Taiyo Kagaku India Private Ltd., Aurangabad V. Assistant Commissioner of Income-tax, Circle - 1, Aurangabad

ITA 183/PUN/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2851 (ITAT-PUNE)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 26-10-2021
• Assessment Year: 2016-2017
• Appeal Filed On: 19-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Transfer pricing; Principle of natural justice; International transaction; Set aside
• Section: 10B; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, PUNE BEFORE SHRI R.S.SYAL, VP AND SHRI PARTHA SARATHI CHAUDHURY , JM . / I TA NO. 183 /PUN/20 21 / ASSESSMENT YEAR : 2016 - 17 TAIYO KAGAKU INDIA PRIVATE LIMITED (EARLIER KNOWN AS TAIYO LUCID INDIA PRIVATE LIMITED) M - 101, MIDC INDUSTRIAL AREA, WALUJ, AURANGABAD - 431 136 PAN : AABCT6570G ....... / APPELL ANT / V/S. THE ASSISTANT COMMISSIONER O F INCOME TAX, CIRCLE - 1, AURANGABAD. / RESPONDENT A SSESSEE BY : SHRI ABHAY A. AVCHAT REVENUE BY : SHRI PIYUSH KUMAR SINGH YADAV / DATE OF HEARING : 26 .10 .2021 / DATE OF PRONOUNCEMENT : 26 . 10 .2021 / ORDER PER PARTHA SARATHI CHAUDHU RY, JM : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE DIRECTIONS OF THE LD. CIT(DRP - 3), MUMBAI - 1 DATED 05.03.2021 FOR THE ASSESSMENT YEAR 2016 - 17 AS PER THE GROUNDS OF APPEAL ON RECORD. 2 ITA NO. 183 /PUN/20 21 A.Y. 2016 - 17 2. THE BRIEF FACTS IN THIS CASE ARE THAT THE ASSESSEE IS INCORPORATED IN 2002 AND IS A JOINT VENTURE BETWEEN TAIYO KAGAKU CO. LTD., LUCID COLLOI DS LIMITED AND CBC CO. LTD., JAPAN. THE ASSESSEE IS THE MANUFACTURER OF A WATER SOLUBLE DIETARY FIBRE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD DISCLOSED TRANSACTION ENTERED WITH CBC CO. LTD. IN THE NATURE OF PURCHASE OF RAW MATERIALS AND PACK ING MATERIALS AMOUNTING TO RS.4,15,31,447/ - IN CLAUSE 22 OF THE FORM 3CEB AS SPECIFIED DOMESTIC TRANSACTION. IT WAS OBSERVED FROM CLAUSE 21 OF THE FORM 3CEB BY THE TPO THAT CBC CO. LTD. WAS LOCATED AT JAPAN AND THEREFORE, THE SAID TRANSACTION SHOULD HAVE BEEN DISCLOSED AS INTERNATIONAL TRANSACTION AS AGAINST SPECIFIED DOMESTIC TRANSACTION. THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO EXPLAIN AS TO WHY THE SAID TRANSACTION WAS DISCLOSED AS SPECIFIED DOMESTIC TRANSACTION AND THE ASSESSEE WAS ALSO ASKED TO FURNIS H THE DOCUMENTATION REQUIRED TO BE MAINTAINED MANDATORILY UNDER RULE 10D(1) & 10D(3), RULE 10B & 10C OF THE INCOME TAX RULES, 1962. THE ASSESSEE DID NOT FILE ANY RESPONSE AND DETAILS. IN ABSENCE OF COMPLIANCE FROM ASSESSEE TO THE STATUTORY NOTICES ISSUED, IT WAS CONCLUDED BY THE TPO THAT THE ASSESSEE HAS NOT MAINTAINED ANY SUCH DOCUMENTATION TO JUSTIFY THE ARMS LENGTH PRICE OF THE TRANSACTIONS. THEREAFTER, THE TPO CONCLUDED THAT THE ALP OF THESE TRANS ACTIONS TO BE NIL. IT WAS SUGGESTED THEREFORE, BY THE TP O THAT ACCORDINGLY, THE ASSESSING OFFICER MAY TREAT THESE AMOUNTS AS UNEXPLAINED EXPENDITURE IN THE HANDS OF THE ASSESSEE AND ADJUSTMENT WAS MADE OF RS.4,15,31,447/ - . 3. THAT WHEN THE MATTER TRAVELLED UP TO THE LD. DRP, IT WAS SUBMITTED BEFORE US BY THE LD. AR THAT THEY HAD FILED TWO WRITTEN SUBMIS SIONS THROUGH E - MAILS SINCE THAT WAS THE TIME WHEN VIRTUAL HEARING HAD STARTED. HOWEVER, THE LD. DRP HAS CONSIDERED ONLY ONE SUBMISSION OF THE ASSESSEE AND THE OTHER ONE WAS NOT CONSIDERED AT ALL. THE LD. DRP VI DE PARA 4.2 OF ITS ORDER 3 ITA NO. 183 /PUN/20 21 A.Y. 2016 - 17 HAS STATED THAT BEFORE THE TPO AND ALSO BEFORE THE DRP, THE ASSESSEE HAS NOT BEEN ABLE TO FILE ANY DOCUMENT REQUIRED TO BE MAINTAINED AS PER RULES 10D(1), 10D(3), 10B AND 10C OF THE INCOME TAX RULES, 1962 TO JUSTIFY THE ARMS LENGT H PRICE OF THE TRANSACTIONS. 3.1 THE CONCLUSION ARRIVED AT BY THE LD. DRP WAS THAT THE ASSESSEE HAS NOT MAINTAINED THE DOCUMENTATION REQUIRED AS PER STATUTORY REQUIREMENTS IN THIS REGARD WAS INESCAPABLE. IT WAS FURTHER HELD THAT IN ABSENCE OF SUCH DOCUMEN TATION, IT WAS NOT POSSIBLE TO EXAMINE WHETHER THE TRANSACTION IN QUESTION WAS AT ARMS LENGTH PRICE OR NOT . IN ADDITION, THE ASSESSEE HAS NOT BEEN ABLE TO ADVANCE ANY WRITTEN OR VERBAL SUBMISSIONS ON THE MERITS OF THE ISSUE. THEREAFTER, THE LD. DRP DISMIS SED THE OBJECTIONS FILED BY THE ASSESSEE BEING NOT SUPPORTED BY ANY SUPPORTING MATERIAL OR ARGUMENTS. FURTHER, THE ASSESSING OFFICER/TPO WAS DIRECTED TO INITIATE PENALTY PROCEEDINGS U/S.271AA AND 271G OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR FAILURE TO KEEP/MAINTAIN INFORMATION AND DOCUMENTS IN RESPECT OF AN INTERNATIONAL TRANSACTION AND FAILURE TO FURNISH INFORMATION/DOCUMENT WITHIN THE PRESCRIBED TIME LIMIT AS SPECIFIED UNDER PROVISIONS OF SECTION 92D(3) OF THE ACT. 4. AT TH E TIME OF HEARING, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THEY WERE UNABLE TO ATTEND PROC EEDINGS BEFORE THE TPO AND FILE NECESSARY SUBMISSIONS WITH DOCUMENTARY EVIDENCES IN SUPPORT OF THE CASE ON MERITS AS WAS CALLED FOR . HOWEVER, THE TPO COULD HAVE DE RIVED THE ARMS LENGTH PRICE OF THE TRANSACTION BASED ON MATERIALS AVAILABLE ON RECORD AND IT WAS NOT CORRECT FOR THE TPO TO ARRIVE AT ARMS LENGTH PRICE AS NIL. THIS IS MORE SO BECAUSE, IT IS AN UNDISPUTED FACT THAT THERE WAS PURCHASE OF RAW MATERIALS AND THIS PURCHASE TRANSACTIONS COULD HAVE BEEN DETERMINED AND THE ARMS LENGTH 4 ITA NO. 183 /PUN/20 21 A.Y. 2016 - 17 PRICE COULD HAVE ARRIVED AT BY THE TPO BY CONDUCTING SPECIFIC ENQUIRY AT HIS END AND AS PER MATERIALS AVAILABLE WITH HIM ON RECORD. THE LD. AR FURTHER SUBMITTED THAT EVEN BEFORE T HE LD. DRP, THEY HAD FILED TWO SUBMISSIONS OUT OF WHICH AS EVIDENT FROM THE ORDER OF THE LD. DRP, THEY HA D GIVEN CONSIDERATION IN RESPECT OF ONLY ONE SUBMISSION PLACED BEFORE THEM AND OTHER ONE WAS NOT CONSIDERED AT ALL. THE LD. AR FURTHER PRAYED FOR BEEN GIVEN ONE MORE OPPORTUNITY TO REPRESENT HIS CASE ON MERITS BEFORE THE TPO BY FILING REQUISITE DETAILS/DOCUMENTARY EVIDENCES FOR ACTUAL DETERMINATION OF ARMS L ENGTH PRICE OF THE TRANSACTION. 5. THE LD. DR SUBMITTED THAT ON MERITS SINCE NO FINDINGS HAVE BEEN GIVEN BY ANY OF THE REVENUE AUTHORITIES IN ABSENCE OF PROPER DOCUMENTATION, THEREFORE, AS PRAYED BY THE ASSESSEE, THE MATTER CAN GO BACK TO THE TPO FOR RE - ADJUDICATION. 6. WE HAVE HEARD THE S UBMISSIONS OF THE PARTIES HEREIN AND CONSIDERED THE FACTS AND CIRCUMSTANCES IN THIS CASE. IT IS AN AGREED FACT THAT THE ASSESSEE HAD ENTERED INTO A TRANSACTION OF PURCHASE OF RAW MATERIALS AMOUNTING TO RS. 4,15,31,447/ - AND REFLECTED IT IN CLAUSE 22 OF FORM 3CEB. NOW, AS THE FACTS ON RECORD DEMONSTRATE THAT NEITHER BEFORE THE TPO NOR BEFORE THE LD. DRP, THE ASSESSEE HAD FILED NECESSARY DETAILS/ DOCUMENTA RY EVIDENCES IN SUPPORT OF HIS CASE. THE ASSESSING OFFICER HAD HOWEVER DERIVED THE ARMS LENGTH PRICE OF T HE TRANSACTION TO BE AS NIL AND FROM THE ORDER OF THE ASSESSING OFFICER, WE ARE UNABLE TO FIND ANY EXERCISE IN THE FORM OF ENQUIRY OR EXAMINATION OF FACTS ON RECORD BY THE ASSESSING OFFICER BEFORE ARRIVING AT ARMS LENGTH PRICE AS NIL. IT IS CORRECT THAT T HE ASSESSEE HAS NOT COMPLIED WITH THE DIRECTIONS OF THE REVENUE AUTHORITIES AND HAS NOT FILED NECESSARY DOCUMENTATION S BUT ALSO IT IS CORRECT THAT THE REVENUE AUTHORITIES ON THEIR 5 ITA NO. 183 /PUN/20 21 A.Y. 2016 - 17 OWN HAS NOT MADE NECESSARY EFFORTS TO ARRIVE AT THE CORRECT CONCLUSION IN RE SPECT OF THE ARMS LENGTH PRICE OF THE TRANSACTION RELATED TO PURCHASE OF RAW MATERIALS. 7. EVEN THE LD. DR HAS NOT DISPUTED THAT THE LD. DRP CONSIDERED ONLY ONE SUBMISSION OF THE ASSESSEE AND OTHER ONE WAS IGNORED THOUGH IT WAS ON RECORD, THE ASSESSEE HA D FILED BOTH THE SUBMISSIONS THROUGH E - MAILS. EVEN IN A CASE OF BEST JUDGMENT ASSESSMENT U/S.144 OF THE ACT, IN A CASE WHERE THE ASSESSEE DOES NOT APPEAR OR DOES NOT PROVIDE PROPER EVIDENCES BEFORE THE ASSESSING OFFICER, THE ASSESSING OFFICER PROVIDE S REASONS AND COMPLETE S THE ASSESSMENT U/S.144 OF THE ACT. IN THIS CASE, WHILE ARRIVING AT ARMS LENGTH PRICE AS NIL, THE ASSESSING OFFICER HAS NOT GIVEN ANY SPECIFIC FINDINGS. FURTHERMORE, THE LD. DRP HAS COME OUT WITH THE SAME FINDINGS UPHOLDING THE ORDER OF THE ASSESSING OFFICER/TPO. 8. T HE SUB - ORDINATE AUTHORITIES IN THEIR RESPECTIVE ORDERS, HAVE GIVEN NO FINDINGS AS REGARDS THE MERITS OF THE CASE AND ONE OF THE REASON FOR THIS THAT THE ASSESSEE HAS NOT FURNISHED NECESSARY DOCUMENTARY EVIDENCES BEFORE THE REVENUE AUTHORITIES. BEFORE US, THE ASSESSEE HAS PRAYED FOR ONE FINAL OPPORTUNITY TO REPRESENT HIS CASE ON MERITS. WE ARE OF THE CONSIDERED VIEW, IN THE INTEREST OF JUSTICE, ONE FINAL OPPORTUNITY SHOULD BE PROVIDED TO THE ASSESSEE. THE ASSESSE E IS SPECIFICALLY DIRECTED TO PROVIDE NECESSARY DETAILS/ EVIDENCES/ DOCUMENTATION BEFORE THE TPO AS AND WHEN CALLED FOR TO REPRESENT HIS CASE ON MERITS. ACCORDINGLY, WE SET ASIDE THE DIRECTIONS OF THE LD. DRP AND REMAND THE MATTER TO THE FILE OF THE ASSESSI NG OFFICER/TPO FOR RE - ADJUDICATION WHILE COMPLYING WITH THE PRINCIPLES OF NATURAL JUSTICE AS PER LAW. 6 ITA NO. 183 /PUN/20 21 A.Y. 2016 - 17 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRO NOUNCED ON 26 TH DAY OF OCTOBER , 20 2 1 . SD / - SD/ - R.S.SYAL PARTHA SARATHI CHAUDHURY VICE PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 26 TH OCTO BER , 202 1 . SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS) - 13, PUNE. 4. THE PR. CIT - 5, PUNE. 5. , , , / DR, ITAT, C BENCH, PUNE. 6 . / GUARD FILE. / BY ORDER, // TRUE COPY // / PRIVATE SECRETARY , / ITAT, PUNE . 7 ITA NO. 183 /PUN/20 21 A.Y. 2016 - 17 DATE 1 DRAFT DICTATED ON 26 . 10 .2021 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 26 .10 .202 1 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER