TII Instant Update - 2017-TII-INSTANT-ALL-496

CASE LAW

2017-TII-59-HC-MAD-INTL

GOPALRATNAM SANTHA MOSUR Vs ITO: MADRAS HIGH COURT (Dated: October 4, 2017)

Income Tax - Writ - Section 271(1)(c) - India-Canada DTAA - Article 13.

Keywords: Inaccurate particulars - Inadvertent claim - Rebate & Suo motu withdrawal.

The Assessee, an individual was the co-owner of the immovable property situated in Tamil Nadu and had sold the property and paid the entire capital gain tax applicable in respect of the transaction. The Assessee thereafter claimed 50% of the capital gains tax as rebate under Indo-Canadian DTAA and filed its return. However, before the assessment proceedings could commence, the AO issued a notice referring to Article 13 of Indo-Canadian DTAA and stated that gains from the alienation of any property, other than referred under Clause 1 of Article 13 of the Indo-Canadian DTAA may be taxed in both contracting States and the Assessee's case was that she had transferred the immovable property situated in India and hence, the gains arising on the same was taxable in India. The AO further stated that there was no provision as per Article 13 of DTAA to claim rebate for the taxes paid in other country and the Assessee was directed to show cause as to why the rebate claimed of Rs.1,02,90,323/- could not be disallowed. In response, the Assessee filed a revised Income Computation Statement for the AY in question after disallowing the rebate claimed. The revised Computation was scrutinized by the AO and the assessment was completed. It was also held that the penalty proceedings u/s 271(1)(c) of the Act will be initiated separately.

In Writ, the High Court held that,

Whether inadvertent claim for rebate under the DTAA made by the assessee can be termed as furnishing inaccurate particulars of income - NO: HC

Whether when the claim was suo motu withdrawn by the assessee and accepted by the Revenue, there is no question of invoking provisions of section 271(1)(c) - YES: HC

++ it has to be seen as to whether in the instant case the assessee has concealed the income or furnished inaccurate particulars of such income. Admittedly, there is no such allegation made in the show cause notice dated 26.08.2016. As pointed out earlier, the notice is a printed format with some of the relevant portions left blank. In response to the notice, the assessee had submitted the reply dated 06.02.2017 stating that after she was served notice under Section 143(2) of the Act, she has furnished all the required documents called for during the course of assessment and the Assessing Officer had asked for the details on rebate claimed by the assessee as per the DTAA and in response to such show cause notice, the assessee mentioned that she had inadvertently claimed a rebate of 50% on total tax payable and submitted a revised computation withdrawing the rebate claimed;

++ the assessee would not have withdrawn her claim, instead, would have received the refund of Rs.1,05,48,140/-. This Court is unable to appreciate the reasoning assigned by the Revenue especially when the matter had not attained any finality. The fact that the assessee had claimed rebate was not a frivolous claim. Probably, on the advice of the authorised representative or Chartered Accountant, at the relevant point of time, the assessee was led to brief that she is entitled to claim rebate for the taxes paid in the other country. On the notice being issued by the Revenue, on being advised, the assessee has withdrawn the claim and in fact, that was accepted by the Revenue and the assessment was completed by the order dated 26.08.2016. Until and unless the Revenue had rendered a specific finding that the conduct of the assessee amounted to concealment of particulars of her income or furnished inaccurate particulars of such income, the question of invoking Clause (c) of Sub Section (1) of Section 271 of the Act does not arise. In fact, certain words and expressions used in the order are uncalled for. There is no reason assigned by the Revenue as to how he had formed an opinion that the claim for rebate made by the assessee could be termed as furnishing inaccurate particulars of income. Mere quoting of the statutory provision is not sufficient as the Assessing Officer has to form an opinion that it was a case where penalty proceedings have to be initiated and all the more, reasons are required to justify an order of imposing penalty. These basic parameters had not been fulfilled in the order.

Assessee's Writ allowed