Thomas Garbarek, Pune V. DCIT, Cir.-10, Pune

ITA 421/PUN/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56632 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-12-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 19-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARESHWAR SHARMA S K AMB ASTHA
• Assessee Lawyers: PRAMOD ACHNUTHAN
• Keywords: Salary income; Bonafide belief; Revised return; Bonafide mistake
• Section: 143(3); 142(1); 260A; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND D.KARUNAKARA RAO, ACCOUNTANT MEMBER SR.NO. ITA NO. ASSTT.YEAR APPELLANT VS. RESPONDENT 1. 421/PN/2008 2004 - 05 THOMAS GARBAREK C/O. DAIMLER CHRYSLER INDIA PVT. LTD., SECTOR 15- A, CHIKHALI VILLAGE, PIMPRI, PUNE 18 PAN AGUPG4681P VS. DCIT, CIR.10, AKURDI, PUNE 2. 422/PN/2008 2004 - 05 ANTONIO FARIA, C/O DAIMLER CHRYSLER INDIA PVT. LTD. SECTOR 15-A, CHIKHALI VILLAGE, PIMPRI, PUNE 18 PAN AAHPF2025M VS. - DO - 3. 424/PN/2008 2004 - 05 BERTHOLD SCHIMMER, C/O DAIMLER CHRYSLER INDIA PVT. LTD. SECTOR 15-A, CHIKHALI VILLAGE, PIMPRI, PUNE 18 PAN AUYPS6287R VS. - DO - 4. 425/PN/2008 2004 - 05 BERNHARD APPELTAUER C/O DAIMLER CHRYSLER INDIA PVT. LTD. SECTOR 15-A, CHIKHALI VILLAGE, PIMPRI, PUNE 18 PAN :AEMPA1593G VS. - DO - 5. 426/PN/2008 2004 - 05 DIETER HEYL C/O DAIMLER CHRYSLER INDIA PVT. LTD. SECTOR 15-A, CHIKHALI VILLAGE, PIMPRI, PUNE 18 PAN: ABHPH6385D VS. - DO - 6. 423/PN/2008 2004 - 05 HUBERT KATZENMEIR C/O DAIMLER CHRYSLER INDIA PVT. LTD. SECTOR 15-A, CHIKHALI VILLAGE, PIMPRI, PUNE 18 PAN:AGXPK5105B VS. - DO - 7. 437/PN/2008 2004 - 05 KLAUS - PETER ARNOLD, VS. - DO - ITA . NS 421 TO 426, 437 T 441 & 497/PN/08 KLAUS MOERMANN ETC., A.Y. 2004-05 PAGE OF 20 2 C/O DAIMLERCHRYSLER INDIA PVT. LTD. SECTOR 15-A, CHIKHALI VILLAGE, PIMPRI, PUNE 18 PAN:AFNPA9977N 8. 438/PN/2008 2004 - 05 KLAUS MOERMANN C/O DAIMLER CHRYSLER INDIA PVT. LTD. SECTOR 15-A, CHIKHALI VILLAGE, PIMPRI, PUNE 18 PAN :AHAPM1650P VS. - DO - 9. 441/PN/2008 2004 - 05 ALEXANDER REUSS C/O DAIMLERCHRYSLER INDIA PVT. LTD. SECTOR 15-A, CHIKHALI VILLAGE, PIMPRI, PUNE 18 PAN:AGBPR3838E VS. - DO - 10. 497/PN/2008 2004 - 05 LINO ALBERTO MARQUES, C/O DAIMLERCHRYSLER INDIA PVT. LTD. SECTOR 15-A, CHIKHALI VILLAGE, PIMPRI, PUNE 18 PAN :AGZPM7598N VS. - DO - APPELLANT BY : S/SHRI PRAMOD ACHNUTHAN & RAJE NDRA AGIWAL RESPONDENT BY : S/SHRI HARESHWAR SHARMA &S.K. AMB ASTHA DATE OF HEARING :07.12.11 DATE OF PRONOUNCEMENT: 30.12.11 ORDER PER I.C. SUDHIR, JM THE ABOVE APPEALS HAVE BEEN REMANDED TO THE TRIBUN AL BY THE HONBLE JURISDICTIONAL HIGH COURT FOR RECONSIDERATION OF TH E ISSUE OF LEVY OF PENALTY U/S.271(1)(C ) AGAINST THE APPELLANT EMPLOYEES IN V IEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF U.O.I VS. DHARMENDRA T EXTILES PROCESSOR (2008), 166 TAXMAN 65 (SC.): 295 ITR 244 (SC). IN ALL THESE AP PEALS, THE ASSESSEES HAVE QUESTIONED THE FIRST APPELLATE ORDER ON SEVERAL GRO UNDS AGAINST THE ACTION OF LD. CIT(A) IN UPHOLDING OF LEVY OF PENALTY U/S. 271(1) (C ) LEVIED BY THE A.O. ITA . NS 421 TO 426, 437 T 441 & 497/PN/08 KLAUS MOERMANN ETC., A.Y. 2004-05 PAGE OF 20 3 2. AT THE OUTSET OF HEARING, THE LD. A.R. POINTED O UT THAT THE ISSUE RAISED IS FULLY COVERED BY THE DECISION OF PUNE BENCH OF THE TRIBUN AL IN THE CASE OF HANS CHRISTIAN GAAS VS. DCIT, ITA NOS. 1583/PN/2008 AND 505 TO 509 /PN/2009 (A.YS. 2004-05, 2000-01 TO 2005-06), ORDER DATED 26.5.2010 UPHELD BY THE HONBLE JURISDICTIONAL BOMBAY HIGH COURT V IDE ITS JUDGEMENT DATED 22.6.11 IN ITA NO. 2209 OF 2010 AND OTHER. THE LD. A.R SUBMITTED THAT THE DECISION IN THE CASE OF HANS CHRISTIAN GAAS HAS BEEN ALSO FOLLOWED IN THE CASE OF ACIT VS. ROL F WEINMAN & OTHERS, ITA NOS. 662/PN/2010 & OTHERS (A.Y. 2000-01 TO 2003-04), ORD ER DATED 30 TH SEPTEMBER 2010. THE LD. A.R. ALSO MENTIONED THAT THE PRESENT APPEALS ARE RELATING TO THE A.Y. 2004-05 AND IN CASE OF THE A.YS. 2001-02 AND 2003-0 4, THE LD CIT(A) VIDE ITS ORDERS DATED 31 ST DECEMBER 2009 AND 26 TH FEBRUARY 2010, HAS DELETED THE PENALTY BY ACCEPTING THE BONAFIDE FACTS AND FULL DISCLOSURE OF MATERIAL FACTS BY THE ASSESSEES. THE SAID FIRST APPELLATE ORDER HAS ALSO BEEN UPHELD BY THE TRIBUNAL VIDE ITS ORDER DATED 30 TH SEPTEMBER 2010 IN ITA NOS. 649/PN/2010 & OTHERS (A .YS. 2000-01 TO 2003-04). COPIES OF THESE ORDERS HAVE BEEN FILED O N BEHALF OF THE ASSESSEE. THE LD. A.R. SUBMITTED FURTHER THAT THESE APPEALS ARE RELATING TO THE A.Y. 2004-05, AND ON EARLIER OCCASION THE TRIBUNAL RESPECTFULLY FOLLO WING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF DILIP N.SHROFF VS. JCI T, 291 ITR 519(SC) HAD DELETED THE PENALTY VIDE ITS ORDER DATED 30 TH APRIL 2008, COPY FURNISHED. THE REVENUE HAD PREFERRED APPEAL U/S 260A AGAINST THAT ORDER OF THE TRIBUNAL BEFORE HONBLE BOMBAY HIGH COURT AND THE HONBLE BOMBAY HIGH COURT KEEPIN G IN MIND THE LATER DECISION OF HONBLE SUPREME COURT EXPLAINING THE PENALTY PRO VISION IN THE CASE OF DHARMENDRA TEXTILES 306 ITR 277 (SC) HAS VIDE ITS O RDER DATED 1 ST DECEMBER 2009 HAS REMANDED THE MATTER BACK TO THE TRIBUNAL FOR RE CONSIDERATION IN PURSUANT TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F DHARMENDRA TEXTILES (SUPRA). ACCORDINGLY, THESE APPEALS HAVE BEEN FIXED BEFORE T HE TRIBUNAL FOR THE HEARING. 3. THE LD. A.R. REITERATED THE FACTS OF THE CASE AN D SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND POINTED OUT THAT THE PUNE BENCH OF THE TRIBUNAL HAS DEALT ITA . NS 421 TO 426, 437 T 441 & 497/PN/08 KLAUS MOERMANN ETC., A.Y. 2004-05 PAGE OF 20 4 WITH AN IDENTICAL ISSUE IN DETAIL IN THE CASE OF HA NS CHRISTIAN GAAS V/S. DCIT(SUPRA) DISCUSSING SEVERAL DECISIONS OF THE HONBLE SUPREME COURT INCLUDING THE DECISION IN THE CASE OF DHARMENDRA TEXTILES PROCESSORS (SUPRA ). 4. THE LD. D.R., ON THE OTHER HAND, TRIED TO JUSTIF Y THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT THERE IS NO INVOLVEMENT O F SECTION 147 PROCEEDINGS IN THE PRESENT CASE. THERE WAS NO DENIAL OF THE FACT THAT THE VALUE OF THE PERQUISITE RECEIVED BY THE ASSESSEE IN THE FORM OF PAYMENT OF INDIAN TAXES IN RESPECT OF THE ASSESSEES SALARY INCOME WAS NOT DISCLOSED BY THE A SSESSEES IN THE ORIGINAL RETURN OF INCOME. HE SUBMITTED THAT ADMITTEDLY BEFORE ISSUAN CE OF QUESTIONNAIRE BY THE A.O ON 1.9.2005 WHEREBY THE ASSESSEES WERE SPECIFICALLY ASKED TO INFORM ABOUT ANY INCOME ARISING OUT OF THE EMPLOYER COMPANY OF INDIA OR ANY OTHER COMPANY NON- COMMUNICATION WAS MADE BY THE ASSESSEES TO THE DEPA RTMENT REGARDING ANY UNDER REPORTING OF INCOME IN THE RETURNS FILED BY THEM AN D REGARDING THEIR INTENTION TO FILE A REVISED RETURN AFTER INCLUDING THE VALUE OF THE TAX PERQUISITE RECEIVED FROM THEIR EMPLOYER. IT WAS ONLY AFTER HAVING BEEN CONFRONTED WITH THE QUESTION RAISED BY THE A.O REGARDING EARNING OF INCOME FROM THE EMPLOYER C OMPANY OR FROM ANY OTHER COMPANY, THE ASSESSEES REALIZED THAT IT WAS NO MO RE POSSIBLE TO HIDE THEIR INCOME. THE FACTS OF THE CASE CLEARLY ESTABLISH A DIRECT NE XUS BETWEEN THE QUERY RAISED BY THE A.O AND FILING OF REVISED RETURN BY THE ASSESSE E. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS : 1) MAHAVIR METAL WORKS VS. CIT, 92 ITR 513 (PUN. & HAR.) 2) CIT VS. HAJI P. MOHAMMED132 ITR 613 (KER.) 3) RAMACHANDRA D. THAKUR (HUF) VS. ITO, 61 ITD 279 (BOM) 4) BADRI PRASAD OM PRAKASH VS. CIT, 163 ITR 440 (R AJ.) 5) K. MAHIM VS. CIT, 232 ITR 115 (KER.) 6) RAVI & CO. VS. ACIT,271 ITR 286 (MAD. 7) PREMPAL GANDHI VS. CIT, 231 CTR 100 (PUN & HAR. ) 5. IN REJOINDER, THE LD. A.R. ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS : ITA . NS 421 TO 426, 437 T 441 & 497/PN/08 KLAUS MOERMANN ETC., A.Y. 2004-05 PAGE OF 20 5 1) T. ASHOK PAI VS. CIT 292 ITR 011 (SC) 2) CIT VS. MANIBHAI & BROS.209 CTR 46 (GUJ.) 6. WE HAVE CONSIDERED THE ABOVE SUBMISSIONS AND HA VE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON BY THE PARTIES. THE RELEVANT FACTS AS NOTED B Y THE TRIBUNAL IN ITS PARA NO. 3 OF ITS EARLIER ORDER DATED 30 TH APRIL 2008 ARE BEING REPRODUCED HEREUNDER : 3. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE APPELLANTS BEFORE US ARE EMPLOYEES OF DAIMLER CHRYSLER AG (DCAG, IN SHORT), A GERMAN COMPANY, AND WERE, AT THE RELEVANT POINT OF TIME, UNDER SECONDME NT TO DAIMLER CHRYSLER INDIA PVT. LTD., PUNE (DCI, IN SHORT), ON ASSIGNMEN T BASIS. THESE APPELLANTS WERE THUS EFFECTIVELY IN DUAL EMPLOYMENT OF DCAG AS WELL AS DCI. IN CONSIDERATION OF THE SERVICES SO RENDERED BY THE AS SESSEE, THEY RECEIVED REMUNERATION FROM TWO SOURCES FIRSTLY, FROM DCAG; AND SECONDLY, FROM DCI. AS FAR AS THE SALARY RECEIVED FROM DCI WAS CO NCERNED, THE APPLICABLE TAXES DUE THEREON WERE DULY DEDUCTED BY THE EMPLOYE R AND DEPOSITED WITH THE GOVERNMENT TREASURY. HOWEVER, SO FAR SALARY RE CEIVED FROM DCAG WAS CONCERNED, IT WAS TO BE PAID TO THE APPELLANTS NET OF INDIAN TAXES IN OTHER WORDS, THE INDIAN TAX LIABILITY IN RESPECT OF DCAG SALARY WAS TO BE BORNE BY THE DCAG. TO DISCHARGE THIS OBLIGATION, THE DCAG C OMPUTED INDIAN TAX LIABILITY IN RESPECT OF SALARY PAID TO THE APPELLAN TS AND PAID OVER THE AMOUNT SO COMPUTED DIRECTLY TO THE APPELLANTS FOR BEING DEPOSITED IN THE GOVERNMENT TREASURY. HOWEVER, WHILE DOING SO, THE EMPLOYER I.E. DCAG DID NOT TAKE INTO ACCOUNT THE GROSSING UP OF THE TAX LI ABILITY IN TERMS OF THE PROVISIONS OF SECTION 195 OF THE ACT WHICH REQUIRES THAT WHERE THE AGREEMENT OR ARRANGEMENT IS THAT THE TAX CHARGEABLE ON THE I NCOME IS TO BE BORNE BY THE PERSON BY WHOM THE INCOME IS PAYABLE, THEN, FO R THE PURPOSE OF DEDUCTION OF TAX AT SOURCE, SUCH INCOME SHALL BE I NCREASED TO SUCH AMOUNT AS WOULD, AFTER DEDUCTION OF TAX THEREON AT THE RAT ES IN FORCE FOR THE FINANCIAL YEAR IN WHICH THE INCOME IS PAYABLE, BE EQUAL TO TH E NET AMOUNT PAYABLE UNDER AGREEMENT OR ARRANGEMENT. THE AMOUNT RECEIVE D BY THE APPELLANTS FROM DCAG FOR DISCHARGING THE TAX LIABILITY, WHICH HAD THE CHARACTER OF A PERQUISITE BY WAY OF TAX FREE SALARY FROM DCAG, WAS REQUIRED TO BE INCLUDED IN THE INCOME OF THE APPELLANTS. THE PERQUISITE OF TAX FREE SALARY RECEIVED BY THE ASSESSEE WAS THUS NOT TAKEN INTO ACCOUNT BY DCA G. IN THE INCOME TAX RETURN ORIGINALLY FILED BY THE APPELLANTS, THE APP ELLANTS DID NOT OFFER TO TAX THIS PERQUISITE OF TAX FREE SALARY. TO THIS EXTENT THERE WAS A FAILURE ON THE ITA . NS 421 TO 426, 437 T 441 & 497/PN/08 KLAUS MOERMANN ETC., A.Y. 2004-05 PAGE OF 20 6 PART OF THE EMPLOYEE. THE CASES OF THE APPELLANTS WERE SELECTED FOR SCRUTINY ASSESSMENT AND, IMMEDIATELY AFTER SCRUTINY NOTICE W AS SERVED TO THE ASSESSEE, THE ASSESSEE REVISED THE INCOME TAX RETUR N AND RECOMPUTED HIS TAX LIABILITY AFTER GROSSING UP TAX UNDER SECTION 195 A OF THE ACT. WHILE THE INCOME SO RECEIVED WAS ACCEPTED BY THE ASSESSING OF FICER, PENALTY PROCEEDINGS WERE ALSO INITIATED FOR NON-DISCLOSURE OF THE FACT OF TAX-FREE EMPLOYMENT AT THE TIME OF FILING ORIGINAL TAX RETUR N, AND FOR NOT GROSSING UP THE TAX LIABILITY UNDER SECTION 195A OF THE ACT. 7. THE A.O. LEVIED THE PENALTY ON THE BASIS THAT TH E CONDUCT OF THE ASSESSEES WAS NOT ABOVE BOARD AND THEIR DISCLOSURE OF CORREC T DETAILS AT THE TIME OF FILING OF ORIGINAL RETURN WAS MALLAFIDE. THE LD CIT(A) HAS UPHELD THE SAME. WITH THIS FURTHER OBSERVATION THAT ASSESSEES CLAIM THAT PENA LTY IS NOT LEVIABLE IN THEIR CASE BECAUSE THERE WAS NO CONSCIOUS CONCEALMENT BY THE M IS HAVING NO FORCE. HE OBSERVED THAT THE MENS REA OF A PERSON IS REFLECTED BY HIS CONDUCT . THE LD CIT(A) HAS UPHELD THE PENALTY MAINLY ON THE BASIS THAT THE ASSESSEES ACT OF OFFERING THE UNDISCLOSED INCOME WAS TRIGGERED BY THE SPECIFIC QU ERRY RAISED BY THE A.O, THUS IT WAS DIFFICULT TO ACCEPT THAT THE REVISED RETURN WAS FILED BY THE ASSESSEE VOLUNTARILY AND SUO-MOTTO. THE SUBMISSION OF THE LD. A.R. BEF ORE US ALSO REMAINED THAT IN EARLY 2005, THERE WAS CHANGE IN DCAGS INDIAN TAX A DVISOR. NEW TAX ADVISOR (M/S. S.R. BATLIBOI AND CO.) WHILE COLLECTING THE INFOR MATION FOR PREPARATION OF INCOME TAX RETURN OF THE EXPATRIATES FOR A.Y. 2005-06 DISCOVER ED THAT IN RESPECT OF THE EXPATRIATES DEPUTED TO INDIA, OUT OF THE COMPONENTS OF THEIR OVERSEAS COMPENSATION ARE NOT COMPLETELY REPORTED IN THEIR INDIAN INCOME TAX RETURNS FOR CERTAIN A.YS. THEREFORE, A DECISION WAS TAKEN BY DAG IN JULY 2005 TO UNDERTAKE AN ANALYSIS OF THE INADVERTENTLY UNREPORTED/DISPUTED SALARY INCOME FOR ALL THE A.YS. FROM A.Y. 1999- 2000 TO A.Y. 2005-06, IN RESPECT OF ITS EXPATRIATES DEPUTED TO INDIA. DAG ALSO DECIDED TO DIFFER THE FILING OF THE RETURNS OF INCO ME OF THE EXPATRIATES FOR A.Y. 2005- 06 TILL THE NON-REPORTING FOR ALL THE PAST YEARS WA S QUANTIFIED. PURSUANT TO THE AFORESAID ANALYSIS THE DCAG VOLUNTARILY DECLARED TH E FACT OF THE INADVERTENT NON- REPORTING OF DISPUTED INCOME TO THE CHIEF COMMISSI ONER OF INCOME TAX (CCIT), ITA . NS 421 TO 426, 437 T 441 & 497/PN/08 KLAUS MOERMANN ETC., A.Y. 2004-05 PAGE OF 20 7 PUNE VIDE LETTER DATED 22 ND DECEMBER 2005. THIS LETTER WAS FILED WITH THE C CITS OFFICE ON 27 TH DECEMBER 2005 AFTER A PERSONAL MEETING WITH THE CC IT ON 27 TH DECEMBER 2005 WHERE THE CCIT VERBALLY ASSURED THAT NO PENALTY PROCEEDINGS WOULD BE INITIATED AGAINST DCAG OR ANY OF THE EXPATRIATES . THE FURTHER SUBMISSION OF THE LD A.R REMAINED THAT THE SAID MEETING WITH CCIT WAS FOLLOWED BY MEETINGS WITH THE COMMISSIONER OF INCOME TAX-I (CIT I) (TDS WING) AN D COMMISSIONER OF INCOME TAX V(CIT V) (I.E. THE COMMISSIONER-IN-CHARGE OF ASSESSMENTS FOR THE EXPATRIATES). THE FURTHER SUBMISSION OF THE LD. A. R. REMAINED THAT DCAG VOLUNTARILY AND SUO MOTTO DEPOSITED ON 27 TH MARCH 2006 THE INCREMENTAL TAX LIABILITY FOR ALL THE RELEVANT YEARS STARTING FROM A.Y. 1999-2000 AFTER C ONSIDERING ALL THE TAXABLE SALARY COMPONENTS ON A CONSERVATIVE BASIS BY WAY OF TAX DE DUCTED AT SOURCE(TDS) ALONG WITH INTEREST U/S. 201(1A) AS PER THE PROVISIONS OF THE INCOME TAX ACT, 1961 FOR ALL THE RELEVANT A.YS. THE SAID FACT WAS COMMUNICATE D TO CCIT ON THE 9 TH MAY 2006 WITH A COPY TO CIT-V ON 22 ND MAY 2006. BASED ON THESE DEVELOPMENTS, THE EXPATRIATES VOLUNTARILY DISCLOSED AND FILED REVISE D RETURNS OF INCOME ON 31 ST MARCH 2006 FOR A.Y. 2004-05 TO THE A.O DISCLOSING THE SA LARY INCOME (INCLUDING INADVERTENTLY UN-REPORTED SALARY INCOME) FROM DCAG ALONG WITH FORM 16 AND FORM 12 BA ISSUED BY DCAG IN RESPECT OF TAX DEDUCTED A T SOURCE BY DCAG. 8. THE FURTHER SUBMISSION OF THE LD AR REMAINED THA T WHILE THE ABOVE DEVELOPMENTS WERE ON GOING, THE A.O HAD ISSUED NOTI CES OF ASSESSMENT U/S. 143(2) TO CERTAIN EXPATRIATES OF DCAG FOR A.Y. 2004-05 BAS ED ON COMPUTER ASSISTED SCRUTINY SYSTEM (CASS). THE FIRST NOTICE IN THIS R EGARD WAS ISSUED ON 6 TH AUGUST 2005 AND THEREAFTER A STANDARD QUESTIONNAIRE WAS IS SUED ON 1 ST SEPTEMBER 2005. THE A.O COMPLETED THE ASSESSMENT PROCEEDINGS BY ACC EPTING THE TOTAL INCOME REPORTED IN THE REVISED RETURN/COMPUTATION OF INCOM E (INCLUDING INADVERTENTLY REPORTED SALARY COMPONENTS) AND ISSUED AN ASSESSMEN T ORDER U/S. 143(3) DATED 21 ST AUGUST 2006. THE A.O THEN INITIATED PENALTY PROCEE DINGS U/S. 271(1)(C ) OF THE ACT AND ISSUED PENALTY ORDERS DATED 26 TH MARCH 2007 LEVYING PENALTY ON THE GROUND THAT ITA . NS 421 TO 426, 437 T 441 & 497/PN/08 KLAUS MOERMANN ETC., A.Y. 2004-05 PAGE OF 20 8 THE DISCLOSURE BY THE EXPATRIATES OF THE UN-REPORTE D/DISPUTED INCOME WAS NOT VOLUNTARY BUT WAS TRIGGERED BY NOTICES ISSUED U/S. 142(1) IN AUGUST AND SEPTEMBER 2005 FOR A.Y. 2004-05 TO THE EXPATRIATES. 9. IN THE FIRST ROUND, THE TRIBUNAL HAS GIVEN RELIE F BY DELETING THE PENALTY IN QUESTION ON THE BASIS OF DECISION OF HONBLE SUPREM E COURT IN THE CASE OF DILIP & SHROFF VS. JCIT, 291 ITR 519 (SC) THAT THERE WAS NO CONSCIOUS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME BY THE EXPATRIATES AND ON THE BASIS THAT EXPATRIATES HAD R ELIED UPON THE INTERPRETATION OF INDIAN TAX LAWS RECEIVED FROM THE EXPATRIATES EMP LOYER AND EARLIER CONSULTANTS/ADVISORS OF THE EXPATRIATES EMPLOYER S UPPORTING THE CLAIM OF THE EXPATRIATES THAT BONAFIDE MISTAKE WAS COMMITTED BY THEM AND THE SAME CANNOT BE VISITED BY PENAL CONSEQUENCES. THE HONBLE BOMBAY HIGH COURT IN ALL THE 10 CASES BEFORE US IN SECOND ROUNDS IN THE APPEALS PREFERRED U/S. 260A BEFORE IT BY THE REVENUE AGAINST EARLIER ORDER DATED 30 TH APRIL 2008 OF THE TRIBUNAL HELD THAT THE TRIBUNAL HAS PASSED THE ORDER IGNORING THE RATIO LA ID DOWN BY HONBLE SUPREME COURT (DIVISION BENCH) IN THE CASE OF DHARMENDRA TE XTILE PROCESSORS (SUPRA). THE MATTER IS ACCORDINGLY REMANDED BY HONBLE HIGH COU RT TO THE FILE OF THE TRIBUNAL FOR RECONSIDERATION OF THE ISSUE IN VIEW OF THE DECISIO N OF HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS (SUPRA). 10. MEANWHILE, THE AFORESAID JUDGMENT OF DIVISION B ENCH OF THE HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILEWAS REFERRE D TO A LARGER BENCH. THE LARGER BENCH OF THE HONBLE SUPREME COURT HAS BEEN PLEAS ED TO PASS AN ORDER ON 29 TH SEPTEMBER 2008 (306 ITR 277) CONFIRMING THE VIEW O F THE DIVISION BENCH THAT WILLFULL CONCEALMENT OR MENSREA IS NOT AN ESSENTIA L INGREDIENT FOR LEVY OF PENALTY. 11. WE FIND THAT THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF HANS CHRISTIAN GAAS VS. DCIT (SUPRA) HAS OCCASION TO DECIDE AN ID ENTICAL ISSUE IN VIEW OF THE ITA . NS 421 TO 426, 437 T 441 & 497/PN/08 KLAUS MOERMANN ETC., A.Y. 2004-05 PAGE OF 20 9 DIFFERENT DECISIONS OF HONBLE SUPREME COURT INCLUD ING THE DECISION OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS AND OTHERS (SUPRA). FOR A READY REFERENCE, PARA NOS. 9 TO 12 ARE BEING REPRODUCED H EREUNDER : 9. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES I N TOTALITY, WE FIND THAT THE ISSUE AS TO WHETHER THERE WAS CONCEALMENT OF PA RTICULARS OF INCOME ON THE PART OF THE ASSESSEE IN NOT OFFERING TAX ON THE REIMBURSEMENT TOWARDS RATIONALIZATION AS A TAXABLE PERQUISITE TO ATTRACT PENALTY UNDER SECTION 271(1)(C ) DEPENDS ON THE ACCEPTABILITY OF THE EXPL ANATION OF THE ASSESSEE THAT THE MISTAKE IN THIS REGARD WAS INADVERTENT DUE TO HIS IGNORANCE OF INDIAN INCOME-TAX LAW, HENCE THERE WAS BONAFIDE REASON FOR THE SAME. EXPLANATION 1 TO SECTION 271(1) STATES THAT WHERE IN RESPECT O F ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME OF ANY PERSON UNDER THI S ACT, SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE AO OR THE COMMISSIONER(APPEALS) OR THE COMMISSIONER TO BE FA LSE, THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME O F SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSE OF CLAUSE (C ) OF TH IS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED. THE OTHER CIRCUMSTANCES FOR DEEMING CONCEALMENT OF PARTICULARS OF INCOME IS WHEN SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONAFID E AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. FOR A READY REFERENCE EXPLA NATION-1 TO SETION 271(1)(C ) IS BEING REPRODUCED HEREUNDER :- EXPLANATION 1.- WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT,- (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE [ASSESSING] OFFIC ER OR THE [COMMISSIONER (APPEALS)] [OR THE COMMISSIONER] TO B E FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT A BLE TO SUBSTANTIATE [AND FAILS TO PROVE THAT SUCH EXPLANAT ION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MA TERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCL OSED BY HIM. THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE P URPOSES OF CLAUSE (C ) ITA . NS 421 TO 426, 437 T 441 & 497/PN/08 KLAUS MOERMANN ETC., A.Y. 2004-05 PAGE OF 20 10 OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INC OME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. THUS, IN OTHER WORDS, IF AN ASSESSEE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME IS ABLE TO OFFER AN EXPLANATION WHICH IS NOT FOUND BY THE ASSESSING OFFICER OR COMMISSIONER (APP EALS) OR COMMISSIONER TO BE FALSE, THEN THE AMOUNT ADDED OR DISALLOWED IN CO MPUTING THE OTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSE OF CLAUSE OF SECTION 271(1) BE NOT DEEMED TO REPRESENT THE INCOM E IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. CONCEALMENT OF PA RTICULARS OF INCOME ON THE PART OF THE ASSESSEE WOULD ALSO NOT BE DEEMED T O LEVY PENALTY UNDER SECTION 271(1)(C ) AS PER EXPLANATION -1 WHERE SUCH PERSON OFFERS AN EXPLANATION WHICH IS BONA FIDE AND THAT ALL THE FRA CTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAV E BEEN DISCLOSED BY HIM. THE LD. CIT(A) HAS BASICALLY UPHELD THE PEMNATLY L EVIED BY THE AO IN THE PRESENT CASE ON THE BASIS THAT THE ASSESSEE BROUGHT NOTHING ON RECORD TO SUBSTANTIATE HIS CLAIM OF BOA FIDE BELIEF REGARDIN G NON TAXABILITY OF THE TAX PERQUISITE. THUS THE ISSUE REVOLVE AROUND THE FACT AS TO WHETHER IN THE PRESENT CASE THE ASSESSEE WAS ABLE TO SUBSTANTIATE HIS EXPLANATION OF BONA FIDE BELIEF REGARDING NON TAXABILITY OF TAX PER QUI SITE, OR NOR. EXPLANATION OF THE ASSESSEE IN THIS REGARD REMAINED THAT HE IS A F OREIGN NATIONAL WHO WAS WORKING AS MANAGING DIRECTOR OF SANDVIK ASIA LTD, A COMPANY INCORPORATION IN INDIA. HIS CONTRACTUAL SERVICE PERIOD FOR SAL I N INDIA WAS FOR THE PERIOD ASSESSMENT YEARS 1998-99 TO 05-06. SAL DEDUCTED TH E APPLICABLE TAXES ON SALARIES PAID TO THE ASSESSEE AND PAIT IT TO THE IN DIAN GOVERNMENT TREASURY. IN ADDITION TO THE EMPLOYMEN T INCOME EARNED FROM SAL, THE ASSESSEE ALSO RECEIVED SOME EMOLUMENT OUTS IDE INDIA AND REIMBURSEMENT OF TAX, BEING DIFFERENCE IN THE TAX R ATES BETWEEN INDIA AND SWEDEN FROM SANDVIK AB, SWEDEN THOUGH THE EMPLOYMEN T WAS EXERCISED IN INDIA. IT WAS SUBMITTED THAT IN THE ORIGINAL RETU RN OF INCOME FILED BY THE ASSESSEE FOR EACH OF THE ABOVE MENTIONED ASSESSMENT YEARS, TOTAL INCOME FILED BY THE ASSESSEE FOR EACH OF THE ABOVE MENTION ED ASSESSMENT YEARS, TOTAL INCOME REPORTED BY THE ASSESSEE INCLUDED REMU NATION RECEIVED IN INDIA FROM SAL AND EMOLUMENTS RECEIVED OUTSIDE INDIA FROM SANDVIK AB, SWEDEN,. BEFORE BEING DEPUTED TO INDIA, THE ASSESSEE WAS ASS URED BY SANDVIK AB, SWEDEN THAT ANY INCREASE IN OVER ALL TAX LIABILITY OF THE ASSESSEE ON ACCOUNT OF DIFFERENT TAX RATES IN INDIA WOULD BE REIMBURSED TO HIM. SUCH REIMBURSEMENT WAS CREDITED TO HIS REGULAR SAVING BA NK ACCOUNT. IT WAS ITA . NS 421 TO 426, 437 T 441 & 497/PN/08 KLAUS MOERMANN ETC., A.Y. 2004-05 PAGE OF 20 11 SUBMITTED THAT FOR THE PURPOSE OF FILING OF RETURN IN INDIA, THE ASSESSEE WAS ASSISTED BY WELL KNOWN TAX CONSULTANTS APPOINTED BY SANDVIK GROUP. SUCH TAX CONSULSTANT COMPUTED THE TAXABLE INCOME OF ASSE SSEE BY ANALYZING VARIOUS SALARY COMPONENTS RECEIVED BY HIM AND DETER MINED THE TAXABILITY OF THESE COMPONENTS. THE ASSESSEE BASED ON THE BONA F IDE BELIEF THAT REIMBURSEMENT OF INCREMENTAL TAX LIABILITY IN INDIA FROM SANDVIK AB, SWEDEN BEING PART OF A TAX RATIONALIZATION MEASURE IS NOT A SEPARATE COMPONENT OF INCOME LIABLE TO TAX IN INDIA DID NOT INCLUDE THIS REIMBURSEMENT WHILE REPORTING HIS TOTAL INCOME IN THE RETURN OF INCOME FILED FOR VARIOUS YEARS DURING HIS INDIAN ASSIGNMENT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS INITIATED UNDER SECTION 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2004-05, THE ASSESSEE COULD LEARN THAT EVEN THE REIMBURSEMEN T TOWARDS TAX RATIONALIZATION NEEDS TO BE CONSIDERED ASD TAXABLE PERQUISITE AND OFFERED TO TAX IN INDIA. IT WAS SUBMITTED THAT ASSESSEE ACCOR DINGLY AGREED TO THE ADDITION TO THE TOTAL INCOME ON ACCOUNT OF GROSSED UP TAX PERQUISITE AS PROPOSED BY THE AO AND PAID THE ADDITIONAL TAX INCL UDING APPLICABLE INTEREST AS DEMANDED BY THE AO FOR A.Y. 2004-05. IT WAS SUB MITTED THAT AS ADDITIONAL TAX LIABILITY ARISE ON ACCOUNT OF INADVERTENT BONA FIDE ERROR IN UNDERSTANDING OF LAW, WHICH WAS AGREED UPON BY THE ASSESSEE IN CO URSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE DID NOT PREFER AN APPEAL BEFORE THE LD. CIT(A) AGAINST THE ASSESSMENT ORDER. IT WAS FURTHER EXPLA INED THAT THE ASSESSEE ALSO VOLUNTARILY, ON 30 TH DECEMBER, 2006 I.E. WITHIN 1.5 MONTHS, PAID OFF TH E INCREMENTAL TAX DUE ALONG WITH APPLICABLE INTEREST FOR ALL EARLIER AND SUBSEQUENT ASSESSMENT YEARS, INCLUDING THE ASSESSME NT YEAR 1998-99 AND 1999-2000, NOT WITHSTANDING THAT TIME LIMIT FOR ISS UE OF NOTICE FOR ASSESSMENT/REASSESSMENT UNDER SECTION N 147 FOR THE SAID TWO ASSESSMENT YEARS I.E. 1998-99 AND 1999-2000 HAD ALREADY ELAPSE D, AFTER RECTIFYING SIMILAR INADVERTENT ERROR MADE IN THESE YEARS. IT WAS SUBM ITTED THAT IT WAS DONE DESPITE OF THE FACT THAT THE ASSESSEE HAD ALREADY R ETIRED FROM HIS EMPLOYMENT. ON THE OBJECTION OF THE DEPARTMENT THA T THE ASSESSEE WAS ASSISTED BY THE TAX EXPERTS SO NO EXCUSE THAT THE ASSESSEE WAS IGNORANT OF THE RELEVANT PROVISIONS OF LAW IS AVAILABLE TO THE ASSESSEE, THE SUBMISSION OF THE LD. A/R REMAINED THAT THE TAX PERQUISITE LAW H AD UNDER GONE A SIGNIFICANT CHANGE IN THE PAST YEARS LEAD TO A LOT OF UNCERTAIN TY REGARDING THE SAME AND THUS BASED ON THE ADVISE OF TAX CONSULTANTS, THE AS SESSEE WAS UNDER A BONA FIDE BELIEF AT THE TIME OF SIGNING HIS ORIGINAL RE TURNS OF INCOME THAT THE INFORMATION GIVEN IN HIS ORIGINAL RETURNS OF INCOM E WAS CORRECT AND COMPLETE AND THAT THE AMOUNT OF TOTAL INCOME AND OTHER PARTI CULARS SHOWN THEREIN ITA . NS 421 TO 426, 437 T 441 & 497/PN/08 KLAUS MOERMANN ETC., A.Y. 2004-05 PAGE OF 20 12 WERE TRULY STATED AND WERE IN ACCORDANCE WITH THE P ROVISIONS OF TAX LAWS AND THUS HE FILED HIS ORIGINAL RETURNS. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE WAS ENTITLED TO REIMBURSEMENT OF INCREMENTAL TAX IN I NDIA FROM SANDVIK AB, SWEDEN AND AS SUCH THERE WAS NO ECONOMIC RATIONAL F OR THE ASSESSEE TO CONCEAL OR UNDER REPORT HIS OVERSEAS SALARY INCOME. THE FURTHER PLEA OF THE LD. A/R BEFORE US ALSO REMAINED THAT THE RELATED LAW WAS COMPLICATED AND POSSIBILITY OF MISTAKE EVEN ON THE PART OF AN EXPER T CANNOT BE RULED OUT. IN THIS REGARD HE HAS PLACED RELIANCE ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SUNIL CHANDRA VOHRA VS. ACI T (2009) 38 SOT 365 (MUMBAI). CONSIDERING THESE MATERIAL FACTS IN TOTA LITY, WE DO NOT FIND REASON TO DOUBT THE BONA FIDE OF ABOVE STATED EXPLANATION FURNISHED BY THE ASSESSEE DURING THE COURSE OF PENALTY PROCEEDINGS. THE LD. CIT(A) HAS DENITED THE EXPLANATION OF THE ASSXESSEE ON THE BASIS THAT THE ASSESSEE BROUGHT NOTHING ON RECORD TO SUBSTANTIATE HIS CLAIM OF BONA FIDE BE LIEF REGARDING NON TAXABILITY OF TAX PERQUISITE AND IN THE LIGHT OF JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF UOI VS. DHARMENDRA TEXTILE PROCESSORS ( 2007) 295 ITR 244 (SC). SO FAR AS APPLICABILITY OF THE SAID DECISION IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS (SUPRA) IS CONCERNED, WE WILL DISCUSS IS IN SUCCEEDING PARAS. 10. REGARDING THE FIRST OBJECTION OF LD. CIT(A) TH AT ASSESSEE BROUGHT NOTHING ON RECORD TO SUBSTANTIATE HIS CLAIM OF BON A FIDE BELIEF REGARDING NON TAXABILITY OF TAX PERQUISITE IS CONCERNED, WE ARE O F THE VIEW THAT IT IS NOT NECESSARY THAT THE CLAIMED BONA FIDE BELIEF MUST BE SUBSTANTIATED WITH SOME DOCUMENTARY EVIDENCE. THE CLAIM OF BONA FIDE BELIE F CAN ALSO BE SUBSTANTIATED BY CIRCUMSTANTIAL EVIDENCE WHEN POSSI BILITY OF DOCUMENTARY EVIDENCE CANNOT BE EXPECTED. IN THE PRESENT CASE, THERE IS NO DISPUTE THAT THE ASSESSEE WAS ASSISTED BY TAX EXPERTS TO COMPUTE HIS TAXABLE INCOME AND FURNISH HIS RETURN OF INCOME ACCORDINGLY. THE SUBM ISSION OF THE ASSESSEE IN THIS REGARD CANNOT BE DOUBTED THAT UNDER THIS BONA FIDE BELIEF THAT HE HAS BEEN ASSISTED BY TAX EXPERT HE SIGHED THE RETURN O F INCOME PREPARED BY THAT EXPERT. WE ALSO FIND SUBSTANCE IN THIS EXPLANATION OF THE ASSESSEE THAT HE WAS ENTITLED TO REIMBURSEMENT OF INCREMENTAL TAX IN INDIA FROM SANDVIK AB, SWEDEN AND AS SUCH THERE WAS NO ECONOMIC RATIONAL FOR THE ASSESSEE TO CONCEAL OR UNDER REPORT ANY PART OF HIS OVERSEAS S ALARY INCOME. ON GOING THROUGH THE CONTENTS OF [PAGE 5 OF THE WRITTEN SUBM ISSION, WE FIND THAT THE PROVISIONS LAID DOWN UNDER SECTION 10 OF THE ACT HA S GONE SEQUENCE OF CHANGES BY FINANCE ACT, 1993, FINANCE ACT, 1970, FI NANCE ACT, 1988 AND FINANCE ACT, 1988 AND FINANCE ACT, 2002. SECTION 1 0(B)(VII) OF THE ACT ITA . NS 421 TO 426, 437 T 441 & 497/PN/08 KLAUS MOERMANN ETC., A.Y. 2004-05 PAGE OF 20 13 PROVIDES EXEMPTION TO TAX PAID BY THE EMPLOYER FOR A PERIOD UPTO 5 YEARS TO TECHNICIANS WHOSE CONTRACT OF SERVICE IS APPROVED B Y THE CENTRAL GOVERNMENT AND WHERE THEIR SERVICES COMMENCED BEFORE 1 ST APRIL, 1971. THIS SUB-CLAUSE WAS OMITTED BY THE FINANCE ACT 1993. SECTION 10(B) (VIIA)(1) OF THE ACT INSERTED BY TAXATION LAWS (AMENDMENT) ACT, 1970, PR OVIDE EXEMPTION IN RESPECT OF TAX PAID BY THE EMPLOYER TO TECHNICIANS FOR A PERIOD UPTO 4 YEARSS WHERE SERVICES COMMENCED BEFORE 1 ST APRIL, 1988 BUT AFTER 31 ST MARCH, 1971 AND WHERE GOVERNMENT APPROVAL WAS OBTAINED FOR A PE RIOD BEYOND 2 YEARS. SECTION 10(6)(VIIA)(II) OF THE ACT INSERTED BY FINA NCE ACT, 1988, PROVIDE EXEMPTION IN RESPECT OF TAX PAID BY EMPLOYEES FOR A PERIOD UPTO 4 YEARS TO TECHNICIANS WHERE SERVICES COMMENCED BEFORE 1 ST APRIL, 1993 BUT AFTER 31 ST MARCH, 1988. THIS SUB CLAUSE WAS OMITTED BY FINANC E ACT, 1998. SECTION 10(5B) OF THE ACT PROVIDED AN EXEMPTION, FOR A PERI OD UPTO 4 YEARS IN RESPECT OF TAX PAID FOR TECHNICIANS. THE SUB-SECTION WAS A MENDED LATER ON AND FINALLY DELETED BY THE FINANCE ACT, 2002. THE DEFINITION O F PERSONS QUALIFYING AS TECHNICIANS FOR WHOM THE EXEMPTION UNDER EACH OF THE ABOVE MENTIONED SECTIONS HAS ALSO UNDER GONE CHANGES AT VARIOUS POI NTS OF TIME. THE FINANCE ACT, 2002 INTRODUCED SECTION 10(10CC) OF THE ACT WH ICH PROVIDED AN EXEMPTION FROM TAX ON NON MONETARY PERQUISITE. UN DER THESE CIRCUMSTANCES WE DO NOT FIND REASON TO DOUBT THE EXPLANATION OF T HE ASSESSEE THAT MISTAKE HAS HAPPENED ONLY BECAUSE OF GROSSING-UP PRINCIPLE EMBEDDED IN THE ACT. THE CONCEPT OF GROSSING-UP IS OF A TECHNICAL NATURE AND CAN CERTAINLY BE TREATED AS OUT OF THE SCOPE OF COMMON KNOWLEDGE OF THE TAX PAYERS. THE VERY CONDUCT O THE ASSESSEE IN THE PRESENT CASE IS ALSO WORTH NOTING TO DECIDE THE VERACITY OF THE CLAIMED BONA FIDE ON THE PART O F THE ASSESSEE IN NOT REPORTING TAX ON TAX REIMBURSEMENT. DURING THE ASS ESSMENT YEAR 2004-05 WHEN ASSESSMENT PROCEEDINGS WERE INITIATED UNDER SE CTION 143(3) AND BY ISSUANCE OF NOTICES UNDER SECTION 143(2) AND 142(1) , THE ASSESSEE WAS SPECIFICALLY REQUIRED TO INFORM IF THERE WAS ANY S OURCE OF INCOME EXCLUDING THE INCOME SHOWN IN THE RETURN OF INCOME AND WHETHE R INCOME AROSE IN CONSEQUENCE OF THE SERVICES RENDERED IN INDIA TO TH E EMPLOYER AND ANY OTHER COMPANY, THE ASSESSEE LEARNED THAT THE REIMBURSEMEN T TOWARDS TAX RATIONALIZATION NEEDS TO BE CONSIDERED AS A TAXABLE PERQUISITE AND HE OFFERED TO TAX IN INDIA. THE ASSESSEE AGREED TO THE ADDITI ON TO THE TOTAL INCOME ON ACCOUNT OF GROSSED UP TAX PERQUISITE AS PROPOSED BY THE AO AND PAID OF THE ADDITIONAL TAX INCLUDING APPLICABLE INTEREST AS DEM ANDED BY THE AO FOR THE ASSESSMENT YEAR 2004-05. THE ASSESSEE ALSO PAID TH E INCREMENTAL TAX DUE ALONG WITH THE APPLICABLE INTEREST FOR ALL EARLIER AND SUBSEQUENT ASSESSMENT ITA . NS 421 TO 426, 437 T 441 & 497/PN/08 KLAUS MOERMANN ETC., A.Y. 2004-05 PAGE OF 20 14 YEARS I.E. 7 YEARS IN TOTAL, INCLUDING THE ASSESSME NT YEARS 1998-99 AND 1999- 2000 NOTWITHSTANDING THAT TIME LIMIT FOR ISSUE OF N OTICE FOR ASSESSMENT/REASSESSMENT UNDER SECTION 147 FOR THES E TWO YEARS HAD ALREADY ELAPSED. IT WAS DONE INSPITE OF THE FACT THAT ASS ESSEE HAD ALREADY RETIRED FROM EMPLOYMENT. THE ASSESSEE FILED REVISED RETURN OF INCOME FOR THE AFORESAID ASSESSMENT YEARS OFFERING TO TAX THE APPR OPRIATELY GROSSED UP AMOUNT OF TAX PERQUISITE THOUGH AS STATED ABOVE, TH E ADDITIONAL TAX ALONG WITH THE INTEREST WAS ALREADY DEPOSITED IN DECEMBER , 2006. UNDER THESE CIRCUMSTANCES, WE DO NOT AGREE WITH THE FINDING OF THE LOWER AUTHORITIES THAT THE EXPLANATION OFFERED BY THE ASSESSEE REGARDING H IS BONA FIDE IN NOT REPORTING THE TAXABLE INCOME IN QUESTION WAS NOT SU BSTANTIATED BY HIM TO AVOID THE PENALTY UNDER SECTION 271(1)(C ) OF THE A CT. 11. SO FAR AS APPLICABILITY OF THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF UOI VS. DHARMENDRA TEXTILE PROCESSORS (SUPR A) IS CONCERNED, WE AFTER HAVING GONE THROUGH THE DECISIONS RELIED UPON BY TH E LD. A/R FIND SUBSTANCE IN HIS ARGUMENT THAT THE HONBLE JUDGES IN THE CASE OF UOI VS. RAJASTHAN SPINNING & WEAVING MILLS (SUPRA) HAVE BEEN PLEASED TO CLARIFY THAT THE PRINCIPLES LAID DOWN IN THE CASE OF UOI VS. DHARMEN DRA TEXTILE PROCESSORS (SUPRA) NEEDS TO BE INTERPRETED TO MEAN THAT EVERY CASE OF LEVY OF PENALTY NEEDS TO BE EXAMINED BASED ON THE FACTS OF EACH CAS E AND CONDITIONS SPECIFIED IN THE LAW IN THIS REGARD. FOR A READY R EFERENCE THE RELEVANT EXTRACT OF THE DECISION IN THE CASE OF UOI VS. RAJASTHAN SP INNING & WEAVING MILLS (SUPRA) IS BEING REPRODUCED HEREUNDER :- AT THIS STAGE, WE NEED TO EXAMINE THE RECENT DECIS ION OF THIS COURT IN DHARMENDRA TEXTILES (SUPRA). IN ALMOST EV ERY CASE RELATING TO PENALTY, THE DECISION IS REFERRED TO ON BEHALF OF THE REVENUE AS IF IT HAD DOWN THAT IN EVERY CASE OF NON -PAYMENT OR SHORT PAYMENT OF DUTY AND PENALTY CLAUSE WOULD AUTO MATICALLY GET ATTRACTED AND THE AUTHORITY HAD NO DISCRETION I N THE MATTER. ONE OF US (AFTAB ALAM, J) WAS PARTY TO THE DECISION IN DHARMENDRA TEXTILE AND WE SEE NO REASON TO UNDERST AND OR READ THE DECISION IN THAT MANNER. FROM THE ABOVE, WE FAIL TO SEE HOW THE DECISION I N DHARMENDRA TEXTILE CAN BE SAID TO HOLD THAT SECTION 11AC WOULD APPLY TO EVERY CASE OF NON-PAYMENT OR SHORT PAYMENT OF DUTY ITA . NS 421 TO 426, 437 T 441 & 497/PN/08 KLAUS MOERMANN ETC., A.Y. 2004-05 PAGE OF 20 15 REGARDLESS OF THE CONDITIONS EXPRESSLY MENTIONED IN THE SECTION FOR ITS APPLICATION. IN THIS REGARD IT IS ALSO VERY PERTINENT TO REFER O VER HERE THE RECENT DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIAN CE PETRO PRODUCTS PVT. LTD. (SUPRA) WHEREIN THE HONBLE COURT HAS BEEN PLE ASED TO OBSERVE AS UNDER:- HOWEVER, IT MUST BE POINTED OUT THAT IN UNION OF I NDIA VS. DHARMENDRA TEXTILE PROCESSORS (CITED SUPRA), NO FAU LT WAS FOUND WITH THE REASONING IN THE DECISION IN DILIP N . SHROFF VS. JOINT COMMISSIONER OF INCOME TAX, MUMBAI & ANR. (CI TED SUPTRA), WHERE THE COURT EXPLAINED THE MEANING OF T HE TERMS CONCEAL AND INACCURATE. IT WAS ONLY THE ULTIMA TE INFERENCE IN DILIP N. SHROFF VS. JOINT COMMISSIONER OF INCOME TAX, MUMBAI & ANR. (CITED SUPRA) TO THE EFFECT THAT MENS REA WA S AN ESSENTIAL INGREDIENT FOR THE PENALTY UNDER SECTION 271(1) T HAT THE DECISION IN DILIP N. SHROFF VS. JOINT COMMISSIONER OF INCOME-TAX, MUMBAI & ANR. (CITED SUPRA) WAS OVERRULED. THE ABOVE OBSERVATION OF THE HONBLE SUPREME COURT IMPLIES THAT IT IS ONLY ON THE POINT OF MENS REA THAT THE JUDGMENT IN THE CA SE OF DILIP N. SHROFF VS. JCIT (SUPRA) HAS BEEN OVERRULED. THE MEANING OF TE RM CONCEAL AS EXPLAINED IN THE SAID JUDGMENT HOLDS GOOD. THE HON BLE PUNJAB &HARYANA HIGH COURT IN THE CASE OF CIT VS. SIDHARTHA ENTERPR ISES (SUPRA) HAS BEEN PLEASED TO HOLD THAT PENALTY IS IMPOSED ONLY WHEN T HERE IS SOME ELEMENT OF DELIBERATE DEFAULT AND NOT A MERE MISTAKE. THE MUM BAI BENCH OF THE TRIBUNAL IN THE CASE OF GLORIES REALY P. LTD. VS. I TO (SUPRA) HAS HELD THAT IF BONA FIDE EXPLANATION OF THE ASSESSEE HAS NOT BEEN FOUND FALSE THEN PENALTY WILL NOT BE LEVIABLE. ON THE BASIS OF THE DECISION RELIED UPON, WE GATHER STRENGTH TO FORM A VIEW THAT PENALTY IS NOT AN AUTO MATIC CONSEQUENCE OF ADDITION TO INCOME; PENALTY UNDER SECTION 271(1)(C ) OF THE ACT CAN COME INTO PLAY ONLY WHEN THE CONDITIONS LAID DOWN UNDER THAT SECTION ARE SATISFIED; CONCEALMENT OF INCOME CANNOT BE A PASSIVE SITUATION AND IT IMPLIES THAT THE PERSON CONCEALING THE INCOME IS HIDING, COVERING UP OR CAMOUFLAGING AN INCOME; PENALTY IS NOT LEVIABLE IN CASE WHERE ASSES SEE IS ABLE TO PROVIDE A BONA FIDE EXPLANATION; AND PENALTY IS NOT LEVIAB LE IN CASES WHERE ASSESSEE MADE ERRORS UNDER BONA FIDE BELIEFS. THE HONBLE S UPREME COURT IN THE CASE ITA . NS 421 TO 426, 437 T 441 & 497/PN/08 KLAUS MOERMANN ETC., A.Y. 2004-05 PAGE OF 20 16 OF K.C. BUILDERS VS. ACIT (SUPRA) HAS BEEN PLEASED TO REFER MEANING OF THE WORD CONCEALMENT AS FOUND IN SHORTER OXFORD DICTI ONARY, THIRD EDITION, VOLUME-I AS UNDER : IN LAW, THE INTENTIONAL SUPPRESSION OF TRUTH OR FA CT KNOWN, TO THE INJRY OR PREJUDICE OF ANOTHER. THE WORD CONCEALMENT INHERENTLY CARRIED WITH IT THE ELEMENT OF MENS REA. THEREFORE, THE ME RE FACT THAT SOME FIGURE OR SOME PARTICULARS HAVE BEEN DISCLOSED BY I TSELF, EVEN IF IT TAKES OUT THE CASE FROM THE PURVIEW OF NON-DISCLOSURE, IT CANNOT BE BY ITSELF TAKE OUT THE CASE FROM THE PURVIEW OF FURNISHING IN ACCURATE PARTICULARS. 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 SO ME EVIDENCE TO SHOW OR SOME CIRCUMSTANCES FOUND FROM WHICH IT CAN BE GA THERED THAT THE OMISSION WAS ATTRIBUTABLE TO AN INTENTION OR DESIRE ON THE PART OF THE ASSESSEE TO HIDE OR CONCEAL SO AS TO AVOID THE IMP OSITION OF TAX THEREON. IN THE CASE OF DILIP N. SHROFF VS. JCIT (SUPRA), TH E HONBLE SUPREME COURT HAS AGAIN BEEN PLEASED TO REFER THAT THE EXPRESSION CO NCEAL IS OF GREAT IMPORTANCE. ACCORDING TO LAW LEXICON, THE WORD CO NCEAL MEANS: TO HIDE OR KEEP SECRET. THE WORD CONCEAL IS CON+CELARE WHIC H IMPLIES TO HIDE. IT MEANS TO HIDE OR WITHDRAW FROM OBSERVATION; TO COVE R OR KEEP FROM SIGHT; TO PREVENT THE DISCOVERY OF; TO WITHHOLD KNOWLEDGE OF. THE OFFENCE OF CONCEALMENT IS, THUS A DIRECT ATTEMPT TO HIDE AN IT EM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF THE INCOME TAX AUTHOR ITIES. THE HONBLE SUPREME COURT HAS FURTHER OBSERVED THAT IT SIGNIF IES A DELIBERATE ACT OR OMISSION ON THE PART OF THE ASSESSEE. IN THE CASE OF T. ASHOK PAI VS. CIT (SUPRA), THE HONBLE SUPREME COURT HAS BEEN PLEASE D TO HOLD THAT CONCEALMENT OF INCOME AND FURNISHING OF INACCURA TE PARTICULARS CARRY DIFFERENT CONNOTATIONS. CONCEALMENT REFERS TO DELIB ERATE ACT ON THE PART OF THE ASSESSEE. A MERE OMISSION OR NEGLIGENCE WOULD NOT CONSTITUTE A DELIBERATE ACT OF SUPPRESSION VERY OR SUGGESTION FALSI. IN L AW,, THE INTENTION SUPPRESSION OF TRUTH OR FACT KNOWN, TO THE INJURY O R PREJUDICE OF ANOTHER, HELD THE HONBLE SUPREME COURT. IN THE CASE OF CEMENT MARKETING CO.OF INDIA LTD. VS. ACIT (SUPRA), THE ASSESSEE DID NOT INCLUDE A PARTICULAR ITEM IN THE TAXABLE TURNOVER UNDER A BONA FIDE BELIEF THAT HE I S NOT LIABLE TO INCLUDE IT. THE HONBLE SUPREME COURT HELD THAT IT WOULD NOT BE RIGHT TO CONDEMN THE ITA . NS 421 TO 426, 437 T 441 & 497/PN/08 KLAUS MOERMANN ETC., A.Y. 2004-05 PAGE OF 20 17 RETURN AS A FALSE RETURN INVITING IMPOSITION OF P ENALTY. THE HONBLE SUPREME COURT ALSO HELD THAT IF AN ALTERNATIVE VIEW IS TAKE N, THEN EVEN WHERE ASSESSES HAVE A BONA FIDE VIEW OF HOW TAXES SHOULD BE COMPUT ED, THE ASSESSEE WOULD HAVE TO PAY TAXES BASED ON THE OTHER VIEW UNDER TH E APPREHENSION OF BEING HELD LIABLE FOR PENALTY IN CASE HIS CONTENTION IS U LTIMATELY FOUND BY THE COURT TO BE NOT ACCEPTABLE AND THIS COULD SURELY NOT HAV E BEEN INTENDED BY THE LEGISLATURE. IN THE CASE OF VELAYUDHAN NAIR VS. IT O (SUPRA) THE ASSESSEE WAS PAID SALARY ALONG WITH TRAVELING, CONVEYANCE AND FO OD ALLOWANCES. FOR THE SAID ASSESSMENT YEAR, THE ASSESSEE FILED HIS RETURN OF INCOME ON THE BASIS OF FORM 16 ISSUED BY HIS EMPLOYER, WHICH DID NOT INCLU DE REIMBURSEMENT. HOWEVER, ON THE BASIS OF ADVICE, THE ASSESSEES EMP LOYER PAID THE DIFFERENCE BY WAY OF TAX DEDUCTED AT SOURCE AND ALSO PAID INT EREST THEREON. THE AO ISSUED A NOTICE UNDER SECTION 148 TO THE ASSESSEE F OR CONCEALMENT OF INCOME. IT WAS HELD THAT THE ASSESSEE DID NOT INCLUDE THE I TEMS IN THE TAXABLE BRACKET UNDER A BONA FIDE BELIEF THAT HE WAS NOT LIABLE TO DO SO. THEREFORE, THE ASSESSEE WAS HELD NOT LIABLE TO PAY PENALTY UNDER S ECTION 271(1)(C ) OF THE ACT. IN THE CASE OF KANYBAY SOFTWARE INDIA PVT. L TD. VS. DCIT (SUPRA), THE PUNE BENCH OF THE TRIBUNAL HAS HELD THAT THERE IS S TILL A THIRD SCENARIO IN WHICH AN ADDITION IS MADE TO THE INCOME BUT IT IS E STABLISHED, OR CAN BE REASONABLY INFERRED, THAT THE ASSESSEES CONDUCT AN D EXPLANATION IS BONA FIDE. THESE ARE THE SITUATIONS ON WHICH THE ASSESSEE IS A BLE TO ESTABLISH HIS INNOCENCE. IN SUCH A SITUATION, IN ACCORDANCE WITH THE UNDISPUTED SCHEME OF SECTION 271(1)(C), NEITHER THE PENALTY WAS LEVIABLE PRIOR TO HONBLE SUPREME COURT JUDGMENT IN THE CASE OF DILIP N. SHROFF VS. J CIT (SUPRA) NOR IS IT LEVIABLE AFTER THE DHARMENDRA TEXTILE PROCESSORS CASE. UND ER THESE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE JUDICIAL PRINCIPLE EXPRESSED IN THE ABOVE CITED DECISION ARE APPLICABLE TO THE CASE OF THE ASSESSEE IN A SITUATION WHERE INCOME HAS INADVERTENTLY BEEN UNDER REPORTED UNDER A BONA FIDE BELIEF THAT SALARY AS REPORTED IN THE RETURN OF INCOME IS CORRECT SINCE THE SAME HAS BEEN DETERMINED BY WELL-KNOWN TAX ADVISERS AND HENC E PENALTY IS NOT LEVIABLE ON THE ASSESSEE FOR THE CONCEALMENT OF INCOME. WE THUS WHILE SETTING ASIDE THE ORDERS OF THE LOWER AUTHORITIES, DIRECT THE AO TO DELETE THE PENALTY IN QUESTION LEVIED UNDER SECTION 27(1)(C ) OF THE ACT. THE GROUNDS ARE ACCORDINGLY ALLOWED. 12. IN THE RESULT, APPEALS ARE ALLOWED. ITA . NS 421 TO 426, 437 T 441 & 497/PN/08 KLAUS MOERMANN ETC., A.Y. 2004-05 PAGE OF 20 18 IT IS APPARENT FROM THE CONTENTS OF PARA NO.11 OF T HE ORDER OF THE TRIBUNAL IN THE CASE OF HANS CHRISTIAN GAAS VS. DCIT (SUPRA) THAT THE HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. RAJASTHAN SPINNING & WEAVING MILL LTD. (2009) 23 DTR 158 (SC) HAVE BEEN PLEASED TO CLARIFY THAT TH E PRINCIPLES LAID DOWN IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS (SUPRA) NEEDS TO BE INTERPRETED TO MEAN THAT EVERY CASE OF LEVY OF PENALTY NEEDS TO BE EXAMINED BASED ON THE FACTS OF EACH CASE AND THE CONDITIONS SPECIFIED IN THE LA W IN THIS REGARD. THE OTHER DECISIONS INCLUDING DECISION OF HONBLE SUPREME CO URT IN THE CASE OF DILIP & SHROFF VS. JCIT HAVE ALSO BEEN DISCUSSED THEREIN. THE PUN E BENCH OF THE TRIBUNAL IN THE CASE OF KAMBAY SOFTWARE INDIA (P) LTD. VS. DCIT (SU PRA) HAD ALSO OCCASION TO DISCUSS THE LAW LAID DOWN IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS (SUPRA) VIDE ITS ORDER DATED 28 TH APRIL 2009. IT IS ALSO WORTH NOTING THAT DECISI ON OF THE TRIBUNAL ON THE ISSUE IN THE CASE OF HANS CHRISTIAN GAAS VS. DCIT (SUPRA) HAS BEEN APPROVED BY THE HONBLE JURISDICTIONAL HIGH COURT VIDE ITS O RDER DATED 22 ND JUNE 2011 IN INCOME TAX APPEAL NO. 2209 OF 2010 AND ANOTHER, A C OPY HAS BEEN FILED BY THE LD. A.R. THE RELEVANT PARA NO. 3 OF THE SAID JUDGMENT IS BEING REPRODUCED HEREUNDER : 3. THE ASSESSEE WAS WORKING AS A MANAGING DIRECTOR OF SANDVIK ASIA LTD.(SAL) AND APART FROM SALARY HAD RECEIVED SOME E MOLUMENTS OUTSIDE INDIA FROM SANDVIK GROUP. THE SAID AMOUNT RECEIVED FROM SANDVIK WAS TOWARDS REIMBURSEMENT OF THE TAX LIABILITY INCURRED BY THE ASSESSEE IN INDIA. IN THE RETURN OF INCOME, THE ASSESSEE HAD NOT OFFERED THE ABOVE REIMBURSED AMOUNT TO TAX UNDER THE BONAFIDE BELIEF THAT THE SAME WERE NOT TAXABLE. HOWEVER, WHEN A QUERY WAS RAISED BY THE ASSESSING OFFICER DU RING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE IMMEDIATELY OFFERED THAT AMOUNT TO TAX FOR ALL THE YEARS. THE PENALTY IMPOSED UNDER SECTION 271(1)(C ) OF THE ACT BY THE ASSESSING OFFICER WAS DELETED BY THE ITAT AFTER REC ORDING DETAILED REASONS THAT IT WAS A CASE OF BONAFIDE MISTAKE AND THAT THE RE WAS NO INTENTION TO EVADE TAX. THE DISCRETION EXERCISED BY THE ITAT IN ACCEPTING THE EXPLANATION GIVEN BY THE ASSESSEE IS REASONABLE AND WE SEE NO REASON TO INTERFERE WITH THE DECISION OF THE TRIBUNAL WHICH I S BASED ON FINDING OF FACTS. ACCORDINGLY, ALL THESE APPEALS ARE DISMISSED WITH N O ORDER AS TO COSTS. ITA . NS 421 TO 426, 437 T 441 & 497/PN/08 KLAUS MOERMANN ETC., A.Y. 2004-05 PAGE OF 20 19 IN THE PRESENT CASE BEFORE US, THE ASSESSEES ARE HA VING REASONABLE EXPLANATION FOR NOT INCLUDING THE TAX LIABILITY HAVING CHARACTER O F A PERQUISITE BY WAY OF TAX FREE SALARY FROM DCAG. IN THE INCOME TAX RETURNS ORIGIN ALLY FILED BY THE APPELLANTS, THE APPELLANTS DID NOT OFFER TO TAX THIS PERQUISITE OF TAX FREE SALARY. TO THIS EXTENT, THERE WAS A FAILURE ON THE PART OF THE EMPLOYEES. HOWEVER, IMMEDIATELY AFTER SCRUTINY NOTICE WAS SERVED UPON THE ASSESSEES, THE ASSESSEES REVISED THEIR INCOME TAX RETURN AND RECOMPUTED THEIR TAX LIABILITY AFTER GROSSING UP TAX U/S. 195A OF THE ACT. THE EXPLANATION OF THE ASSESSEES REMAINED THA T THEY WERE UNDER BONAFIDE BELIEF THAT INDIAN TAXES ON SALARY PAID BY THE DCAG ARE IN TERMS OF THE UNDERSTANDING THAT THE ASSESSEES HAD WITH DCAG, AN D WAS CORRECTLY COMPUTED AND BORNE BY THE DCAG. IT WAS EXPLAINED THAT THE ASSE SSEES HAD NOTHING TO GAIN BY MAKING A LESSER STATEMENT OR CONCEALING ANY INCOME RECEIVED FROM DCAG BECAUSE THE ASSESSEES WERE NOT TO BEAR ANY PART OF TAXES AN D ALL THESE TAXES WERE TO BE BORNE BY THE DCAG. WE HAVE ALSO NOTED THAT THE TAX MATTERS OF THE APPELLANT EMPLOYEES WERE ALL ALONG LOOKED AFTER BY THE TAX CONSULTANTS OF THE EMPLOYER. THE APPELLANT EMPLOYEES DID NOT HAVE A SAY IN THIS AND THEY CANNOT BE FAULTED IN RELYING UPON THE ADVICE RECEIVED BY THE EMPLOYERS TAX CONS ULTANTS PARTICULARLY IN A SITUATION THEY WERE WORKING OUTSIDE THE COUNTRY OF THEIR N ORMAL WORK OPERATIONS. THE APPELLANT EMPLOYEES CANNOT BE MADE TO SUFFER FOR T HE MISTAKES, IF ANY, OF THE CONSULTANT OF THE EMPLOYER OF THE APPELLANT EMPLOY EES. THESE ARE SITUATION IN WHICH ASSESSEES IN OUR VIEW HAVE BEEN ABLE TO ESTA BLISH THEIR INNOCENCE . SUCH A SITUATION AS ALSO BEEN DISCUSSED BY THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF HANS CHRISTIAN GAAS VS. DCIT (SUPRA), UPHELD BY THE HONBLE BOMBAY HIGH COURT, IN ACCORDANCE WITH UNDISPUTED SCHEME OF SECTION 271(1 )(C ). IN SUCH A SITUATION NEITHER THE PENALTY WAS LEVIABLE PRIOR TO HONBLE S UPREME COURT JUDGMENT IN THE CASE OF DILIP N.2 SHROFF VS. JCIT (SUPRA) NOR IS IT LEVIABLE AFTER THE DECISION IN THE CASE OF DHARMENDRA TEXTILES PROCESSORS (SUPRA). UN DER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE JUDICIAL PRINCIPLE EXPRESS ED IN THE ABOVE CITED DECISIONS OF HONBLE SUPREME COURT ARE APPLICABLE TO THE CASE O F THE APPELLANT EMPLOYEES IN A ITA . NS 421 TO 426, 437 T 441 & 497/PN/08 KLAUS MOERMANN ETC., A.Y. 2004-05 PAGE OF 20 20 SITUATION WHERE INCOME HAD UNDISPUTEDLY BEEN UN-REP ORTED UNDER A BONAFIDE BELIEF THAT THE SALARY AS REPORTED IN THEIR RETURNS OF IN COME ORIGINALLY FILED WAS CORRECT SINCE THE SAME WAS DETERMINED BY WELL KNOWN TAX ADV ISORS AND HENCE PENALTY IS NOT LEVIABLE ON THE APPELLANT EMPLOYEES FOR THE ALLEG ED CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF . WE THUS WHILE SETTING ASIDE THE ORDERS OF THE AUTHORITIES BELOW, DIRECT THE A.O TO DELETE THE PENALTY IN QUESTION LEVIED U/S. 271(1)(C ) OF THE ACT. THE GROUNDS RAI SING THE ISSUE ARE ACCORDINGLY DECIDED IN FAVOUR OF THE APPELLANTS AND ARE ALLOWED . 12. CONSEQUENTLY, THE APPEALS ARE ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DECEMBER 2011. SD/- SD/- ( D. KARUNAKARA RAO ) ACCOUNTANT MEMBER (I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 30 TH DECEMBER, 2011 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT -V, PUNE 4. THE CIT(A)-III, PUNE 4. THE D.R. A BENCH, PUNE 5. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE