Penalty under sec 271(1)(C) cannot be imposed either for concealment or furnishing inaccurate particulars

Last updated: 04 February 2012

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
The relevant facts of the case are that the assessee is a company incorporated in Thailand and was engaged in the business of providing digital broadcast service through its transponders to its customers including Indian residents. For the years under appeal, the assessee declared NIL income in the return filed by it. The claim of the assessee was that its receipt from the business of providing transponder services was in normal course of carrying on business and, therefore, constituted “business profits” in the hands of the assessee. Further, since the assessee did not have a permanent establishment in India, its business profits were not liable to tax in India as per Article 7 of the DTAA between India and Thailand

Citation :
JDIT, Intl. Taxation, Circle 2(2),New Delhi. (Appellant)Vs. Shin Satellite Public Co. Ltd.,C/o Mohinder Puri & Co.,1A-D, Vandana, 11,Tolstoy Marg, New Delhi.AAGCS4481E(Respondent)

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH ‘G’, NEW DELHI

BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER

SHRI K.D. RANJAN, ACCOUNTANT MEMBER

ITA Nos. 5073 & 5074/Del/2011

Assessment Years: 2003-04 & 2004-05

JDIT,

Intl. Taxation,

Circle 2(2),

New Delhi.

(Appellant)

Vs.

Shin Satellite Public Co. Ltd.,

C/o Mohinder Puri & Co.,

1A-D, Vandana, 11,

Tolstoy Marg, New Delhi.

AAGCS4481E

(Respondent)

Appellant by:A. Mahajan, CIT(DR)

Respondent by:Jatinder Singh, CA

ORDER

PER BENCH:

These appeals are filed by the Revenue against the consolidated order dated 06.07.2011 of CIT(A)-XXIX, New Delhi pertaining to 2003-04 & 2004-05 assessment years. In both these appeals the Revenue is aggrieved by the action of CIT(A) in quashing the penalty imposed by the Assessing Officer u/s 271(1)(c) of the Act.

2. The relevant facts of the case are that the assessee is a company incorporated in Thailand and was engaged in the business of providing digital broadcast service through its transponders to its customers including Indian residents. For the years under appeal, the assessee declared NIL income in the return filed by it. The claim of the assessee was that its receipt from the business of providing transponder services was in normal course of carrying on business and, therefore, constituted “business profits” in the hands of the assessee. Further, since the assessee did not have a permanent establishment in India, its business profits were not liable to tax in India as per Article 7 of the DTAA between India and Thailand.

3. However, not convinced with the explanation the AO held that the receipts of the assessee were in the nature of “royalty” and, therefore, taxable in India. As such, the income of the assessee was determined at 15% on its gross receipts. Consequent to the confirmation of the assessment orders by the CIT(A), penalty was imposed by the AO on the grounds of concealment in the years under consideration.In the quantum proceedings assessee failed before the Tribunal which decided the issue against the assessee relying upon the decision rendered by the Special Bench in the case of Asia Satellite Telecommunications Co. Ltd. However, in the meantime the Hon’ble High Court reversed the order of the Spl. Bench in the case of Asia Satellite Telecommunication Co. Ltd. and decided the issues against the Revenue vide order dated 31.01.2011 in ITA No. 131 of 2003. Following its order in the case of Asia Satellite Telecommunication Co. Ltd. the Hon’ble Delhi High Court set aside the orders of the ITAT in assessee’s case and remitted the issue back to the Tribunal to decide the case afresh in the light of the judgment in the case of Asia Satellite Telecommunication Co. Ltd. vs. DCIT. The Tribunal thereafter seized of the issue again in the quantum proceedings comparing the facts of the assessee’s case with that of Asia Satellite Telecommunication Co. Ltd. (supra), came to a conclusion that the facts were identical and following the decision of Hon’ble Delhi High Court in the case of Asia Satellite Telecommunication Co. Ltd., the ITAT deleted the addition made by the AO vide order dated 11.03.2011 in ITA NO. 2467 & 2468/Del/2008.

4. Considering the abovementioned facts the CIT(A) quashed the penalty proceedings accepting the assessee’s plea that since the entire demand had been deleted the penalty imposed deserved to be deleted. The relevant finding of the CIT(A) is as under: -

“6. I have considered the submissions of the appellant. The stand taken by the appellant in its return of income has been upheld by the ld. High Court. Since, the quantum additions in both the assessment years under appeal has already been deleted by the ld. ITAT, no penalty can be levied u/s 271(1)(c) for either concealment or furnishing inaccurate particulars of income. Therefore, the AO is directed to delete the penalty levied u/s 271(1)(c) for A.Ys. 2003-04 & 2004-05.”

5. Aggrieved by this, the Revenue is in appeal before the Tribunal.

6. Ld. DR placed reliance on the penalty order.

7. The ld. AR, on the other hand, relied upon the impugned order.

8. We have heard the rival submissions and perused the material available on record. On a careful consideration of the same, we are of the view that in the peculiar facts and circumstances of the case where the entire addition has been deleted the order of the CIT(A) holding that the penalty order does not survive cannot be faulted with. Being satisfied with reasoning and finding of the CIT(A) arrived at in the impugned order on the facts as they stand the departmental ground in both the years is dismissed.

9. In the result, the appeals of the Revenue are dismissed.

This decision was pronounced in the Open Court on 27.01.2012.

Sd/- Sd/-

(K.D. RANJAN) (DIVA SINGH)

ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 27.1.12

*Kavita

Copy forwarded to: -

1. Appellant

2. Respondent

3. CIT

4. CIT(A)