TaxTMI 
TaxTMI 
2012 (12) TMI 486
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....T(A) erred in holding that the appellant concealed the particulars of his income and evaded assessment of his correct income. 3. The CIT(A) erred in not accepting the appellant's contention to the effect that the appellant had bonafide believed that the additional income declared by him in his return was not liable to Indian taxation. 4. The CIT(A) erred and acted on the basis of conjecture, suspicion and surmises and contrary to the record in alleging that 'it was only as a result of issuance of a notice u/s.148 by the Assessing Officer that the appellant was cornered to disclose his true and correct state of affairs. 5. The CIT(A) erred in alleging that the additional income was not voluntarily disclosed by the appellant. 6. The CIT(A) erred and acted on the basis of conjecture, suspicion and surmises and without any material in alleging that the appellant 'kept on hiding his unreported income' even after the issue of the notice u/s.148. 7. The order of the CIT(A) is vitiated inter alia by errors of fact and law and on account of its being based on conjecture, suspicion and surmises and allegations never put to the ....
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....e us, the Ld. Authorised Representative pointed out that appeal in assessee's own case in 1st round was decided in his favour by the ITAT in ITA No.991/PN/2008 wherein vide paras 26 to 31, ITAT has decided the issue in favour of assessee by observing as under: "26. We have already given a finding that the assessee's explanation for not disclosing the income in question in his returned income is duly evidenced by the material on record and, as such, deserves to be accepted. We have also held that in the absence of categorical conclusions about taxability of an income, particularly when the said income is taxed only on the basis of assessee's suo motu declaration and when, despite this declaration, the assessee has categorically challenged the taxability, a concealment penalty cannot be imposed. In these circumstances, it is not really necessary to go into the question whether or not there was any mens rea in the conduct of the assessee. That aspect of the matter, in this case, is somewhat academic. However, suffice to say that as held by the Hon'ble Supreme Court, in the case of Dilip N Shroff (supra), "before a penalty can be imposed, the entirety of the circumstances must reasona....
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....l is allowed. Pronounced in the open court today on 29th day of August 2008." 5.1. Matter was carried before the jurisdictional High Court wherein the first appellant's name in this group cases appeared at Income Tax Appeal No.2529/2009, wherein a group case, Hon'ble jurisdictional High Court has restored the issue to Tribunal by observing as under: "1. Learned Counsel for the appellant and learned counsel for the respondents have jointly tendered minutes of order. The same are taken on record and marked 'X' for identification. 2. All the appeals are disposed of in terms of minutes of order with no order as to costs. MINUTES OF THE ORDER Both the parties agree that the appeals should be restored to the Tribunal for fresh adjudication in view of the Tribunal's erroneous reference to section 273B of the Act in view of the subsequent decision of a three judge Bench of the apex Court in Dharamendra Textile's case (306 ITR 207) and other judgments, rendered after the date of the judgment of the Tribunal which the Tribunal did not have the occasion to consider. Both parties agree that all issues and contentions are left open. Sd/- A....
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....ation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all facts relating to the same and material to the computation of his total income have been disclosed by him", Then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income 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 (Appeals) or Commissioner to be false, then the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purpose of clause (c) of section 271(1) be not deemed to represent the income in respect of which particulars have been concealed. Concealment of particulars of income on the part of the assessee would also not be deemed to levy penalty under section 271(1)(c) as per Explanation-l where such person offers an explanation which is bona fide and that all the facts relating to....
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....uring 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 reimbursement towards tax rationalization needs to be considered as taxable perquisite and offered to tax in India. It was submitted that assessee accordingly 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 including applicable interest as demanded by the AO for A. Y. 2004-05. It was submitted that as the additional tax liability arise on account of inadvertent bonafide error in understanding of law, which was agreed upon by the assessee in the course of assessment proceedings, the assessee did not prefer an appeal before the ld. CIT (A) against the assessment order. It was further explained that the assessee also voluntarily, on 30th December, 2006 i.e. within 1.5 months, paid off the incremental tax due along with applicable interest for all earlier and subsequent assessment years, including the assessment year 1998-99 and 1999-2000, notwithstanding that time limit for issue of notice for assessment/reassessment ....
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....tiate his claim of bona fide belief regarding non taxability of tax perquisite is concerned, we are of 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 belief can also be substantiated by circumstantial evidence when possibility 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 submission of the assessee in this regard cannot be doubted that under this bona fide belief that he has been assisted by tax expert he signed the return of 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 ,salary income. On going through the contents of page 5 of the written submission, we find that the provisions laid down under section 10 of the Act has gone sequence of changes by Finance Act, 1993, Finance Act, 1....
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....reimbursement towards tax rationalization needs to be considered as a taxable perquisite and he offered to tax in India. The assessee agreed to the addition 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 demanded by the AO for the assessment year 2004-05. The assessee also paid the incremental tax due along with the applicable interest for all earlier and subsequent assessment years i.e. 7 years in total, including the assessment years 1998-99 and 1999-2000 notwithstanding that time limit for issue of notice for assessment/reassessment under section 147 for these two years had already elapsed. It was done inspite of the fact that assessee had already retired from employment. The assessee filed revised return of income for the aforesaid assessment years offering to tax the appropriately grossed up amount of tax perquisite though as stated above, the 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 his bona fide in not....
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....t that mens rea was an essential ingredient for the penalty under section 271(1)(c) that the decision in Dilip N. Shroff v. Joint Commissioner of Income-tax, Mumbai & Am. (cited supra) was overruled." The above observation of the Hon'ble Supreme Court implies that it is only on the point of "mens rea" that the judgment in the case of Dilip N. Shroff v. JCIT (supra) has been overruled. The meaning of term "conceal" as explained in the said judgment holds good. The Hon'ble Punjab & Haryana High Court in the case of CIT v. Sidhartha Enterprises (supra) has been pleased to hold that penalty is imposed only when there is some element of deliberate default and not a mere mistake. The Mumbai Bench of the Tribunal in the case of Glories Realty P. Ltd. v. ITO (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 automatic 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 passiv....
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....ssio veri or suggestio falsi." In law, the intentional suppression of truth or fact known, to the injury or prejudice of another, held the Hon'ble Supreme Court. In the case of Cement Marketing Co. of India Ltd. v. ACIT (supra), the assessee did not include a particular item in the taxable turnover under a bona fide belief that he is not liable to include it. The Hon'ble Supreme Court held that it would not be right to condemn the return as a "false" return inviting imposition of penalty. The Hon'ble Supreme Court also held that if an alternative view is taken, then even where assesses have a bona fide view of how taxes should be computed, the assessee would have to pay taxes based on the other view under the apprehension of being held liable for penalty in case his contention is ultimately found by the court to be not acceptable and this could surely not have been intended by the Legislature. In the case of Velayudhan Nair v. ITO (supra) the assessee was paid salary along with traveling, conveyance and food 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 include reimbursement. However, ....
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....ing as a Managing Director of Sandvik Asia Ltd. (SAL) and apart from salary had received some emoluments 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 during 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 recording detailed reasons that it was a case of bona fide mistake and that there 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 is based on finding of facts. Accordingly, all these appeals are dismissed with no order as to costs." 8. Further, Ld. Authorised Representative pointed out that Tribunal Pune Bench 'A' in case of Asstt. CIT v. Alaxender Reuss in ....
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....der payment of taxes in the past years, then Daimler AG would want to suo moto and voluntarily report these to the Indian Revenue authorities and voluntarily deposit taxes and interest for all its expatriates. Thus no reporting was noticed in July 2005 and steps were initiated by Daimler AG in consultation with tax advisor. 9. Thereafter detailed review of the past reporting was done and the revised tax liability of the expatriates computed based on interpretation of the Indian tax laws by the new tax advisor of Daimler AG and also adopting various conservative positions Daimler AG then voluntarily and suo moto deposited the incremental tax arising after considering the taxable salary component's, by way of tax deduction at source (TDS) along with interest u/s 201(1A) as per the provisions of the Act for all the relevant assessment years on 27-3-2006. Thereafter, Daimler AG issued form 16 inter alia to the assessee for tax deducted at source by Daimler AG. Subsequently, Daimler AG communicated the fact of payment of taxes to the CCIT wherein it was inter alia requested that the penalty proceedings should not be initiated because of voluntary disclosure by Daimler AG. However, time....
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....received by the assessee from Daimler AG. 12. In the facts and circumstances, the A.O was not justified in levying the penalty under the provisions of sec. 271(1)(c) of the Same. The same has rightly been deleted by the CIT(A). We are not inclined to interfere with the same because the assessee has filed revised computation of income prior to any reassessment proceedings initiated by the revenue. This view is fortified by the decision of co-ordinate Bench of the Tribunal in the case of Hans Christian Gass v.. DCIT (ITA No. 1583/PN/2008 and 505 to 509/PN/2009 for A.Y. 2004-05, 2000-01 to 2005-06 dated 26-5-2010 wherein even after 148 proceeding tax has been deposited and penalty has been deleted. The overall conduct of the assessee shows that it is not a fit case for levy of penalty. Similar issue arose in other years with other employees of same employer placed on similar situation. Facts being similar, so following the same reasoning we are not inclined to interfere with the views of the CIT(A) who has deleted the penalty following the reasons in decision in the case of Rolf weinmann. 13. In the result, all the appeals filed by the revenue are dismissed. 9. In this background, ....
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....r of the CIT(A) should be set aside and penalty should be deleted in all these cases. 10. On the other hand, the Ld. Departmental Representative submitted that the explanation furnished by the assessee in response to show cause notice issued by the Assessing Officer requiring the assessee to explain as to why penalty u/s. 271(1)(c) be not levied, rightly did not find favour from the Assessing Officer who was of the view that additional income of Rs. 35,47,950/- had been disclosed by the assessee in the return filed in response to notice u/s.148 of the Act and the same was not offered to tax in original return of income while assessee was well aware of this addition and income in terms of conditions for deputation to India. Thus, the Assessing Officer was justified in holding that intention of the assessee was to conceal the income received from Tetra Pak International S.A. Accordingly, he rightly levied penalty under section 271(1)(c) at the rate of 150% of the tax sought to be avoided and same had rightly been confirmed by the concerned CIT(A). Accordingly all the appeals by the assessees be dismissed. 11. After going through the above submissions and material on record, we find....
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....tional High Court wherein the order of the ITAT deleting the penalty levied in similar set of circumstances in case of Hans Christian Gass was dismissed as discussed in para 9 of said order. Similarly, ITAT Pune Bench 'A' in case of Alaxender Reuss (supra) in ITA.No.662 and others has decided a similar issue in favour of the assessee as discussed in para 8 of this order. Nothing contrary was brought to our knowledge on behalf of Revenue on above mentioned decisions in favour of the assessee. 12. Let us apply these legal proposition to fact of this case. We find salary income received by the assessee from Tetra Pak India Ltd., there is no dispute to the taxability of the income from the same. As regards the salary income received by the assessee from Tetra Pak International S.A., the assessee was entitled to net of taxes salary and Indian Taxes were borne by Tetra Pak International S.A. and hence, the liability to pay tax in respect of the salary income from Tetra Pak International S.A. was on Tetra Pak International S.A. itself. In view of such legal opinion, Tetra Pak International S.A. in consultation with tax advisors computed salary income of the expatriate taxable in India fo....
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....erson fails to offer an explanation or offers an explanation which is found by the AO or the Commissioner (Appeals) or the Commissioner to be false, then the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purpose of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars 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 bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him. For a ready reference Explanation-1 to section 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 Officer or the Commissioner (Appeals) or the Commissioner to be False, or (B) Such person offers an explanation which he is not able to subs....
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....e of Rajasthan Spinning & Weaving Mills (supra) is being reproduced hereunder :- "At this stage, we need to examine the recent decision of this Court in Dharamendra Textiles (supra). In almost every case relating to penalty, the decision is referred to on behalf of the Revenue as if it laid down that in every case of non-payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter. One of us (Aftab Alam, J) was party to the decision in Dharamendra Textile and we see no reason to understand or read that decision in that manner .... .... From the above, we fail to see how the decision in Dharamendra Textile can be said to hold that section 11AC would apply to every case of non-payment or short payment of duty regardless of the conditions expressly mentioned in the section for its application." In this regard it is also very pertinent to refer over here the recent decision of Hon'ble Supreme Court in the case of CIT v. Reliance Petro Products (P.) Ltd. [2010] 322 ITR 158 wherein the Hon'ble Court has been pleased to observe as under :- "However, it must be pointed out that in Union of India v. Dharmendra Te....