M/s. Tussor Machine Tools India (P) Ltd., CHENNAI V. ACIT, Coimbatore

ITA 1270/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0769 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 08-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA
• Assessee Lawyers: V JAGADISAN
• Keywords: Transfer pricing; International transaction
• Section: 92C; 143(3); 92D; 92B

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.1270/MDS/2012 ASSESSMENT YEAR : 2008-09 M/S. TUSSOR MACHINE TOOLS INDIA (P) LTD., 1/247, AVANASHI ROAD, MUTHUGOUNDENPUDUR, NEELAMBUR PO, COIMBATORE 641 014. [PAN:AACCT1651R] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(1), COIMBATORE. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V. JAGADISAN, FCA RESPONDENT BY : DR. S. MOHARANA, CIT DATE OF HEARING : 01.02.2013 DATE OF PRONOUNCEMENT : 14.02.2013 ORDER PER S.S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL CHALLENGES ORDER OF THE COM MISSIONER OF INCOME TAX (APPEALS) I; COIMBATORE DATED 03.04.2012 IN APPEAL NO. 70/11- 12 FOR THE ASSESSMENT YEAR 2008-09, CONFIRMING PENA LTY UNDER SECTION 271AA OF THE INCOME TAX ACT 1961 [IN SHORT THE ACT ]. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A COMPANY, WHEREIN, THE PUBLIC IS NOT SUBSTANTIALLY INTERESTED. IT IS E NGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF MACHINE TOOLS AS WELL AS CO MPONENTS AND I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1270 1270 1270 1270/M/ /M/ /M/ /M/12 1212 12 2 ACCESSORIES. ON 24.09.2008, THE ASSESSEE HAD FILED ITS RETURN AND DECLARED LOSS OF ` .8,80,33,005/-. ON 18.09.2009, THE RETURN WAS PROCE SSED UNDER SECTION 143(1) OF THE ACT LEADING TO NIL DEMAND . THEREAFTER, THE ASSESSING OFFICER FINALIZED SCRUTINY ASSESSMENT O N 29.12.2010 AND ADDED AN AMOUNT OF ` .11,65,455/- RE BALANCE OF THE SUNDRY CREDITORS IN QUESTION. WHILE PASSING THE ABOVE SAID ASSESSMENT ORDER, THE ASSESSING OFFICER OBSERVED THAT SINCE THE ASSESSEE HAD ENTERE D INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATE ENTERPRISES, IT WAS REQUIRED TO MAINTAIN PRESCRIBED INFORMATION AND DOCUMENTS UNDER SECTION 92D OF THE ACT READ WITH RULE 10D OF INCOME TAX RULES, WHICH IT HAD FAI LED TO COMPLY. THEREFORE, HE ISSUED PENALTY NOTICE TO THE ASSESSEE UNDER SECT ION 271AA OF THE ACT. 3. IN PENALTY PROCEEDINGS, THE ASSESSEE PLEADED TH EREIN THAT THE ABOVE PRESCRIBED DOCUMENTS I.E. FORM 3CEB WAS DULY MAINTA INED. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED. THEREFORE, HE IMPOSED PENALTY ON THE ASSESSEE UNDER SECTION 271AA OF THE ACT OF ` .30,05,780/- @ 2% OF THE INTERNATIONAL TRANSACTION DISCLOSED BY THE ASSESSEE BY OBSERVING AS FOLLOWS: 5. THE SEQUENCE OF FACTS AND EVENT IN THIS CASE G O TO SHOW THAT: THE ASSESSEE COMPANY HAD INTERNATIONAL TRANSACTIONS AS DEFINED IN SECTION 92B WITH ASSOCIATED ENTERPRISES. THE ASSESSEE FAILED TO FILE ACCOUNTANT'S REPORT IN FORM 3CEB BEFORE THE DUE DATE OR ON THE DUE DATE. ACCOUNTANT'S REPORT IN FORM 3CEB, WAS FILED ON 31/1 2/2010, THE LAST DATE OF COMPLETION OF ASSESSMENT. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1270 1270 1270 1270/M/ /M/ /M/ /M/12 1212 12 3 IN THE ABSENCE OF ACCOUNTANT'S CERTIFICATE IN FORM 3CEB, THE QUANTUM AND NATURE OF INTERNATIONAL TRANSACTIONS COULD NOT BE ASCERTAINED. THE ASSESSEE COMPANY FAILED TO DISCLOSE DURING THE HEARING THAT THEY HAD INTERNATIONAL TRANSACTION WITH ASSOCIATED ENTER PRISES, THEREBY PREEMPTING THE ASSESSING OFFICER FROM MAKING A REFE RENCE TO THE TRANSFER PRICING OFFICER AS REQUIRED UNDER SECTION 92CA. IN THE REPORT UNDER SECTION 44AB, THE ASSESSEE COMP ANY HAD STATED THAT TRANSACTION WITH PERSONS SPECIFIED IN SECTION 40A(2)(B) IS RS.12,11,70,581/- (WHICH INCLUDES TRANSACTIONS WITH ASSOCIATED ENTERPRISES) BUT IN THE FORM 3CEB FURNISHED ON 31/1 2/2010, THE TRANSACTION WITH ASSOCIATE ENTERPRISES IS PEGGED AT RS.15.02,89,194/-. BUT REFERENCE COULD NOT BE MADE TO THE TRANSFER PRI CING OFFICER AS THE FORM 3CEB WAS FILED AFTER THE COMPLETION OF ASSESSM ENT ON 31.12.2010. SINCE THE NATURE AND QUANTUM OF TRANSACTION WERE NO T AVAILABLE WITH THE ASSESSING OFFICER, THE ASSESSING OFFICER COULD NOT SOURCE ANY DOCUMENT ARE RECORD FROM THE ASSESSEE COMPANY AS ST ATED IN RULE 92D(3), AND COMPUTE THE ARMS LENGTH PRICE. WHAT THE ASSESSEE HAD STATED IN THEIR NOTE ON TRAN SFER PRICING SUBMITTED ON 28/12/201.0 IS DETAILING THE NATURE OF TRANSACTION AND COPY OF INVOICES. NOWHERE THE DETAILS OF DOCUMENTS REQUIRED TO BE MAINTAINED UNDER RULE 10D ARE LISTED OUT. HENCE DUE TO DEFAULT OF THE ASSESSEE COMPANY, THE A SSESSING OFFICER COULD NOT COMPUTE THE ARMS LENGTH PRICE AS STATED IN SECTION 92C NOR COULD A REFERENCE BE MADE TO THE 'TRANSFER PRIC ING OFFICER UNDER SECTION 92CA AND DURING THE COURSE OF' ASSESSMENT, THE ASSESSEE COMP ANY DID NOT DISCLOSE THE DETAILS AND NATURE OF INTERNATIONAL TR ANSACTIONS NOR DIVULGE THE DETAILS OF RECORDS AND DOCUMENTS AS REQ UIRED U/S.92D READ WITH RULE 10D OF THE INCOME-TAX RULES. THE ASSESSEE COMPANY CAME OUT ONLY AFTER A SPECIFIC QUERY WAS RAISED BY THE A SSESSING OFFICER VIDE LETTER DATED 16.12.2010. HENCE, THERE IS SERIES OF FAILURE ON THE PART OF TH E ASSESSEE-COMPANY TO REPORT THE INTERNATIONAL TRANSACTIONS, FILE REPORT IN FORM 3CEB AND ALSO TO DETAIL THE LIST OF RECORDS AND DOCUMENTS AS MANDATED IN SE CTION 92D READ WITH RULE 10D, ON THEIR OWN WITHOUT BEING FOUND OUT BY THE AS SESSING OFFICER. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1270 1270 1270 1270/M/ /M/ /M/ /M/12 1212 12 4 IN APPEAL PREFERRED BY THE ASSESSEE, THE CIT(A) HAS ALSO CONFIRMED THE ABOVE SAID PENALTY. THEREFORE, THE ASSESSEE IS IN A PPEAL BEFORE US. 4. IN THE COURSE OF HEARING, THE ASSESSEE HAS VEH EMENTLY CONTENDED THAT THE CIT(A) HAS ERRED IN CONFIRMING PENALTY IN QUEST ION UNDER SECTION 271AA OF THE ACT. IN SUPPORT OF ITS ARGUMENTS, IT HAS A LSO FILED A PAPER BOOK, COPY OF VARIOUS NOTICES ISSUED BY THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT AS WELL AS CASE LAW REPORTED [2012] 016 ITR (TRIB) 0253 (MUM) TITLED ACIT V. SMITH AND NEWPHEW HEALTHCARE P. LTD. IN THE LIGHT THEREOF IT PRAYED FOR ACCEPTANCE OF THE APPEAL. 5. OPPOSING THIS, THE REVENUE HAS CHOSEN TO DRAW S TRONG SUPPORT FROM THE ORDER OF THE CIT(A) UNDER CHALLENGE. FURTHER, T HE CASE LAW CITED BY THE ASSESSEE IS SOUGHT TO BE DISTINGUISHED ON THE GROUN D THAT THE FACTS IN QUESTION ARE ENTIRELY DIFFERENT SINCE IN THAT CASE, THE ASSESSEE CONCERNED HAD DULY FURNISHED ALL DETAILS IN THE ASSESSMENT PR OCEEDINGS. ACCORDINGLY, THE DR HAS PRAYED FOR CONFIRMING THE CIT(A)S ORDER . 6. WE HAVE HEARD BOTH PARTIES IN DETAIL, PERUSED A SSESSMENT ORDER, PENALTY ORDER, CIT(A)S ORDER AS WELL AS CASE LAW C ITED. ADMITTED FACTS ARE THAT IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HA D DECLARED INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATE ENTERPRISES OF ` .15,02,89,109/-. THE ASSESSING OFFICER HAD FINALIZED ASSESSMENT UNDER SE CTION 143(3) OF THE ACT WITHOUT MAKING ANY ADDITION QUA INTERNATIONAL TRANS ACTION. IT ALSO EMANATES I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1270 1270 1270 1270/M/ /M/ /M/ /M/12 1212 12 5 FROM THE PENALTY ORDER THAT THE ASSESSING OFFICER H AD FINALIZED THE ASSESSMENT ON 29.12.2010 AND THE ASSESSEE HAD FILED REQUISITE FORM 3CEB IN QUESTION ON 31.12.2010. FROM THE OPERATIVE PART OF THE PENALTY ORDER, IT IS NOTICED THAT THERE IS NO DISPUTE THAT THE RECORD IN QUESTION FORM 3CEB IS DULY MAINTAINED BY THE ASSESSEE AND ALSO SUBMITTED BEFORE THE ASSESSING OFFICER. SINCE THE PENALTY IN QUESTION PERTAINS TO SECTION 271AA OF THE ACT [AS IT EXISTED IN THE IMPUGNED ASSESSMENT YEAR 2008 -09 AND BEFORE ITS SUBSTITUTION W.E.F. 01.07.2012], WE DEEM IT FIT TO REPRODUCE THE PROVISION, WHICH READS AS UNDER: 271AA. PENALTY FOR FAILURE TO KEEP AND MAINTAIN IN FORMATION AND DOCUMENTS IN RESPECT OF INTERNATIONAL TRANSACTION - WITHOUT P REJUDICE TO THE PROVISIONS OF SECTION 271, IF ANY PERSON FAILS TO KEEP AND MAINTA IN ANY SUCH INFORMATION AND DOCUMENT AS REQUIRED BY SUB-SECTION (1) OR SUB- SECTION (2) OF SECTION 92D, THE ASSESSING OFFICER OR COMMISSIONER (APPEALS ) MAY DIRECT THAT SUCH PERSON SHALL PAY, BY WAY OF PENALTY, A SUM EQUAL TO TWO PER CENT OF THE VALUE OF EACH INTERNATIONAL TRANSACTION ENTERED INTO BY S UCH PERSON. A PERUSAL OF THE ABOVE SAID PENAL PROVISION MAKES I T CLEAR THAT IT APPLIES TO A CASE WHERE THE CONCERNED ASSESSEE FAIL S TO KEEP AND MAINTAIN ITS DOCUMENTS IN RESPECT OF INTERNATIONAL TRANSACTI ONS. A GLANCE OF THE PENALTY ORDER AS WELL AS THE ORDER PASSED BY THE CI T(A) UNDER CHALLENGE MAKES IT ABUNDANTLY CLEAR THAT THE FAULT OF THE ASS ESSEE IS THAT THE RELEVANT RECORD (SUPRA) HAD BEEN FURNISHED IN LATTER IN POIN T OF TIME AFTER PASSING THE ASSESSMENT ORDER (SUPRA). IN OUR CONSIDERED OPINION , THIS IS NOT FAILURE OF THE ASSESSEE TO KEEP AND MAINTAIN THE RECORD. RATHER, I T IS A CASE OF NOT PRODUCING THE RECORD BEFORE ASSESSMENTS FINALIZATI ON WHICH IS NOT COVERED I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1270 1270 1270 1270/M/ /M/ /M/ /M/12 1212 12 6 BY THE TENOR OF THE PROVISIONS. IN OTHER WORDS, ONC E THE ASSESSEE PRODUCED THE RELEVANT RECORD EVEN AFTER THE FINALIZATION OF THE ASSESSMENT, IT CANNOT BE PUNISHED UNDER SECTION 271AA OF THE ACT AS IN SUC H CASES, THERE IS YET ANOTHER SPECIFIC PENALTY PROVISION INSERTED BY THE LEGISLATURE UNDER SECTION 271G OF THE ACT, WHICH ADMITTEDLY HAS NOT BEEN IN VOKED HERE BY THE REVENUE. FURTHER, WE ALSO CAUTIOUS OF THE LAW THAT THERE WAS NOTHING WHICH COULD HAVE STOPPED THE ASSESSING OFFICER TO MAKE RE FERENCE TO THE TRANSFER PRICING OFFICER QUA THE ASSESSEES INTERNATIONAL TR ANSACTION WITH ITS ASSOCIATED ENTERPRISES AND ALSO, THERE IS NO ADDITI ON MADE IN THE ASSESSMENT PROCEEDINGS. IN THE LIGHT OF OUR ABOVE D ISCUSSION, WE SEE NO REASON TO CONCUR WITH THE PENALTY IN QUESTION IMPOS ED BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A). CONSEQUENTLY, ASSESSEES APPEAL IS ALLOWED AND THE PENALTY IN QUESTION STANDS DELETED. ORDER PRONOUNCED ON THURSDAY, THE 14 TH OF FEBRUARY, 2013 AT CHENNAI. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER (S.S. GODARA) JUDICIAL MEMBER CHENNAI, DATED, THE 14.02.2013 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.