TaxTMI 
TaxTMI 
2025 (10) TMI 421
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....e lead case, result of which will apply mutatis- mutandis for the other two (2) appeals. 3. The Ld. AR for the assessee, at the outset, pointed out that, this Tribunal in their own case for AYs 2011-12 to AY 2016-17 in ITA Nos. 889-894/Chny/2025 has deleted the penalty which was levied by the AO under section 271(1)(c) of the Act on the same facts and circumstances and accordingly claimed that the impugned issue was squarely covered in favour of the assessee. Per contra, the Ld. DR vehemently supported the order of the lower authorities and didn't agree that the lis in question was covered by our order cited by AR. 4. Heard both the parties. It is noted that, the assessee, M/s. Redington Distribution Pte Ltd ('RDPL'), is a foreign company incorporated in Singapore and a wholly owned subsidiary of M/s. Redington Limited (formerly known as 'Redington (India) Limited') ('RIL'). A survey u/s 133A of the Act was conducted at the premises of their parent company, RIL, in India in the month of December, 2017. For the years under appeal, the assessee was of the view that it does not have any PE in India and had filed return of income under section 139 of the A....
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....upheld the AO's finding that regarding existence of PE in India, but, as regards the attribution of profits, the DRP found certain infirmities in the calculation for which, necessary directions were issued to the AO. It was brought to our notice that, in the lead case for AY 2011-12, this Tribunal in their order in IT(TP) No. 14/Chny/2020 dated 16.11.2022 had confirmed the existence of PE in India, but had remitted the matters back to the AO to redo the calculation of profits attributable to India. Aggrieved by the order of this Tribunal in AY 2011-12, the assessee had filed appeal before the Hon'ble High Court; and the Hon'ble High Court had admitted the appeal after framing the question involving the existence of PE in India or not in assessee's case, by way of a substantial question of law. In the meanwhile, and during the pendency of this entire dispute, the assessee is noted to have simultaneously opted for resolution of the impugned dispute in terms of the Mutual Agreement Procedure (in short 'MAP') under Article 27 of the India-Singapore DTAA and mutual agreement was arrived at between the two Competent Authorities and, two separate orders were passed, one for AY....
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....uthorities of both the countries. The AO is noted to have initiated and levied penalty u/s 271(1)(c) in relation to the addition finally confirmed under the MAP resolution for AYs 2011-12 to 2016-17 and penalty under the new penal provisions of Section 270A(2) in AYs 2017-18, 2018-19 & 2020-21. It is observed that, the reasoning given for levying penalty was similar viz., the assessee didn't offer the said income in its original return of income and that the MAP resolution didn't reduce the adjustment to NIL. The AO accordingly held that the assessee had under-reported the income in AYs 2017-18, 2018-19 & 2020-21 and levied penalty qua the addition confirmed. The action of the AO was confirmed by the Ld. CIT(A) and the assessee is now in appeal before us. 7. It is well-settled jurisprudence that penalty proceedings are separate and distinct from the assessment proceedings. The levy of penalty is also not automatic and only because any addition/disallowance has been made in an assessment does not ipso facto lead to imposition of penalty under section 270A of the Act. This is evident from the language used in Section 270A of the Act where the term 'may' has been used which suggest....
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....osed all the material facts to substantiate the explanation offered; (b) the amount of under-reported income determined on the basis of an estimate, if the accounts are correct and complete to the satisfaction of the Assessing Officer or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, but the method employed is such that the income cannot properly be deduced therefrom; (c) the amount of under-reported income determined on the basis of an estimate, if the assessee has, on his own, estimated a lower amount of addition or disallowance on the same issue, has included such amount in the computation of his income and has disclosed all the facts material to the addition or disallowance; (d) the amount of under-reported income represented by any addition made in conformity with the arm's length price determined by the Transfer Pricing Officer, where the assessee had maintained information and documents as prescribed under section 92D, declared the international transaction under Chapter X, and, disclosed all the material facts relating to the transaction; and (e) the amount of undisclosed income refer....
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....see had disclosed all material facts relating to this aspect in the course of assessment. According to the assessee, the support services rendered by the 'RIL Dollar Team' did not give rise to any fixed place PE or dependent agency PE in India. This bonafide belief of the assessee is found to have emanated from their interpretation of the decisions of E- Funds IT Solution Inc. (supra) & Morgan Stanley & Co (supra) amongst several other decisions, which were also cited before us. The Revenue however was of the view that the nature of services rendered by the 'RIL Dollar Team' was not back office or auxiliary or preparatory services, as claimed by the assessee, but it constituted the back bone of the business model of the assessee and therefore the Revenue was of the view that the 'RIL Dollar Team' constituted both fixed place PE and also a dependent agent PE of the assessee in India. We find that, the coordinate bench of this Tribunal upheld the Revenue's finding that there did exist a PE of the assessee in India, and answered the question against the assessee. However, we note that, the Hon'ble High Court has admitted the appeal of the assessee on th....
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....gal proceedings instituted against them. The amount so received was claimed to be capital receipt and therefore it was not offered to tax. The AO however observed that the impugned receipt was revenue in nature which arose from cancellation of a business contract and was therefore taxable u/s 28(v) of the Act. The impugned addition was confirmed by the Ld. CIT(A) as well as this Tribunal. Later on, the AO levied penalty u/s 271(1)(c) of the Act on the ground that the assessee had furnished inaccurate particulars of income. On appeal, it was brought to the notice of the Tribunal that, though the quantum was confirmed by the coordinate bench of the Tribunal, but subsequently, the Hon'ble High Court had admitted the main issue by way of a substantial question of law. Taking note of the same, and referring to the above decision of the Hon'ble Delhi High Court (supra), this Tribunal held that the admission of the appeal by the High Court evidenced that the issue was debatable and therefore, the question of levy of penalty would not arise. The Tribunal accordingly deleted the penalty, having regard to the complexity and issue being debatable 19. In light of the above dec....
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....sm by way of a MAP under Article 27 of the DTAA between India and Singapore and mutual agreement was reached between the parties, the appeal before the Hon'ble High Court stood rendered academic. However, the fact that the Hon'ble High Court had admitted the appeal on a substantial question of law being involved did show that the issue was debatable. 20. The Ld. CIT(A) is noted to have also relied upon the MAP resolution to justify the levy of penalty by observing that, the assessee had entered into MAP resolution only because evidences against it had been gathered by the Revenue which suggested that it had a PE in India. We find these observations to be based on suspicion and surmise. Rather, according to us, the MAP resolution and the agreed terms supports the case of the assessee that the impugned issue was a debatable one. It is noticed that, under the MAP resolution, the Competent Authorities of both the countries had mutually arrived at a settlement, in terms of which, both the parties agreed to disagree on the question of existence of a PE of the assessee in India. This particular agreement between the parties reveals that even though the coordinate bench of....
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.... MAP resolution, on the given facts, cannot be said to be a case of inaccurate reporting by the assessee and thus does not warrant levy of penalty. 23. The Ld. CIT, DR had stressed on the decision of Toyota Kirloskar (supra) relied upon by the lower authorities to justify the levy of penalty. Having perused the said judgment, it is noted that, in the decided case, the assessee had filed a writ petition against the validity of initiation of penalty by the AO on the addition which was confirmed under a MAP resolution. The Hon'ble High Court is noted to have dismissed the writ petition challenging the constitutional validity of Section 271(1)(c) in so far as it related to imposition of penalty on the amount determined pursuant to mutual agreement in terms of the DTAA. The Hon'ble High Court only held that, the AO is not prohibited from initiating penalty in relation to amount adjusted after incorporating the decision under MAP resolution. The Hon'ble High Court at the same time is noted to have clarified that, the penalty proceedings are distinct and independent from the assessment proceedings and it remained open for the assessee to show that the addition confirm....