DEPUTY COMMISSIONER OF INCOME TAX,(IT)-4(2)(1), MUMBAI V. M/S. SIEMENS, MUMBAI

ITA 3109/MUM/2016

AI Insights

The case involves the Deputy Commissioner of Income Tax, Mumbai, as the appellant, and M/s. Siemens Aktiengensellschaft, a non-resident company and tax resident of Germany, as the respondent. The core issue was the deletion of a penalty of Rs. 37,52,08,140 levied under section 271G of the Income Tax Act for failure to furnish information or documents under section 92D(3) concerning international transactions. The assessee had reported certain international transactions with its associated enterprises, but the Transfer Pricing Officer (TPO) noted discrepancies in the amounts reported. The TPO made adjustments and the Assessing Officer (AO) initiated penalty proceedings under section 271G. However, the CIT(A) deleted the penalty, leading to the Revenue's appeal before the Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 33372 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2008-2009
• Other Referred Cases: Procter & Gamble Home Products (P) Ltd. vs. DCIT, Leroy Somer & Controls (India) (P.) Ltd. vs. DCIT, Gillette India Ltd. vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY CHANDRA
• Assessee Lawyers: NITESH JOSHI
• Keywords: Set aside; Revised return; Transfer pricing; International transaction
• Section: 142(1); 143(2); 250; 92CA; 2; 92D

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No.3109/MUM/2016 (Assessment Year : 2008–09) Deputy Commissioner of Income Tax, (IT)-4(2)(1), Scindia House, Balard Pier, N.M. Road, Mumbai – 400038 Maharashtra ……………. Appellant v/s M/s. Siemens Aktiengensellschaft, C/o, BSR & Co. Lodha Excelus, 1st Floor, Apollo Mills Compound, M.N. Joshi Marg, Mahalaxmi, Mumbai - 400038, Maharashtra PAN – AABCS8516K ……………. Respondent Assessee by : Shri Nitesh Joshi Mr. Siddesh Chaugule Mr. Christopher Rebello Revenue by : Shri Ajay Chandra, CIT-DR Date of Hearing – 03/03/2025 Date of Order – 05/03/2025 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The Revenue has filed the present appeal against the impugned order dated 24.02.2016, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals)-58, Mumbai [“learned CIT(A)”], which in turn arose from the penalty order passed under section 271G of the Act, for the Assessment Year 2008-09. ITA No.3109 -Mum-2016 (A.Y. 2008-09) 2 2. In this appeal, the Revenue has raised the following grounds: – “1) \"Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the penalty of Rs. 37,52,08,140/- levied u/s. 271G of the Act, which had been initiated for failure to furnish information or documents under section 92D of Income-tax Act, 1961?\". 2) The Appellant prays that the order of the CIT(A) be set aside on the above grounds) and the order of the Assessing Officer restored.” 3. The solitary grievance of the Revenue is against the deletion of penalty under section 271G of the Act. 4. The brief facts of the case pertaining to this issue as emanating from the record are: The assessee is a non-resident company and is a tax resident of Germany. For the year under consideration, the assessee filed its return of income on 30.09.2008, declaring a total income of Rs.84,78,66,807/-. Subsequently, the assessee filed its revised return of income on 31.03.2010, declaring a total income of Rs.109,33,71,431/-. The return filed by the assessee was selected for scrutiny and statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, the Assessing Officer (“AO”) made a reference under section 92CA(1) of the Act to the Transfer Pricing Officer (“TPO”) for determination of Arms’ Length Price of International Transactions entered into by the assessee. In Form No.3CEB, the assessee reported the following international transaction entered with its Associated Enterprises in India: - Sr. No. Name of the Associated Enterprises Amount in Rs. 1. Siemens Limited 53,25,79,390 2. Siemens Power Engineering Private Limited 4,51,08,840 3. Siemens Information Systems Ltd. 4,98,78,400 Total 62,75,66,630 ITA No.3109 -Mum-2016 (A.Y. 2008-09) 3 5. On 12th August, 2001, the assessee filed a letter declaring following additional international transactions to the tune of INR 18,42,38,160/-: - Sr. No. Name of the Associated Enterprises Amount in Rs. 1. Siemens Limited 149,945,270 2 Siemens Information Systems Limited 26,545,760 3. Siemens Power Engineering Private Limited 217,512 4. Siemens Corporate Finance Private Limited 6,952,930 5. Flender Limited 576,688 Total 184,238,160 6. Thus, during the year under consideration, the total international transactions reported by the assessee are as follows: - Sr. No. Name of the Associated Enterprises Amount in Rs. 1. Siemens Limited 682,524,660 2 Siemens Information Systems Limited 76,424,160 3. Siemens Power Engineering Private Limited 45,326,352 4. Siemens Corporate Finance Private Limited 6,952,930 5. Flender Limited 576,688 Total 811,804,790 7. During the Transfer Pricing assessment proceedings, upon perusal of the transfer pricing documentation filed by the Associated Enterprises of the assessee in India, the TPO observed that the assessee has not reported international transactions to the following extent: - Sr. No. Name of the Associated Enterprises Amount of International transactions as per Form No.3CEB of respective AEs with the assessee (in Rs.) Amount of International transactions as reported by the assessee (in Rs.) Difference in the amount of international transactions (in Rs.) 1. Siemens Limited 15,057,851,644 682,542,660 14,375,326,984 2 Siemens Information Systems Limited 3,696,736,059 76,424,160 3,620,311,899 ITA No.3109 -Mum-2016 (A.Y. 2008-09) 4 3. Siemens Power Engineering Private Limited 709,533,626 45,326,352 664,207,274 4. Siemens Corporate Finance Private Limited 107,513,779 576,688 10,6937,091 Flender Limited 576,688 576,688 0 Total 19,571,635,108 804,851,860 18,766,783,248 8. In its submission before the TPO, the assessee submitted that it has declared only those international transactions in respect of which it has earned income from India. The other transactions with the Associated Transactions in India were not declared as there was no income element. The TPO, vide order dated 31.10.2011 passed under section 92CA(3) of the Act, disagreed with the submissions of the assessee, and held that only the transactions where the assessee has received income need to be declared is not acceptable. On the basis that the assessee has failed to furnish evidence and has also failed to prove the transactions are at Arms’ Length Price, the TPO by adopting rate of 10% of the amount declared to be the Arms’ Length Price value, made an adjustment of Rs.8,11,80,479/-. 9. In the meanwhile, penalty proceedings under section 271G of the Act were initiated on the basis that the assessee has not furnished the information or documentation as required under section 92D(3) of the Act in respect of the international transaction not reported by the assessee. Vide order dated 30.04.2013 passed under section 271G of the Act, the AO held that the assessee has committed default in not furnishing the documents and information pertaining to all the international transactions entered into by the ITA No.3109 -Mum-2016 (A.Y. 2008-09) 5 assessee as envisaged under section 92D(1) of the Act. Accordingly, the penalty of Rs.37,52,08,140/- was levied under section 271G of the Act. 10. The learned CIT(A), vide impugned order, allowed the appeal filed by the assessee and deleted the penalty levied under section 271G of the Act on the basis that penalty under the aforesaid section cannot be levied in a case where the income itself is not taxable in India. Being aggrieved, the Revenue is in appeal before us. 11. We have considered the submissions of both sides and perused the material available on record. In the present case, the assessee reported international transactions with its Associate Enterprises in Form 3CEB to the tune of Rs.62,75,66,630/-. Subsequently, during the transfer pricing assessment proceedings, the assessee declared additional transactions to the tune of Rs.18,42,38,160/-. Thus, the total international transactions disclosed by the assessee were to an extent of Rs.81,18,04,790/-. However, the TPO after perusal of the transfer pricing documentation of the Associated Enterprises in India, with whom the assessee entered into international transactions, noticed that international transactions to an extent of Rs.1876,67,83,248/- were not reported by the assessee with its Associated Enterprises. Rejecting the submission of the assessee that only the transactions which resulted in income to the assessee are required to be reported, the TPO vide order passed under section 92CA(3) of the Act made an adjustment by adopting an ad hoc rate of 10% of the international transactions declared by the assessee. On the basis that the assessee has not furnished the documents and information pertaining to all international ITA No.3109 -Mum-2016 (A.Y. 2008-09) 6 transactions entered into by the assessee as envisaged under section 92D, penalty under section 271G of the Act was levied on the assessee. 12. In order to decide the issue at hand, it is relevant to note the provisions of section 271G of the Act, which reads as follows: - “271G. If any person who has entered into an international transaction fails to furnish any such information or document as required by sub-section (3) of section 92D, the Assessing Officer or the Commissioner (Appeals) may direct that such person shall pay, by way of penalty, a sum equal to two per cent of the value of the international transaction for each such failure.” 13. From a plain reading of the aforesaid provisions, it is evident that the penalty is leviable under section 271G of the Act if the assessee fails to furnish any information or documents as required under section 92D(3), in respect of international transaction entered into by the assessee. Further, Section 92D reads as follows: - “92D. (1) Every person who has entered into an international transaction shall keep and maintain such information and document in respect thereof, as may be prescribed. (2) Without prejudice to the provisions contained in sub-section (1), the Board may prescribe the period for which the information and document shall be kept and maintained under that sub-section. (3) The Assessing Officer or the Commissioner (Appeals) may, in the course of any proceeding under this Act, require any person who has entered into an international transaction to furnish any information or document in respect thereof, as may be prescribed under sub-section (1), within a period of thirty days from the date of receipt of a notice issued in this regard: Provided that the Assessing Officer or the Commissioner (Appeals) may, on an application made by such person, extend the period of thirty days by a further period not exceeding thirty days.” ITA No.3109 -Mum-2016 (A.Y. 2008-09) 7 14. Therefore, under section 92D(3) of the Act, the AO or the Commissioner (Appeals) may require any person, who has entered into an international transaction, to furnish information or document in respect thereof. 15. During the hearing, the learned Authorized Representative (“learned AR”) submitted that in the present case in compliance of the provisions of section 92D(1) of the Act, the assessee kept and maintained such information and documents, as are prescribed in respect of the international transactions entered into with its Associated Enterprises. The learned AR further submitted that during the Transfer Pricing assessment proceedings no notice under section 92D(3) of the Act was issued by the AO to furnish any information or documents in respect of the international transaction not reported by the assessee. In this regard, the learned AR referred to the notice issued by the TPO under section 92CA of the Act on 13.12.2010 and 03.05.2011, which forms part of the paper book at pages 113-114 and 179, respectively. From the perusal of both the notices, as noted above, we find that under the same information was sought from the assessee for determination of Arms’ Length Price of the international transaction as reported in Form 3CEB, in respect of which reference was received by the TPO under section 92CA(1) of the Act. Therefore, from the perusal of the material placed on record, it is evident that no notice under section 92D(3) of the Act was issued requiring the assessee to furnish the information or document in respect of the international transaction not disclosed by the assessee. Further, we find that neither in the show cause notice dated 19.04.2013 issued under section 271G of the Act nor in the penalty order dated 30.04.2013 passed under section 271G of the Act ITA No.3109 -Mum-2016 (A.Y. 2008-09) 8 there is any reference to any notice issued under section 92D(3) requiring the assessee to furnish any information or document in respect of the international transaction entered into by the assessee, which was not complied by the assessee. 16. We find that a similar issue came up for consideration before the Co- ordinate Bench of the Tribunal in Procter & Gamble Home Products (P) Ltd. vs. DCIT, reported in (2020) 180 ITD 194 (Mum). While quashing the penalty levied under section 271G of the Act, the Co-ordinate Bench in the aforesaid decision, held that unless and until a specific defect is pointed out in the documents submitted by the assessee under section 92D, penalty under section 271G of the Act cannot be levied. The relevant findings of the Co- ordinate Bench in the aforesaid decision are reproduced as follows: - “8. We have heard rival contentions and gone through the facts and circumstances of the case. From the above, we noted that the main allegation of the revenue is that of non-furnishing of audited AE and non AE segmental as well as documents regarding choice of foreign entity as tested party. We also noted that any other reason for levy of penalty is for non-furnishing of audited manufacturing and distribution of segmental accounts. Further, reason for levy of penalty is non-furnishing of documents on applicability of TNMM as per Rule 10D. We noted from the arguments of the learned Counsel for the assessee as noted above in detail and the details submission made by the assessee is to support its transfer pricing study report and international transaction entered into with its AE that the assessee has completely complied with Rule 10D(i) of the Rules. We noted that from the letter issued by revenue dated 07.09.2015 i.e. notice under section 92CA(2) read with section 92D(3) of the Act requiring information to be furnished in connection with the TP proceedings that a general notice is issued by the Assessing Officer. We noted that this