ACIT, CHENNAI V. M/s. Nippo Batteries Co. Ltd., CHENNAI

ITA 1138/CHNY/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64301 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 12-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA
• Keywords: Transfer pricing; International transaction; Reasonable cause
• Section: 92D; 92

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI. BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO.1137 AND 1138/MDS/2010 ASSESSMENT YEAR : 2005-06 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV(4) CHENNAI 600 034. VS. M/S. NIPPO BATTERIES COL. LTD., POTTIPATTI PLAZA, 4 TH FLOOR, 77, NUNGAMBAKKAM HIGH ROAD, CHENNAI 34. [PAN:AAACI2291L] (APPELLANT) (RESPONDENT) A PPELLANT BY : DR. S. MOHARANA, CIT DR RESPONDENT BY : SHRI SAROJ KUMAR PARIDA, ADVOCATE DATE OF HEARING : 10.09.2012 DATE OF PRONOUNCEMENT : 18.09.2012 ORDER PER BENCH THESE TWO APPEALS OF THE REVENUE ARE DIRECTED AGAI NST DIFFERENT ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) V, CHENNAI DATED 15.04.2010 IN ITA NO. 52/09-10 AND 51/09-10; DELETI NG PENALTIES UNDER SECTION 271G AND 271AA OF THE INCOME TAX ACT 1961 [ IN SHORT ACT] RESPECTIVELY, FOR THE ASSESSMENT YEAR 2005-06. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING/SALE OF DRY CELLS B ATTERIES HAVING ASSOCIATED ENTERPRISES IN JAPAN AND SINGAPORE. IN THE ASSESSME NT YEAR 2005-06, IT FILED ITS RETURN OF INCOME ON 31.10.2005 COUPLED WITH FOR M 3CEB EXPLAINING I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1137 & 1138 1137 & 1138 1137 & 1138 1137 & 1138/M/ /M/ /M/ /M/10 1010 10 2 PARTICULARS OF INTERNATIONAL TRANSACTIONS OF THE AS SESSEE. THE DEPARTMENT MADE REFERENCE UNDER SECTION 92CA OF THE ACT TO T HE TRANSFER PRICING OFFICER (IN SHORT TPO), CHENNAI SO AS TO DETERMINE THE ARMS LENGTH PRICE WITH REGARD TO ASSESSEES INTERNATIONAL TRANSACTIONS STA TED IN FORM NO. 3CEB, WHO PASSED THE ORDER ON 20.10.2008, HOLDING THEREIN THAT THE ASSESSEES CASE DID NOT WARRANT ANY ADJUSTMENT. HOWEVER, IT WA S OBSERVED THAT THE CASE WAS COVERED BY SECTION 271G OF THE ACT SO AS TO INITIATE PENALTY PROCEEDINGS FOR THE REASON THAT THE ASSESSEE FAILED TO FURNISH INFORMATION AND DOCUMENTS WITHIN TIME AS PER LETTER DATED 06.09 .2006. 3. IN PENALTY PROCEEDINGS, THE ASSESSEE STATED THA T NON-FURNISHING OF DETAILS WITHIN THE STIPULATED TIME WAS DUE TO CIRCU MSTANCES BEYOND ITS CONTROL AND IT WAS NOT A CASE OF WILLFUL DEFAULT AS ITS COMPANY SECRETARY HAD LEFT SERVICE SUDDENLY DUE TO WHICH ITS RELEVANT FIL ES COULD NOT BE LOCATED. THE ASSESSING OFFICER DID NOT AGREE TO THE ASSESSEES E XPLANATION AND VIDE ORDER DATED 25.06.2009 PASSED ORDER UNDER SECTION 271G OF THE ACT, COMING TO CONCLUSION THAT THE ASSESSEE HAD FAILED TO FURNISH THE RELEVANT DOCUMENTS AS STIPULATED UNDER SECTION 92D(3) OF THE ACT WITHIN 30 DAYS. PER ASSESSING OFFICER, THE SAME LEAD TO THE CONTRAVENTION OF THE ACTS PROVISIONS. HENCE, DEEMING IT AS A FIT CASE TO LEVY PENALTY, THE ASSES SING OFFICER IMPOSED PENALTY AT THE RATE OF 2% OF THE VALUE OF EACH OF A SSESSEES INTERNATIONAL TRANSACTIONS I.E. TOTALING TO ` .35,77,200/-. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPE AL, WHEREIN THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1137 & 1138 1137 & 1138 1137 & 1138 1137 & 1138/M/ /M/ /M/ /M/10 1010 10 3 COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE PE NALTY BY OBSERVING AS UNDER: 4.11 I HAVE HEARD THE APPELLANTS REPRESENTATIVE A ND HAVE PERUSED THE RECORDS. I FIND THAT IN FORM 3CEB DETAILS RELATING TO INTERNATIONAL TRANSACTIONS HAVE BEEN FURNISHED IN TIME. I ALSO FI ND THAT THERE IS JOINT VENTURE AGREEMENT WITH THE COLLABORATOR WHICH IS BI NDING ON THE COMPANY. 4.12 PAYMENT OF ROYALTY IS SUBJECT TO PRIOR APPROV AL AND CONTROL BY A SEPARATE GOVERNMENT DEPARTMENT. ROYALTY HAS BEEN IN EXISTENCE SINCE THE TIME OF INCEPTION OF THE COMPANY AND COPIES OF AGREEMENTS WERE BEING FILED WITH THE DEPARTMENT WHENEVER REQUIRED I N THE COURSE OF ASSESSMENTS. 4.13 FURTHER I FIND THAT PAYMENTS THAT IN RESPECT OF INTERNATIONAL TRANSACTIONS CAN BE CLASSIFIED INTO FOUR TYPES AS P OINTED OUT BY THE APPELLANT'S REPRESENTATIVE. AS ALREADY OBSERVED THE COMPANY HAS SOME CONSTRAINTS IN ENTERING INTO INTERNATIONAL TRANSACT IONS RELATING TO PURCHASE OF RAW-MATERIALS, EQUIPMENTS AND FINISHED GOODS FURNISHED IN FORM 3CEB. INTERNATIONAL TRANSACTIONS, WHEN VIEWED FROM THIS ANGLE, ONE CANNOT SAY THAT THE DETAILS FURNISHED BY THE AP PELLANT ARE NOT COMPLETE. 4.14 THE SUBMISSION OF THE APPELLANTS REPRESENTAT IVE THAT NO LOSS HAS BEEN CAUSED TO THE REVENUE, AND THAT THERE IS NO WI LLFUL DELAY, IS NOT WITHOUT FORCE. I FIND THAT THE APPELLANT HAS FURNIS HED BASIC DETAILS IN TIME IN FORM 3CEB. FAILURE, IF ANY, TO FILE ADDITIO NAL DETAILS WAS DUE TO CIRCUMSTANCES BEYOND APPELLANTS CONTROL. FURTHER T RANSACTIONS RELATING TO PURCHASE OF RAW-MATERIALS AND FINISHED GOODS PERTAINING TO INTERNATIONAL TRANSACTIONS ARE NOT APPRECIABLE A S COMPARED TO THE TOTAL OPERATIONS OF THE APPELLANT COMPANY. 4.15 THE APPELLANT HAD ALSO EXPLAINED THAT THE SEC RETARY OF THE COMPANY HAD LEFT AND THE NEW SECRETARY WHO JOINED I N OCTOBER 2006 TOOK CONSIDERABLE TIME TO ADAPT TO THE NEW ENVIRONM ENT. THE SUDDEN LEAVING OF THE ERSTWHILE SECRETARY PUT UNNECESSARY PRESSURE ON THE COMPANY AND IT TOOK CONSIDERABLE AND LONG TIME TO L OCATE THE SYSTEM RELATED FILES DUE TO CIRCUMSTANCES AND REASONS BEYO ND CONTROL. IN FACT IN THE SUBSEQUENT YEAR'S WORK ALSO AFFECTED. THAT N O ADJUSTMENT HAS BEEN FOUND NECESSARY TO THE VALUE ACCOUNTED FOR WOU LD CONFIRM THE FACT THAT THE AUTHORITY HAD CONSIDERED ALL THE MATERIALS FURNISHED ON BEHALF I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1137 & 1138 1137 & 1138 1137 & 1138 1137 & 1138/M/ /M/ /M/ /M/10 1010 10 4 OF THE APPELLANT COMPANY WHICH IS A SIGNIFICANT ASP ECT FOR PURPOSES OF CONSIDERING LEVY OF PENALTY. 4.16 I FIND THAT THE VALUES OF THE INTERNATIONAL T RANSACTIONS HAVING BEEN ACCEPTED ARE GENUINE AND THE APPELLANT COMPANY HAS EXPLAINED REASONABLE CAUSE VIDE PARA 4.6 ABOVE THAT THE COMPA NY SECRETARY WHO WAS HANDLING THE MATTER LEFT SERVICES IN 2006. HENC E, I AM OF THE VIEW THAT THE APPELLANT HAS REASONABLE CAUSE FOR NOT FUR NISHING DETAILS IN TIME AS PER SECTION 273 B OF THE INCOME TAX ACT, 19 61. FURTHER MORE, FILING OF LATE DETAILS WILL NO WAY LEAD TO REVENUE LOSS. HENCE, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE PENALTY OF ` .35,77,200/- LEVIED U/S 271G RELATING TO THE ASSESSMENT YEAR 200 5-06. I.T.A. NO. 1138/MDS/2010 4. SIMILARLY, IN I.T.A. NO. 1138/MDS/2010 FOR THE SAME ASSESSMENT YEAR I.E. 2005-06, THE RELEVANT FACTS OF THE CASE ARE TH AT AFTER AGREEING TO THE ARMS LENGTH PRICE STATED BY ASSESSEE (SUPRA), THE TPO OBSERVED THAT THERE WAS FAILURE ON ASSESSEES PART IN MAINTAINING INFOR MATION AND DOCUMENTS AS REQUIRED UNDER SECTION 92D OF THE ACT. THEREFORE, PENALTY PROCEEDING STOOD INITIATED AGAINST THE ASSESSEE UNDER SECTION 271AA OF THE ACT READ WITH RULE 10D OF THE INCOME TAX RULES, 1962. IN PENALTY PROCEEDINGS, THE ASSESSEES JUSTIFICATION WAS SAME AS IN 271G PENALT Y (SUPRA). HOWEVER, THE ASSESSING OFFICER IMPOSED SAME PENALTY UNDER SECTIO N 271AA AS IMPOSED UNDER SECTION 271G OF THE ACT. 5. THE ASSESSEE CARRIED THE MATTER IN APPEAL, WHERE IN ALSO, THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE PE NALTY BY HOLDING AS UNDER: 5. I HAVE HEARD THE APPELLANTS REPRESENTATIVE AN D HAVE PERUSED THE RECORDS. IT IS A FACT THAT INTERNATIONAL TRANSACTIO NS FALL IN TO FOUR TYPES AS I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1137 & 1138 1137 & 1138 1137 & 1138 1137 & 1138/M/ /M/ /M/ /M/10 1010 10 5 MENTIONED ABOVE. IT IS EQUALLY A FACT THAT IN FORM 3CEB, DETAILS RELATING TO THE FOUR TYPES AFORESAID HAVE BEEN FURNISHED. I AGREE WITH THE APPELLANTS REPRESENTATIVE THAT NO SPECIFIC INSTANC E HAS BEEN POINTED OUT TO SHOW THAT THERE IS DIFFICULTY IN COMPUTING THE A RMS LENGTH PRICE IN RESPECT OF UNCONTROLLED TRANSACTIONS. 5.1 AS SUBMITTED BY THE APPELLANTS REPRESENTATIVE, PAYMENT OF ROYALTY IS SUBJECT TO PRIOR APPROVAL BY THE CENTRAL GOVERNM ENT. SIMILARLY IMPORTS OF CAPITAL GOODS AND RAW-MATERIALS AND OUTRIGHT PUR CHASE OF FINISHED GOODS AS WELL AS IMPORT OF MACHINERY ARE ALSO SUBJE CT TO GOVERNMENT REGULATIONS. FURTHER, THE FACT REMAINS THAT IMPORT OF ALL OTHER ITEMS INCLUDING MACHINERY AND EQUIPMENTS WILL HAVE TO BE ON THE ADVICE AND AT THE INSTANCE OF THE FOREIGN COLLABORATORS. SIMILAR IS THE POSITION WITH REGARD TO IMPORT OF RAW- MATERIALS . THUS THERE IS CONSIDERABLE CONSTRAINT FACED BY THE APPELLANT COMPANY IN THE INTERNATIONAL TRANSACTIONS. IN THIS BACKGROUND MAINTENANCE OF RECORDS AND INFORMATION W ILL HAVE TO BE CONSIDERED. INFORMATION RELATING TO ROYALTY HAD BEE N FURNISHED. SIMILARLY DETAILS OF IMPORT OF RAW-MATERIALS AND MA CHINERY HAVE BEEN FILED IN TIME. I FIND FROM THE REPORT IN FORM 3CEB AND ANNEXURE THAT IT CONFIRMS THE MAINTENANCE OF RECORD AND INFORMATION AS PER THE ACT. 5.2 THE APPELLANT SUBMITS THAT NO DETRIMENT HAS B EEN CAUSED TO THE REVENUE AS EVEN THE TPO HAS HELD THAT NO ADJUSTMENT WAS FOUND NECESSARY TO THE VALUE OF INTERNATIONAL TRANSACTIONS AS DISCL OSED BY THE APPELLANT COMPANY . THE VALUE OF INTERNATIONAL TRANSACTIONS EXCLUDING ROYALTY OF ` .5.73 CRORES IS NOT APPRECIABLE COMPARED TO THE APP ELLANT COMPANY'S TOTAL PURCHASES OF RAW-MATERIALS AND COMPONENTS OF ` .137 CRORES. 5.3 TAKING INTO ACCOUNT FORM 3CEB AND OTHER FACTS A ND CIRCUMSTANCES, I HOLD THAT THAT THE APPELLANT COMPANY IS MAINTAINING RECORDS AND INFORMATION AS REQUIRED UNDER 92D RW RULE 10D OF TH E I.T. RULES. I HOLD THE VIEW THAT THE APPELLANT COMPANY IS MAINTAINING RECORDS AND INFORMATION AS REQUIRED UNDER LAW AND BY WHICH THE APPELLANT COMPANY PREPARED FORM NO.3CEB REPORT. HAVING REGARD TO THE FACT THAT NO FURTHER ADJUSTMENT WAS REQUIRED TO THE VALUE OF INTERNATION AL TRANSACTIONS AND CONSIDERING APPELLANT'S SUBMISSIONS THAT FORM 3CEB HAD BEEN FILED IN TIME. 5.4 HENCE, I AM OF THE VIEW THAT THE APPELLANT HAD REASONABLE CAUSE FOR NOT FURNISHING DETAILS IN TIME AS PER SECTION 273 B OF THE INCOME TAX ACT, 1961. FURTHER MORE, FILING OF LATE, DETAILS WILL NO WAY LEAD TO REVENUE LOSS. I AM OF THE OPINION THAT THE COMPANY HAS MAINTAINED INFORMATION AND DOCUMENTS AS REQUIRED UNDER SECTION 92 D OF THE ACT R.W. RULE 10D OF THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1137 & 1138 1137 & 1138 1137 & 1138 1137 & 1138/M/ /M/ /M/ /M/10 1010 10 6 RULES AND THEREFORE I HOLD THE VIEW THAT THE APPELL ANT HAD REASONABLE CAUSE UNDER SECTION 273 B OF THE ACT. HENCE, THE AS SESSING OFFICER IS DIRECTED TO DELETE THE PENALTY OF ` .35,77,200/- LEVIED U/S 271 AA OF THE ACT. 6. IT IS, IN THIS BACKGROUND OF THESE FACTS WITH B OTH APPEALS HAVE BEEN PREFERRED BY THE REVENUE CHALLENGING THE DELETION O F PENALTY BY THE COMMISSIONER OF INCOME TAX (APPEALS) I.E. UNDER SEC TION 271G AND 271AA OF THE ACT. 7. BEFORE US, THE REVENUE HAS REITERATED VARIOUS P LEAS RAISED IN THE GROUNDS OF BOTH THE APPEALS AND PRAYED FOR RESTORIN G THE ORDER OF THE ASSESSING OFFICER. 8. ON BEHALF OF THE ASSESSEE, THE AR HAS STRONGLY S UPPORTED CIT(A)S ORDER IN BOTH CASES AND ALSO CITED ORDER OF THE ITA T CHENNAI BENCH PERTAINING TO THE ASSESSMENT YEAR 2006-07 IN I.T.A. NOS. 1180 AND 1181/MDS/2011 DATED 09.03.2012 PASSED IN ASSESSEES OWN CASE INVOLVING THE VERY SAME ISSUES. IN THE LIGHT THEREOF, THE AR OF THE ASSESSEE HAS PRAYED FOR CONFIRMATION OF THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS). 9. WE HAVE DULY CONSIDERED THE ARGUMENTS RAISED BY BOTH THE PARTIES AT LENGTH AND ALSO PERUSED RELEVANT FINDINGS IN BOTH T HE CASES. ADMITTEDLY, IN ASSESSMENT PROCEEDINGS, THERE IS NO ADJUSTMENT IN T HE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE. THE ONLY ISSUE IS THA T THERE HAS BEEN FAILURE ALLEGED ON THE PART OF THE ASSESSEE IN NOT FURNISHI NG AND MAINTAINING THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1137 & 1138 1137 & 1138 1137 & 1138 1137 & 1138/M/ /M/ /M/ /M/10 1010 10 7 COMPLETE DOCUMENTS OF THE CASE. THE ASSESSEES STAN D IS THAT IN BOTH CASES, THE CIRCUMSTANCES WERE BEYOND ITS CONTROL AS ITS COMPANY SECRETARY HAD SUDDENLY LEFT THE JOB. WE NOTICE FROM THE COORD INATE BENCH ORDER (SUPRA), WHEREIN ONE OF US [N.S. SAINI, A.M. WAS A MEMBER OF THE BENCH] HAD DULY ACCEPTED THE ASSESSEES PLEA BY UPHOLDING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE ORDER OF THE TPO IN THE PRESENT CASE PASSED U/S 92 OF THE AC T DATED 20.09.2009 CLEARLY SHOWS THAT NO ADJUSTMENTS HAVE BEEN MADE. A PERUSAL OF THE SHOW CAUSE NOTICES LEVIED U/S 271AA AND 271G SHOWS THAT THERE IS NO SPECIFIC INDICATION AS TO THE DOCUMENTS WHICH WERE NOT FURNI SHED. IN FACT, THE ORDER OF THE TPO SHOWS THAT THE DETAILS WERE CALLED FOR AND THE ASSESSEE HAD SUBMITTED THE DETAILS. FURTHER PERUSAL OF THE ORDER OF THE TPO SHOWS THAT THE ASSESSEE HAD BEEN ASKED TO PROVIDE THE DET AILS IN 30 DAYS. HOWEVER, THE DETAILS HAD BEEN PRODUCED WITH DELAY O F SIX MONTHS. A PERUSAL OF THE ORDER OF THE LD. CIT(A) CLEARLY SHOW S THAT THE REASON FOR DELAY IN PRODUCING THE DOCUMENTS WAS THE RESIGNATIO N OF THE SECRETARY AND THIS CLAIM OF THE ASSESSEE HAS NOT BEEN FOUND TO BE FALSE. THE ASSESSEE ADMITTEDLY IS A CORPORATE ENTITY. THE ASSESSEE CAN FUNCTION ONLY THROUGH ITS EMPLOYEES. IF AN EMPLOYEE LEAVES THE SERVICES OF THE ASSESSEE COMPANY GETTING ANOTHER EMPLOYEE TO TAKE OVER THE JOB AND G ET ACCLIMATIZED AND FAMILIAR TO THE FUNCTIONS ORIGINALLY DONE BY THE EA RLIER EMPLOYEE WOULD TAKE TIME. THIS WOULD BE A REASONABLE CAUSE. IT I S NOTICED THAT THE LD. CIT(A) HAS ALSO ACCEPTED THIS AS REASONABLE CAUSE. THE CLAIM OF THE ASSESSEE HAS ALSO NOT BEEN FOUND TO BE FALSE. IN T HESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS RIGHT IN DE LETING BOTH THE PENALTIES U/S 271AA AND 271G OF THE ACT. OUR VIEW IS ALSO SU PPORTED BY THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL I N THE CASE OF SSLTTK LTD REFERRED TO SUPRA. IN THE CIRCUMSTANCES, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. HAVING PERUSED THE ORDER OF COORDINATE BENCH, IT C OMES OUT THAT THE ISSUE IN HAND IS NO MORE RES INTEGRA AS THE SAME REASON WAS TENDERED BY THE ASSESSEE IN THAT CASE AS WELL. THEREFORE, WE CO NCLUDE THAT THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1137 & 1138 1137 & 1138 1137 & 1138 1137 & 1138/M/ /M/ /M/ /M/10 1010 10 8 COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGHTLY DE LETED THE PENALTY AFTER KEEPING IN MIND THE CIRCUMSTANCES OF BOTH CASES. TH EREFORE, WE SEE NO REASON TO INTERFERE AND REVIVE THE PENALTIES ON THE ASSESSEE IMPOSED BY THE ASSESSMENT AUTHORITY. 10. IN THE RESULT BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON TUESDAY , THE 18 TH OF SEPTEMBER, 2012 AT CHENNAI. SD/ - SD/ - (N.S. SAINI) ACCOUNTANT MEMBER (S.S. GODARA) JUDICIAL MEMBER CHENNAI, DATED, THE 18.09.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.