DCIT, Circle-4, Pune V. Pyxis Solutions (I) Pvt Ltd., Mumbai

ITA 1267/PUN/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6707 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 05-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: N O N E
• Keywords: Transfer pricing; International transaction; Reasonable cause
• Section: 273B; 143(3); 92D; 92E

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 12 67 / P N/ 20 1 3 ASSESSMENT YEAR : 200 9 - 10 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 4 , PUNE VS. PYXIS SOLUTIONS (I) PVT. LTD., SP CENTRE, 41/44, MINOO DESAI, MARG, COLABA, MUMBAI (APPELLANT) (RESPONDENT) PAN NO. AADCP8973F APPELLANT BY: SHRI S.P. WALIMBE RESPONDENT BY: N O N E DATE OF HEARING : 22 - 05 - 2014 DATE OF P RONOUNCEMENT : 28 - 05 - 2014 ORDER PER R.S . PADVEKAR , JM : - IN THIS APPEAL, THE REVENUE HAS CHALLENGED THE IMPUGNED ORDERS OF THE LD. CIT(A) - IT/TP, PUNE DATED 2 5 - 03 - 2013 FOR THE A.Y. 200 9 - 10. THE REVENUE HAS TAKEN THE FOLLOWING GROUND S IN THE APPEAL : 1. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN DELETING THE PENALTY OF RS.5,04,570/ - U/S. 271AA OF THE ACT. 2. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT IT IS MANDATORY FOR AN ASSESSEE WHO HAS ENTERE D INTO INTERNATIONAL TRANSACTION TO KEEP AND MAINTAIN SUCH INFORMATION & DOCUMENTS IN RESPECT THEREOF AND AS PER RULE 10D(5) FOR A PERIOD OF EIGHT YEARS AND NON PRODUCTION OF SUCH DOCUMENTS WAS CORRECTLY VISITED WITH PENALTY U/S. 271AA OF THE ACT. 3. THE LEA RNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN HOLDING THAT CLOSURE OF BUSINESS WAS A SUFFICIENT CAUSE FOR NON PRODUCTION OF INFORMATION AND DOCUMENTS AS CALLED FOR BY THE ASSESSING OFFICER. 2 ITA NO. 12 67 /PN/2013, PYXIS SOLUTIONS (I) PVT. LTD., MUMBAI 2. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT AND MAN POWER RECRUITMENT SERVICES. FOR THE A.Y. 2009 - 10, THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL TAXABLE INCOME OF RS.5,91,950/ - AND ASSESSMENT OF THE ASSESSEE COMPANY HAS BEE N COMPLETED U/S. 143(3) OF THE INCOME - TAX ACT VIDE ORDER DATED 28 - 12 - 2011. THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAD TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES (AE) AND AS PER THE 3CEB REPORT THOSE TRANSACTIONS WERE TO THE EXTENT OF RS.2,52, 28,598/ - . AS OBSERVED IN THE PENALTY ORDER PASSED U/S. 271AA OF THE I.T. ACT DATED 29 - 06 - 2012 IT IS OBSERVED THAT THE AR OF THE ASSESSEE WAS ASKED TO FURNISH THE DOCUMENTS AS PER THE REQUIREMENTS SPECIFIED IN SEC. 92D OF THE I.T. ACT. THE AR OF THE ASSES SEE STATED THAT THE SAID DOCUMENTS WERE NOT READILY AVAILABLE AND HENCE , COULD NOT PRODUCE THE SAME FOR VERIFICATION. THE ASSESSING OFFICER INITIATED THE PENALTY PROCEEDINGS U/S. 271AA OF THE I.T. ACT FOR FAILURE TO KEEP, MAINTAIN OR RETAIN BOOKS OF ACCOU NTS, DOCUMENTS IN RESPECT OF INTERNATIONAL T RANSACTIONS. THE ASSESSEE COMPANY FILED THE SUBMISSIONS WHICH ARE REPRODUCED IN THE PENALTY ORDER WHICH IS AS UNDER: 1) M/S. PYXIS SOLUTIONS (I) PVT. LTD. WAS ESTABLISHED IN THE F. Y. 2006 - 07 IN PUNE. 2) WHEN THE CO MPANY WAS IN OPERATION, WE HAVE COMPLIED ALL STATUTORY COMPLIANCES IN RELATION TO INCOME TAX, VAT, PROFESSIONAL TAX, PROVIDENT FUND, SERVICE TAX ETC. IN TIME. 3) WE WERE PUNCTUAL TO FOLLOW ALL DATED OF RETURNS AND PAYMENTS OF TAXES. WE HAVE MAINTAINED ALL R ECORDS NEEDED FOR DAY - TO - DAY OPERATIONS IN GENERAL AND FOR INTERNATIONAL TRANSACTIONS IN PARTICULAR FOR ALL THE YEARS. 4) ON THE BASIS OF RECORDS, RELATING TO INTERNATIONAL TRANSACTIONS WE GOT OUT ACCOUNT AUDITED. WITHOUT BACKING OF THESE DOCUMENTS AS REQUI RED IN RULE 10D OF THE I. T. RULES IT WOULD NOT HAVE BEEN 3 ITA NO. 12 67 /PN/2013, PYXIS SOLUTIONS (I) PVT. LTD., MUMBAI POSSIBLE FOR US TO PRODUCE THESE TO OUR CHARTERED ACCOUNTANT AND GET THE AUDIT REPORT IN FORM NO - 3CEB, U/S. 92E RELATING TO INTERNATIONAL TRANSACTIONS 5) WE HAVE SUBMITTED THE FORM NO - 3CEB IN TUNE BEF ORE THE DUE DATE OF FILING THE RETURN. 6) THE OPERATIONS OF THE COMPANY IN INDIA WERE CLOSED IN THE MONTH OF MAY 2009 DUE TO WORLDWIDE RECESSION. 7) AFTER CLOSURE, THE RECORDS WERE SHIFTED FROM PUNE OFFICE TO MUMBAI AND DELHI. WHILE TRANSPORTING THESE RECORDS, SOME OF THE RECORDS GOT MISPLACED AND IT WAS NOT POSSIBLE FOR US TO PRODUCE THESE RECORDS TO YOU IN STIPULATED T IME . WE REQUEST TO GIVE SOME MORE TIME TO PRODUCE THESE DOCUMENTS. 8) ALL THE ABOVE MENTIONED FACTS PROVE THAT WE ARE MAINTAINING RECORDS. THOUGH WE ARE NOT IN POSSESSION, TO PRODUCE THE RECORD, WE REQUEST YOU NOT TO CONSIDER THE SAME ADVERSELY, WHICH WILL PUT HARDSHIP TO THE ASSESSEE. 3. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE AND HE LEVIED THE PENALTY @ 2% ON THE AMOUNT OF THE INTERNATIONAL TRANSACTIONS U/S. 271AA OF THE ACT WHICH WAS WORKED OUT AT RS.5,04,572/ - . THE ASSESSEE CHALLENGED THE PENALTY ORDER BEFORE THE LD. CIT(A) AND LD. CIT(A) DELETED THE PENALTY. THE OPERATIVE PART OF THE REASONS AND FINDING S OF THE LD. CIT(A) FOR DELETING THE PENALTY ARE AS UNDER: 3.1 I HAVE CONSIDERED FACTS OF THE CASE, ARGUMENTS OF THE LEARNED AO AND OF THE APPELLANT. I AGREE WITH THE APPELLANT THAT THE PENALTY SHOULD BE DELETED. THE REASONS FOR MY DECISION ARE AS UNDER: 3.2 FIRSTLY, PENALTY U/S 271AA IS LEVIABLE FOR FAILURE TO KEEP AND MAINTAIN INFORMATION DOCUMENTS AS REQUIRED U/S 92D. THE LEARNED AO HAS MENTIONED IN THE PARA 3 OF THE PENALTY ORDER THAT THE APPELLANT HAD FURNISHED CERTAIN DOCUMENTS RELATING TO THE INTE RNATIONAL TRANSACTIONS ALONG WITH ITS SUBMISSION DATED 4 ITA NO. 12 67 /PN/2013, PYXIS SOLUTIONS (I) PVT. LTD., MUMBAI 18.06.2012. IN THE OPINION OF THE LEARNED AO, THE APPELLANT'S SUBMISSIONS WERE GROSSLY INADEQUATE COMPARED TO THE ENTIRE GAMUT OF THE REQUIREMENTS GIVEN UNDER THE RULE 10D. BE THAT AS IT MAY. SINCE SO ME OF THE DOCUMENTS WERE ALREADY FURNISHED BEFORE THE LEARNED AO, THERE IS NO CASE OF FAILURE TO MAINTAIN INFORMATION AND DOCUMENTS. AT BEST, THERE COULD BE A CASE OF PARTIAL FAILURE TO KEEP AND MAINTAIN INFORMATION AND DOCUMENTS. 3.3 SECONDLY, THE APPELLA NT HAD STATED THAT IT HAD MAINTAINED INFORMATION AND DOCUMENTS. HOWEVER THE SAME COULD NOT BE FURNISHED BECAUSE OF THE CLOSURE OF THE COMPANY IN 2009. IN THIS REGARD, I FIND THAT THE LEARNED AO'S DECISION TO LEVY PENALTY WAS ARRIVED AT RATHER QUICKLY, WITH OUT PROVIDING MORE OPPORTUNITIES TO THE APPELLANT TO FURNISH THE REQUIRED INFORMATION. ALTHOUGH THE APPELLANT'S CIRCUMSTANCES REQUIRED THAT MORE OPPORTUNITIES SHOULD HAVE BEEN AFFORDED TO IT. HOWEVER, IT APPEARS THAT THE LEARNED AO HAS PROVIDED ONLY ONE OP PORTUNITY TO FURNISH THE DOCUMENTS AND INFORMATION AND HE HAS LEVIED PENALTY ON FAILURE TO PRODUCE THE SAME. 3.4 THIRDLY, I FIND THAT THE LEARNED AO HAS NOT SPECIFICALLY MENTIONED IN THE ORDER AS TO WHICH PARTICULAR INFORMATION AND DOCUMENTS WERE ASKED BY HIM AND WHICH DOCUMENTS WERE SUBMITTED AND WHICH DOCUMENTS WERE NOT SUBMITTED BY THE APPELLANT. THE LEARNED AO'S NARRATION OF THE APPELLANT'S DEFAULT IS VERY GENERAL IN NATURE. IT IS FUNDAMENTAL THAT PENAL PROVISION IS INVOKED FOR THE SPECIFIC DEFAULTS AND NOT FOR THE OVERALL DESCRIPTION OF THE DEFAULT. THIS IS BECAUSE THE APPELLANT CAN DEFEND ITSELF ONLY IF THE SPECIFIC CHARGES AGAINST IT ARE KNOWN TO IT. 3.5 FOURTHLY, CLOSURE OF A COMPANY WOULD CONSTITUTE A 'REASONABLE CAUSE' U/S 273B. IN THIS CASE, THE C OMPANY WAS CLOSED IN 2009, WHEREAS IT WAS REQUIRED TO FURNISH THE INFORMATION AND DOCUMENTS IN 2012. IN ABSENCE OF THE REGULAR EMPLOYEES AND ITS OWN INFRASTRUCTURE, THE COMPANY WOULD TAKE MORE TIME THAN A COMPANY WHICH HAS NORMAL RUNNING BUSINESS OPERATION S. 3.6 FIFTHLY, I AGREE WITH THE APPELLANT THAT, THE DEFAULT OF THE APPELLANT, IF ANY, IS OF TECHNICAL IN NATURE IN ABSENCE OF ANY TRANSFER PRICING ADJUSTMENT MADE BY THE LEARNED AO. ALTHOUGH LEVYING OF PENALTY UNDER THIS SECTION DOES NOT DEPEND ON MAKING OF THE 5 ITA NO. 12 67 /PN/2013, PYXIS SOLUTIONS (I) PVT. LTD., MUMBAI TRANSFER PRICING ADJUSTMENT. HOWEVER, THE FACT REMAINS THAT THE DOCUMENTS AND INFORMATION ARE REQUIRED IN SUPPORT ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION. WHEN INTERNATIONAL TRANSACTIONS AFTER SCRUTINY HAVE BEEN FOUND TO BE AT THE ARM'S LENGTH THEN REQUIREMENT OF SUPPORTING INFORMATION AND DOCUMENTS IN MY VIEW WOULD ONLY BE A TECHNICAL REQUIREMENT. THEREFORE, IN THIS BACKGROUND, DEFAULT MAY NOT BE VIEWED SERIOUSLY TO VISIT THE APPELLANT WITH THE PENAL PROVISIONS. 3.7 IN VIEW OF THE ABOVE, I HOLD THAT THE LEARNED AO HAS NOT ESTABLISHED A CASE, IN WHICH PENAL PROVISIONS CAN BE INVOKED. AS MENTIONED, THIS IS NOT THE CASE OF TOTAL FAILURE TO MAINTAIN DOCUMENTS AND INFORMATION, AGAIN THERE WAS A 'REASONABLE CAUSE' ON PART OF THE APPELLANT AND T RANSFER PRICING ADJUSTMENT IS NOT MADE BY THE LEARNED AO. CONSIDERING ALL THESE FACTS, I AM OF THE VIEW THAT LEVYING OF PENALTY BY THE LEARNED AO WAS NOT PROPER. ACCORDINGLY, I DELETE THE PENALTY OF RS.5,04,570 LEVIED U/S 271AA. NOW THE REVENUE IS IN APPE AL BEFORE US. 4. WE HAVE HEARD THE LD. DR. NONE WAS PRESENT FOR THE ASSESSEE. WE HAVE ALSO PERUSED THE REASONS GIVEN BY THE ASSESSING OFFICER FOR LEVYING THE PENALTY AND THE REASONS GIVEN BY THE LD. CIT(A) FOR DELETING THE PENALTY. IT APPEARS THAT DURI NG THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ASKED FOR CERTAIN DETAIL/INFORMATION U/S. 92D OF THE ACT. IT WAS STATED BY THE ASSESSEE COMPANY THAT THE OPERATIONS IN INDIA WERE CLOSED IN THE MONTH OF MAY , 2009 DUE TO WORLDWIDE RECESSION AND A FTER CLOSURE OF ITS OPERATIONS , THE RECORDS WERE SHIFTED FROM PUNE OFFICE TO MUMBAI AND DELHI. WHILE TRANSPORTING THESE RECORDS, SOME OF THE RECORDS GOT MISPLACED AND IT WAS NOT POSSIBLE FOR THE ASSESSEE COMPANY TO PRODUCE THESE RECORDS IN STIPULATED T IME. THE ASSESSEE ALSO REQUEST ED FOR GIVING THE TIME. 5. ON PERUSAL OF THE REASONS GIVEN BY THE ASSESSING OFFICER IN OUR OPINION THE ASSESSING OFFICER HAS LEVIED THE PENALTY IN UNDUE HASTE OR WITHOUT CONSIDERING THE EXPLANATION OF THE ASSESSEE WHETHE R THE SAME 6 ITA NO. 12 67 /PN/2013, PYXIS SOLUTIONS (I) PVT. LTD., MUMBAI AMOUNT TO REASONABLE CAUSE WITHIN THE MEANING OF SEC. 273B. THE LD. CIT(A) HAS ACCEPTED THE EXPLANATION THAT THE COMPANY OPERATION WAS CLOSED IN MAY, 2009 AND THERE WAS SHIFTING OF THE RECORDS AND SOME OF THE DOCUMENTS WERE MISPLACED WAS ACCEPT ED AS A REASONABLE CAUSE. AS RIGHTLY HELD BY THE LD. CIT(A) THE DEFAULT CONTEMPLATED U/S. 271AA IS P ROCEDURAL DEFAULT AND PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN STEEL LIMITED VS. STATE OF ORISSA 83 ITR 26 ARE SQUARELY A PPLICABLE IN THE CASE OF THE ASSESSEE. AFTER GIVING OUR ANXIOUS CONSIDERATION TO THE REASONS GIVEN BY THE LD. CIT(A) FOR DELETING THE PENALTY , IN OUR OPINION NO INTERFERENCE IS CALLED FOR AS THE EXPLANATION OF THE ASSESSEE IS A REASONABLE CAUSE WITHIN THE MEANING OF SEC. 273B OF THE ACT. WE, ACCORDINGLY, CONFIRM THE ORDER OF THE LD. CIT(A) AND THE GROUNDS TAKEN BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 28 - 05 - 20 1 4 S D/ - SD/ - ( R.K. PANDA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 28 TH MAY, 20 1 4 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - IT/TP, PUNE 4 THE DR, ITAT, B BENCH, PUNE. 5 GUARD FI LE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE