BP INDIA PVT LTD,MUMBAI V. DY COMMISSIONER OF INCOME TAX, MUMBAI

CO 252/MUM/2025

AI Insights

The case involves BP India Pvt. Ltd., which faced a penalty under Section 271(1)(c) of the Income Tax Act, 1961, for alleged furnishing of inaccurate particulars of income related to transfer pricing adjustments. The TPO made an upward adjustment to the Arm's Length Price (ALP) of Rs.13,73,75,673, which was confirmed by the CIT(A). However, the CIT(A) later deleted the penalty, noting that the adjustments were based on debatable issues concerning the selection of comparables. The revenue appealed against this decision, while the assessee filed a cross-objection. The Tribunal dismissed both the appeal and the cross-objection, agreeing with the CIT(A) that the penalty was not warranted as the issue was debatable and the adjustments made by the TPO were not based on any malafide intention.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 789811 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 26-11-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: K
• Assessment Year: misc
• Appeal Filed On: 19-09-2025
• Other Referred Cases: KC Builders vs. 2004 134 taxman 461, Ensim India Pvt. Ltd. - ITA No. 330/Pune/2018 for AY. 2008-09, ADP (P) Ltd. [2013] 40 taxmann.com 314
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NEENA JEPH; DR
• Assessee Lawyers: CHANDNI SHAH. AMOL
• Keywords: Set aside; Transfer pricing; International transaction
• Section: 143(3); 271(1)(c); 92C

Judgement Text

" `IN THE INCOME TAX APPELLATE TRIBUNAL “K” BENCH, MUMBAI BEFORE SMT. BEENA PILLAI (JUDICIAL MEMBER) AND SHRI OMKARESHWAR CHIDARA (ACCOUNTANT MEMBER) I.T.A. No. 4868/Mum/2025 Assessment Year: 2010-11 Dy. Commissioner of Income tax Vs. BP India Pvt. Ltd. P B No. 19411 Technopolis Knowledge Park Andheri Mumbai - 400043 [PAN: AACCB2030Q] (Appellant) (Respondent) C.O. No. 275/Mum/2025 Assessment Year: 2010-11 BP India Pvt. Ltd. P B No. 19411 Technopolis Knowledge Park Andheri Mumbai - 400043 [PAN: AACCB2030Q] Vs. Dy. Commissioner of Income tax (Appellant) (Respondent) Appellant by Ms. Chandni Shah/Mr. Amol Mahajan and Ms. Nidhi Agarwal, A/Rs Respondent by Ms. Neena Jeph, CIT D/R Date of Hearing 06.11.2025 Date of Pronouncement 26.11.2025 ORDER Per Bench: The present penalty appeal and cross-objection have been filed by the revenue as well as the assessee against the order dated 27/05/2025 passed by the ld. CIT(A) – 55, Mumbai on following grounds:- Printed from counselvise.com 2 I.T.A. No. 4868/Mum/2025 C.O. No. 275/Mum/2025 Grounds of appeal in r/o ITA No. 4868/Mum/2025: “Ground 1. 'Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the penalty u/s 271(1)(c) of the Income-tax Act, 1961 despite having a clear evidence that the assessee furnished inaccurate particulars of income by selecting inappropriate comparables, which were rejected during the transfer pricing proceedings.\". Ground 2. \"Whether on the facts and circumstances of the case and in law. the Ld. CIT(A) was correct in ignoring the statutory presumption of concealment/furnishing inaccurate particulars of income as per explanation 7 to section 271(1)(c) which applies in cases WHARE TP adjustment are made and the assessee fails to demonstrate good faith and due diligence in its benchmarking analysis.\" Ground 3. \"The appellant craves leave to amend OR alter any grounds OR add a new grounds which may be necessary.” Grounds of appeal in r/o C.O. No. 275/Mum/2025: “The grounds of cross objections stated here are without prejudice to the relief granted by the Hon'ble Commissioner of Income-tax (Appeals) - 55 ['Ld. CIT(A)]. 1. On the facts and in the circumstances of the case and in law, the Learned Assessing Officer ('Ld. A0') erred in levying penalty amounting to IN 4,66,91,245 under Section 271(1)(c) of the Income Tax Act, 1961 ('the Act'). The cross-objector most humbly prays that the penalty levied under Section 271(1)(c) of the Act be deleted. 2. On the facts and in the circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings without specifying the specific limb of 271(1)(c) of the Act under which the penalty proceedings were initiated by striking off the other limb in the notice initiating penalty. The cross-objector most humbly prays that the penalty proceedings being void-ab-initio, be held as bad in law. 3. On the facts and in the circumstances of the case and in law, the Ld. AO erred in levying penalty amounting to Rs 4,66,91,245 under Section 271(1)(c) of the Act. While doing so, the Ld. AO failed to appreciate that: - the Arm's length price determined by the Respondent was in good faith and with due diligence in accordance with Section 92C of the Act; - the Respondent had made full and adequate disclosure of all the material facts at the time of filing its return of income; Printed from counselvise.com 3 I.T.A. No. 4868/Mum/2025 C.O. No. 275/Mum/2025 - penalty under section 271(1)(c) of the Act cannot be levied when there are two plausible views or opinions on the issue; - the entire adjustment in the quantum appeal would stand deleted vide Hon'ble ITAT order dated 21 November 2019 and consequently penalty could not be levied. The cross-objector most humbly prays that the penalty levied u/s 271(1)(c) of the Act be deleted. The Respondent craves leave to add, alter, amend or withdraw all or any of the Cross Objections and to submit such statements, documents and papers as may be considered necessary either at or before the hearing of the appeal.” 2. Brief facts of the case are as under: The assessee is a private limited company and filed its return of income for the year under consideration on 14.10.2010, declaring total income of Rs.10,07,66,066/-. The case was selected for scrutiny. During the course of assessment, the matter relating to international transactions with Associated Enterprises (AEs) was referred to the Transfer Pricing Officer (Ld. TPO) under section 92CA(1) of the Income-tax Act. The Ld. TPO passed order under section 92CA(3) on 30.11.2013, making an upward adjustment of Rs.13,73,75,673/- to the Arm’s Length Price (ALP). Consequent to the Ld. TPO’s order, the Ld. AO completed the assessment under section 143(3) read with section 144C(13) vide order dated 28.02.2014, determining total income at Rs.23,81,41,740/- after making the aforesaid transfer pricing adjustment and other additions. 2.1. Subsequently, the Ld. AO issued penalty notice under section 274 read with section 271(1)(c) on 28.02.2014 for furnishing inaccurate particulars of income. Thereafter, the Ld. AO passed penalty order under section 271(1)(c) on 06.03.2017, levying Printed from counselvise.com 4 I.T.A. No. 4868/Mum/2025 C.O. No. 275/Mum/2025 penalty of Rs.4,66,91,245/-, being 100% of the tax sought to be evaded. Aggrieved by the penalty order passed by the Ld. AO, the assessee preferred appeal before the Ld. CIT(A). 3. The Ld. CIT(A) deleted the penalty levied by the Ld. AO by observing as under:- “6. In the instant case, the appellant has filed appeal against order u/s.271(1)(c) of the Act dated 06.03.2017 for AY.2010-11. The penalty has been imposed by the AO for furnishing of inaccurate particulars of income based on the adjustment to Arm's Length Price made by the AO in the impugned assessment order of an amount of Rs.13,73,75,673/-. The said assessment order was confirmed by the Ld. CIT(A) and as per the details submitted by the appellant as have been quoted above, the appellant has filed further appeal before the Hon'ble ITAT. The appellant has submitted the copy of the order of Hon'ble ITAT in its own case vide ITA No.3892/Mum/2015 for AY.2010-11 dated 27.11.2019. On perusal of this order of Hon'ble ITAT, it is noted that the appellant had filed this appeal against the order of Ld.CIT(A) dated 25.03.2015. The appellant is engaged in providing back-office support services to its AEs and had benchmarked transactions of support services using TNMM and chosen nine comparables whereas the TPO rejected all the nine comparables selected by the appellant and carried out a fresh search and chose four new comparables, correspondingly making an upward adjustment of an amount of Rs.13,73,67,595/-, which was confirmed by Ld.CIT(A). The appellant submitted that they would be pressing for exclusion of two comparables out of the four comparables chosen by the TPO, ie. Infosys BPO Ltd. and Accentia Technologies Ltd. Hon'ble ITAT has concluded the order as mentioned in para 10 of this order by agreeing with the appellant that Infosys BPO Ltd. and Accentia Technologies Ltd. be excluded from the list of comparables and also accepted the appellant's contention of inclusion of Omega Healthcare Management Services as a comparable. The appellant's request for working capital adjustment was also accepted by Hon'ble ITAT in this order. The appellant has claimed that it has already requested the AO/TO for giving effect to this order of Hon'ble ITAT pursuant to which there shall be no demand outstanding in this case.. Consequently, the appellant has submitted that once the quantum of adjustment amount stands deleted, then the penalty imposed by the AO u/s.271 (1)(c) would not survive in the instant case. The appellant has relied upon the decisions of Hon'ble ITAT and Hon'ble Supreme Court in the case of KC Builders 2004) 134 taxman 461 and Printed from counselvise.com 5 I.T.A. No. 4868/Mum/2025 C.O. No. 275/Mum/2025 other decisions in support of this proposition. Further, the appellant has also relied upon various decisions including that of Hon'ble ITAT - Pune in the case of Ensim India Pvt. Ltd. -ITA No. 330/Pune/2018 for AY. 2008-09 and Hon'ble ITAT - Hyderabad in the case of ADP (P) Ltd. [2013] 40 taxmann.com 314, to claim that the issue involved of making transfer pricing adjustments' pertains to selection of comparables and this is an issue where possibility of two opinions exist and it is a debatable issue and, therefore, the appellant cannot be penalized for adopting a position which does not find favour with the Assessing Officer. Thus, the appellant has firstly claimed that it had made full disclosure of all relevant facts and the addition/adjustment made by the TPO based on the selection/rejection of certain comparables constitute a debatable issue and, moreover, the addition would not survive and consequently, the penalty also does not survive. These claims of the appellant are found to be prima facie correct. On perusal of Hon'ble, ITAT's order, it is noted that all the arguments raised by the appellant and the submissions made have been favourably decided/accepted by the Hon'ble ITAT and hence, addition made by tie TO/AO would not survive if effect to the order of Hon'ble ITAT, which was supposed to be given by the AO, is being given. Therefore, relying on the decision of Hon'ble Supreme Court in the case of KC Builders 135 taxman 461 (SC) and other decisions of Hon'ble High Courts and Hon'ble ITAT, as quoted above, the penalty addition made by the AO would also not survive, if the assessment on the basis of penalty is imposed, is set aside or cancelled. Further, since the addition has been made by rejection of certain comparables and further selection of comparables, is clearly a debatable issue on which two opinions are possible and it cannot be said that the said selection of comparables has been made with certain malafide intention or by furnishing certain inaccurate particulars of income and, therefore, the decisions cited by the appellant, as quoted above, are also squarely applicable in the instant case. Therefore, the penalty imposed by the AO u/s 271(1)(c) for furnishing inaccurate particulars of income is directed to be deleted. As a result, the appeal filed by the appellant is considered as Allowed.” Aggrieved by the order of the Ld. CIT(A), the revenue is in appeal before this Tribunal. 4. The assessee has preferred cross-objection raising legal issue that the notice issued does not specify under which limb of Section 271(1)(c) of the Act, penalty proceedings were initiated. It is Printed from counselvise.com 6 I.T.A. No. 4868/Mum/2025 C.O. No. 275/Mum/2025 submitted that the cross-objections filed by the assesse is barred by limitation by 16 days. 4.1. Be that as it may, it is noted that, the Ld. CIT(A) deleted the penalty by observing the quantum appeal was allowed by this Tribunal in ITA No. 3892/Mum/2015, vide order dated 27/11/2019, for the year under consideration. 4.2. Assessee placed copy of the said order before Co-ordinate Bench of this Tribunal in quantum appeal (supra) at pages 3 – 9 of the paperbook. On perusal of the said order it is noted, that the assesse sought for exclusion/inclusion of certain comparables, which was accepted by this Tribunal, based on which the addition made u/s 92CA(3) of the Act, stood deleted. The Ld. AR also filed order giving effect to the ITAT order accepting the exclusion/inclusion of the comparables directed by the Tribunal. 4.3. Under such circumstances, we do not find any merit in the grounds raised by the revenue and the same stands dismissed. As we have dismissed the appeal by the revenue, the cross-objection filed by the assessee becomes infructuous. In the result, appeal and cross-objection filed by the revenue as well as the assessee respectively, stands dismissed. Order pronounced in the open court on 26/11/2025 Sd/- Sd/- (OMKARESHWAR CHIDARA) (BEENA PILLAI) Accountant Member Judicial Member Mumbai Dated: 26/11/2025 SC Sr. P.S. Printed from counselvise.com 7 I.T.A. No. 4868/Mum/2025 C.O. No. 275/Mum/2025 Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order (Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "