MATTEL TOYS (INDIA) P. LTD, MUMBAI V. ASST CIT CIR 6(3)1, MUMBAI

ITA 1665/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8059 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 10-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMARDR
• Assessee Lawyers: PRANITH GOLECHAAR
• Keywords: Depreciation; Transfer pricing; Principle of natural justice; International transaction; Corroborative evidences
• Section: 92C

Judgement Text

1 MATTEL 1665/MUM/2014 IN THE INCOME TAX APPELLATE TRIBUNNAL MUMBAI BENCH B, MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA ( ACCOUNTANT MEMBER) I.T.A.NO. 1665/MUM/2014 ( ASSESSMENT YEAR 2003-2004) MATTEL TOYS(INDIA) PRIVATE LIMITED, 4 TH FLOOR, B WING, PHOENIX HOUSE,462, SENAPATI BPAT MARG, LOWER PAREL, MUMBAI-400020. V/S ASST. CIT 6(3)1 MUMBAI-400018. PAN AACCM2563P APPELLANT RESPONDENT APPELLANT BY SHRI PRANITH GOLECHA(AR) RESPONDENT BY SHRI SUMAN KUMAR(DR) DATE OF HEARING 07.03.2017 DATE OF ORDER 09.03.2017 O R D E R PER ASHWANI TANEJA, AM:- THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY COMMISSIONER OF INCOME-TAX (APPEALS)-15, MUMBAI [HE REINAFTER CALLED CIT(A)] DATED 13.12.2013 PASSED AGAINST THE PENALTY ORDER O F THE AO U/S 271(1)(C) OF THE ACT DATED 14.02.2013 FOR ASSESSMENT YEAR 2003-0 4 ON THE FOLLOWING GROUNDS:- BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, M/S MATTEL PRIVATE LIMITED(HEREINAFTER REFERRED TO AS THE APP ELLANT) IS 2 MATTEL 1665/MUM/2014 AGGRIEVED BY THE ORDER DATED 13 TH DECEMBER,2013(RECEIVED ON 9 TH JANUARY,2014) PASSED BY THE COMMISSIONER OF INCOME- TAX(APPEALS)- 15, MUMBAI[CIT(A)] UNDER SECTION 250 OF THE INCOM E-TAX ACT, 1961(ACT) ON THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED CIT(A) HAS FAILED TO AP PRECIATE THAT THE ORDER OF THE LEARNED ASSESSING OFFICER(AO) IS CON TRARY TO THE PRINCIPLES OF EQUITY AND NATURAL JUSTICE, NOT BASED ON A PROPER UNDERSTANDING OF THE FACTS AND CIRCUMSTANCES OF THE CASE, VIOLATE THE PROVISIONS OF THE INCOME TAX ACT, ARE AGAINST WELL SETTLED PRINCIPLES OF LAW, AND ARE LIABLE TO BE STRUCK DOWN. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE PENAL TY OF RS. 1,92,01,263/- UNDER SECTION 271(1)(C) OF THE ACT ON THE APPEAL FOR THE RELEVANT ASSESSMENT YEAR. 3. THE LEARNED CIT(A) ERRED IN CONSIDERING THE ADDI TIONS MADE TO THE TOTAL INCOME OF THE APPELLANT AS FURNISHING OF INAC CURATE PARTICULARS AND THEREBY CONFIRMING THE LEVY OF PENALTY UNDER SE CTION 271(1)(C) OF THE ACT. A) PRIOR PERIOD EXPENSES OF RS. 11,34,779. B)SUNDRY CREDITORS OF RS. 35,64,988. C)TRAVELLING EXPENSES FOR SALES TEAM OF RS. 11,62,2 50 D)EXPENSES DISALLOWED OF RS. 47,78,416 E)TRAVELLING AND CONVEYANCE(INTER-STATE) EXPENSES O F RS. 1,37,866 F) TRANSFER PRICING ADJUSTMENT OF RS. 4,40,82,451 G) DEPRECIATION ON CLOSED PLANT. 4. THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATI NG THAT THE LEARNED ASSESSING OFFICER HAS FAILED TO RECORD THE REQUISIT E SATISFACTION THAT THE APPELLANT COMPANY HAS FURNISHED INACCURATE PARTICUL ARS OF HIS INCOME ON WHICH PENALTY IS INITIATED AND HENCE LEVYING PEN ALTY IS INVALID AND BAD IN LAW. 5. THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATI NG THAT LEVY OF PENALTY IS NOT AN AUTOMATIC CONSEQUENCE, WHEN THE APPELLANT S CLAIM FOR DEDUCTION IS REJECTED BY THE LEARNED AO. 3 MATTEL 1665/MUM/2014 6. THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATIN G THAT THE APPELLANT HAD ENGAGED A REPUTED FIRM OF CHARTERED ACCOUNTANTS AND MAINTAINED A DETAILED TRANSFER PRICING DOCUMENTATION AND COMPU TED THE ARMS LENGTH PRICE OF ITS INTERNATIONAL TRANSACTIONS N AC CORDANCE WITH THE PROVISIONS OF SECTION 92C OF THE ACT AND IN THE MAN NER PRESCRIBED IN THAT SECTION, IN GOOD FAITH AND WITH DUE DILIGENCE, AND HENCE DOES NOT WARRANTY A PENALTY FOR FURNISHING IN ACCURATE PARTI CULARS. 7. THE LEARNED CIT(A) FAILED TO CONSIDER THAT A SI MILAR PENALTY UNDER SECTION271 OF THE ACT WAS DELETED BY THE MUMBAI OF THE HONOURABLE INCOME TAX APPELLATE TRIBUNAL(ITA 6390/2011) FOR TH E PRECEDING AY 2002-03 VIDE ORDER DATED JULY 10,2013. 8. EACH ONE OF THE ABOVE GROUNDS OF APPEAL ARE DIS TINCT AND SEPARATE AND WITHOUT PREJUDICE TO THE OTHER. 9. THE APPELLANT RESERVES THE RIGHT TO AMEND, ADD, ALTER OR DELETE ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT THE TIME OF APPEAL HEARING. 2. DURING THE COURSE OF HEARING, IT WAS BROUGHT TO OUR NOTICE BY THE LD. COUNSEL FOR ASSESSEE THAT IN THE QUANTUM APPEAL, TH E TRIBUNAL HAS REMANDED BACK TO THE AO ALL THE GROUNDS EXCEPT GROUND NO.5, AGAINST WHICH PENALTY WAS LEVIED BY THE AO. THUS, PENALTY ORDER DOES NOT SURV IVE AS ON DATE ON THESE ISSUES AND IT MAY BE SET ASIDE. WITH REGARD TO GRO UND NO.5, PENALTY WAS LEVIED TOWARDS DISALLOWANCE OF TRAVELLING & CONVEYANCE OF RS. 1,37,866/-; IT WAS SUBMITTED THAT PENALTY IS NOT LEVIABLE ON THE SAID DISALLOWANCE. 3. PER CONTRA LD. DR FAIRLY SUBMITTED THAT SINCE MOST OF THE ISSUES HAVE BEEN REMANDED BACK TO THE AO, THE PENALTY ORDER DOE S NOT SURVIVE AS ON DATE. WITH REGARD TO PENALTY ON DISALLOWANCE OF TRAVEL AN D CONVEYANCE ALLOWANCE, IT WAS SUBMITTED THAT SINCE THIS ISSUE WAS NOT PRESSED BEFORE THE ITAT IN QUANTUM APPEAL, PENALTY SHOULD BE CONFIRMED . 4 MATTEL 1665/MUM/2014 4. WE HAVE GONE THROUGH THE ORDER PASSED BY THE LO WER AUTHORITIES AND BY THE TRIBUNAL IN THE QUANTUM APPEAL. IT HAS BEEN FO UND THAT ALL THE ISSUES HAVE BEEN REMANDED BACK BY THE TRIBUNAL TO THE AO, THERE FORE, ON THESE ISSUES PENALTY ORDER DOES NOT SURVIVE AS ON DATE. THE AO S HALL BE FREE TO LEVY THE PENALTY AS AND WHEN FRESH ASSESSMENT ORDER IS PASSE D, AS PER LAW. 5. WITH REGARD TO PENALTY ON DISALLOWANCE OF TRAVEL CO NVEYANCE EXPENSES OF RS. 1,37,866/-, IT IS NOTED BY US THAT DISALLOWANCE WAS MADE BY THE AO ON THE GROUND THAT ASSESSEE HAD MADE CLAIM ON ACCOUNT OF M ERE PROVISION AND NO DOCUMENTARY EVIDENCE WERE FURNISHED IN SUPPORT OF T HE SAME. IT IS NOTED BY US THAT NEITHER AO NOR LD. CIT(A) FOUND THE EXPENSE S TO BE BOGUS OR FALSE. AS PER ASSESSEE, LEARNED CIT(A) HAD AGREED WITH THE CL AIM MADE BY THE ASSESSEE, WHEREAS AS PER AO, IT WAS MERELY A PROVISION AND NO SUPPORTING EVIDENCE WAS FURNISHED. IN OUR OPINION, NOTHING HAS BEEN BOUGHT ON RECORD TO SHOW IF THERE WAS ANY CONCEALMENT OR FURNISHING OF ANY PARTICULAR S OF INCOME BY THE ASSESSEE. 6. THE FINDINGS RECORDED BY THE LEARNED CIT(A) AGA INST DISALLOWANCE MADE BY THE AO ARE REPRODUCED HEREUNDER:- 'I HAVE CONSIDERED THE FACTS OF THE CASE. SUBMISSIO NS OF THE ASSESSEE AS AGAINST THE OBSERVATIONS FINDINGS OF TH E AO IN THE ASSESSMENT ORDER. THE PROVISIONS OF THE FUNDS WHIC H ARE NOT DETERMINED BASED ON THE SOME RELIABLE ESTIMATES OR MADE WITHOUT ESTIMATES AND FOR WHICH THE LIABILITY FOR T HE EXPENSES HAVE NOT BEEN ACCRUED DURING THE YEAR CANNOT BE ALL OWED AS EXPENSE. AS THE FACTS EMANATING FROM THE AOS FIND ING AND SUBMISSION OF THE APPELLANT THAT THERE IS NET PROVI SION OF RS. 1,37,866/- AFTER THE PROVISIONS WRITTEN BACK DURING THE YEAR, WHICH NEEDS TO BE DISALLOWED, INSTEAD OF THE WHOLE AMOUNT REFLECTED IN SUCH PROVISION. ACCORDINGLY THE DISAL LOWANCE TO THE EXTENT OF RS. 1,37,866/- IS CONFIRMED AND REMAI NING AMOUNT IS DIRECTED TO BE DELETED. ACCORDINGLY THE APPELLANT 5 MATTEL 1665/MUM/2014 GETS PART RELIEF IN RESPECT OF THIS GROUND OF APPEA L TO THE EXTENT OF RS. 2,50,340/-. 7. WE HAVE GONE THROUGH THE AFORESAID OBSERVATIONS M ADE BY THE LD. CIT(A) AND FIND THAT IT IS NOT A FIT CASE FOR LEVY OF PENA LTY, THEREFORE, PENALTY LEVIED ON AFORESAID DISALLOWANCE IS ALSO DELETED. 8. AS A RESULT APPEAL OF THE ASSESSEE IS ALLOWED IN T ERMS OF ORDER. ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE CONCL USION OF HEARING. SD/- SD/- (MAHAVIR SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 09 .03.2017 KT/- COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , B, BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES