Smt. Anita Sunil Mahajan, Nashik V. Assistant Commissioner of Income-tax, Circle - 1, Nashik

ITA 1859/PUN/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1061 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-07-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 31-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: IS DIRECTED AGAINS T PASSED
• Keywords: Transfer pricing; International transaction
• Section: 92C; 92D; 92E; 201; 44AB; 13; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE VIRTUAL COURT BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY , JUDICIAL MEMBER I TA NO. 1859 /PUN/201 7 / ASSESSMENT YEAR : 20 13 - 14 SMT. ANITA SUNIL MAHAJAN KEDRIYA RAJASWA BHAVAN, RAM GANESH GADKARI CHOWK, OLD AGRA ROAD, NASHIK 422002 PAN: A MQPM9510P VS. ACIT, CIRCLE - 1, NASHIK APPELLANT RESPONDENT / ORDER PER R.S.SYAL, VP: TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) ON 9.5.2017 ECHOING THE PENALTY OF RS.39,28,638 IMPOSED BY THE ASSESSING OFFICER (AO) U/S 271AA OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT) FOR FAILURE TO KEEP AND MAINTAIN INFORMATION AS REQUIRED U/S 92D AND NOT FURNISHING THE REPORT U/S 92E OF THE ACT IN RELATION TO THE ASSESSMENT YEAR 20 13 - 14 . A SSESSEE BY S HRI PRAMOD SHINGTE RE VENUE BY SHRI VITTHAL BHOSALE DATE OF HEARING 09 - 0 7 - 202 1 DATE OF PRONOUNCEMENT 12 - 0 7 - 202 1 ITA NO . 1859 /PUN/ 201 7 SMT. ANITA SUNIL MAHAJAN 2 2. SUCCINCTLY, THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSESSEE FILED HE R RETURN DECLARING TOTAL INCOME AT RS.18,61,808. T HE ASSESSEE REPORTED FOUR PAYMENTS TOTALING RS.19,64,31,914 , IN THE TAX AUDIT REPORT, AS HAVING BEEN MADE TO PERSONS SPECIFIED U/S 40A(2)(B) OF THE ACT AS UNDER : MAHAJAN ADAT DUKAN PROP YOGITA MAHAJAN PU RCHASES RS.16,34,02,140/ - SONI ADAT DUKAN PROP PRABHAVATI MAHAJAN PURCHASES RS.3,28,31,774/ - SUNIL P MAHAJAN RENT RS.1,80,000/ - YOGESH P MAHAJAN RENT RS.1,80,000/ - 3. THE AO OBSERVED THAT TOTAL OF SUCH TRANSACTIONS IN THE NATU RE OF SPECIFIED DOMESTIC TRANSACTIONS (SDTS) EXCEEDED THE QUALIFYING LIMIT OF RS.5 CRORE , REQUIRING THE ASSESSEE TO MAINTAIN DOCUMENTS AND INFORMATION IN TERMS OF SECTIONS 92D AND FURNISH AUDIT REPORT AS PER SECTION 92E OF THE ACT . H E CALLED UPON THE ASSE SSEE TO FURNISH THE SAME , I N REPLY TO WHICH THE ASSESSEE STATED THAT THE TAX AUDITOR INADVERTENTLY REPORTED SUCH PAYMENTS AS HAVING BEEN MADE TO PERSONS SPECIFIED U/S 40A(2)(B) OF THE ACT. NOT CONVINCED , THE AO HEL D THAT SINCE THE ASSESSEE HAD HER SELF REPO RTED TRANSACTIONS U/S 40A(2)(B) IN THE TAX AUDIT REPORT U/S 44AB AND FURTHER THERE WAS NO ITA NO . 1859 /PUN/ 201 7 SMT. ANITA SUNIL MAHAJAN 3 ADMISSION OF ERROR BY THE AUDITOR, THE ASSESSEE WAS LIABLE TO BE VISITED WITH PENALTY U/S 271AA FOR NOT COMPL YING WI TH THE PROVISIONS OF SECTION 92D AND 92 E OF THE AC T . TOTAL OF SUCH TRANSACTIONS GIVEN IN THE TAX AUDIT REPORT U/S 40A(2)(B) AT RS.19.64 CRORE WAS CONSIDERED FOR LEVYING PENALTY OF RS.39,28,638 @ 2%. THE ASSESSEE REITERATED HER STAND BEFORE THE L D. CIT(A) THAT PAYMENTS WERE MADE TO SUCH PERSONS WHO WERE NOT COVERED WITHIN THE DEFINITION OF `RELATIVE. REJECTING THE ASSESSEES CONTENTION, THE LD. FIRST APPELLATE AUTHORITY AFFIRMED THE PENALTY, AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD BOTH THE SIDES THROUGH VIRT UAL COURT AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. PENALTY HAS BEEN IMPOSED UNDER THE PROVISIONS OF SECTION 271AA, THE RELEVANT PART OF WHICH READS AS UNDER: (1) . IF ANY PERSON IN RESPECT OF AN INTERNATIONAL TRANSACTION OR SPECIFIED DOMESTIC TR ANSACTION , (I) FAILS TO KEEP AND MAINTAIN ANY SUCH INFORMATION AND DOCUMENT AS REQUIRED BY SUB - SECTION (1) OR SUB - SECTION (2) OF SECTION 92D ; (II) FAILS TO REP ORT SUCH TRANSACTION WHICH HE IS REQUIRED TO DO SO; OR (III) MAINTAINS OR FURNISHES AN INCORRECT INFORMATION OR DOCUMENT , 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 ITA NO . 1859 /PUN/ 201 7 SMT. ANITA SUNIL MAHAJAN 4 VALUE OF EACH INTERNATIONAL TRANSACTION OR SPECIFIED DOMESTIC TRANSACTION ENTERED INTO BY SUCH PERSON. (2) .. . 5. ON CIRCUMSPECTION OF THE ABOVE PROVISION , IT IS CLEAR THAT THE PENALTY GETS ATTRACTED WHERE THE ASSESSEE FAILS TO KEEP RECORDS AND DOCUMENTS ETC. , INTER ALIA, IN RESPECT OF A SPECIFIED DOMESTIC TRANSACTION . THE TERM `SPECIFIED DOMESTIC TRANSACTION HAS BEEN DEFINED IN SECTION 92BA, WHICH AT THE MATERIAL TIME READ AS UNDER: - FOR THE PURPOSES OF THIS SECTION AND SECTIONS 92 , 92C , 92D AND 92E , 'SPECIFIED DOMESTIC TRANSACTION' IN CASE OF AN ASSESSEE MEANS ANY OF THE FOLLOWING TRANSACTIONS, NOT BEING AN INTERNATIONAL TRANSACTION, NAMELY: ( I ) ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN MADE OR ITS TO BE MADE TO A PERSONS REFERRED TO IN CLAUSE (B) OF SUB - SECTION (2) OF SECTION 40A (II) TO (VI) . AND WHERE THE AGGREGATE OF SUCH TRANSACTIONS ENTERED INTO BY THE ASSESSEE IN TH E PREVIOUS YEAR EXCEEDS A SUM OF FIVE CRORE RUPEES. 6. A CONJOINT READING OF SECTIONS 271AA AND 92BA, INSOFAR AS IT IS RELEVANT FOR OUR PURPOSE, TRANSPIRES THAT IF AN ASSESSEE VIOLATES SECTION S 92D/92E IN RESPECT OF A SPECIFIED DOMESTIC TRANSACTION, B EING, INCURRING OF ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN MADE OR IS TO BE MADE TO PERSONS ITA NO . 1859 /PUN/ 201 7 SMT. ANITA SUNIL MAHAJAN 5 REFE RRED TO IN SECTION 40A(2)(B), IT IS LIABLE TO BE VISITED WITH PENALTY AT THE RATE OF 2% OF THE VALUE OF THE SDT. 7. THE CRUX OF THE AO'S POINT O F VIEW IS THAT THE ASSESSEE PAID RS.19.64 C RORE TO THE PERSONS REFERRED TO IN SECTION 40A(2)(B) AS PER HER OWN ADMISSION IN THE TAX AUDIT REPORT AND THUS BREACHED THE MANDATE OF SECTIONS 92D/92E. AU CONTRAIRE, THE CASE OF THE ASSESSEE IS THAT SHE DID NOT M AKE PAYMENTS TO PERSONS REFERRED TO SECTION 40A(2)(B) OF THE ACT. BEFORE PROCEEDING WITH THE MATTER, WE WANT TO CLARIFY THAT THERE CAN BE NO ESTOPPEL AGAINST THE PROVISIONS OF THE ACT. IF A PARTICULAR TRANSACTION DOES NOT FALL WITHIN THE AMBIT OF A SPECIFI C PROVISION, THE SAME CANNOT BE CONSIDERED AS SO FALLING MERELY BECAUSE THE ASSESSEE TOOK A MISTAKEN VIEW ON THAT SCORE. COMING BACK, W E NEED TO DECIDE AS TO WHETHER THE TRANSACTIONS REPORTED BY THE ASSESSEE U/S 40A(2)(B) WE RE ACTUALLY COVERED WITHIN ITS KEN. TO RESOLVE THE CONTROVERSY, LET US HAVE A GLANCE AT THE RELEVANT PORTION OF SECTION 40A(2)(B) , PERTAINING TO AN INDIVIDUAL, AS IS THE ASSESSEE , WHICH RUNS AS FOLLOWS: - ( B ) THE PERSONS REFERRED TO IN CLAUSE ( A ) ARE THE FOLLOW ING, NAMELY : ITA NO . 1859 /PUN/ 201 7 SMT. ANITA SUNIL MAHAJAN 6 ( I ) WHERE T HE ASSESSEE IS AN INDIVIDUAL ANY RELATIVE OF THE ASSESSEE 8 . IT TALKS OF PAYMENTS MADE BY AN INDIVIDUAL TO ANY OF HIS OR HER RELATIVES. THE ENTIRE CONTROVERSY ROTATES AROUND THE MEANING OF THE TERM `RELATIVE AS USED IN SECTION 40A(2)(B), WHICH HAS NOT BEEN ADMITTEDLY DEFINED IN SECTION 40A OF THE ACT . THE TERM HAS BEEN SO DEFINED IN S ECTION 2(41) : `IN RELATION TO AN INDIVIDUAL, MEANS THE HUSBAND, WIFE, BROTHER OR SISTER OR ANY LINEAL ASCENDANT OR DESCENDANT OF THAT INDIVIDUAL . THE LD. CIT(A) H AS UPHELD THE IMPOSITION OF THE PENALTY BY SPECIFICALLY NOTING THE DEFINITION OF THE TERM `RELATIVE IN PARA 7.2 OF HIS ORDER, AS UNDER: - 'RELATIVE' MEANS (I) SPOUSE OF THE INDIVIDUAL; (II) BROTHER OR SISTER OF THE INDIVIDUAL; (III) BROTHER OR SISTER O F THE SPOUSE OF THE INDIVIDUAL; (IV) BROTHER OR SISTER OF EITHER OF THE PARENTS OF THE INDIVIDUAL; (V) ANY LINEAL ASCENDANT OR DESCENDANT OF THE INDIVIDUAL; (VI) ANY LINEAL ASCENDANT OR DESCENDANT OF THE SPOUSE OF THE INDIVIDUAL; (VII) SPOUSE OF THE PERSO N REFERRED TO IN CLAUSES (II) TO (VI); ITA NO . 1859 /PUN/ 201 7 SMT. ANITA SUNIL MAHAJAN 7 9. THE ABOVE DEFINITION OF THE TERM `RELATIVE IN THE IMPUGNED ORDER APPEARS TO HAVE BEEN BORROWED BY THE LD. CIT(A) FROM THE EXPLANATION TO SECTION 56(2)(V), WHICH OPENS AS FOLLOWS: EXPLANATION. FOR THE PURPOSES O F THIS CLAUSE, `RELATIVE MEANS - . THEREAFTER THE ABOVE CLAUSES FROM (I) TO (VII) HAVE BEEN SET OUT. I T IS OVERT FROM THE OPENING PART OF THE EXPLANATION THAT THE DEFINITION OF THE TERM `RELATIVE AS GIVEN HEREIN IS `FOR THE PURPOSES OF THIS CLAUSE ONLY. ON THE OTHER HAND, SECTION 2 IS DEFINITION CLAUSE OF THE INCOME - TAX ACT, WHICH BEGINS WITH THE FOLLOWING WORDS : I N THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES . THUS, IT IS GRAPHICALLY CLEAR THAT THE DEFINITION CLAUSE APPLIES TO ALL THE PROVISIONS UNDER THE ACT UNLESS THE CONTEXT OF A PARTICULAR SECTION OR SET OF SECTIONS OTHERWISE REQUIRE S . WE HAVE NOTED THE LANGUAGE OF SECTION 56(2)(V), IN WHICH THE CONTEXT OF THE `RELATIVE REQUIRES OTHERWISE AND FOR THAT PURPOSE, A SEPARATE DEFINITION HAS BEEN GIVEN IN THE EXPLANATION. OBVIOUSLY, WHILE INTERPRETING SECTION 56(2)(V), WE CANNOT GO WITH THE MEANING OF THE TERM `RELATIVE AS GIVEN IN SECTION 2(41) . IT WILL HAVE TO BE UNDERSTOOD THERE AS DEFINED IN THE EXPLANATION. ONCE WE ARE OUT OF SECTION ITA NO . 1859 /PUN/ 201 7 SMT. ANITA SUNIL MAHAJAN 8 56(2)(V) , AGAIN THE DEFINITION OF THE TERM `RELATIVE AS GIVEN IN SECTION 2(41) COMES TO GOVERN, WHICH HAS TO BE FOLLOWED, UNLESS THE CONTEXT OF A PARTICULAR SECTION OTHERWISE REQUIRES. WE HAVE NOTED ABOVE THAT NO DEFINITION OF THE TERM `RELATIVE HAS BEEN GIVEN I N SECTION 40A(2)(B). THUS, IT IS THE AMBIT OF THE TERM `RELATIVE AS GIVEN IN SECTION 2(41), WHICH WILL PREVAIL FOR UNDERSTANDING THE CONNOTATION OF THE TERM `RELATIVE U/S 40A(2)(B) OF THE ACT OVER THE ONE GIVEN IN THE EXPLANATION TO SECTION 56(2)(V), AS HAS BEEN TAKEN COGNIZANCE BY THE LD. CIT(A). EX CONSEQUENTI, ONLY THE TRANSACTIONS WITH HUSBAND, WIFE, BROTHER OR SISTER OR ANY LINEAL ASCENDANT OR DESCENDANT OF THE INDIVIDUAL WILL GET ENVELOPED UNDER SECTION 40A(2)(B) OF THE ACT . 10 . NOW WE A DVERT TO TH E NATURE OF PAYMENTS THAT HAVE BEEN COVERED U/S 40A(2)(B) IN THE TAX AUDIT REPORT IN FORM NO. 3CD . T HE FIRST TRANSACTION OF PURCHASES AMOUNTING TO RS.16.34 CRORE WAS WITH YOGITA YOGESH MAHAJAN , WHO IS ASSESSEES HUSBANDS BROTHERS WIFE. SHE IS NEITHER TH E HUSBAND NOR WIFE OR BROTHER OR SISTER OR ANY LINEAL ASCENDANT OR DESCENDANT OF THE ASSESSEE AND HENCE NOT COVERED WITHIN THE DEFINITION OF RELATIVE AS ITA NO . 1859 /PUN/ 201 7 SMT. ANITA SUNIL MAHAJAN 9 GIVEN IN SECTION 2(41). THE SECOND TRANSACTION OF PURCHASES AMOUNTING TO RS.3.28 CRORE IS WITH PRAB HAVATI MAHAJAN, PROPRIETOR SONI ADAT DUKAN, WHO IS MOTHER - IN - LAW OF THE ASSESSEE. SHE IS ALSO NOT COVERED UNDER SECTION 2(41). THE THIRD TRANSACTION IS PAYMENT OF RENT OF RS.1.80 LAKHS TO YOGESH PANDURANG MAHAJAN, WHO IS ASSESSEES HUSBANDS BROTHER. HE TOO DOES NOT FALL WITHIN THE DEFINITION OF RELATIVE AS GIVEN IN SECTION 2(41). THE LAST TRANSACTION IS PAYMENT OF RENT OF RS.1.80 LAKHS TO SUNIL PANDURANG MAHAJAN , WHO IS THE ASSESSEES HUSBAND. THIS TRANSACTION IS COVERED WITHIN THE MEANING OF TERM RELATIVE AS GIVEN IN SECTION 2(41) AND HENCE FALLS WITHIN THE REALM OF SECTION 40A(2)(B). 11 . WE HAVE NOTICED ABOVE THE DEFINITION OF SPECIFIED DOMESTIC TRANSACTION AS GIVEN IN SECTION 92BA AS EMBRACING, INTER ALIA, THE TRANSACTIONS REFERRED TO IN SE CTION 40A(2)(B) OF THE ACT PROVIDED THE AGGREGATE OF SUCH TRANSACTIONS ENTERED INTO BY THE ASSESSEE IN THE PREVIOUS YEAR EXCEEDS A SUM OF FIVE CRORE RUPEES. AS THE ASSESSEES TRANSACTION COVERED U/S 40A(2)(B) IS RESTRICTED ONLY TO RS.1.80 LAKH , T HE SAME WOULD NOT QUALIFY AS SDT U/S 92BA. A FORTIORI, SECTION S 92D /92E ALSO ITA NO . 1859 /PUN/ 201 7 SMT. ANITA SUNIL MAHAJAN 10 DO NOT GET MAGNETIZED AND CONSEQUENTLY, THERE CAN BE NO QUESTION OF ANY PENALTY U/S 271AA. WE, THEREFORE, ORDER TO DELETE THE PENALTY. 1 2 . IN THE RESULT, THE APPEAL IS ALLOWED. ORDE R PRONOUNCED IN THE OPEN COURT ON 12 TH JULY , 2021 . SD/ - SD/ - (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT PUNE ; DATED : 12 TH JULY , 2021 GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A) - 1 , NASHIK 4 . 5. THE PR. CIT - 1 , NASHIK DR A , ITAT, PUNE 6 . / GUARD FILE / BY ORDER, / / TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE ITA NO . 1859 /PUN/ 201 7 SMT. ANITA SUNIL MAHAJAN 11 DATE 1. DRAFT DICTATED ON 09 - 0 7 - 202 1 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 12 - 0 7 - 202 1 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *