Raman Chopra, New Delhi V. DCIT, New Delhi

ITA 6619/DEL/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7820 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 21-04-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 11-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: AMIT SRIVASTAVA
• Keywords: Residential status; Salary income; Double taxation relief
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO. 6619/DEL/2015 A.Y. : 2011-12 RAMAN CHOPRA, L-10, LAJPAT NAGAR-3, NEW DELHI (PAN: AAAPC0771A) VS. DCIT, CIRCLE 48(1), NEW DELHI ROOM NO. 505, 5 TH FLOOR, D-BLOCK, PRATYAKSH BHAWAN CIVIC CENTRE, JL NEHRU MARG, NEW DELHI (APPELLANT ) (RESPONDENT ) ASSESSEE BY : SH. AMIT SRIVASTAVA, AR DEPARTMENT BY : SH. R.S. NEGI, SR. DR DATE OF HEARING: 21-4-2016 DATE OF ORDER : 05-5-2016 ORDER PER H.S. SIDHU, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-21, NEW DEL HI DATED 10.9.2015 PERTAINING TO ASSESSMENT YEAR 2011-12. ITA NO. 6619/DEL/2015 2 2. THE ASSESSEE HAS RAISED SO MANY GROUNDS CHALLENGI NG THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) DATED 10.9. 2015 WHEREIN HE HAS CONFIRMED THE PENALTY OF RS. 10,98,721/- LEV IED U/S. 271(1)(C) OF THE I.T. ACT IMPOSED BY THE AO. 3. IN THIS CASE THE RETURN FOR THE ASSESSMENT YEAR 201 1-12 WAS FILED ON 29.7.2011 DECLARING INCOME OF RS. 32,71,133/-. TH E CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND NOTICE U/S. 143 (2) WAS ISSUED ON 10.9.2012. NOTICE U/S.142(1) ALONGWITH QUESTION NAIRE WAS ISSUED ON 21.8.2013 TO THE ASSESSEE. THE ASSESSEE EARNED S ALARY INCOME FROM M/S UOP INDIA PVT. LTD. AND ALSO INCOME FROM OTHER S OURCES. DURING THE ASSESSMENT PROCEEDINGS AO NOTED THAT THAT DURING FINANCIAL YEAR 2010-11, THE ASSESSEE WAS WORKING IN USA DURING T HE PERIOD FROM 01/04/2010 TO 01/07/2010 AND THE ASSESSEE CLAIMED E XEMPTION AMOUNTING RS.35,55,722/- CITING ARTICLE 16(1) OF DTA A BETWEEN INDIA AND US. ON BEING ASKED TO EXPLAIN THE CLAIM MADE BY THE ASSESSEE HE PLACED RELIANCE ON OECD COMMENTARY SO AS TO JUSTIFY H IS ACTION IN CLAIMING EXEMPTION BASED ON SPILT RESIDENCY POSITION . HOWEVER, THE AO WAS NOT CONVINCED WITH ASSESSEE'S ABOVE CONTENTION. AO OBSERVED THAT SINCE THE PERIOD OF ASSESSEE'S STAY IN INDIA WAS MOR E THAN 183 DAYS THE AO HELD THE ASSESSEE AS RESIDENT AND ORDINARY RESI DENT OF INDIA ITA NO. 6619/DEL/2015 3 AND CONSEQUENTLY HIS ENTIRE GLOBAL INCOME FOR THE WHO LE FINANCIAL YEAR WAS SUBJECTED TO TAX IN INDIA. AS SUCH ASSESSEE'S C LAIM FOR EXEMPTION OF RS.35,55,722/- UNDER ARTICLE 16(1) OF DTAA BETWEE N INDIA AND USA WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME O F THE ASSESSEE. BASED ON ABOVE DISALLOWANCE, THE AO INITIATED PENAL TY PROCEEDING ULS 271(1)(C) AND SHOW CAUSE NOTICE ULS 274 READ WITH S ECTION 271(1)(C) WAS ISSUED ON 31/03/2014 ALLOWING OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. A FRESH SHOW CAUSE NOTICE WAS ALSO ISS UED ON 28/08/2014 IN RESPONSE TO WHICH THE ASSESSEE APPEARED AND FILED WRITTEN SUBMISSION DATED 10/04/2014. IN CONSIDERATION OF ENTI RE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO HELD ASSESSEE GUIL TY OF FURNISHING INACCURATE PARTICULARS OF INCOME WHICH ATTRACTED THE PE NAL PROVISIONS OF SECTION 271(1)(C), AND ACCORDINGLY LEVIED A PENAL TY OF RS.10,98,721/- VIDE ORDER DATED 26/09/2014. AGGRIEVED WI TH THE PENALTY ORDER, ASSESSEE APPEALED BEFORE THE LD. CIT( A), WHO VIDE IMPUGNED ORDER DATED 10/9/2015 HAS UPHELD THE PENALTY AND ACCORDINGLY, DISMISSED THE APPEAL OF THE ASSESSEE. 4. AGAINST THE ABOVE ORDER OF THE LD. CIT(A) DATED 1 0.9.2015, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO. 6619/DEL/2015 4 5. DURING THE HEARING, LD. COUNSEL OF THE ASSESSEE HAS FILED A SMALL PAPER BOOK CONTAINING PAGES 1 TO 37 HAVING THE COPY OF RETURN OF INCOME TAX FOR AY 2011-12; COPY OF RECTIFICATION APP LICATION UNDER SECTION 154; COPY OF INDIA USA DTAA AND NOTICE OF DEMAND U/S. 156 DATED 24.3.2014. HE SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FULLY DISCLOSED ALL THE IN FORMATION ASKED FOR AND HAS NOWHERE FURNISHED ANY INACCURATE PARTICULARS. I T WAS THE FURTHER CONTENTION THAT NOWHERE IN THE ASSESSMENT OR DER, IT HAS BEEN RECORDED THAT THE APPELLANT FURNISHED INACCURATE PARTIC ULARS OF INCOME. THEREFORE, HE STATED THAT NO PENALTY CAN BE LEVIED I N THIS CASE AS IT CANNOT BE SAID THAT THERE WAS ANY ATTEMPT BY THE AS SESSEE TO CONCEAL PARTICULARS OF INCOME. IN THIS BEHALF, HE FILED A CO PY OF THE DECISION RENDERED BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. REPORTED IN (2010) 322 ITR 158 (SC) AND STATED THAT THE PRESENT CASE IS FULLY COVERED BY SAID DECISION AND ACCORDINGLY, REQUESTED THAT THE PENALT Y IN DISPUTE MAY BE DELETED. 6. ON THE CONTRARY, LD. DR RELIED UPON THE ORDER OF THE AUTHORITIES BELOW AND STATED THAT THE LD. CIT(A) HAS PASSED A WE LL REASONED ORDER ITA NO. 6619/DEL/2015 5 WHICH DOES NOT NEED ANY INTERFERENCE, HENCE, THE SAM E MAY BE AFFIRMED. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE ORDERS PASSED BY THE REVENUE AUTHORITIES ALONGWITH DOCUMENTARY EV IDENCES FILED BY THE ASSESSEE IN THE SHAPE OF PAPER BOOK AND THE CASE LAW CITED BY HIM. FROM THE RECORDS, IT REVEALS THAT THE ASSESSEE IS A 'RESIDENT AND ORDINARILY RESIDENT' INDIVIDUAL FOR THE ASSESSMENT YEA R (AY) 2011-12. HE DERIVED INCOME FROM SALARY AND FROM OTHER SOURCES. HE IS ALSO A RESIDENT OF USA FOR THE PERIOD APRIL 1 2010 TO JUNE 30 2 010. AS THE ASSESSEE MAY BE CONSIDERED LIABLE TO TAX BOTH IN IN DIA AND US AS PER THE TAX LAWS IN EACH JURISDICTION, A DETERMINATION OF THE RESIDENTIAL STATUS AS PER THE INDIA - USA DOUBLE TAXATION AVOIDA NCE AGREEMENT (TREATY) HAS TO BE DONE BASED ON THE TIE BREAKER ANAL YSIS AS CONTAINED IN ARTICLE 4(2) OF THE TREATY. BASED ON THE TIE BREAK ER ANALYSIS AS CONTAINED IN ARTICLE 4(2), THE ASSESSEE IS TIE-BREAK ING TO USA FOR THE PERIOD APRIL 1 2010 TO JUNE 30 2010. ACCORDINGLY, THE A SSESSEE SHALL BE CONSIDERED AS A RESIDENT OF USA FOR THE PERIOD APRIL 1 2010 TO JUNE 302010 AS PER THE TREATY. SINCE THE ASSESSEE IS A RESI DENT OF USA FOR THE PERIOD APRIL 1 2010 TO JUNE 30 2010 AND HAS EXERCIS ED HIS EMPLOYMENT IN USA DURING THE ABOVE PERIOD, HE IS ENTI TLED TO CLAIM ITA NO. 6619/DEL/2015 6 EXEMPTION OF SALARY IN INDIA AS PER ARTICLE 16(1) OF THE TREATY. ACCORDINGLY, THE ASSESSEE HAS CLAIMED AN EXEMPTION O N REMUNERATION RECEIVED IN INDIA AMOUNTING TO RS. 35,55,722/- IN RES PECT OF THE SERVICES RENDERED IN USA. 7.1 WE FIND THAT THE ASSESSEE FILED A RETURN OF INC OME ON JULY 29, 2011 DECLARING RS. 32,71,133/- AS THE TOTAL TAXABLE INCOME UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961 AFTER CLAIMIN G THE BENEFITS AS PER THE PROVISIONS OF THE TREATY. THE RETURN OF INCOME W AS SELECTED FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT WAS COMPLETE D UNDER SECTION 143(3) VIDE ORDER DATED MARCH 28 2014. THE ASSESSEE FULLY CO- OPERATED WITH THE ASSESSMENT PROCEEDINGS. ALSO, ALL T HE DETAILS RELATING TO THE CLAIM OF EXEMPTION OF SALARY IN THE TAX RETURN WERE PROVIDED TO THE AO. HOWEVER, THE AO DID NOT AGREE WITH THE CLAIM O F EXEMPTION OF REMUNERATION. IN THE ORDER, THE AO HAS DISALLOWED THE CLAIM AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. BASED ON ABOVE DISALLOWANCE, THE AO INITIATED PENALTY PROCEEDING UL S 271(1)(C) AND HELD THAT ASSESSEE IS GUILTY OF FURNISHING INACCURAT E PARTICULARS OF INCOME WHICH ATTRACTED THE PENAL PROVISIONS OF SECT ION 271(1)(C), AND ACCORDINGLY LEVIED A PENALTY OF RS.10,98,721/- VIDE ORDER DATED ITA NO. 6619/DEL/2015 7 26/09/2014 AND IN APPEAL BEFORE THE LD. CIT(A), THE LD. CIT(A) VIDE IMPUGNED ORDER DATED 10/9/2015 HAS UPHELD THE PENALTY IN DISPUTE. 7.2 WE ALSO FIND THAT SECTION 271(1)(C) POSTULATES IMPOSITION OF PENALTY FOR FURNISHING OF INACCURATE PARTICULARS AND CONCEALMENT OF INCOME. ON THE FACTS AND CIRCUMSTANCES OF THIS CASE THE ASSESSEES CONDUCT CANNOT BE SAID TO BE CONTUMACIOUS SO AS TO WARRANT LEVY OF PENALTY. 7.3 IN THIS REGARD, WE FIND THAT ASSESSEES COUNSEL RELIANCE FROM THE HONBLE APEX COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD. IN CIVIL APPEAL NO. 2463 OF 2010 IS SQUARELY APPLICABLE IN THE PRESENT CASE OF THE ASSESSEE. IN THIS CASE VIDE ORDER DATED 17.3.2010 IT HAS BEEN HELD THAT THE LAW LAID DOWN IN THE DILIP SHEROFF CASE 291 ITR 519 (SC) AS TO THE MEANING OF W ORD CONCEALMENT AND INACCURATE CONTINUES TO BE A GOOD LAW BECAUSE WHAT WAS OVERRULED IN THE DHARMENDER TEXTILE CASE WA S ONLY THAT PART IN DILIP SHEROFF CASE WHERE IT WAS HELD THAT MENSREA WAS A ESSENTIAL REQUIREMENT OF PENALTY U/S 271(1)(C). THE HONBLE APEX COURT ALSO OBSERVED THAT IF THE CONTENTION OF THE REVENUE IS AC CEPTED THEN IN CASE OF EVERY RETURN WHERE THE CLAIM IS NOT ACCEPTED BY TH E ASSESSING ITA NO. 6619/DEL/2015 8 OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE TH E PENALTY U/S 271(1)(C). THIS IS CLEARLY NOT THE INTENDMENT OF LE GISLATURE. 7.4 WE FURTHER PLACE RELIANCE FROM THE APEX COURT DEC ISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF TH EIR LORDSHIPS IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 26 WHEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-C RIMINAL PROCEEDINGS, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUI LTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DISRE GARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAIL URE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL T HE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIB ED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED I N REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH O F THE PROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FROM A BONAFIDE BE LIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. ITA NO. 6619/DEL/2015 9 8. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS, WE FIND THAT THE LEVY OF PENALTY IN THIS CASE IS NO T JUSTIFIED. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE LEVY OF PENALTY IN DISPUTE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/5/2016. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 05-5-2016 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES