The DCIT(OSD)-1, Range-4, Ahmedabad V. Mission Pharma Logistics Pvt.Ltd., Ahmedabad

ITA 2179/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1834 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-03-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 01-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Keywords: Business income; Transfer pricing; International transaction; Revised return
• Section: 92C; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI SHAILENDRA YADAV, JM, & SHRI MANISH BORAD, AM. ITA NO.2179/AHD/2012 ASST. YEAR:2005-06 DCIT (OSD)-1, CIRCLE-4, AHMEDABAD. VS. MISSION PHARMA LOGISTICS (INDIA) P. LTD. 101, COMMERCE HOUSE, OPP. RAJVANSH TOWERS, BODAKDEV, AHMEDABAD. APPELLANT RESPONDENT PAN AACCM 6133D APPELLANT BY SHRI DINESH SINGH, SR.DR RESPONDENT BY SHRI PRASHANT MAHESHWARI, AR DATE OF HEARING: 28.3.2016 DATE OF PRONOUNCEMENT: 6/4 /2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF ASSESSEE IS DIRECTED AGAINST THE OR DER OF LD. CIT(A) VIII, AHMEDABAD DATED 26.7.2012 PASSED AGAI NST ORDER U/S 271(1)(C) OF THE IT ACT, 1961 (IN SHORT THE ACT) DA TED 29.3.2011 FOR ASST. YEAR 2005-06 PASSED BY ACIT (OSD)-1, RANGE-4, AHMEDABAD. REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE PENALTY OF RS.17,65,978/- LEVIED U/S. 271(L)(C) OF THE IT. ACT , 1961 FOR' FURNISHING INACCURATE PARTICULARS OF INCOME AND THEREBY CONCEA LING THE TRUE INCOME, BY INCORRECT CALCULATION OF INCOME IN RESPE CT OF INTERNATIONAL TRANSACTIONS. ITA NO. 2179/AHD/201 ASST. YEAR 2005-062 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED T O THE ABOVE EXTENT. 2. BRIEFLY STATED FACTS AS CULLED OUT FROM THE ASSE SSMENT RECORDS ARE THAT ASSESSEE IS A PRIVATE LIMITED COMPANY ENGA GED IN THE MEDICAL KITS AND MEDICAL DISPOSABLES. IT FILED ITS RETURN OF INCOME ON 28.10.2005 DECLARING TOTAL INCOME AT RS.NIL AND AGA IN REVISED RETURN WAS FILED ON 12.3.2007 DECLARING TOTAL INCOME AT RS .1,00,79,260/-. THEREAFTER CASE WAS SELECTED FOR SCRUTINY ASSESSMEN T AND NOTICE U/S 143(2) OF THE ACT WAS ISSUED AND NECESSARY DETAILS WERE FURNISHED. ASSESSEES CASE WAS REFERRED TO THE TRANSFER PRICIN G OFFICER (TPO) AS PER PROVISIONS OF SECTION 92CA FOR THE PURPOSE O F COMPUTATION OF ARMS LENGTH PRICE IN RESPECT OF ITS INTERNATIONAL TRANSACTIONS WITH MISSION PHARMA A/S, DENMARK WHICH IS AN ASSOCIATED ENTERPRISE. THE TPO HAS MADE UPWARD ADJUSTMENT IN RESPECT OF INTERN ATIONAL TRANSACTIONS FOR AN AMOUNT OF RS.2,69,06,690/- TO T HE INCOME OF ASSESSEE AND ASSESSED IT AT RS.3,69,85,950/-. 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CIT(A ) AGAINST THE QUANTUM ADDITION AND LD. CIT(A) DELETED THE ADD ITION TO THE EXTENT OF RS.2,20,80,690/- AND SUSTAINED IT TO RS.48,26,00 0/-. 4. THEREAFTER ASSESSEE AND REVENUE BOTH CAME IN APP EAL BEFORE THE TRIBUNAL AND THE CO-ORDINATE BENCH VIDE ITS ORD ER IN ITA NO.945 & 3149/AHD/2010 FOR ASST. YEARS 2005-06 & 2006-07 DIS MISSED THE ITA NO. 2179/AHD/201 ASST. YEAR 2005-062 3 APPEAL OF REVENUE AND ALLOWED THAT OF THE ASSESSEE THEREBY DELETING THE TOTAL ADDITION OF RS.2,69,06,690/-. ON THE OTHE R HAND, SUBSEQUENT TO THE ORDER OF LD. CIT(A) DATED 30.12.2009 GIVING PART RELIEF TO THE ASSESSEE, LD. ASSESSING OFFICER FRAMED THE ORDER U/ S 271(1)(C) OF THE ACT ON 29.3.2011 IMPOSING PENALTY OF RS.17,65,978/- FOR THE DEFAULT AND FURTHER ON APPEAL BY ASSESSEE, LD. CIT(A) DELET ED THE IMPUGNED PENALTY. 5. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE THE T RIBUNAL. 6. THE LD. DR SUPPORTED THE ORDER OF LD. ASSESSING OFFICER. 7. ON THE OTHER HAND, LD. AR SUBMITTED THAT AS THE QUANTUM OF ADDITION MADE BY LD. ASSESSING OFFICER HAS BEEN DEL ETED BY THE CO- ORDINATE BENCH WHICH CLEARLY PROVES THAT ASSESSEE H AS NOT FURNISHED INACCURATE PARTICULARS AND SO PENALTY U/S 271(1)( C) OF THE ACT SHOULD NOT HAVE BEEN IMPOSED BY LD. ASSESSING OFFICER AND LD. CIT(A) HAS RIGHTLY DELETED THE PENALTY IMPOSED U/S 271(1)(C) O F THE ACT. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. REVENUE IS IN APPEAL AGAINST THE ACTION OF LD. CIT(A) DELETING THE PENALTY OF RS.17,65,978/- LEVIED U/S 2 71(1)(C) OF THE ACT. WE OBSERVE THAT CO-ORDINATE BENCH IN THE CASE OF AS SESSEE IN ITA NO.945 & 3149/AHD/2010 (SUPRA) WHILE DEALING WITH T HE QUANTUM ADDITION MADE IN THE CASE OF ASSESSEE DECIDED THE I SSUE IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER :- ITA NO. 2179/AHD/201 ASST. YEAR 2005-062 4 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND JUD GMENTS CITED BY BOTH THE SIDES. WE FIND FORCE IN THE SUBMISSIONS OF THE LEARNED AR OF THE ASSESSEE THAT, EVEN IF, IT IS ACCEPTED THAT THE 'AE' OF THE ASSESSEE IS A TESTED PARTY, AND IDA IS COMPARABLE, THEN ALSO, NO ADDITION IS JUSTIFIED IN THIS YEAR, IF THE MARGIN FOR THE AGGREGATE TRANSACTIONS IS CONSIDERED. BECAUSE, THE PROFIT MARGIN OF THE IDA I .E. COMPARABLE IS CONSIDERED ON YEARLY AVERAGE BASIS, THE PROFIT MARGIN OF THE TEST ED PARTY SHOULD ALSO BE ADOPTED ON SIMILAR BASIS, I.E. YEARLY AVERAGE IN RESPECT OF AL L THE TRANSACTIONS, AND IT CANNOT BE ON THE BASIS OF ONLY THOSE TRANSACTIONS WHERE MARGIN R EPORTED BY THE 'AE' I.E. TESTED PARTY IS MORE THAN THE PROFIT MARGIN OF THE COMPARA BLE AND BY EXCLUDING THOSE TRANSACTIONS WHERE THE PROFIT RATE OF THE 'AE' I.E. TESTED PARTY IS LESS THAN THE PROFIT MARGIN OF IDA I.E. COMPARABLE. AS PER THE CA'S CERT IFICATE PROVIDED BY THE ASSESSEE, BEING CERTIFICATE DATED 3.4.2013, WHEN WE CONSIDER ALL 15 SALE TRANSACTIONS OF THE ASSESSEE WITH ITS 'AE', THE AVERAGE PROFIT MARGIN O F TOTAL SALES OF THE 'AE' WORKS OUT TO 11.68%. THIS IS ADMITTED POSITION OF THE FACT TH AT THE PROFIT MARGIN OF THE COMPARABLE ADOPTED BY THE TPO AND THE ASSESSEE I.E. IDA WAS 11.94%, AND HENCE, THE AGGREGATE PROFIT MARGIN OF THE 'AE' IS WITHIN T HE LIMIT OF 5% OF THE PROFIT MARGIN OF THE COMPARABLE I.E. IDA, AND THEREFORE NO ADDITION IS CALLED FOR IN THIS YEAR, EVEN AS PER THE BASIS ADOPTED BY THE AO/TPO, I.E. ' AE' AS A TESTED PARTY, AND IDA AS COMPARABLE. WE, THEREFORE, DO