TRANSOCEANIC FINANCIAL ENGINEERING P. LTD, MUMBAI V. ITO 13(3)(4), MUMBAI

ITA 1524/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1212 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 14-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR P MENON
• Keywords: Transfer pricing; International transaction; Set aside
• Section: 92D; 92E

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL , ACCOUNTANT MEMBER ITA NO. 1524 /MUM. /201 9 ( ASSESSMENT YEAR : 20 11 1 2 ) ITA NO. 1525 /MUM. /2019 ( ASSESSMENT YEAR : 20 11 12 ) TRANSOCEANIC FINANCIAL ENGINEERING PVT. LTD. , 402, FIELD VIEW, UPPER GOVIND NAAR, MALAD (E), MUMBAI 400 097 PAN AADCT4166A . APPELLANT V/S INCOME TAX OFFICER WARD 13(3)(4), MUMBAI . RESPONDENT ASSESSEE BY : SHRI PRATEEK JHA REVENUE BY : S HRI VIJAY KUMAR P. MENON DATE OF HEARING 25.11.2020 DATE OF ORDER 04.12.2020 O R D E R PER SAKTIJIT DEY. J.M. THE AFORESAID APPEAL S HAVE BEEN FILED BY THE ASSESSEE CHALLENGING THE COMMON ORDER DATED 31 ST JANUARY 2019, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 58, MUMBAI, CONFIRMING PENALTY IMPOSED UNDER SECTION 271AA AND 271BA OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 2011 12. 2 TRANSOCEANIC FINANCIAL ENGINEERING PVT. LTD. 2. BRIEF FACTS ARE, THE ASSESSEE IS A RESIDENT COMPANY AND IS ENGAGED IN THE BU SINESS OF PROVIDING CONSULTANCY/ ADVISORY SERVICES ON FINANCIAL MATTERS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 31 ST MARCH 2013, DECLARING LOSS OF ` 13,745. IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE IN THE RELEVANT PREVIOUS YEAR HAD ENTERED INTO INTERNATIONAL TRANSACTION S WITH ITS ASSOCIATED ENTERPRISES (AE) AGGREGATING TO ` 18,70,20,000. HOWEVER, THE ASSESSEE HAS NOT SUBMITTED THE STATUTORY AUDIT REPORT CONCERNING SUCH INTERNATIONAL TRANSACTION ALONG WITH THE RETURN OF INCOME. THEREFORE, FOR THE PURPOSE OF DETERMINING THE ALLEGED ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION, THE ASSESSING OFFICER MADE A REFERENC E TO THE TRANSFER PRICING OFFICER. THE TRANSFER PRICING OFFICER VIDE ORDER DATED 29 TH JANUARY 2015, PROPOSED ADJUSTMENT OF ` 9,08,60,000. IN THE DRAFT ASSESSMENT ORDER PASSED IN PURSUANCE TO THE ORDER PASSED BY THE TRANSFER PRICING OFFICER, THE ASSESSING O FFICER ADDED BACK THE TRANSFER PRICING ADJUSTMENT PROPOSED BY TRANSFER PRICING OFFICER. AGAINST THE DRAFT ASSESSMENT ORDER, THE ASSESSEE RAISED OBJECTION S BEFORE THE D ISPUTE R ESOLUTION P ANEL (DRP) . WHEN THE MATTER STOOD THUS, THE ASSESSING OFFICER INITIATE D PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 271AA AND 271BA ON THE ALLEGATION THAT THE ASSESSEE HAD 3 TRANSOCEANIC FINANCIAL ENGINEERING PVT. LTD. FAILED TO KEEP AND MAINTAIN INFORMATION AND DOCUMENTS AS REQUIRED UNDER SECTION 92D OF THE ACT AND HAS FURTHER FAILED TO FURNISH THE REPORT FROM A N A CCOUNTANT AS REQUIRED UNDER SECTION 92E OF THE ACT. THOUGH, THE ASSESSEE FILED HIS SUBMISSIONS OBJECTING TO THE PENALTY PROCEEDINGS INITIATED UNDER SECTION 271AA AND 271BA OF THE ACT, HOWEVER, THE ASSESSING OF FICER REJECTING THE SUBMISSIONS/EXPLANATION OF THE ASSESSEE PROCEEDED TO PASS ORDER S IMPOSING PENALTY OF ` 18,17,200, UNDER SECTION 271AA AND ` 1,00,000 UNDER SECTION 271BA OF THE ACT. THOUGH THE ASSESSEE CONTESTED THE LEVY OF PENALTY UNDER THE AFORESAID PROVISIONS BY FILING APPEALS BEFORE LEARNED COMMISSIONER (APPEALS), HOWEVER, IT WAS UNSUCCESSFUL. 3. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ASSESSEE FROM THE VERY BEGINNING HAS TAKEN A STAND BEFORE THE DEPARTMENTAL AUTHORITIES THAT DURING THE YEAR UNDER CONSIDERATION, IT HAS NOT ENTERED INTO ANY INTER NATIONAL TRANSACTION WITH THE A E. T HEREFORE, THE TRANSFER PRICING PROVISIONS WOULD NOT BE APPLICABLE. HE SUBMITTED , WHILE CONSIDERING THE ISSUE IN THE QUANTUM PROCEEDINGS, THE TRIBUNAL VIDE ORDER DATED 28 TH JANUARY 2019, IN ITA NO.675/MUM./20 16, HAS RESTORED BACK THE ISSUE TO THE DRP FOR FRESH ADJUDICATION. THUS, HE SUBMITTED , IN VIEW OF THE DECISION OF THE TRIBUNAL, THE ISSUES RELATING TO IMPOSITION OF PENALTY SHOULD ALSO BE RESTORED BACK TO THE ASSESSING OFFICER. 4 TRANSOCEANIC FINANCIAL ENGINEERING PVT. LTD. 4. THE LEARNED DEPARTMENTAL RE PRESENTATIVE , THOUGH , RELIED UPON THE OBSERVATIONS OF LEARNED COMMISSIONER (APPEALS), HOWEVER, HE SUBMITTED THAT THE ISSUES RAISED IN THE PRESENT APPEAL CAN BE RESTORED BACK TO THE ASSESSING OFFICER. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MA TERIAL ON RECORD. AS COULD BE SEEN FROM THE FACTS ON RECORD, THE GENESIS OF IMPOSITION OF PENALTY UNDER SECTION 271AA AND 271BA OF THE ACT IS ON AN ASSUMPTION BY THE ASSESSING OFFICER AND THE TRANSFER PRICING OFFICER THA T IN THE RELEVANT PREVIOUS YEAR THE ASSESSEE HAD ENTERED INTO INTER NATIONAL TRANSACTION WITH ITS A E. THEREFORE, WHILE PROPOSING ADJUSTMENT TO THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION, THE TRANSFER PRICING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS NOT COMPLIED WITH THE PROVISI ONS OF SECTION 92D AND 92E OF THE ACT. ON THE BASIS OF THE AFORESAID, THE ASSESSING OFFICER HAS INITIATED PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 271AA AND 271BA OF THE ACT AND HAS ULTIMATELY IMPOSED PENALTY UNDER THE AFORESAID PROVISIONS. HOWE VER, IT IS SEEN FROM RECORD , FROM THE VERY BEGINNING IN COURSE OF PROCEEDINGS BEFORE THE ASSESSING OFFICER AND THE TRANSFER PRICING OFFICER, THE ASSESSEE HAD TAKEN A CATEGORICAL STAND THAT DURING THE YEAR UNDER CONSIDERATION IT HAS NOT ENTERED INTO ANY INT ER NATIONAL TRANSACTION WITH THE AE. T HEREFORE, THE TRANSFER PRICING PROVISIONS 5 TRANSOCEANIC FINANCIAL ENGINEERING PVT. LTD. WOULD NOT BE APPLICABLE. CONSEQUENTLY, THE ASSESSEE IS NOT REQUIRED TO COMPLY WITH THE PROV ISIONS CONTAINED UNDER SECTIONS 9 2D AND 92E OF THE ACT. THOUGH, THE ASSESSEE WAS UNSUC CESSFULLY ON THE AFORESAID STAND BEFORE THE ASSESSING OFFICER, THE TRANSFER PRICING OFFICER AS WELL AS THE DRP, HOWEVER, THE TRIBUNAL WHILE CONSIDERING ASSESSEES CONTENTION IN ITA NO.675/MUM./2016, DATED 28 TH JANUARY 2019, HAS RESTORED THE ISSUE TO THE DR P FOR RE CONSIDERING ASSESSEES CLAIM THAT THERE WAS NO INTERNATIONAL TRANSACTION OF REVENUE NATURE BETWEEN THE ASSESSEE AND THE AE IN THE RELEVANT FINANCIAL YEAR. THUS, IN OUR CONSIDERED OPINION, WHEN ASSESSEES CONTENTION REGARDING NOT HAVING ANY INTER NA TIONAL TRANSACTION WITH THE AE IS STILL UNRESOLVED AND IS PENDING BEFORE THE DRP, IT WOULD NOT BE LOGICAL AND PROPER TO PROCEED IN THE MATTER OF IMPOSITION OF PENALTY UNDER SECTION 271AA AND 271BA OF THE ACT. THE REQUIREMENT OF COMPLYING WITH THE PROVISION S OF SECTION 92D AND 92E OF THE ACT ONLY ARISES IN THE EVENT OF ASSESSEE HAVING ANY INTER NATIONAL TRANSACTION WITH THE A E. SINCE , THE AFORESAID PRELIMINARY CLAIM IS NOW PENDING FOR DECISION BEFORE THE DRP, WE ARE INCLINED TO SET ASIDE THE IMPUGNED ORDER S OF LEARNED COMMISSIONER (APPEALS) AND RESTORE THE ISSUE RELATING TO IMPOSITION OF PENALTY UNDER SECTION 271AA AND 271BA OF THE ACT TO THE ASSESSING OFFICER. THE ASSESSING OFFICER, IF WARRANTED, MAY INITIATE PROCEEDINGS UNDER THE AFORESAID PROVISIONS ON TH E BASIS OF OUTCOME OF THE DECISION OF THE DRP IN THE QUANTUM 6 TRANSOCEANIC FINANCIAL ENGINEERING PVT. LTD. PROCEEDINGS. GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 04.12.2020 SD/ - MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 04.12.2020 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI