TaxTMI 
TaxTMI 
TaxTMI 
2012 (7) TMI 585
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....d by a Mauritius enterprise from operation of ships in international traffic is taxable only in the country where place of effective management is situated. Based on the above provisions, the assessee through its agent, JMCPL, applied for the Annual Port Clearance Certificate u/s. 172 to the Assessing Officer, who as per the Board's Circular No.732, dated 20th December, 1995, granted the same on 9-6-2000, which was valid upto 31-3-2001, i.e. upto Assessment Year 2001-2002, subject to undertaking of the assessee i.e. RL that no ship belonging to it, will be engaged in any traffic other than international traffic. Based on the above certificate, the RL through its agent JMCPL, filed its income tax return at 'Nil' income after claiming the tax relief under DTAA. This position continued in the assessment year 2000-2001 & 2001-2002. Later on, the Assessing Officer while examining the similar certificate for the subsequent year found on opinion that the Treaty benefit cannot be given to RL as the place of effective management of RL was not in Mauritius but was in India. In view of this, a notice under Section 148 was issued on 30-3-2004 for the assessment year 2001-2002 in the case of RL....
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....bmitted that its plea for non-levy of interest under section 234B has also been accepted on the ground of similar bonafide belief that it was not liable to tax on shipping profits in India. The Assessing Officer, however, rejected the said contention of the assessee and levied the penalty of Rs. 9,97,937/- in the case of the agent JMCPL vide order dated 26-9-2005 and also levied penalty for the same amount of Rs. 9,97,938/- in the case of principal, RL. 4. Against the said penalty orders, both the assessees filed appeal before the CIT(A). Before the CIT(A), preliminary objection was raised that two penalty orders cannot be passed one in the case of agent and other in the case of principal, for the same assessment year in respect of the same income. Without prejudice and purely as an alternative, it was submitted that if any penalty is levied, then it should be levied on the principal but not on the agent. Even in the penalty order, the Assessing Officer has very categorically held as under :- "I have perused and considered all the submissions of the assessee. It is a fact that a penalty order u/s. 271(1)(c) has been passed in the case of James Mackintosh & Co., Pvt. Ltd., as agen....
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....hey travelled to Mauritius to attend Board Meeting. (ii) The assessee could not substantiate its explanation and, therefore, its case falls within the four corners of the Explanation 1 to sec. 271(1)(c) as its basic contention has been proved to be wrong. (iii) Regarding assessee's plea before the CIT(A), that the return income and the assessed income being the same, it has been contended by the learned DR that merely showing the freight receipts from India in the return of income, while at the same time claiming it to be exempt, will not amount to say, that return income and the assessed income are same. Moreover, there is no concept of "return income" in Explanation 4 to section 271(1)(c), but the term used is "assessed income". (iv) Regarding simultaneously assessment on principal and agent, it has been submitted that the liability of the agent is a nature of personal liability, hence, it was the agent's liability to pay the taxes and there is no prohibition under the law to proceed against both the parties i.e. principal and the agent. The only limitation is with regard to recovery of taxes. (v) Finally, if the penalty is to be assessed, the same sho....
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....vied, the same should be in the case of the principal and not the agent and, therefore, the penalty in the case of the agent should be straightaway deleted. In support of his contentions, reliance has been placed on the judgment of Hon'ble Supreme Court in the case of Claggett Blachi Co. Ltd. v. CIT, reported in [1989] 177 ITR 409 (SC), wherein it has been held that it is open to the Assessing Officer to either assess the non-resident assessee, or to assess the agent of such non-resident assessee and if the assessment is made on one, there can be no assessment on the other. It was further submitted that the stand of the Revenue at this stage that the penalty should be levied in the case of the agent, is wholly misplaced as the Learned DR cannot improve upon the case of the Assessing Officer, who has given a categorical finding that penalty should be levied in the case of the principal only. (iii) Penalty order in the case RL is also invalid in law, since the show cause notice was issued in the name of the agent JMPCL and not RL. This contention is duly supported by the Assessing Officer's scrutiny report for the assessment year 2000-2001, wherein it has been stated that the ....
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....RL for the assessment year 2000-2001, wherein it has been admitted that there is no difference between the return of income and the assessed income, thus, there can be no concealment of income with reference to the said return of income and it is only the assessee's claim of double tax relief under Section 90, which is disputed. 8. We have carefully considered the rival submissions and perused the material placed on record. Here in this case, the assessment has been made on substantive basis in the case of principal as well as agent on the same income. Penalty has also been levied in both the cases for the same income. Thus, it is a case of double jeopardy. The principal, RL, which is engaged in the business of operation of ships in the International traffic is a resident of Mauritius, which is evident from tax residency certificate issued by Mauritius Government Authority. The JMCPL is the agent of RL and is resident of India. The return of income which was filed in response to notice under Section 148 on 9-4-2004 by RL through its agent JMCPL, total freight earned was shown at Rs. 2,77,20,500/- and income at the rate of 7.5% was shown as per section 44B of Rs. 20,79,038/-. The t....
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.... is dismissed on the preliminary ground. 9. Now, coming to the levy of penalty on merits in the case of principal i.e. RL, it is seen from the perusal of the assessment order dated 31-1-2005, the Assessing Officer has come to following conclusions :- (i) The benefit of Article 8 is not available to RL as effective place of management of the assessee is not in Mauritius. (ii) The RL is a company resident in India by virtue of Section 6(3)(ii) and has treated to be a tax resident of India under Article 4(3) of the Indo-Mauritius Treaty. (iii) Alternatively, the assessee has an agency PE in India and according to Article 7, income of the assessee is to be taxed as per domestic law. From the conclusion drawn by the Assessing Officer, it is seen that the Assessing Officer has taken three different stands for taxing the income of RL in India. Even though such a taxing of income has become final in the quantum proceedings, however, such a finding in the assessment order is not a final word in the penalty proceedings upon the pleas which can be taken up at the penalty stage and whatsoever relevant and good the findings are given in the assessment proceedings, t....
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....ief by the assessee at the time of filing of the return. It is settled law that primary burden of the proof even under the Explanation 1 is on the revenue to establish that Explanation of the assessee is false or is not bonafide which here in this case has not been discharged by the Assessing Officer in the penalty order. The entire finding in the assessment as well as penalty order is based on the fact that claim of the assessee (RL) that its income is exempt under Indo-Mauritius Treaty is not eligible as the effective place of management of the assessee was not proved to be in Mauritius by the assessee. Not proving the effective place of management in Mauritius by the assessee can be a subject of adverse inference in quantum proceedings, but there has to be some independent material or evidence before the department that the assessee's stand and explanation is false and is contrary to the record, for the purpose of bringing the assessee in the ambit of penal provision of section 271(1)(c). Explanation 1 to section 271(1)(c) also carves out 'preponderance of probabilities', which means in the circumstances whether there was a probability of assessee acting bonafidely or the explan....
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....1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present 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 furnishing inaccurate particulars. The learned counsel argued that "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". We do not think that such can be the interpretation of the concerned words. 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 incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In CIT v. Atul Mohan Bindal [2009] 9 SCC 589*, where this court was considering the same provision, the court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such incom....
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....and also considering section 271(1)(c), the court came to the conclusion that since section 271(1)(c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing return, there was no necessity of mens rea. The court went on to hold that the objective behind the enactment of section 271(1)(c) read with Explanations indicated with the said section was for providing remedy for loss of revenue and such a penalty was a civil liability and, therefore, wilful concealment is not an essential ingredient for attracting civil liability as was the case in the matter of prosecution under section 276C of the Act. The basic reason why decision in Dilip N. Shroff v. Joint CIT was overruled by this court in Union of India v. Dharamendra Textile Processors**, was that according to this court the effect and difference between section 271(1)(c) and section 276C of the Act was lost sight of in the case of Dilip N. Shroff v. Joint CIT*. However, it must be pointed out that in Union of India v. Dharamendra Textile Processors2, no fault was found with the reasoning in the decision in Dilip N. Shroff v. Joint CIT*, where the court explaine....