Case Law Details
It is observed that in the returns of income originally filed, both the assessees had declared the profit on sale of securities as capital gains. Subsequently, on the basis of the order passed by AAR in the case of XYZ/ ABC Equity Fund (250 ITR 194) and Fidelity Advisers Series VIII (271 ITR 1), the assessees felt that the said profits may constitute their business profits and as the assessees did not have any Permanent establishment in India, the same would not be taxable in India.
Accordingly, they filed revised returns claiming the income as exempt and appending a note explaining the reason for the same. This claim of the assessees, however, was not accepted by the AO and the income of the assessees was held to be chargeable to tax as capital gain by him in the assessments. He also imposed penalties u/s 271(1)(c) holding that there was concealment on the part of the assessees in the revised returns filed by them. As demonstrated by the assessees before the learned CIT(A) on the basis of a note appended to the revised returns, there was however no case of furnishing of any inaccurate particulars by the assessses. The said note has already been extracted by us above from the impugned order of the learned CIT(A) and a perusal of the same shows that the reason for claiming exemption of its income on the basis of AAR ruling was duly explained by the assessees which is sufficient to show that the said claim was made bona-fide and in good faith. Moreover, all the material particulars relevant to the said claim were fully and truly furnished by the assessees along with their revised returns. Even the AO has not pointed out any falsity in the said particulars either in the assessment order or in the penalty order.
In its recent judgement delivered in the case of CIT vs Reliance Petro Products (P) Ltd. (322 ITR 158), Hon’ble Supreme Court has held that S. 271 (1) (c) applies where the assessee “has concealed the particulars of his income or furnished inaccurate particulars of such income”. As regards the furnishing of inaccurate particulars, it was found by the Honourable Supreme Court that no information given in the Return was found to be incorrect or inaccurate. It was held that the words “inaccurate particulars” mean that the details supplied in the Return are not accurate, not exact or correct, not according to truth or erroneous and in the absence of a finding by the AO that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false, there would be no question of inviting penalty u/s 271 ( 1)(c). The argument of the revenue raised in this regard that “submitting an incorrect claim for expenditure would amount to giving inaccurate particulars of such income” was not found to be acceptable by the Honourable Apex Court observing that by no stretch of imagination can the making of an incorrect claim in law tantamount to furnishing inaccurate particulars. It was held that a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee and if the contention of the Revenue to this effect is accepted then in case of every Return where the claim made is not accepted by the AO for any reason, the assessee will invite penalty u/s 271(1)(c) which is clearly not the intendment of the Legislature. It is observed that applying this ratio of the decision of Hon’ble Supreme Court in the case of Reliance Petro Products (P) Ltd. (supra), the penalties imposed by the AO u/s 271(1)(c) in the cases of Fidelity Management & Research Co. A/C Fidelity Focus Technology Fund and Fidelity Management & Research Co. A/C Fidelity Investment Canada involving identical facts and circumstances have been held to be not sustainable by the Tribunal vide its order dated 30th September, 2010 in ITA Nos. 14 & 15/MUM/2010. Respectfully following the said judicial pronouncement, we uphold the impugned orders of the learned CIT(A) cancelling the penalties imposed by the AO and dismiss these appeals filed by the Revenue.
