Transport Corporation of India Ltd., Hyd, Secunderabad V. Addl. CIT, Range-2, Hyd, Hyderabad

ITA 188/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6274 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-12-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 22-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92

Judgement Text

ITA NO 188 OF 2016 TCI LTD HYDERABAD PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.188/HYD/2016 (ASSESSMENT YEAR: 2010-11) TRANSPORT CORPORATION OF INDIA LIMITED HYDERABAD PAN: AAACT 7966 R VS ADDL. COMMISSIONER OF INCOME TAX, RANGE-2 HYDERABAD FOR ASSESSEE : SHRI Y. RATNAKAR FOR REVENUE : SHRI K.J. RAO, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2010-11. IN TH IS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF T HE CIT(A) IN CONFIRMING THE PENALTY LEVIED BY THE AO U/S 271G OF THE I.T. ACT. 2. BRIEF FACTS OF THE CASE ARE THAT DURING THE SCRU TINY PROCEEDINGS IN THE CASE OF THE ASSESSEE FOR THE A.Y 2010-11, THE ASSESSEE WAS REQUIRED TO FILE THE T.P. STUDY MAINTA INED U/S 92D(3) R.W.R 10D OF THE ACT. THE AO OBSERVED THAT A REQUEST WAS MADE TO THIS EFFECT DURING THE HEARING DATED 30.10. 2012, BUT THE REPORT WAS NOT FILED DURING THE YEAR AND THAT DURIN G THE HEARING DATED 30.03.2013, IT CAME TO THE NOTICE OF THE AO T HAT NO SUCH STUDY WAS MAINTAINED BY THE ASSESSEE EVEN THOUGH TH E VALUE OF DATE OF HEARING : 29.12.2016 DATE OF PRONOUNCEMENT : 11.01.2017 ITA NO 188 OF 2016 TCI LTD HYDERABAD PAGE 2 OF 6 THE TRANSACTION EXCEEDED THE TIME LIMIT PRESCRIBED U/S 92D(3) OF THE ACT. THEREFORE, PENALTY PROCEEDINGS U/S 271G WE RE INITIATED BY WAY OF ISSUE OF SHOW CAUSE NOTICE ON 31.03.2013 AND LEVIED PENALTY U/S 271G OF THE I.T. ACT @2% OF THE INTERNAT IONAL TRANSACTION. AGGRIEVED, THE ASSESSEE PREFERRED AN A PPEAL BEFORE THE CIT (A) STATING THAT NO NOTICE U/S 92D(3) WAS I SSUED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS REQUIRING THE ASSESSEE TO FURNISH THE INFORMATION AND DOCUMENTS AND THEREF ORE, THE PROCEEDINGS U/S 271G ARE NOT VALID. THE CIT (A) HOW EVER, CONFIRMED THE PENALTY ORDER AND THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE HAS DRAWN O UR ATTENTION TO THE RELEVANT PROVISIONS OF LAW I.E. SE CTION 92D(3) AND SECTION 271G AND THE DECISIONS OF THE COORDINATE BE NCH OF THIS TRIBUNAL IN THE FOLLOWING CASES: I) INCOME TAX OFFICER VS. NETSOFT INDIA LTD REPORTE D IN (2013) 35 TAXMANN.COM 579 II) ADIT (I.T) AHMEDABAD VS. NICCO RESOURCES LTD REPORTED IN 36NTAXMANN.COM 378. III) CARGIL INDIA (P) LTD VS. DCIT REPORTED IN 167 TAXMAN/110 ITD 616 (DEL.). HE HAS ALSO FILED DETAILED WRITTEN SUBMISSIONS ON T HIS ISSUE. 4. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE PENALTY LEVIED IS U/S 2 71G OF THE ACT. ITA NO 188 OF 2016 TCI LTD HYDERABAD PAGE 3 OF 6 FOR THE SAKE OF READY REFERENCE, THE RELEVANT PROVIS ION IS REPRODUCED HEREUNDER: 271G. PENALTY FOR FAILURE TO FURNISH INFORMATION OR DOCUMENT UNDER SECTION 92D.IF ANY PERSON WHO HAS ENTERED IN TO AN INTERNATIONAL TRANSACTION FAILS TO FURNISH ANY SUCH INFORMATION OR DOCUMENT AS REQUIRED BY SUB-SECTION (3) OF SECTI ON 92D, THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) MAY DIRECT THAT SUCH PERSON SHALL PAY, BY WAY OF PENALTY, A SU M EQUAL TO TWO PER CENT OF THE VALUE OF THE INTERNATIONAL TRAN SACTION FOR EACH SUCH FAILURE.'. 6. ON A LITERAL READING OF THE ABOVE PROVISION, IT IS CLEAR THAT THE AO HAS TO ISSUE A NOTICE UNDER SUB SECTION 3 OF SECTION 93D OF THE ACT REQUIRING THE ASSESSEE TO FURNISH AN Y INFORMATION OR DOCUMENTS AND ONLY ON THE FAILURE OF THE ASSESSE E TO FURNISH SUCH INFORMATION, CAN THE AO OR THE CIT (A) INITIAT E PROCEEDINGS U/S 271G OF THE ACT. THOUGH THE ASSESSEE HAS RAISED ITS SPECIFIC OBJECTION BEFORE THE AO AS WELL AS THE CIT (A), BOT H HAVE FAILED TO CONSIDER AND ADJUDICATE THE SAID OBJECTION OF THE A SSESSEE. WE FIND THAT THE CIT (A) HAS ONLY DISCUSSED ABOUT THE ISSUANCE OF NOTICE U/S 271G OF THE ACT AND THERE IS NO DISCUSSI ON AT ALL ABOUT THE ISSUANCE OF NOTICE U/S 92D(3) OF THE ACT. WE FI ND THAT SIMILAR ISSUE HAD ARISEN BEFORE THE DELHI BENCH OF THE TRIB UNAL IN THE CASE OF CARGIL INDIA (P) LTD (CITED SUPRA) AND THE TRIBUNAL AT PARA 32 TO 34 HAS HELD AS UNDER: 32. IN THE LIGHT OF WHAT WE HAVE DISCUSSED ABOVE RELAT ING TO REQUIREMENT OF VALID NOTICE UNDER SECTION 92D(3) OF THE ACT, ABOVE MENTIONED NOTICES CANNOT BE TREATED AS VALID AND LE GAL TO JUSTIFY APPLICATION OF PROVISION UNDER SECTION 271G OF THE ACT AND LEVY OF PENALTY OF MORE THAN RS. 40 CRORES. THESE ARE OMNIB US NOTICES ISSUED WITHOUT APPLICATION OF MIND AND WITHOUT CONSIDERING DOCUMENTS ALREADY PLACED BY THE TAXPAYER ON RECORD AND WITHOU T CONSIDERATION AS TO WHICH OF THE SPECIFIC CLAUSES OF SUB-RULE (1) OR OTHER SUB-RULES WAS ATTRACTED OR WHICH RELEVANT INFORMATION WAS NEEDED IN THIS CASE. UNDER SECTION 92D(3), ASSESSING OFFICER OR CIT (APPEALS) IS AUTHORIZED TO REQUIRE PRESCRIBED INFORMATION BUT HERE BOTH PRESCR IBED AND UN- ITA NO 188 OF 2016 TCI LTD HYDERABAD PAGE 4 OF 6 PRESCRIBED INFORMATION LIKE BALANCE SHEET, PROFIT A ND LOSS ACCOUNT, COMPUTATION OF INCOME ETC. WAS ALSO REQUIRED TO BE FURNISHED FROM THE TAXPAYER BEFORE THE TAXPAYER COULD FILE EVIDENCE UN DER SECTION 92CA(2). NOT ONLY PRIMARY DOCUMENTS NECESSARY TO SU PPORT THE COMPUTATION OF ALP OF TAXPAYER, BUT ALSO SUPPORTING DOCUMENTS DETAILED IN SUB-RULE (3) OF RULE 10D WERE REQUIRED TO BE FURNISHED WITHOUT CONSIDERING WHICH SUPPORTING DOCUMENTS OUT OF SEVERAL MENTIONED IN VARIOUS CLAUSES OF THE SAID SUB-RULE W ERE AVAILABLE WITH THE TAXPAYER. THE BURDEN OF SELECTION/RELEVANCY OF CLAUSES APPLICABLE WAS SHIFTED TO THE TAXPAYER. THE NOTICE ONLY INCREA SED BURDEN OF THE TAXPAYER AND CONFUSED THE NOTICEE. ABOVE NOTICES IS SUED WITHOUT APPLICATION OF MIND AND WITHOUT CONSIDERING RELEVAN CY AND REQUIREMENT OF ALL THE PRESCRIBED INFORMATION AND DOCUMENTS UND ER RULE 10D VITIATED THE LEGALITY OF THE NOTICES. ABOVE NOTICES COULD NOT BE TREATED AS PROPER AND LEGAL NOTICES IN TERMS OF SECTION 92D(3) OF THE ACT. THE FAILURE, THEREFORE, OF THE TAXPAYER TO COMPLY SUCH NOTICES IN TIME CANNOT JUSTIFY LEVY OF PENALTY OF RS. 40,46,41,376. THE NO TICE BEING ILLEGAL QUESTION OF LEVY OF PENALTY DID NOT ARISE. 33. APART FROM THE DECISIONS CITED BY SHRI AGARWAL, THE LEARNED COUNSEL FOR TAXPAYER, OUR ABOVE VIEW IS SUPPORTED BY DECISI ON OF CALCUTTA HIGH COURT IN THE CASE OF NEW CENTRAL JUTE MILLS CO. LTD . V. DWIJENDRALAL BRAHMACHARI [1993] 90 ITR 467 WHERE A NOTICE WAS IS SUED BY THE ITO ASKING FOR PRODUCTION OF ALL THE BOOKS OF ACCOUNT A ND DOCUMENTS OF COMPANY LYING IN THE CUSTODY OF THE REGISTRAR OF TH E COMPANY. THE COURT FOUND THAT BOOKS OF ACCOUNT AND DOCUMENTS SUM MONED WERE NOT SEIZED AND NOT SEEN BY THE ITO AND, THEREFORE, THE ITO HAD NO KNOWLEDGE AND COULD NOT HAVE ANY KNOWLEDGE ABOUT TH E CONTENTS OF BOOKS AND DOCUMENTS NOR COULD DETERMINE THE RELEVAN CY OR OTHERWISE OF SAID BOOKS AND DOCUMENTS. THE COURT HELD THAT NO TICE CLEARLY SUGGESTED THAT ITO HAD NOT APPLIED HIS MIND BEFORE ISSUING THE NOTICE. IT WAS ALSO HELD TO BE VAGUE AND ILLEGAL. THE NOTIC E WAS, THEREFORE, HELD TO BE BEYOND STATUTORY POWERS, ILLEGAL AND QUASHED ACCORDINGLY. THE FACTS HERE ARE QUITE SIMILAR. 34. IN THE LIGHT OF ABOVE DISCUSSION, WE HOLD THAT THR EE NOTICES REFERRED TO ABOVE ISSUED BY THE TPO COULD NOT BE TREATED AS VALID NOTICES ISSUED IN TERMS OF SECTION 92D(3) OF THE ACT AND, THEREFOR E, DID NOT ATTRACT PENALTY PROVISIONS OF SECTION 271G OF THE INCOME-TA X ACT. 7. SINCE, IT IS NOT PROVED BY THE REVENUE THAT A NO TICE U/S 92D(3) HAS BEEN ISSUED TO THE ASSESSEE, RESPECT FULLY FOLLOWING THE ABOVE DECISION, WE ALLOW THE ASSESSEES APPEAL AND SET ASIDE THE PENALTY ORDER U/S 271G OF THE ACT. ITA NO 188 OF 2016 TCI LTD HYDERABAD PAGE 5 OF 6 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JANUARY, 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 11 TH JANUARY, 2017. VINODAN/SPS COPY TO: 1 TRANSPORT CORPORATION OF INDIA LTD, 306 & 307, 3 RD FLOOR, ASHOKA BHOOPAL CHAMBERS, S.P. ROAD, SECUNDERABAD 500003 2 ADDL. CIT RANGE-2 HYDERABAD 3 CIT (A)-9, HYDERABAD 4 PR. CIT 2 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER ITA NO 188 OF 2016 TCI LTD HYDERABAD PAGE 6 OF 6