD., PWC HOUSE, PLOT 18 - A, GURU NANAK ROAD (STATION ROAD), BANDRA (W), MUMBAI - 50 ./ ./ PAN/GIR NO. : A A ACD 7306 H ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI S.D.SHRIVASTAVA /ASSESSEE BY : SHRI P.J.PARDIWALA / DATE OF HEARING : 07/04/2015 / DATE OF PRONOUNCEMENT 08 / 05/ 2015 / O R D E R PER BENCH : TH ESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE ORDER CIT(A), FOR THE ASSESSMENT YEARS 2003 - 04 & 2004 - 05 , 2000 - 01 TO 2002 - 03 &2005 - 06 & 2006 - 07 , RESPECTIVELY, IN THE MATTER OF IMPOSITION OF PENALTY U/S.271(1)(C) OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY IS INCORPORATED IN THE NETHERLANDS AND IS A RESIDENT OF THE NETHERLANDS AS PER DTAA ENTERED INTO BETWEEN ITA NO S . 6076, 6099 & 3981 TO 3985/ 10 2 INDIA AND NETHERLANDS (INDIA - NETHERLANDS DTAA) AND IS A TAX RESIDENT OF NETHERLANDS. THE ASSESSEE COMPANY BELONGS TO DHL GROUP OF COMPANIES AND IS ENGAGED IN THE BUSINESS OF INTERNATIONAL COURIER SERVICES, WHICH INVOLVES DELIVERING OF TIME SENSITIVE CONSIGNMENTS AND DOCUMENTS THROUGH DHLS WORLDWIDE NETWORK. FOR TRANSHIPMENT OF INTERNATIONAL CONSIGNMENTS RELA TING TO INDIA, THE ASSESSEE HAD ENTERED INTO AN AGREEMENT DATED 26TH APRIL 2002 WITH DHL EXPRESS (INDIA) PRIVATE LIMITED (DHL INDIA) FOR PROVIDING SERVICES IN RELATION THERETO. UNDER THE SAID AGREEMENT BOTH THE PARTIES RENDER SERVICES TO EACH OTHER MUTUALL Y ON A PRINCIPAL TO PRINCIPAL BASIS. AS PER THE SAME, THE ASSESSEE DELIVERS CONSIGNMENTS COLLECTED BY DHL INDIA FROM VARIOUS LOCATIONS IN INDIA TO SPECIFIED DESTINATIONS OUTSIDE INDIA AND DHL INDIA PROVIDES SIMILAR SERVICES TO THE ASSESSEE WITHIN INDIA. THE AGREEMENT HAS BEEN ENTERED INTO ON THE BASIS OF OST PLUS MODEL. AS PER THE COST PLUS BASED OPERATING AGREEMENT, THE CONSIDERATION OF THE ASSESSEE IS DETERMINED AS AN AMOUNT IN EXCESS OF REVENUES COLLECTED BY DHL INDIA OVER COSTS INCURRED BY IT PLU S THE AGREED MARK - UP. 3. THE ASSESSEE HAD FILED ITS RETURN OF INCOME FOR THE A.Y.2003 - 04 DECLARING TOTAL INCOME OF RS.1,47,46,115/ - AS INCOME FROM OTHER SOURCES AND NIL INCOME FROM BUSINESS WITH APPROPRIAT E DISCLOSURES BY WAY OF NOTES. THE ASSESSMENT WAS C OMPLETED UNDER SECTION 143(3) ASSESSING TOTAL INCOME OF THE ASSESSEE AT RS. 13,23,16,646/ - , AGAINST WHICH THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) AND THE CIT(A) HELD THAT THE REVENUES OF THE ASSESSEE ARE TAXABLE AS UNDER : - ITA NO S . 6076, 6099 & 3981 TO 3985/ 10 3 I) 5% OF REVENUES ATTRIBU TABLE TO INDIA - ROYALTY INCOME; II) 25% OF REVENUES ATTRIBUTABLE TO INDIA - FTS III) 70% OF REVENUES ATTRIBUTABLE TO INDIA - BUSINE SS INCOME THUS, THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED AT RS. 47,20,68,215/ - . THEREAFTER PENALTY PROCEEDINGS U/S.271(1)( C) W ERE ALSO INITIATED SEPARATELY BY THE AO BY ISSUING NOTICE FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALING PARTICULARS OF INCOME. 4. BY THE IMPUGNED ORDER, THE CIT(A) AFTER FOLLOWING CATENA OF JUDICIAL PRONOUNCEMENTS, DIRECTED THE AO TO D ELETE THE ENTIRE PENALTY OF RS. 5,20,18,448/ - AFTER HAVING THE FOLLOWING OBSERVATIONS : - 1.3.1 I HAVE CONSIDERED THE FACTS AND GONE THROUGH THE PENALTY ORDER PASSED BY THE AO AND ALSO THE SUBMISSIONS MADE BY THE APPELLANT BEFORE ME. THE ASSESSMENT ORDER WA S PASSED ON 03 - 03 - 2006. A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO HAD CONSIDERED THE NOTE BELOW THE COMPUTATION OF INCOME AND INVESTIGATED. HOWEVER, THERE IS NO ALLEGATION OR OBSERVATION OF THE AO IN THE ASSESSMENT ORDER THAT ANY FACT MATERIAL TO THE COMPUTATION OF INCOME WAS EITHER NOT DISCLOSED OR WAS FOUND TO BE WRONG. THE ASSESSMENT HAS BEEN MADE ON THE BASIS OF FACTS DISCLOSED BY THE APPELLANT IN THE RETURN OF INCOME AND ALSO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS AND WHEN DEMANDED BY THE AO. THE ASSESSMENT HAS BEEN MADE BY THE AO HAVING A DIFFERENT OPINION FROM TH E POINT OF VIEW OF THE APPELLAN T THE PENALTY ORDER IS PASSED ON 23.03.2009 BY THE AO. T HE PROVISIONS OF SECTION 271 (1 )(E) READS A S UNDER: '(I) IF THE [ASSESSING] OFFICER OR THE [ ] [COMMISSIONER (APPEALS)) [OR THE COMMISSIONER] IN THE COURSE OF A NY PROCEEDINGS UNDER THE ACT, IS SATISFIED THAT ANY PERSON - (A ) (B) (C) HAS CONCEALED THE PARTICULARS OF' HIS INCOME OR (*** ) FURNISHED INACCURATE PARTICULARS OF INCOME ], HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY PENALTY - (I) (II) IN THE CASES REFERRED TO IN CLAUSE (B) {IN ADDITION TO TAX. IF ANY. PAYABLE} BY HIM [ A SUM OF TEN THOUSAND RUPEES} FOR EACH SUCH FAILURE} (III) IN THE CASE REFERRED TO IN CLAUSE (C) {OR CLAUSE (D))} {A D DITION TO TAX IF ANY, PAYABLE] BY HIM, A SUM WH ICH SH ALL NOT BE LESS THAN , BUT WHICH SHALL NOT EXCEED [THREE TIMES], THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME {OR FRINGE BENEFITS} O R THE FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME {OR FRINGE BENEFITS]. ITA NO S . 6076, 6099 & 3981 TO 3985/ 10 4 EXPLANATION 1 - WHERE IN RESPECT OF ANY FACTS MATERIALS TO THE COMPUTATION OF TOTAL INCOME OF ANY PERSON UNDER THIS ACT - (A) SUCH PERSON FOILS TO OFFER ON EXPLANATION OR OFF ERS ON EXPLANATION WHICH IS FOUND BY THE [ASSESSING] OFFICER OR THE { COMMISSIONER (APPEALS)) {OR THE COMMISSIONER] TO BE FALSE, OR (B) SUCH PERSON OFFERS ON EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE [FOILS TO PRO VE THAT SUCH EXPLANATION IS BONAFID E AND THAT ALL THE FACTS RELATING TO THE SOME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HOVE BEEN DISCLOSED BY HIM}. 1.3.2. THE PERUSAL OF ABOVE PROVISIONS READ W ITH EXPLANATION WOULD SHOW THAT EXPLANATION 1 TO SECTION 271 (1) (C) OF THE ACT PR OVIDES THAT THE PENALTY WOULD BE DEEMED TO ATTRACT WHERE IN RESPECT OF A FACT MATERIAL TO THE COMPUTATION OF INCOME EITHER NO EXPLANATION IS OFFERED, OR EXPLANATION OFFERED IS FOUND TO BE FALSE. IT IS EVIDENT FROM THE RETURN FILED BY THE APPELLANT THAT FUL L DISCLOSURE OF THE CLAIM TH A T ITS BUSINESS RECEIPTS ORE NOT TAXABL E IN INDIA I.E. CLAIM OF PE NOT BEING IN EXISTENCE AND BUSINESS RECEIPTS NOT BEING TAXABLE AS FTS AND ROYALTY UNDER THE RELEVANT P ROVISIONS OF THE ACT AND THE INDIA - NETHER L ANDS TAX TREATY W AS MADE BY WAY OF NOTES TO THE COMPUTATION OF INCOME. IT IS OBSERVED FROM THE RECORDS THAT DURING THE ASSESSMENT PROCEEDINGS ALL THE DOCUMENTS. ETC. HAD BEEN FILED TO SUPPORT THE CLAIM OF THE APPELLANT. THE APPELLANT HAS OFFERED AN EXPLANATION AND ITS CASE IS NOT COVERED BY CLAUSE (A) OF EXPLANATION 1 TO SECTION 271 (1 )(C) OF THE ACT. THE CLAUSE (8) OF E X PLANATION 1 PROVIDES THAT WHERE THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE ITS EXPLANATION AND FOILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND ALL THE FACTS RELATING TO THE SOME HAVE BEEN DISCLOSED, PENALTY IS LEVIABLE. I FIND THAT THE APPELLANT HAD IN THE COMPUTATION OF INCOME. THEREAFTER DURING ASSESSMENT PROCEEDINGS COPIES OF AGREEMENTS, JUDICIAL RULINGS RELIED UPON. ETC H A VE ALL BEEN DISCLOSED. JUST BECAUSE APPELLANT'S EXPLANATION WAS NOT FOUND ACCEPTABLE BY THE AO, IT DOES NOT FOLLOW THAT THE APPELLA NT WAS UNABLE TO SUBSTANTIATE ITS EXPLANATION BY PROVIDING VARIOUS EVIDENCES AND JUDICIAL OPINIONS. I AM , THEREFORE , OF THE VIEW THAT THE ASSESSMENT HAS BEEN MODE ON THE BASIS OF DIFFERENCE OF OPINION ON THE S A ME SET OF FACTS WHICH H A VE BEEN FULLY DISCLOSED BY THE APPELLANT. THE CASE OF THE APPELLANT IS. THEREFORE. NOT COVERED BY EXPLANATION 1. BASED ON THE FACTS OF THE CASE. I NOTE THAT THE APPELLANT HA D MODE ALL THE NECESSARY DISCLOSURES BY WAY OF NOTES TO THE RETURN OF INCOME AND SUBMITTED REQUIRED INFORMATION. DOCUMENTS AND EXPLANATIONS TO THE AO DURING THE ASSESSMENT PROCEEDINGS. THIS VIEW IS ALSO SUPPORTED BY RECENT RULING OF HONBLE ITAT MUMBAI IN TH E CASE OF M/ S VARIABLE PRODUCT FUNDS; OVERSEAS PORTFOLIO V ADIT (IT) 2(2) (ITA NO. 559 &584/M/2009) (A Y - 2004 - 05) (DTD. 7.5.2009) WHEREIN THE ITAT HELD THAT 'WE FIND SUFFICIENT FORCE IN THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THERE IS NO CONCEALMENT WHATSOEVER NOR HAS THE ASSESSEE COMMITTED ON ACT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THESE CASES. THE ENTIRE CLAIM HAS BEEN EXPLAINED BY WAY OF A LETTER WHILE FILING THE REVISED RETURNS OF INCOME AND IT WAS BASED ITA NO S . 6076, 6099 & 3981 TO 3985/ 10 5 ON CERTAIN JU DICIAL DECISIONS DELIVERED IN THE CASE OF ASSESSEE SISTER CONCERN. THE ISSUES ORE DEBATABLE AND THE EXPLANATION FURNISHED BY THE ASSESSEE IS NOT HELD TO BE FALSE BY THE ASSESSING OFFICER. THE EXPLANATION IS BONAFIDE AND UNDER SUCH CIRCUMSTANC ES. LEVY OF PE NALTY IS BAD IN LA W. THUS, THIS DECISION IS EQUALLY APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE. 1.3.3. THE HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF HARYANA WA REHOUSIN G CORPORATION (2009 - TIOL - 332 - HC - P&H - IT) HELD THAT THE ESSENTIAL PRE - REQ UISITES UNDER SECTION 271 (1) (C) OF THE ACT BEFORE 0 PENALTY CON BE LEVIED IS THAT THE ASS ESSEE SHOULD HA VE EITHER CONCEALED ITS INCOME OR FURNISHE D INACCURATE PARTICULARS OF INCOME. AC CORDINGLY. TO LEVY PENALTY AT A FIRST PLACE, ALL THE ESSENTIAL INGREDI ENTS TO LEVY PENALTY UNDER SECTION 271 (1) (C) OF THE ACT SHOULD BE FULFILLED. THE AO HAS. HOWEVER. TAKEN A DIFFERENT VIEW THAT THE AMOUNT IS TAXABLE. IT IS TRITE LAW THAT PENALTY PROCEEDINGS ARE DISTINCT AND SEPARATE PROCEEDINGS FROM ASSESSMENT PROCEEDIN GS. THE FINDING RECORDED IN THE ASSESSMENT ORDER IS NOT CONCLUSIVE FOR DECIDING THE IMPOSITION OF PENALTY. IT ONLY HAS A PERSUASIVE VALUE. THE AO HAS REFERRED TO THE DECISION OF HON'BLE KERALA HIGH COURT IN THE EASE OF P.K. NARAYANAN 238 ITR 905 WHEREIN IT IS HELD THAT A PRESUMPTION ARISES OF CONCEALMENT OF INCOME. IF ANY ADDITION MADE BY THE AO IS SUSTAINED BY THE APPELLATE AUTHORITY. THIS IS CORRECT BUT THE PRESUMPTION IS REBUT TABLE. ANY FINDING RECORDED IN THE ASSESSMENT ORDER DOES NOT MEAN THAT THE PEN ALTY HAS TO BE IMPOSED AUTOMATICALLY. EXPLANATION 1 TO SECTION 271 (I) (C) PROVIDES THAT THE PENALTY WOULD BE DEEMED TO ATTRACT WHERE IN RESPECT OF A FACT MATERIAL TO THE COMPUTATION OF INCOME EITHER NO EXPLANATION IS OFFERED OR EXPLANATION OFFERED IS FOUN D TO BE FALSE. APPELLANT HAS OFFERED EXPLANATION WHICH WAS NOT FOUND TO BE FALSE AND ACCORDINGLY ITS CASE 15 NO! COVERED BY CLAUSE (A) OF EXPLANATION 1. CLOUSE (8) OF EXPLANATION 1 PROVIDES THAT WHERE THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE ITS EXPLANATIO N AND FOILS TO PROVE T HAT SUCH EXPLANATION IS BONA FIDE A ND ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED. PENALTY IS LEVIABLE. 1.3.5. THE HON'BLE SUPREME COURT IN THE CASE OF K.C. BUILDERS (265 ITR 562) (SC) HAS HELD THAT MERE OMISSION FROM THE RETURN OF AN ITEM OF RECEIPT DOES NEITHER AMOUNT TO CONCEALMENT NOR DELIBERATE FURNISHING OF INACCURATE PARTICULARS OF INCOME. UNLESS AND UNTIL THERE IS SOME EVIDENCE TO SHOW OR SOME CIRCUMSTANCES FOUND FROM WHICH IT CAN BE GATHERED THAT THE OMISSION WAS A TTRIBUTABLE TO AN INTENTION OR DESIRE ON THE PART OF THE ASSESSEE TO HIDE OR CONCEAL THE INCOME SO AS TO AVOID IMPOSITION OF TAX THEREON. NO SUCH FINDING HAS BEEN RECORDED BY THE AO IN THIS C A SE. ON THE CON T R A R Y ALL FACTS HAVE BEEN DISCLOSED BY THE APPELLA NT AND THE ASSESSMENT HAS BEEN MADE MERELY ON DIFFERENCE OF OPINION. 1.3.6. IN THE IMPUGNED ORDER IT IS HELD THAT THE APPELLANT HAVING DENIED THAT ITS INCOME FROM BUSINESS WAS TAXABLE TANTAMOUNTS TO FURNISHING OF INACCURATE THEREBY CONCEALING THE INCOME , WHEREIN THE AO OBSERVES ITA NO S . 6076, 6099 & 3981 TO 3985/ 10 6 THAT THE INTENTION OF THE ASSESSEE WAS MERELY TO CLAIM REFUND ON ACCOUNT OF TDS. HOWEVER, THE AO HAS NOT RECORDED ANY SUCH FINDING EITHER IN THE ASSESSMENT ORDER OR THE PENALTY ORDER WHICH LEADS TO A CONCLUSION THAT CERTAIN INCOME WAS CONCEALED BY THE APPELLANT OR ANY INACCURATE PARTICULARS WERE FURNISHED BY THE APPELLANT. THE AO O UGHT TO HAVE RECORDED FINDINGS POSITIVE PROOF OF CONSCIOUS ATTEMPT OF CONCEALMENT OF INCOME. BEFORE PROCEEDING TO LEVY PENALTY. BASED ON THE MA T ERIAL ON RECORD. THERE IS NOTHING TO SHOW THAT THERE W A S AN ATTEMPT AT CONCEALING INCOME OR FURNISHING INACCURATE PARTICULARS. 1.3.7. THE HON'BLE PUNE TRIBUNAL IN THE CASE OF KANBAY SO F TW A RE INDIA PVT. LTD. VS, DCLT [2009J 22 DTR 481 (PUNE) (2009 T I 0L196 I TATP UNE ) H A S OBSERVED THAT CONCEALMENT IMPLIES THAT THE PERSON CONCEALING AN INCOME IS HIDING CAMOUFLAGING OR COVERED UP SO A S IT CANNOT BE SEEN FOUND OBSERVED OR DISCOVERED. FURTHER THE EXPRESSION 'FURNISHING OF INACCURATE P A RTICULARS OF INCOME', IMPLIES FURN ISHING OF DETAILS OR INFORMATION ABOUT INCOME WHICH ARE NOT IN CONFORMITY WITH THE FACTS OR TRUTH, IT DOES NOT EXTEND TO SUBJECTIVE AREAS SUCH AS THE TAXABILITY OF INCOME ADMISSIBILITY OF A DEDUCTION AND INTERPRETATION OF LAW. THE ADMISSION OR REJECTION OF A CLAIM IS A SUBJECTIVE EXERCISE AND WHETHER A CLAIM IS ACCEPTED OR REJECTED H A S NOTHING TO DO WITH FURNISHING OF INACCUR A TE PARTICULARS OF INCOME. IN THIS DECISION. THE PUNE ITAT. INTERPRETING THE DECISION OF THE SUPREME COURT IN CASE OF DHARMENDRA TEXTI LE HA S HELD THAT THE JUDGMENT OF THE APEX COURT IS NOT EN AUTHORITY FOR PROPOSITION THAT PENALTY IS AN AUTOMATIC CONSEQUENCE OF AN ADDITION BEING MADE TO THE INCOME OF THE ASSESSEE. 1.3.8. IN THE INSTANT CASE, THE APPELLANT HAS MADE A LEGAL CLAIM WHILE F ILING THE RETURN OF INCOME BY DISCLOSING APPROPRIATE FACTS IN THE NOTES TO RET U RN OF INCOME (COPY ENCLOSED AS ANNEXURE 2 AT PAGE NOS, 29 TO 31 OF SUBMISSION DATED DECEMBER 18. 2008). THE VIEW ADOPTED BY THE APPELLANT IS A PLAUSIBLE VIEW AND NOT IN ANY WAY A FRIVOLOUS CLAIM. ACCORDINGLY. LIABILITY TO PENALTY CANNOT ARISE MERELY BECAUSE THE APPELL ANT CONTENDS FOR A PARTICULAR POSITION CONTRARY TO THE VIEW TAKEN BY THE LEARNED ASSESSING OFFICER, THE AO HAS HELD THAT THERE IS NO DEBATABLE ISSUE PRESENT AND THE REVENUE HAS BEEN ABLE TO ESTABLISH SUCCESSFULLY ON THE BASIS OF EXTERNAL EVIDENCE THAT THE ASSESSEE HAD MADE AN INCORRECT CLAIM. ON DETAILED PERUSAL OF THE VOLUMINOUS SUBMISSIONS MADE BEFORE THE AO AND THE FACTS OF THE APPELLANT IT IS OBSERVED THAT THE AO / CLT(A) DID NOT ACCEPT THE SUBMISSIONS OF THE APPELLANT THAT BUSINESS RECEIPTS ARE NOT TAXABLE AND CHARACTERIZED INCOME OF THE APPELLANT ON THE FOLLOWING BASIS: 5% OF REVENUES ATTRIBUTABLE TO INDIA - ROYALTY INCOME 25% OF REVENUES ATTRIBUTABLE TO INDIA - FTS 70% OF REVENUES ATTRIBUTABLE TO INDIA _. BUSINESS INCOME ITA NO S . 6076, 6099 & 3981 TO 3985/ 10 7 1.3.10 THE APPELLANT HAS FILED RETURN OF INCOME STATING THAT IT BELIEVES THAT ITS INCOME IS NOT TAXABLE IN INDIA. IN THE ASSESSMENT SUBMISSION, THE APPELLANT HAS SUBMITTED THAT IT HAS NO PE IN INDIA BASED ON VARIOUS INTERNATIONAL COMMENTARIES, VIEWS OF VARIOUS EXPERTS. JUDICIAL RULINGS. ETC. FURTHER, THE APPELLANT HAS RELIED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF MORGAN STANLEY & CO. INC. (292 ITR 416) TO CLAIM THAT ARM 'S LENGTH PAYMENT TO OHL INDIA EXTINGUISHES FURTHER ATTRIBUTION. SIMILAR VIEWS WERE ALSO EXPRESSED BY HON'BLE BOMBAY HIGH COURT IN CASE OF SET SATELLITE (SINGAPORE). 1.3.11 . THE APPELLANT HAS RELIED ON THE FOLLOWING JUDICIAL PRECEDENT TO CLAIM THAT ITS R ECEIPTS ARE NOT TAXABLE AS ROYALTY OR FTS: DDLT V SHERATON INTERNATIONAL (10 SOT 542), (DELHI TRIBUNAL) SKYCELL COMMUNICATIONS LTD. VS. OY. CLT (251 1TF< 53) P.N.WRITER (941TO 446), ETC.] 1.3.12 . FURTHER, DETAILED SUBMISSIONS HAVE BEEN MADE B Y THE APPELLANT IN THE ASSESSMENT PROCEEDINGS ON EACH OF THESE POINTS. THE AO HAS COMPUTED THE INCOME OF THE APPELLANT ON ESTIMATION BASIS. THIS CLEARLY SHOWS THAT TAXABILITY OF INCOME IS DISPUTABLE. 1.3.1 3. IT DOES NOT SEEM TO BE A CASE THAT THE ASSESSE E HAS T A KEN A STAND WHICH IS NOT TENABLE OR WHICH IT IS NO T ABLE TO SUBSTANTIATE. THE CONCLUSIONS REACHED AT BY THE A O MERELY APPEAR TO BE A DIFFERENCE OF OPINION ON A DEBATABLE ISSUE THAN THE ONE TAKEN BY THE APPELLANT. THE AO HAS HIMSELF POINTED IN PARA 6 AT PAGE NO 8 IN THE PENALTY MATTER THAT THE APPELLANT SHOULD HAVE REFERRED SECTION 9(1)(I), 9(1)(VI) AND 9(1)(VII) IN THE NOTES ALONGWITH COMPUTATION AND ASSESSEE HAS ALSO NOT PRODUCED JUDICIAL DECISION IN SUPPORT OF ITS CLAIM. ON PERUSAL OF THE NOTES T O RETURN OF INCOME AND THE ASSESSMENT SUBMISSIONS OF THE APPELLANT DURING ASSESSMENT PROCEEDINGS, IT IS OBSERVED THAT THE APPELLANT MADE THE RELEVANT REFERENCES IN THE NOTES TO RETURN WHICH WERE SUBSTANTIATED IN THE ASSESSMENT PROCEEDINGS BY WAY OF REFEREN CES TO JUDICIAL PRECEDENTS, REFERENCES TO CIRCULARS COMMENTARIES, ETC. IN SUPPORT OF ITS CLAIM. THIS CLEARLY SHOWS THE ISSUES INVOLVED WERE 'DEBATABLE ISSUES' OF LEGAL INTERPRETATION. 1.3.15. THE HON'BLE MUMBAI TRIBUNAL IN THE CASE OF ACLT VS. VIP INDUST RIES LTD. [2009) (30 SOT 254) (MUM) (21 DTR 153) HAS HELD THAT IN CASE A GENUINE CLAIM IS MODE FOR DEDUCTION WHICH IS NOT ACCEPTED BY THE AO BUT 011 NECESSARY PARTICULARS ARE DECLARED IN THE RETURN OF INCOME, IT CANNOT BE SAID THAT ASSESSEE HAS CONCEALED H IS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPECT OF CLAIM WHICH STANDS REPELLED BY THE AO. THE MUMBAI TRIBUNAL ALSO BROUGHT OUT THE OBSERVATION THAT IF THE PENALTY IS IMPOSED IN SUCH FACTS, THERE WILL BE NO COURSE OPEN TO THE ASSESSEE TO GENUINELY CLAIM THE DEDUCTION WHICH IN ITA NO S . 6076, 6099 & 3981 TO 3985/ 10 8 HIS OPINION IS ADMISSIBLE BECAUSE OF THE FEAR THAT SUCH CLAIM BEING REJECTED IN EVENTUALITY WILL EXPOSE HIM TO THE RIGOR OF. PENALTY. IN VIP INDUSTRIES, THE JURISDICTIONAL TRIBUNAL HAS ALSO HELD INTERPRETING THE DECIS ION OF THE APEX COURT IN DHARMENDRA TEXTILE THAT THE HON'BLE SUPREME COURT HAS NOT HELD THAT IN LL CASES WHERE ADDITION IN CONFIRMED THE PENALTY SHALL MECHANICALLY FOLLOW. IT IS ALSO HELD THAT IF THAT WAS THE INTENTION OF THE LEGISLATURE THEN THE PENALTY PROCEEDINGS WOULD REQUIRE OBLITERATION FROM THE STATUTE AND THE VERY ACT OF MAKING ADDITION IN THE QUANTUM ENTITLE THE AO TO IMPOSE PENALTY SIMULTANEOUSLY. IN ACIT V VIP INDUSTRIES LIMITED 21 DTR 153 (MUM) IT WAS FURTHER OBSERVED THAT 'THE HON'BLE SUPREME COURT IN DHARMENDRA TEXTILE (SUPRA) HAS HELD THAT THE PENALTY U/S 271 (1) (C) IS 0 CIVIL LIABILITY AND THE WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS IS THE CASE IN THE MATTER OF PROSECUTION U/ S 276C OF THE INCOME - T AX ACT.' IT HAS FURTHER BEEN HELD THAT THE MENS REA IS NOT ON ESSENTIAL INGREDIENT FOR IMPOSING PENALTY UNDER THIS SECTION. ON THE CIRCUMSPECTION OF THIS CASE WE FIND THAT IT HAS BEEN LAID DOWN THAT WILLFUL CONCEALMENT IS NOT NECESSARY AND HENCE MENS REA ( GUILTY MIND) IS NOT ESSENTIAL FOR INVOKING PROVISIONS OF SECTION 271 (1 )(C). THE HON'BLE SUPREME COURT HAS NOT HELD THAT IN ALL CASES WHERE ADDITION IS CONFIRMED, THE PENALTY SHALL MECHANICALLY FOLLOW. THE RATIO DECIDENDI OF THE JUDGMENT IS CONFINED TO TR EATING THE WILLFUL CONCEALMENT AS NOT VITAL FOR IMPOSING PENALTY U/S 271 (I) (C). IT IS AUSTERE FROM THE LANGUAGE OF SECTION 271 (I) (C) THAT THE PENALTY IS IMPOSABLE FOR THE CONCEALMENT OF THE PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. THE LITERAL MEANING OF THE WORD 'CONCEAL' IS TO HIDE. BE THAT AS IT MAY, IN ORDER TO BE COVERED WITHIN THE MISCHIEF OF THIS SECTION, THE ACT (INTENTIONAL OR UNINTENTIONAL) OF THE ASSESSEE SHOULD RESULT INTO THE CONCEALMENT OF INCOME. WHERE ON ASSESSEE GENUINELY MAKES CLAIM FOR 0 PARTICULAR DEDUCTION BY DISCLOSING ALL THE NECESSARY FACTS RELATING TO THE SOME THAT WILL NOT AMOUNT TO CONCEALMENT EVEN IF THE ASSESSEE'S CLAIM IS REJECTED.' 1.3.16. THE HON'BLE SUPREME COURT IN UNION OF INDIA VS. RAJASTHAN SPINNING & WEAVING MILLS 23 DTR (SC) 158 WHICH ALSO WAS GIVEN IN THE CONTEXT OF EXCISE LAWS AS IN THE CASE OF DHARMENDRA TEXTILES, IT WAS OBSERVED THAT THE DECISION OF DHARMENDRA TEXTILES WILL NOT APPLY TO EVERY CASE OF NON - PAYMENT OR SHORT PAYM ENT OF DUTY. 1.3.17. THE HON'BLE ITAT, MUMBAI BENCH IN THE CASE OF ROBORANT INVESTMENTS (P) (7 SOT 181) (MUM) HAS HELD THAT THE CASES INVOLVING GENUINE DIFFERENCE OF OPINION ON MATTERS OF LOW BETWEEN THE ASSESSEE AND THE AO ARE CLEARLY OUTSIDE THE SCOPE OF EXPLANATION TO SEC.271 (1)(C). 1.3.18. THE HON'BLE JURISDICTIONAL MUMBAI TRIBUNAL IN THE CASE OF TELEBUILD CONSTRUCTION (P) LTD. VS. ACLT (13 SOT 218) HAS REAFFIRMED THE PRINCIPLE THAT MERELY BECAUSE THE CLAIM OF DEDUCTION CLAIMED BY THE ASSESSEE IS F OUND TO BE NOT ADMISSIBLE UNDER THE PROVISION OF THE ACT, SNAIL NOT BY ITSELF MAKE LIABLE THE ASSESSEE TO THE PROVISION OF PENALTY FOR CONCEALMENT OF INCOME OR FILING OF INACCURATE PARTICULARS OF ITA NO S . 6076, 6099 & 3981 TO 3985/ 10 9 INCOME UNDER SECTION 271 (1) (C) OF THE ACT. THE HON'BLE PUN JAB & HARYANA HIGH COURT IN THE CASE OF AJAIB SINGH & CO. (253 ITR 630) (P&H) HAS HELD THAT DISALLOWANCE OF ON EXPENSE PER SE CANNOT MEAN THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME. 1.3.19. T HE CLAIM MADE BY THE ASSESSEE MA Y HAV E BEEN UNDER ERRONEOUS UNDERSTANDING OF LAW BUT IT CANNOT LEAD TO THE CONCLUSION OF CONCEA L MEN T ON THE PART OF THE ASSESSEE. WHERE A PL A USIB L E EXPLANATION IS OFFERED AND THE EXPLANATION IS NOT FOUND TO BE FALSE PENALTY C A NNO T BE IMPOSED. 1.3.20. THE HON' B L E DELHI HIGH COURT IN THE CASE OF CIT VS. SENCMA SA. FRANCE (288 ITR 76) (DELHI) HAS HELD THAT PENALTY UNDER SECTION 271 C CANNOT BE IMPOSED WHERE THE TAX WAS NOT DEDUCTED AT SOURCE 011 SALARY PAID TO EXPATRIATE EMPLOYEES SINCE ASSESSEE WAS UNDER BONAFID E BELIEF THAT HE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE. THE HON'BLE DELHI HIGH COURT IN THE CASE OF BACARDI MARTIN INDIA LTD .. 288 1 TR 585 (DELHI) HAS HELD THAT PENALTY UNDER SECTION 271 (1 )(C) CANNOT BE LEVIED IN A CASE WHERE IN THE REVISED RETURN FIL ED SUBSEQUENTLY ON THE BASIS OF APPELLATE ORDER CLAIM OF IOSS WAS REDUCED AND ONLY THE CLAIM OF EXPENDITURE WAS DISALLOWED. THE DELHI HIGH COURT HAS CATEGORICALLY HELD THAT IT COULD NOT BE SAID THAT THE CLAIMS M A DE BY THE ASSESSEE, WHICH ULTIMATELY CAME TO BE REJECTED. SUFFERED FROM ANY SUPPRESSION OF FACTS OR DELIBERATE CONCEALMENT OF INCOME OR PARTICULARS. ALSO. IN CASE OF DCLT VS. MS. AISHWARYA RAI (12 SOT 11 ~), THE MUMBAI TRIBUNAL HAS HELD THAT IF EVERY ADDITION MADE IN THE COURSE OF AN ASSESSMENT UNDE R SECTION 143(3) IS MECHANICALLY TREATED AS THE BASIS FOR IMPOSING PENALTY. THEN THERE IS NO MEANING FAR AN ASSESSMENT UNDER SECTION 143(3). AN ASSESSMENT UNDER SECTION 143(3) PRESUPPOSES ON ASSESSMENT AFTER ENQUIRIES. IT IS QUITE NATURAL THAT THERE WILL B E A NUMBER OF ADJUSTMENTS EITHER BY WAY OF ADDITIONS OR BY WAY OF DISALLOWANCES. 1.3.21. THE HON'BLE DEIHI HIGH COURT IN THE CASE OF CLT VS. NATH BROS. EXIM INTERNATIONAL. 2C)8 ITR 670 HAS RECENTLY DECIDED 0 SIMILAR ISSUE. IN THIS CASE THE ASSESSEE H A D C LAIMED DIVIDEND INCOME AS PART OF BUSINESS INCOME AND H A D THEREFORE CLAIMED THAT IT WAS TO BE INCLUDED IN THE PROFIT FOR PURPOSE OF SEC.80HHC. THE A O DISALLOWED THE CLAIM AND IMPOSED PENALTY. THE TRIBUNAL FOUND THAT ALL THE WHICH COULD NOT BE JUSTIFIED IN LOW. THE HON'BLE DELHI HIGH COURT HAD H ELD THAT WHEN THERE WAS FULL DISCLOSURE OF MATERIAL IT COULD NOT BE SAID TH A T THE CONDUCT OF ASSESSEE ATTRACTED PROVISIONS OF SECTION 271 (1) (C) OF THE ACT PENALTY WAS HELD UNJUSTIFIED. THE HON'BLE DELHI HIGH COURT H AS DISCUSSED THE CASE OF C LT VS. VIDYAGAURI NATVARLAL 233 ITR 91 (GUJ) AND HAS HELD A S UNDER. ,'WHAT IS REQUIRED TO BE CONSIDERED IS WHETHER THERE WAS ANY ENQUIRY THAT WAS REQUIRED TO BE MODE BY' THE ASSESSING OFFICER BEFORE CONCLUDING THAT THE ASSESSEE H AD FURNISHED INACCURATE OR FALSE PARTICULARS. IN THIS CASE WE ARE OF THE VIEW THAT NO SUCH ENQUIRY WAS REQUIRED TO BE MODE BUT THERE WAS ONLY THE NEED FOR APPLICATION OF THE LOW. ON THE LEGAL POSITION. THE ASSESSING OFFICER WAS NOT SATISFIED AND ITA NO S . 6076, 6099 & 3981 TO 3985/ 10 10 DID NOT AG REE WITH THE ASSESSEE BUT THAT BY ITSELF IS NOT A GROUND TO INVOKE THE PENALTY PROVISION OF THE STATUTE. LEARNED COUNSEL FOR THE REVENUE RELIED UPON CLT V VIDYAGAURI NATVARLAL (/999) 238 ITR 91 (GUJ). IN THAT CASE THE QUESTION THAT AROSE WAS OF UNEXPLAIN ED CASH CREDIT. THE GUJARAT HIGH COURT MODE A DISTINCTION BETWEEN A WRONG CLAIM OS OPPOSED TO 0 FALSE CLAIM. IN THAT CASE. THE ASSESSING OFFICER NEEDED TO MAKE ON ENQUIRY AS TO WHETHER THE CL A IM OF THE ASSESSEE WAS RIGHT OR NOT. IN SO FOR OS THE PRESENT CA SE IS CONCERNED, THE DECISION CITED BY LEARNED COUNSEL FOR THE REV ENUE IS CLEARLY DISTINGUISHABLE . WE FIND THAT THERE WAS FULL DISCLOSURE OF ALL RELEVANT MATERIAL. IT CANNOT BE SAID THAT THE CONDUCT OF THE ASSESSEE ATTRACTED THE PROVISION OF SECTION 27 1(1) (C) OF THE ACT.' 1.3.22. THE HON'BLE DELHI HIGH COURT HAS ACCORDINGLY HELD THAT WHERE NO FACTS ORE TO BE INVESTIGATED AND NO ENQUIRY WAS REQUIRED TO BE CONDUCTED ABOUT THE CLAIM, ASSESSMENT MODE ON THE DIFFERENCE OF OPINION DOES NOT ATTRACT CONCEALME NT PEN AL TY. THE HON'BLE PUNJAB & H A RY A NA HIGH COURT IN THE CASE OF AJOIB SINGH & CO.(253 ITR 630) (P&H) HAS HELD THAT DISA L LOW A NCE OF AN EXPENSE PER SE CANNOT MEAN THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME. IN CLT VS. TEK RAM (HU F) (300 ITR 354) P&H), WHEREIN THE HON'BLE PUNJAB AND HARYANA HIGH COL)II HAS HELD TH A T IN CASES INVOLVING DEBATABLE ISSUES WHEREIN TWO OR MORE VIEWS ARE POSSIBLE, IF THE CLAIM OF THE ASSESSEE IS BASED ON ONE OF THE POSSIBLE VIEWS. NO PENALTY CAN BE IMPOSE D. MAKING OF A BONAFIDE CLAIM CANNOT BE TREATED AS CONCEALMENT OF ITS INCOME BY THE ASSESSEE OR FURNISHING OF INACCURATE PARTICULARS SO A S TO A TT RACT PENAL PROVISIONS OF SECTION 271(1)(C). 1.3.23. IN VIEW OF THE ABOVE, I AM OF THE VIEW THAT THE ADDITIONS MADE IN THE ASSESSMENT ARE PURELY DUE TO DIFFERENT INTERPRETATION OF LAW. THIS CAN BE NOTICED FROM THE FACT THAT THE QUESTION OF TAXABILITY OF THE APPELLANT FOR EARLIER YEARS HAS BEEN ADMITTED BY THE HON'BLE MUMBAI HIGH COURT. THE CONTENTIONS OF THE APPELL ANT THAT IT DOES NOT H A VE A PE IN INDIA AND THAT NO PORTION OF ITS INCOME IS TAXABLE AS ROYALTY OR FTS OR BUSINESS INCOME IS BACKED BY VARIOUS JUDICIA L PRECEDENTS. RELY ING ON THE DECISION OF THE HONBL E SUPREME COURT IN CASE OF CL T VS. RELIANCE PETROPRODUCT S PVT . L T D. (322 ITR 158) (SC) AND VARIOUS OTHER JURISDICTION TRIBUNAL DECISIONS IN THIS CONTEXT I HOLD THAT WHEN THERE ARE TWO VIEWS POSSIBLE AND THE APPELLANT HAS TAKEN ONE VIEW BASED ON A BON A FID E BELIEF, WHICH IS NOT AGREEABLE TO THE AO / HIGHER APPELL ATE AUTHORITIES. IT WILL NOT AUTOMATICALLY LEAD TO 0 CASE FOR PEN ALTY UNDER SECTION 271 (1 )(C) OF THE IT ACT. 1961. 1,3.24. FURTHER AS OBSERVED IN THE CASE OF THE APPELLANT ASSESSMENT HAS BEEN MA DE ON THE BASIS OF DIFFERENCE OF OPINION REGARDING THE INT ERPRETATION OF LAW ON THE QUESTION OF PE, EXISTENCE OF AGENCY PE. ROYALTY A ND FTS. THERE IS NO CONCEALMENT OF ANY FACT NOR H A VE ANY ITA NO S . 6076, 6099 & 3981 TO 3985/ 10 11 ADDITIONAL FACTS BEEN DISCOVERED PROVING THE EARLIER DISCLOSURE IN THE RETURN TO BE FALSE OR WRONG. 1.3.25 . FURTHER MY PRE DECESSOR CLT (A) HAS ALSO IN THE ASSESSEE'S OWN CASE FOR AY 1998 - 99 VIDE APPEAL ORDER NO. CLT (A) XXXI/DDIT(IT)1 (2)/ITO - L 08107 - 08 DATED 28 - 2 - 2008 AND AY 1999 - 2000 VIDE OR DER NO. CLT (A) XXXI/DDIT(I T) 1 (2)/IT - 1 07/07 - 08 DATED 29 - 2 - 2008 AND MY OWN F I NDING FOR A.Y. 2000 - 01 2001 - 02. 2002 - 03, 2005 - 06 AND 2006 - 07 UNDER THE SAME SET OF FACTS H A S HELD THAT NO PENALTY IS L EVI ABL E UNDER SECTION 271 (1) (C) IN CASE OF THE APPELLANT AND DELETED THE PENALTY LEVIED BY THE AO. ON SIMILAR LINES A) ABOVE. I ALSO HAVE NO R EASON TO L EVIA B LE FROM FINDINGS GIVEN BY MY PREDECESSOR CLT (A) IN THIS REGARD. 1.3.26. CONSIDERING MY AFORESAID CONCLUSIONS AS WELL AS MY PREDECESSOR'S FINDINGS AND MY OWN FINDING, IT IS HELD THAT NO PENALTY UNDER SEC ION 271 (1) (C) FOR THE YEAR UNDER C ONSIDERATION IS LEVIABLE IN CASE OF THE APPELLANT AS THE APPELLANT HAS MADE APPROPRIATE DISCLOSURE IN THE NOTES TO RETURN. PROVIDED DETAILS AND THE CLAIM WAS BONAFIDE AND THE ISSUE WAS DEBATABLE. I AM THEREFORE. SATISFIED THAT THE AO HAS WRONGLY IMPOSED PE NALTY. PENALTY IMPOSED BY THE AO IS DELETED. THEREFORE, THE APPEAL ON ALL THE GROUND OF APPEALS IS ALLOWED. ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE ENTIRE PENALTY OF RS. 5,20,18,448/ - . 5. LD. AR AT THE OUTSET, PLACED ON RECORD ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1989 - 90 & 1990 - 91 , WHEREIN THE TRIBUNAL IN ITA NO. 3593&3594/MUM/2003 , VIDE ORDER DATED 25 - 6 - 2010, FOLLOWING THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS LTD., 189 TAXMAN 32 2 (SC) , HAS DELETED THE PENALTY SO LEVIED. AGAINST WHICH THE DEPARTMENT PREFERRED APPEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT AND THE HONBLE HIGH COURT UPHELD FINDINGS OF THE TRIBUNAL. THEREFORE, LD. AR SUBMITTED THAT THE ISSUE INVOLVED IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE AFORESAID CASE IN FAVOUR OF THE ASSESSEE. 6. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT ASSESSEE HAS DELIBERATELY FURNISHED THE ITA NO S . 6076, 6099 & 3981 TO 3985/ 10 12 INACCURATE PARTICULARS OF INCOME RESULTI NG THEREBY IN CONCEALMENT OF INCOME WHICH ATTRACTS PENALTY U/S.271(1)(C). 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY PERUSED THE RECORD. WE HAVE ALSO GONE THROUGH THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1989 - 90 & 1990 - 91 . THE RELEVANT OBSERVATION OF THE TRIBUNAL IN THIS REGARD ARE AS UNDER : - 6. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON A PERUSAL OF THE PAPERS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE CASE LAW CITED, WE HOLD AS FOLLOWS. 7. THE ASSESSEE HAS FURNISHED FULL PARTICULARS IN HIS RETURN OF INCOME. IN FACT, IN THE NOTES TO THE RETURN OF INCOME, THE CLAIM HAS BEEN MADE AMPLY CLEAR. THE VERY FACT THAT THE ISSUE HAS BEEN REFE RRED TO A SPECIAL BENCH FOR ADJUDICATION, DEMONSTRATES THAT IT IS A DEBATABLE LEGAL ISSUE. THE CLAIM OF THE ASSESSEE, IN OUR HUMBLE OPINION, IS A BONAFIDE CLAIM. THE HON'BLE BOMBAY HIGH COURT HAS ALSO ADMITTED THE APPEAL OF THE ASSESSEE ON THE GROUND THAT A SUBSTANTIAL QUESTION OF LAW ARISES. ON THIS FACTUAL MATRIX, WE ARE OF THE CONSIDERED OPINION THAT NO PENALTY CAN BE LEVIED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. THE FACTS HAVE ALREADY BEEN BROUGHT OUT ON PAGE 1 TO 6 OF THIS ORDER. 8. THE HON'BLE SU PREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS LTD. HELD AS FOLLOWS : ' A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME - TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF TH E INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. PRESENT IS NOT THE CASE OF CONCEALMENT OF THE INCOME. THAT IS NOT THE CASE OF THE REVENUE EITHER. AS PER LAW LEXION, THE MEANING OF THE WORD 'PARTICU LAR' IS A DETAILS (IN PLURAL SENSE); THE DETAILS OF THE CLAIM, OR THE SEPARATE ITEMS OF AN ACCOUNT. THEREFORE, THE WORD 'PARTICULARS' USED IN THE S. 271(1)(C) WOULD EMBRACE THE MEANING OF THE DETAILS OF THE CLAIM MADE. IT IS AN ADMITTED POSITION IN THE PRE SENT CASE THAT NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. IT IS NOT AS IF ANY STATEMENT MADE OR ANY DETAIL SUPPLIED WAS FOUND TO BE FACTUALLY INCORRECT. HENCE, AT LEAST, PRIMA FACIE, THE ASSESSEE CANNOT BE HELD GUILTY OF FU RNISHING INACCURATE PARTICULARS. THE WORDS ARE PLAIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY ANY STRETCH OF IMAGINATION, MAKING AN ITA NO S . 6076, 6099 & 3981 TO 3985/ 10 13 INCORRE CT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THEREFORE, IT IS OBVIOUS THAT IT MUST BE SHOWN THAT THE CONDITIONS UNDER S. 271(1)(C) MUST EXIST BEFORE THE PENALTY IS IMPOSED. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPO N THE RETURN FILED BECAUSE THAT IS THE ONLY DOCUMENT, WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. - CIT VS. ATUL MOHAN BINDAL (2009) 225 CTR (SC) 248 : 28 DTR (SC) 1 : (2009) 9 SSC 589 FOLLOWED. (PARAS 7 & 8) READING THE WORDS 'INACCURA TE' AND 'PARTICULARS' IN CONJUNCTION, THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. IN THIS CASE, THERE I NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RET URN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH NOT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER S. 271(1)(C). A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INAC CURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR W AS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT ATTRACT THE PENALTY UNDER S. 271(1)(C). IF THE CONTENTION OF THE REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE AO FOR ANY REASON, THE ASSESSEE WILL IN VITE PENALTY UNDER S. 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. THE TRIBUNAL, AS WELL AS, THE CIT(A) AND THE HIGH COURT HAVE CORRECTLY REACHED THIS CONCLUSION. - SREE KRISHNA ELECTRICALS VS. STATE OF TAMIL NADU & ANR. (2009) 23 VST 2 49 (SC), APPLIED, RELIANCE PETROPRODUCTS (P) LTD. (JUDGMENT DT, 23RD OCT., 2007 OF THE GUJARAT HIGH COURT IN TAX APPEAL NO. 1149 OF 2007) AFFIRMED.' 9. APPLYING THE PROPOSITIONS LAID DOWN TO THE FACTS OF THIS CASE, WE HAVE TO NECESSARILY HOLD THAT MERELY BECAUSE THE ASSESSEE HAS MADE A BONAFIDE CLAIM, AND THE REVENUE HAS REJECTED THE CLAIM ON A DIFFERENT LEGAL INTERPRETATION, A PENALTY U/S 271(1)(C) CANNOT BE LEVIED. THUS WE UPHOLD THE CONTENTION OF THE ASSESSEE THAT THERE IS NO FURNISHING OF INACCURATE PA RTICULARS OF INCOME IN THIS CASE. THERE IS NO FINDING IN THE RETURN OF INCOME THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN THE RETURN OF INCOME WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. HENCE WE DELETE THE PENALTIES FOR BOTH THE ASSESSMENT YEARS. ITA NO S . 6076, 6099 & 3981 TO 3985/ 10 14 1 0. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED. WE HAVE ALSO GONE THROUGH THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT, WHEREIN THE APPEAL PREFERRED BY THE DEPARTMENT AGAINST THE ABOVE ORDER OF THE TRIBUNAL WAS DISMISSED. THE RELEVANT OBSE RVATION OF THE HONBLE HIGH COURT IN THIS REGARD IS AS UNDER : - 2. THE INCOME TAX APPELLATE TRIBUNAL IN PARA 7 OF THE JUDGMENT HAS RECORDED A FINDING OF FACT THAT THE ASSESSEE IN ITS RETURN OF INCOME HAD FURNISHED FULL PARTICULARS AND THAT THE ISSUE BEIN G DEBATABLE THE MATTER WAS REFERRED TO THE SPECIAL BENCH. THE TRIBUNAL RELYING UPON THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS LTD., REPORTED IN 189 TAXMAN 322 (SC) HAS HELD THAT THE CLAIM MADE BY THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT THE CLAIM WAS ALLOWABLE AND THEREFORE PENALTY UNDER SECTION 271(1)(C) WAS NOT JUSTIFIED. 3. IN VIEW OF THE FINDING OF FACT RECORDED BY THE TRIBUNAL, WE SEE NO MERIT IN THE APPEAL. ACCORDINGLY, THE APPEAL IS DISMISSED. NO ORDER AS TO C OSTS. WE ALSO FOUND FROM THE ORDER OF THE CIT(A) THAT THE ASSESS MENT HAS BEEN MADE ON THE BASIS OF DIFFERENCE OF OPINION REGARDING THE INTERPRETATION OF LAW ON THE QUESTION OF PE, EXISTENCE OF AGENCY PE, ROYALTY AND FTS. THERE IS NO CONCEALMENT OF ANY FAC T NOR HAVE ANY ADDITIONAL FACTS BEEN DISCOVERED PROVING THE EARLIER DISCLOSURE IN THE RETURN TO BE FALSE OR WRONG. THE FINDINGS RECORDED BY THE CIT(A) ARE JUST AND PROPER AND AFTER CONSIDERATION OF VARIOUS JUDICIAL PRONOUNCEMENTS . RESPECTFULLY FOLLOWING TH E ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WHICH HAS BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT AS WELL AS THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS LTD. (SUPRA) , WE ITA NO S . 6076, 6099 & 3981 TO 3985/ 10 15 SEE NO REASON TO INTERFERE IN THE FINDINGS O F THE CIT(A) DELETING THE PENALTY SO LEVIED BY THE AO. 7 . IN THE RESULT, ALL APPEAL S OF REVENUE ARE DISMISSED . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 08/05 / 201 5 . SD/ - SD/ - ( ) ( AMIT SHUKLA ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 08/05 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//