NOT GO INTO THIS ASPE CT OF THE MATTER IN THIS YEAR, AS TO WHETHER THE 'AE' SHOULD BE SELECTED AS A TESTED PAR TY OR THE ASSESSEE SHOULD BE CONSIDERED AS THE TESTED PARTY AND WHETHER IDA CAN BE CONSIDERED AS COMPARABLE OR NOT. WHEN NO ADDITION IS JUSTIFIED, EVEN AS PER THE BASIS ADOPTED BY THE AO AND THE TPO, WE DO NOT ENTER INTO THIS ASPECT IN THE PRESEN T YEAR, AND THEREFORE, THE ENTIRE ADDITION MADE BY THE AO IN RESPECT OF SALES EFFECTE D BY THE ASSESSEE TO THE 'AE' OF RS.2,65,37,704/- IS DELETED AND CONSEQUENTLY, GROUN D NOS.L, 2 AND 3 OF THE REVENUE ARE REJECTED AND THE GROUND NO.L OF THE ASSESSEE IS ALLOWED. WE ALSO OBSERVE THAT LD. CIT(A) HAS DELETED THE PEN ALTY IMPOSED U/S 271(1)(C) OF THE ACT BY OBSERVING AS UNDER :- 4.4. I HAVE GIVEN CAREFUL CONSIDERATION TO THE WRIT TEN SUBMISSIONS FILED BY THE APPELLANT, REPRODUCED AS ABOVE. I HAVE ALSO CAREFUL LY PERUSED THE ASSESSMENT ORDER IN THE COURSE OF WHICH THE PENALTY PROCEEDING S WERE INITIATED AND ALSO PERUSED THE ORDER U/S. 271(1)(C) WHICH IS UNDER APP EAL. UPON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND CONSIDERABLE FORCE AND MERIT IN THE SUBMISSIONS OF THE A.R. TO T HE EFFECT THAT ADDITION MADE BY THE AO ON ACCOUNT OF UPWARD ADJUSTMENT IN RESPECT O F INTERNATIONAL TRANSACTIONS WITH ASSOCIATE ENTERPRISES DOES NOT CONSTITUTE THE DEFAULT OF FURNISHING INACCURATE PARTICULARS OF INCOME. FURTHER, IT IS ON PERUSAL OF THE IMPUGNED PENALTY ORDER THAT THE AO HAS, FOR THE PURPOSE OF ING THE PENALTY, PRE SSED INTO SERVICE THE PROVISIONS OF EXPLANATION-1 OF SECTION 271(1)(C) OF THE IT ACT. THERE IS NO DISPUTE ITA NO. 2179/AHD/201 ASST. YEAR 2005-062 5 OVER THE FACT THAT THE PENALTY HAS BEEN LEVIED WITH RESPECT TO THE UPWARD ADJUSTMENT MADE ON THE BASIS OF AN ORDER U/S. 92CA (3) PASSED BY THE TRANSFER PRICING OFFICER. THEREFORE, FOR THE PURPOSE OF THE PROVISIONS OF SECTION 271(1)(C), IT IS EXPLANATION-7 BELOW THAT SECTION WHICH IS APP LICABLE IN THE PRESENT CASE. ON PERUSAL OF THE WRITTEN SUBMISSION FILED BY THE APPE LLANT, REPRODUCED ABOVE, IT IS FOUND THAT EXPLANATION-1 BELOW SECTION 271(1)(C) HA S NO APPLICABILITY TO THE FACTS OF THE CASE. FURTHER, THE APPELLANT'S SUBMISSION CL EARLY BRINGS OUT THE FACT THAT THE PRICE CHARGED OR PAID IN THE INTERNATIONAL TRANSACT IONS WAS COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION 92C AND IN THE MANNER PRESCRIBED UNDER THAT SECTION IN GOOD FAITH AND WIT H DUE DILIGENCE. THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE P ETRO PRODUCTS PVT. LTD. (322 ITR 158 (SC)) HAS HELD AS UNDER:- 'A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, T HERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSES. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICU LARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS' USED IN SECTI ON 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INF ORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY TH E ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FU RNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO B E INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETA ILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACC ORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FA LSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NO T AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIMMADE IN THE RETURN CANNOT AMOUNT TO FURNISHIN G INACCURATE PARTICULARS'. --' THE A.R. OF THE APPELLANT HAD ALSO FILED COPY OF TH E JUDGMENT OF THE 1TAT, AHRRDABAD BENCH 'B' IN THE CASE OF BOSCH REXROTH I NDIA LIMITED V/S. ACIT IN ITA HO. 1926/AHD/2009) WHEREIN THE HON'BLE TRIBUNAL HAD DELETED THE PENALTY LEVIED WITH RESPECT TO UPWARD ADJUSTMENT UNDER TRAN SFER PRICING. THE A.R, HAD ALSO FILED COPY OF THE JUDGMENT OF THE ITAT, MUMBAI IN THE CASE OF DCIT VS. RBS EQUITIES INDIA LIMITED REPORTED IN 141 TTJ 58 W HERE /TAT, MUMBAI (141 TTJ 58) (2011) IN RESPECT OF THE ADJUSTMENTS U/S. 92C UNDER TRANSFER PRICING REGULATIONS, THE HON'BLE ITAT HAS HELD THAT WHEN THE ASSESSEE HAS COMPUTED ARM'S LENGTH PRICE (ALP) IN GOOD FAITH AND WITH DUE DILIGENCE, NO PENALTY CAN ITA NO. 2179/AHD/201 ASST. YEAR 2005-062 6 BE LEVIED U/S. 271(1)(C) IN VIEW OF EXPLANATION - 7 TO THE SAID SECTION. \ FIND THAT THE RATIOS OF THESE JUDGMENTS ARE APPLICABLE T O THE FACTS OF THE APPELLANT'S CASE. 4.5. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE AND RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. (322 ITR 158 (SC)) CITED S UPRA AND THE JUDGMENT OF THE JURISDICTIONAL ITAT, AHMEDABAD BENCH IN THE CAS E OF BOSCH REXROTH INDIA LIMITED V/S. ACIT IN ITA NO. 1926/AHD/2009) AND THE JUDGMENT ITAT, MUMBAI BENCH IN THE CASE OF DCIT VS. RBS EQUITIES INDIA LI MITED REPORTED IN 141 TTJ 58, IT IS HELD THAT THE ORDER U/S. 271(1)(C) PASSED BY THE AO IS NOT MAINTAINABLE IN LAW. ACCORDINGLY, ORDER U/S. 271(1) (C) IMPOSING PENALTY OF RS.17,65,978/- IS HEREBY BY CANCELLED. 9. WE ARE, THEREFORE, OF THE VIEW THAT AS THE SUSTA INED QUANTUM ADDITION ON WHICH PENALTY U/S 271(1)(C) OF THE ACT HAS BEEN IMPOSED BY LD. ASSESSING OFFICER, HAS BEEN DELETED BY THE C O-ORDINATE BENCH IN THE CASE OF ASSESSEE FOR ASST. YEAR 2005-06 THEN IN THE GIVEN CIRCUMSTANCES, ASSESSEE SHOULD NOT BE VISITED WITH PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND LD. CIT(A) HAS RIG HTLY DELETED THE SAME. WE ACCORDINGLY FIND NO REASON TO INTERFERE WI TH THE ORDER OF LD. CIT(A) AND UPHOLD THE SAME. THE GROUND RAISED BY TH E REVENUE IS DISMISSED. 10. OTHER GROUNDS ARE OF GENERAL NATURE, WHICH NEED NO ADJUDICATION. ITA NO. 2179/AHD/201 ASST. YEAR 2005-062 7 11. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 6/4/2016 SD/- SD/- (SHAILENDRA YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 6/4/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 5/4/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 6/4/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK:7 /4/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: