M/s Open Technologies India Pvt. Ltd, New Delhi V. DCIT, New Delhi

ITA 1688/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3747 (ITAT-DELHI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 15-06-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 15-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction; Bonafide belief; Reasonable cause; TDS; Set aside
• Section: 273B; 92E; 92

Judgement Text

ITA NO. 1688/DEL/2010 A.Y. 2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 1688/DEL/2010 A.Y. : 2006-07 M/S OPEN TECHNOLOGIES INDIA PVT. LTD., VS. DCIT, CIRCLE 13(1), NEW DELHI , 33/11, OLD RAJINDER NAGAR, NEW DELHI 110 060 (PAN: AAAC01525B) [APPELLANT] (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SMT. PRATIBHA KAUSHIK, SR. DR PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONERS OF INCOME TAX (APPEALS) DATED 23.2.20 10 PERTAINING TO ASSESSMENT YEAR 2006-07. 2. THE ISSUE RAISED IS THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE PENALTY OF RS. 1,00,000/- U/S 271 BA OF THE ACT. 3. IN THIS CASE THE ASSESSING OFFICER NOTED THAT THE CHARTERED ACCOUNTANTS REPORT, AS PER SECTION 92E OF INCOME TAX ACT, IN FO RM NO. 3CEB RELATING TO INTERNATIONAL TRANSACTIONS WAS NOT FILED ALONGWITH THE RETURN OF INCOME WHEREAS THE SAME WAS REQUIRED TO BE FILED ON OR BEFORE TH E DUE DATE PRESCRIBED U/S ITA NO. 1688/DEL/2010 A.Y. 2006-07 2 139(1) OF THE INCOME TAX ACT I.E. BY 31.10.2006. TH E PENALTY PROCEEDING WERE ALSO INITIATED. ASSESSEE RESPONDED AS UNDER VIDE REPLY DATED 14.7.2008:- 1. THAT FILING OF THE INCOME TAX RETURN U/S 139(1) FOR A.Y. 2006-07 WAS MADE MANDATORY TO FILE ONLINE WITHOUT ANY ANNEXURE/REPOR TS/ ATTACHMENT. 2. THAT ON ACCOUNT OF ONLINE FILING BEING INTRODUCE D FOR THE FIRST TIME, NON DOCUMENTS WERE FILED WITH THE RETURN WHICH ARE USUA LLY FILED ALONGWITH MANUAL RETURN LIKE COPY OF AUDITED ACCOUNTS, TDS C ERTIFICATES, FORM 3CA, FORM 29B, FORM 56F, AND FORM 3CEB U/S 92 E ETC. 3. THAT A REPORT IN FORM NO. 3CEB U/S 92E (RULE 10E ) DATED 01.09.2006 WAS OBTAINED BY THE COMPANY FROM ITS CHARTERED ACCOUNT ANTS. 4. THAT THE REPORT U/S 92 WAS OBTAINED BY THE COMPA NY WELL IN TIME BUT COULD NOT BE FILED IN VIEW OF THE ONLINE FILING OF RETURN WITHOUT ANY ATTACHMENT. 5. THAT A.Y. 2006-07 BEING A SCRUTINY CASE THE SAID REPORT IN FORM 3CEB U/S 92E WAS FILED WITH YOU ON 11.02.2008 IN RESPONSE TO YOUR NOTICE AND FIXED FOR 1.02.3008. AS THE SAID REPORT HAS BEEN FILED BEFORE THE ASSESS MENT WAS COMPLETED, AND IN THE LIGHT OF THE ABOVE FACTS, THERE WAS NO INTENTION NOT TO FILE THE REPORT IN TIME OR TO FILE LATE INSPITE OF THE REPO RT HAVING BEEN OBTAINED ON 01.09.2006. YOU ARE, THEREFORE, REQUESTED TO DROP PENALTY PROCEEDINGS AS THE REPORT HAS ALREADY BEEN FILED WITH YOU AND ACCE PTED BEFORE THE ASSESSMENT WAS COMPLETED ON 3.05.2008. CASE REFE RENCE AUDOT SQUARE V. ITO (1992) 43 ITD 259 (PAT TRIB.) 3.1 HOWEVER, ASSESSING OFFICER DID NOT ACCEPT THES E CONTENTIONS. HE REFERRED TO THE PROVISION OF SECTION 92E AND HENCE IMPOSED T HE PENALTY OF RS. 1 LAKH U/S 271BA. 4. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPE ALS) ASSESSEE REITERATED THE SUBMISSIONS BEFORE THE ASSESSING OFFICER. I T WAS FURTHER STATED THAT THE REPORT IN FORM 3CEB HAS BEEN FILED WITH THE ASSESSI NG OFFICER BEFORE THE ITA NO. 1688/DEL/2010 A.Y. 2006-07 3 ASSESSMENT PROCEEDINGS WERE COMPLETED. IN THIS RE GARD, RELIANCE WAS PLACED UPON THE FOLLOWING CASE LAWS:- I) C.I.T. VS. AXIS COMPUTERS (INDIA) P LTD. (200 9) 178 TAXMAN 143, II) C.I.T. VS. INTEGRATED DATABASES INDIA LTD. (20 09) 178 TAXMAN 432, III) C.I.T. VS. GABRIEL INDIA LTD. (1993) 71 TAXMAN 585; (1993) 114 CR 81 (1993) 203 ITR 108, 11 TAXMAN 158. 4.1 FURTHER AFFIDAVIT FROM DIRECTOR AND CHARTERED A CCOUNTANT OF THE ASSESSEE COMPANY WAS ALSO ENCLOSED CONFIRMING THAT THE REPOR T IN FORM 3CEB FOR THE ASSESSMENT YEAR 2006-07, WAS OBTAINED IN TIME ON 01 .09.2006 AND WAS IN AGREEMENT WITH THE RETURN OF INCOME AND ANNUAL AUDI TED ACCOUNTS FILED. BUT LD. COMMISSIONER OF INCOME TAX (APPEALS) DID NOT ACCEPT THESE CONTENTIONS. HE REFERRED TO THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF C.I.T. VS. ESCORTS FINANCE 206 CTR 105. HENCE HOLDING THAT ASSESSEE WA S LIABLE FOR PENALTY U/S 271BA, LD. C.I.T.(A) CONFIRMED THE PENALTY OF RS. 1 LAKH. 5. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. 6. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E. NONE APPEARED ON BEHALF OF THE ASSESSEE, DESPITE SERVICE OF NOTICE. HOWEVER IN OUR CONSIDERED OPINION WE CAN PROCEED WITH THE ISSUE BY PERUSING T HE RECORDS AND HEARING THE LD. DEPARTMENTAL REPRESENTATIVE. LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. SHE FURTHER PLACED RELIANCE UPON THE DECISION OF THIS TRIBUNAL IN ITA NO. 106/DEL/2009 DATED 16.4.2010 IN THE CASE OF MICROSOFT CORPORATION INDIA PVT. LTD. VS. DCIT AND IN ANOTHER DECISION OF THE TRIBUNAL IN ITA NO. 12/DEL/2010 DATED 14.5.2010 IN THE CASE OF SURVIDHI FINANCIAL SERVICES LTD. ACIT. 6.1 WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. ITA NO. 1688/DEL/2010 A.Y. 2006-07 4 6.2 WE CAN GAINFULLY REFER TO THE PROVISION OF SECT IONS 92E AND 271BA WHICH READ AS UNDER:- 92E. EVERY PERSON WHO HAS ENTERED INTO AN INTERN ATIONAL TRANSACTION DURING A PREVIOUS YEAR SHALL OBTAIN A R EPORT FROM AN ACCOUNTANT AND FURNISH SUCH REPORT ON OR BEFORE THE SPECIFIED DATE IN THE PRESCRIBED FORM DULY SIGNED A ND VERIFIED IN THE PRESCRIBED MANNER BY SUCH ACCOUNTANT AND SE TTING FORTH SUCH PARTICULARS AS MAY BE PRESCRIBED. 271BA IF ANY PERSON FAILS TO FURNISH A REPORT FROM AN ACCOUNTANT AS REQUIRED BY SECTION 92E, THE ASSESSING OFFICER MAY DIRECT THAT SUCH PERSON SHALL PAY, BY WAY OF PENALTY, A SUM OF ONE HUNDRED THOUSAND RUPEES. 7. FROM THE ABOVE IT IS CLEAR THAT AS PER THE MANDA TE OF SECTION 92E, THE ASSESSEE IN THIS CASE WAS TO OBTAIN THE AUDIT REP ORT AND FILE IT BEFORE THE DUE DATE FOR FILING RETURN. SECTION 271BA PROVIDES F OR A PENALTY OF RS. 1,00,000/- FOR FAILURE TO FOLLOW THE MANDATE OF SECTION 92E. WE ALSO NOTE THAT SECTION 273B PROVIDES THAT NO PENALTY INTER-ALIA U/S 271BA WILL BE LEVIABLE, IF THERE IS REASONABLE CAUSE FOR THE FAILURE OF THE ASSESSEE TO COMPLY WITH THE PROVISIONS MENTIONED THEREIN. 8. NOW IN THE PRESENT CASE, WE FIND THAT ASSESSEE HAS CLAIMED THAT THE SAID AUDIT REPORT WAS OBTAINED MUCH EARLIERTHAN THE DUE DATE FOR FILING THE RETURN. THE SAME COULD NOT BE FILED ALONGWITH THE RETURN AS THE RETURN WAS FILED ELECTRONICALLY AND THE ASSESSEE WAS UNDER THE BELIE F THAT ANY ANNEXURES ETC. WERE NOT TO BE FILED ALONGWITH THE RETURN. AFFIDAVIT FRO M DIRECTOR AND CHARTERED ACCOUNTANT IS ALSO ON RECORD THAT THE REPORT IN FOR M NO. 3CEB WAS OBTAINED ON 1.9.2006 I.E. BEFORE THE DUE DATE FOR FILING THE R ETURN. THE ASSESSEE HAD ALSO PROVIDED THE SAID REPORT TO THE ASSESSING OFFICER BEFORE THE COMPLETION OF THE ITA NO. 1688/DEL/2010 A.Y. 2006-07 5 ASSESSMENT. UNDER THE ABOVE SAID CIRCUMSTANCES, I N OUR CONSIDERED OPINION, THERE WAS REASONABLE CAUSE FOR THE ASSESSEE IN NOT FILING THE REPORT IN FORM NO. 3CEB ALONGWITH THE RETURN OF INCOME. HENCE IN OUR CONSIDERED OPINION, SECTION 273B IN THIS CASE COMES TO THE RESCUE OF THE ASSESS EE FROM THE RIGORS OF PENALTY U/S 271BA. THE CASE LAWS REFERRED BY THE REVENUE ARE NOT APPLICABLE IN THIS CASE ON THE FACTS OF THE PRESENT CASE IN AS MUCH AS IN T HIS CASE WE HAVE FOUND THAT THERE WAS REASONABLE CAUSE FOR THE FAILURE OF THE A SSESSEE TO COMPLY WITH THE PROVISION OF THE ACT. 9. IN THIS REGARD WE PLACE RELIANCE FROM THE APEX COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF THEIR LORDSH IPS IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 26 WHEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGA TION IS THE RESULT OF A QUASI- CRIMINAL PROCEEDINGS, AND PENALTY WILL NOT ORDINARI LY BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LA W OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DI SREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDIC IALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENA LTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE P ROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OF FENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. ITA NO. 1688/DEL/2010 A.Y. 2006-07 6 10. IN THE BACKGROUND OF THE AFORESAID DISCUSSION A ND PRECEDENT, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE LEVY OF PENALTY OF RS. 1,00,000/-. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/06/2010 UP ON CONCLUSION OF HEARING. SD/- SD/- [A.D. JAIN] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 15/06/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES