2024 (5) TMI 102 - AT - Income Tax

Foreign Company Escapes Penalty for Late Tax Report Filing Due to Bona Fide Belief; Tribunal Orders Deletion.

The ITAT addressed the imposition of a penalty under section 271BA of the Income-tax Act, 1961, on the assessee, a foreign company, for not submitting a ... Levy of penalty u/s 271BA - assessee failure to furnish report u/s 92E, though assessee had transaction with its Indian AE - assessee is a Foreign Company incorporated and resident in USA and it did not file its return of income and therefore notice u/s 148 of the Act was issued - income was received by the assessee as Royalty which was subjected to TDS @15% as per the Article 12 of India – USA DTAA - HELD THAT:- Assessee was under a bonafide belief that it was not required to file any return of income as its income has been subjected to tax deducted at source. We find that the assessee did furnish report under section 92E of the Act during the course of the scrutiny assessment proceedings itself - we do not find this to be a fit case for the levy of penalty under section 271BA - Decided in favour of assessee. For A.Y. 2011-12, assessee (a US resident foreign company) challenged levy of penalty of Rs.1,00,000 under section 271BA for alleged failure to furnish Accountant's Report under section 92E (Form 3CEB). The assessee, served notice under section 148, filed return declaring royalty income of Rs.3,55,37,509, subject to TDS @15% under Article 12 of the India-USA DTAA; assessment was framed under section 143(3) r.w.s. 147 without any transfer pricing adjustment. The tribunal found the assessee acted under a bonafide belief that no return was required given TDS, and that the assessee furnished the report under section 92E during scrutiny. On these facts, the tribunal held: 'we do not find this to be a fit case for the levy of penalty under section 271BA of the Act.' The directing order: delete the impugned penalty of Rs.1,00,000/-. The assessment validity ground was not adjudicated as it was not contested.