TaxTMI 
TaxTMI 
2026 (4) TMI 572
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....ned by the branch of the bank situated at Hong Kong. 3. She would argue that the bank was fully aware of the position that the DTAA between India and China could not be extended to entities in Hong Kong and hence the very premise of the claim was compromised. Hong Kong was a Special Administrative Region (in short, SAR) from 01.07.1997 onwards and Section 90 does not provide for the execution of a DTAA between India and a SAR, till its amendment in 01.10.2009. 4. The intention of the Legislature was thus clear, to the effect that there was no double taxation relief intended in respect of entities located within a SAR. It is only pursuant to the amendment of Section 90 on and with effect from 01.04.2009 providing for a treaty with a SAR, that India entered into a treaty with Hong Kong on 21.12.2018. Thus, treaty relief, if at all, should have been availed by the assessee only on and from 21.12.2018 and not earlier. She relies on the judgment of the Supreme Court in Union of India V. Dharmendra Textile Processors [306 ITR 277]. 5. Moreover, the disallowance made in the quantum assessment had been confirmed at the stage of first appeal and the assessee had accepted the order ....
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....In the returns of income for AYs. 2006-07 and 2007-08, the assessee had claimed double taxation relief in respect of the income earned by its branches at various foreign jurisdictions. We are, in these appeals, only concerned with the relief claimed qua the branch at Hong Kong. Hong Kong was under the control of the United Kingdom till 30.06.1997 when it was handed over to the People's Republic of China. 13. In light of the above position, the assessee has proceeded on the basis that taxability of transactions involving Indian entities in Hong Kong prior to 01.07.1997, would be governed by the DTAA qua India and United Kingdom, and post 01.07.1997, by the DTAA between India and China. In fact, the DTAA between India and China has been in effect on and with effect from 21.11.1994. 14. It is true that Section 90 did not, at the relevant point in time, specifically refer to a DTAA with a SAR, as Section 90, as it stood then, provided only for the Central Government to enter into an agreement with the Government of any Country outside India for the grant of double taxation relief. The phrase 'specified territory' was inserted in Section 90, only on, and with effect from 01.10.200....
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....levy penalty below the prescribed limit, was referred to the larger Bench in Dharmendra Textile Processors (Foot Note Supra (1)). The revenue contended that the authority has no such discretion, whereas, the assessee case relied on Dilip N.Shroff (Foot Note Supra (4)), since the provisions of Section 271(1) (c) of the Act were analogous to Section 11AC of the Central Excise Act. 21. After a detailed exposition on the subject and upon considering the judgments in Dilip N.Shroff (Foot Note Supra (4)), Chairman, SEBI v. Shriram Mutual Fund [(2006) 5 SCC 361], Director of Enforcement v. MCTM Corpm. (P) Ltd. [(1996) 2 SCC 471], J.K.Industries V. Chief Inspector of Factories & Boilers [(1996) 6 SCC 665], R.S.Joshi V. Ajit Mills Ltd. [(1977) 4 SCC 98], Gujarat Travancore Agency V. CIT [(1989) 3 SCC 52], Swedish Match AB V. SEBI [(2004) 11 SCC 641], State of MP V. Bharat Heavy Electricials [(1997) 7 SCC 1] and SEBI V. Cabot International Capital Corpn. [(2005) 123 Comp. Cases 841], the Court concluded that mens rea, as understood in criminal law, is not an essential ingredient for holding a delinquent liable to pay penalty for contraventions under the Foreign Exchange Regulation Act. ....
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....act or omission on behalf of the assessee. It went on to hold that Clause (iii) of Section 271(1) provided for a discretionary jurisdiction upon the Assessing Authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term "inaccurate particulars" was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. It was further held that the assessee must be found to have failed to prove that his explanation is not only not bona fide but all the facts relating to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a finding as to how and in what manner, the assessee had furnished the particulars of his income. The Court ultimately went on to hold that the element of mens rea was essential. It was only on the point of mens rea that the judgment in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr....
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....alty under Section 271(1)(c) would stand triggered, merely on the making of a disallowance. If that were to be so, there would be no relevance of the requirement of 'satisfaction' of the Assessing Officer, as penalty would become leviable on the mere act of addition or disallowance in an assessment order. The provision does not support such a conclusion. 28. Those offences that would attract levy of penalty under Section 271(1)(c) would thus have to be circumscribed by the language and purport of that provision, and unless the Department is able to establish concealment or furnishing of inaccurate particulars, neither of which has been established in the present case, Section 271(1)(c) does not stand attracted at all. 29. On 11.01.2016, the substantial question of law framed by the Department has been admitted and reads as follows: 'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in deleting the penalty under Section 271(1)(c) when the fact remains that the assessee has made an inflated claim of double taxation relief, in the absence of Double Taxation Avoidance Agreement (DTAA) between India and Hong Kong?'. 30. Upon h....