issue has been considered by Hon'ble Delhi High Court in the case of Leory Somer & Controls (India) (P.) Ltd. (supra), wherein it is held that when there is a general notice and no specific information of document which is required to be submitted by the assessee under section 92D(3) of the Act, is asked for, the penalty levied under section 271G cannot be sustained. We noted that the assessee in the present case has made substantive compliance of the provisions of rule 10D, it is sufficient. The Legislature was conscious of this fact and, therefore, had specifically stipulated in section 92D(3) that the Assessing Officer or the Commissioner (Appeals) may require a person to furnish any information or document in respect thereof and on failure of the ITA No.3109 -Mum-2016 (A.Y. 2008-09) 9 said person to furnish the documentation within the specified time, penalty under section 271G can be imposed. Thus, for imposing penalty the Revenue must first mention the document and information, which was required to be furnished but was not furnished by the assessee within the specified time. The documentation or information should be one specified in rule 10D, which has been formulated in terms of section 92D(1). We noted that this has been clarified this issue in Para 11 to 14 by Hon'ble Delhi High Court by interpreting the provisions as under: — \"11. Rule 10D(1) consists of clauses (a) to (m). Clause (m) states any other information, data or document, including information or data relating to the associated enterprises, which may be relevant for determination of arm's length price. A bare perusal of sub-clauses (a) to (m) would indicate that some of the information and details pertain to the assessee and the associated enterprise, their ownership, structure, address, name, broad description of business etc. The assessees are also required to maintain details like, nature and terms of international transaction, property or services provided and quantum and value of each transaction etc. However, some of the clauses are very broad and wide like clause (m) mentioned above. These clauses relate to record of economic and market analysis, forecasts, budget and other financial estimates prepared by an assessee, record of uncontrolled transactions for realising their comparability with international transactions including record of nature, terms and conditions relating to uncontrolled transactions with third parties, record of analysis performed to evaluate comparability of uncontrolled transactions. These are general clauses relating to data, details etc. of third parties etc. These details, data, information etc. can be voluminous, fluctuating and otherwise capacious. 12. Sub-rule (3) to Rule 10D states that information specified in Rule 1 shall be supported by authentic documents, which may include the documents mentioned in sub-clauses (a) to (g). These include official publication report, status and data bases of Government of countries of residents of associated enterprises or other countries, market research studies, price publications including stock exchange and commodity market quotations, agreement contracts with unrelated enterprises etc. The word used in sub-section (3) to Rule 10D is \"may\". 13. It is clear from the reading of Section 10D (sic) that it will include almost anything and everything relating to international transactions, including data bases, reports, publications, data bases from Governments or bodies outside India. Some other stipulations are assessee specific and not general, broad or heterogeneous. 14. Sub-rule (4) further states that the documents specified in sub-rules (1) and (2), as far as possible, be contemporaneous and should be latest by the specified date referred to in Section 92F(iv), i.e., due date in Explanation 2 below Section 139(1). Thus, indicating the documentation/information may be floating, transient and changeable. Constant assimilation may be required. Besides, data/information can also vary. The tribunal has rightly concluded that with such a broad rule, which requires documentation and information voluminous and virtually unlimited, Section 271G has to be interpreted reasonably and in a rational manner. Information or documentation, which is assessee specific or specific to the associated enterprises, should be readily available, whereas other documentation or information relates to data bases or transactions entered into by third parties may require collation/collection from time to time. There cannot be any end or limit to the documentation or information relating to data bases or third parties. When there is general and substantive compliance of the provisions of Rule 10D, it is sufficient. The Legislature was conscious of this fact and, therefore, had specifically stipulated in Section 92D(3) that the Assessing Officer or Commissioner (Appeals) may require a person to furnish any information or ITA No.3109 -Mum-2016 (A.Y. 2008-09) 10 document in respect thereof and on failure of the said person to furnish the documentation within the specified time, penalty under Section 271G can be imposed. Thus, for imposing penalty the Revenue must first mention the document and information, which was required to be furnished but was not furnished by the assessee within the specified time. The documentation or information should be one specified in Rule 10D, which has been formulated in terms of Section 92D(1) of the Act. Looking from any quarter and angle, the appeal of the Revenue is misconceived, totally lacking in merits and is, therefore, dismissed.\" 9. Similarly, Jaipur Tribunal in assessee's sister concern case in the case of Gillette India Ltd. (supra) has considered this issue and Hon'ble High court of Rajasthan High Court in the case of Gillette India Ltd. (supra) has finally held as under: — \"8. Copy of the notice dated 23.03.2011 issued by the Assessing Officer has not been filed on record by the Revenue along with the present grounds of appeal. We do not know what was requisitioned and asked for by the said notice and which/what documents and details were supplied. We also do not know whether any extension of time was prayed for or granted by the Transfer Pricing Officer and whether any hearing was fixed by the Transfer Pricing Officer pursuant to notice dated 12.03.2007. It appears that the Transfer Pricing Officer had asked for specific details and documents vide letter dated 12.06.2008 and these details were fully complied with on 25.06.2008 and 23.07.2008. Compliance of the letter dated 12.06.2008 was made within period of 30 days on 25.06.2008 and then subsequently on 23.07.2008. The date 23.07.2008 is within 60 days of issue of notice/letter dated 12.06.2008. We do not know the documents filed on 25.06.2008 and which documents or details were subsequently filed on 23.07.2008. There is no discussion on the said aspect in the order passed by the Assessing Officer, imposing penalty. In these circumstances, we do not find any merit in the present appeal and the same is dismissed.\" 10. In view of the above factual aspects and case laws of Hon'ble Delhi High Court in the case of Leroy Somer & Controls (India) (P.) Ltd. (supra), we are of the view that the assessee has sufficiently complied with the requirement of Rule 10D(i) of the Rules and moreover the AO has not raised any specific issue which specific documents is not produced under section 92D(3), hence, we conclude that the assessee has furnished all the informations as asked for by the AO and unless and until a specific defect is pointed out in the submissions of documents, penalty under section 271G of the Act cannot be levied. We delete the penalty and allow the appeal of the assessee.” 17. During the hearing, the learned Departmental Representative (“learned DR”) placed reliance upon the decision of the Co-ordinate Bench of the Tribunal in DCIT vs. Canverges Customer Management Group Inc., in ITA No.3529 and 3530/Del/2015, vide order dated 13.10.2010. From the perusal of the aforesaid decision, at the outset, we find that the dispute before the Co-ordinated Bench of the Tribunal pertains to the levy of penalty under ITA No.3109 -Mum-2016 (A.Y. 2008-09) 11 section 271AA of the Act, which specifically provides that penalty shall be leviable, inter alia, for failure to keep and maintain such information and documents as required under section 92D(1) or 92D(2) of the Act. However, in the present case as evident from the record, the AO did not invoke the provision of Section 271AA of the Act for non-maintenance of information and documents as required under section 92D(1) or 92D(2) of the Act, and instead penalty was levied under section 271G of the Act, which as noted in the foregoing paragraphs, specifically requires failure to comply with a notice issued under section 92D(3) of the Act. Thus, we are of the considered view that the decision relied upon by the learned DR, being factually distinguishable, is not applicable to the present case. 18. Therefore, in the absence of any notice issued under section 92D(3) of the Act requiring the assessee to furnish any information or document in respect of international transaction entered into by the assessee, which is sine quo non for initiating the penalty proceedings under section 271G of the Act, we are of the considered view that this is not a fit case for levy of penalty under section 271G of the Act. Accordingly, the sole ground raised by the Revenue is dismissed. 19. In the result, the appeal by the Revenue is dismissed. Order pronounced in the open Court on 05/03/2025 Sd/- -AMARJIT SINGH ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 05/03/2025 prabhat ITA No.3109 -Mum-2016 (A.Y. 2008-09) 12 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. True Copy By Order Assistant Registrar ITAT, Mumbai "