ACIT, New Delhi V. M/s. Mahashian Di Hatti Pvt. Ltd., New Delhi

ITA 2374/DEL/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4746 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 29-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B RAMANJANEYULA
• Assessee Lawyers: PIN
• Keywords: Transfer pricing; International transaction
• Section: 142(1); 92

Judgement Text

1 ITA NOS. 5667, 1799, 2374 & 1800/DEL/2015 IN THE INCOME TAX APPELLA TE TRIBUNAL DELHI BENCH: I-1 NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A .NO. 1799/DEL /2015 (A.Y 2008-09) ACIT CENTRAL CIRCLE-04, (ERSTWHILE CC-25) NEW DELHI (APPELLANT) VS MAHASHIAN DI HATTI LTD. 9/44, KIRTI NAGAR INDUSTRIAL AREA NEW DELHI AAACM4165F (RESPONDENT) I.T.A .NO. 5667/DEL/2 015 (A.Y 2008-09) ACIT CENTRAL CIRCLE-04, ROOM NO. 331, ARA CENTRE, JHANDEWALAN EXTN. NEW DELHI (APPELLANT) VS MAHASHIAN DI HATTI LTD. 9/44, KIRTI NAGAR INDUSTRIAL AREA NEW DELHI AAACM4165F (RESPONDENT) I.T.A .NO. 1800/DEL/ 2015 (A.Y 2009-10) ACIT CENTRAL CIRCLE-04,(ERSTWHILE CC-25, NEW DELHI (APPELLANT) VS MAHASHIAN DI HATTI LTD. 9/44, KIRTI NAGAR INDUSTRIAL AREA NEW DELHI AAACM4165F (RESPONDENT) I.T.A .NO. 2374/DEL/2016 (A.Y 2009-10) ACIT CENTRAL CIRCLE-04,(ERSTWHILE CC-25, ROOM NO. 331, ARA CENTRE, JHANDEWALAN EXTENSION NEW DELHI (APPELLANT) VS MAHASHIAN DI HATTI LTD. 9/44, KIRTI NAGAR INDUSTRIAL AREA NEW DELHI AAACM4165F (RESPONDENT) 2 ITA NOS. 5667, 1799, 2374 & 1800/DEL/2015 APPELLANT BY SH. B. RAMANJANEYULA, SR. DR RESPONDENT BY SH. VINOD KUMAR BINDAL, CA, MS. SWEETY KOTHARI, CA & MS. PINKY SHARMA, ADV ORDER PER SUCHITRA KAMBLE, JM THESE FOUR APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDERS DATED 22/01/2015, 23/7/2015 & 30/12/2015 FOR ASSESSMENT Y EAR 2008-09 & 2009- 10 PASSED BY CIT(A)-44, NEW DELHI. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- I.T.A .NO. 1799/DEL/2015 (A.Y 2008-09) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN:- 1. THE ORDER OF THE CIT(A) IS NOT CORRECT IN LAW AN D FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,16,81,541/- MADE BY A.O ON ACCOUNT OF ADVERTISING EXPENDITURE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.3,97,06,202/- MADE BY A.O ON ACCOUNT OF ARMS LENGTH PRICING. I.T.A .NO. 5667/DEL/2015 2015 (A.Y 2008-09) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN:- DATE OF HEARING 25.10.2018 DATE OF PRONOUNCEMENT 29.10.2018 3 ITA NOS. 5667, 1799, 2374 & 1800/DEL/2015 1. THE ORDER OF THE CIT(A) IS NOT CORRECT IN LAW AN D FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) HAS ERRED IN QUASHING THE ORDER OF PENALTY IMPOSED BY T HE A.O AMOUNTING TO RS.27,48,618/- U/S 271AA OF THE INCOME TAX ACT. I.T.A .NO. 1800/DEL/2015 (A.Y 2009-10) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN:- 1. THE ORDER OF THE CIT(A) IS NOT CORRECT IN LAW AN D FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.2,89,06 ,778/- MADE BY A.O ON ACCOUNT OF ADVERTISEMENT EXPENDITURE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.2,18,25 ,568/- MADE BY A.O ON ACCOUNT OF ARMS LENGTH PRICING. I.T.A .NO. 2374/DEL/2016 (A.Y 2009-10) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN:- 1. THE ORDER OF THE CIT(A) IS NOT CORRECT IN LAW AN D FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) HAS ERRED IN DELETING THE PENALTY ORDER PASSED BY THE A .O IMPOSING PENALTY AMOUNTING TO RS.23,86,158/- U/S 271AA OF THE INCOME TAX ACT, 1961. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) HAS ERRED IN DELETING THE PENALTY ORDER PASSED BY THE A .O IMPOSING PENALTY AMOUNTING TO RS.23,86,158/- U/S 271G OF THE INCOME TAX ACT, 1961. 3. THE PRESENT APPEALS ARE FILED BY THE REVENUE. TH ESE FOUR APPEALS 4 ITA NOS. 5667, 1799, 2374 & 1800/DEL/2015 COMPRISED OF TWO QUANTUM APPEALS AND TWO PENALTY AP PEALS. THE ISSUES ARE COMMON IN THESE APPEALS. THEREFORE, WE ARE TAKING UP BRIEF FACTS OF ASSESSMENT YEAR 2008-09 IN ITA NO. 1799/DEL/2015. 4. M/S. MAHASHAYAN DI HATTI LIMITED (HEREINAFTER RE FERRED AS M/S MDH LTD.) IS A PRIVATE COMPANY AND THE MAIN DIRECTORS O F THE COMPANY ARE SHRI DHARAM PAL GULATI AND SHRI RAJEEV GULATI. THE COMP ANY IS ENGAGED IN THE MANUFACTURING OF EDIBLE OILS AT MDH HOUSE, GURGAON. OVER THE YEARS, THE COMPANY HAS POSITIONED ITSELF INTO A WELL-KNOWN BRA ND IN ITS LINE OF BUSINESS. AT PRESENT, THE COMPANY HAS LARGE NETWORK OF ASSOCI ATED CONCERNED THAT ARE ENGAGED IN PROCUREMENT OF RAW MATERIALS FOR THE MAN UFACTURING BY THE COMPANY AND A HIGHLY DIVERSIFIED NETWORK OF DISTRIB UTORS/SUPER-STOCKIEST FOR ALL INDIA DISTRIBUTION OF ITS PRODUCTS. THE PRODUC TS PORTFOLIO OF THE COMPANY HAS ALSO DIVERSIFIED AND SEVERAL NEW PRODUCTS SUCH AS DANT MANJAN, AGARBATTIES HAVE BEEN ADDED. ANOTHER COMPANY M/S S UPER DELICACIES P. LTD HAS BEEN SET UP TO MANUFACTURE THESE NEW PRODUCTS. THE COMPANY HAS ALSO BEEN REGULARLY EXPORTING ITS PRODUCTS TO FOREIGN CO UNTRIES SUCH AS EUROPE AND USA. ITS OVERSEAS BUSINESS IS LOOKED AFTER BY 100% SUBSIDIARIES NAMELY M/S MARK SPICES LTD. (U.K) AND M/S R. PURE AGRO LTD. (U AE). THE RETURN DECLARING INCOME OF RS. 66,36,39,237/- WAS E-FILED ON 30/09/2 008 AND A PAPER RETURN WAS FILED ON 15/10/2008 I.E. WITHIN STIPULATED PERI OD OF 15 DAYS. RETURN WAS PROCESSED U/S 143(1) ON 15/3/2010. THE CASE WAS SE LECTED FOR SCRUTINY. NOTICE U/S 143(2) AND 115WE (2) DATED 29/6/2009 WAS SENT. BASIC QUESTIONNAIRE WAS ISSUED ON 13/07/2009. ON 6/5/200 9, THE ASSESSEE FILED THE DETAILS IN RESPONSE TO THE BASIC QUESTIONNAIRE. FURTHER NOTICES U/S 143(2) AND 142(1) WERE ISSUED ALONG WITH QUESTIONNAIRE DAT ED 18/8/2011. IN RESPONSE TO STATUTORY NOTICES AND QUESTIONNAIRE, C. A OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED WRITTEN SUBMISSIONS. T HE ASSESSEE FILED FORM NO. 3CEB SHOWING TOTAL FOREIGN TRANSACTIONS OF RS. 9,77 ,24,705/-. THE MATTER WAS REFERRED TO TPO AFTER DETERMINATION OF ARMS LENGTH PRICING ON 22/7/2010 AFTER OBTAINING THE PERMISSION FROM THE COMMISSIONER OF I NCOME TAX, CENTRAL CIRCLE- 5 ITA NOS. 5667, 1799, 2374 & 1800/DEL/2015 1, NEW DELHI. THE TPO VIDE ORDER U/S 92CA (3) DATED 25/10/2011DIRECTED THAT THE ARMS LENGTH PRICING SHOWN BY THE ASSESSEE FOR EXPORT TO ASSOCIATED ENTERPRISES BE INCREASED BY AN AMOUNT OF RS. 3,97, 06,202/-. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY CLAIMED A HUGE EXPENDITURE OF RS.10.84 LACS IN ITS PROFIT AND LOSS ACCOUNT TOWARD S ADVERTISEMENT EXPENSES. THE SAID EXPENDITURE WAS DISALLOWED AT 20% BY THE A SSESSING OFFICER AND RS. 2,16,81,541/- WAS ADDED TO THE INCOME OF THE ASSESS EE. THUS, THE ASSESSING OFFICER ASSESSED TOTAL INCOME OF RS.72,50,26,980/-. 5. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) WHILE CONSIDERING ALL THE C ONTENTIONS OF THE ASSESSEE AND AFTER VERIFYING THE RECORD ALLOWED THE APPEAL OF TH E ASSESSEE. 6. AS REGARDS GROUND NO. 2, THE LD. DR SUBMITTED TH AT THE CIT(A) ERRED IN LAW IN DELETING ADDITION OF RS. 2,16,81,541/- ON AC COUNT OF ADVERTISEMENT EXPENDITURE. THE LD. DR SUBMITTED THAT THE ASSESSI NG OFFICER HAS RIGHTLY OBSERVED THAT THE EXPENDITURE ON ADVERTISEMENT WAS NOT FULLY EXPANDED FOR THE PURPOSE OF BUSINESS OF THE COMPANY BUT TO PROMOTE M AHASHIAN DHARAMPAL GULATI AND IT IS EXCESSIVE AND UNREASONABLE. 7. AS REGARDS GROUND NO. 3, THE LD. DR SUBMITTED TH AT NO DOCUMENTATION AS PRESCRIBED IN SUB RULE 1(E) TO 1(M) WAS FILED BY THE ASSESSEE AND THERE WAS NO TRANSFER PRICING STUDY/WORKING IN REGARD TO INTE RNATIONAL TRANSACTION UNDERTAKEN AND MOST APPROPRIATE METHOD CLAIM TO HAV E APPLIED AND REPORTED IN FORM 3CEB WAS GIVEN BY THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER RIGHTY MADE ADDITION OF RS. 3,97,06,202/- ON ACCOUN T OF ARMS LENGTH PRICING AS PER THE LD. DR. 8. THE LD. AR SUBMITTED THAT FOR ASSESSMENT YEAR 20 10-11 AND 2012-13, THE TRIBUNAL HAS ALREADY DELETED ADVERTISEMENT EXPE NDITURE BY RELYING ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN ASSESSE ES OWN CASE IN WHICH THE HONBLE HIGH COURT DISMISSED THE APPEALS OF THE REV ENUE. THEREFORE, THE LD. 6 ITA NOS. 5667, 1799, 2374 & 1800/DEL/2015 AR SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE DELHI HIGH COURT IN PREVIOUS YEAR AND SUBSEQUENT YEARS IN FAVOUR OF THE ASSESSEE. 9. AS REGARDS, GROUND NO.2, THE LD. AR RELIED UPON THE ORDER OF THE TPO IN ASSESSMENT YEAR 2005-06, 2006-07, AND 2010-11, WHER EIN THE NATURE OF THE BUSINESS MODEL OF THE ASSESSEE HAS BEEN STATED OUT WHICH IS EXACTLY THE SAME IN THE CURRENT ASSESSMENT YEAR. BASED ON EARLIER AN D SUBSEQUENT ASSESSMENT YEARS 2005-06, 2006-07, 2007-08 AND 2010-11, THE TP O HAS NOT MADE ANY ARMS LENGTH PRICE ADDITION. THE LD. AR RELIED UPO N THE ORDER OF THE CIT(A) AND STATED THAT THE SAID ORDER IS JUST AND PROPER. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS REGARDS GROUND NO.1, THE ISSUE OF ADVE RTISEMENT EXPENDITURES HAS BEEN ALLOWED IN FAVOUR OF THE ASSESSEE IN EARLIER A ND SUBSEQUENT ASSESSMENT YEARS BY THE ITAT BEING ITA NO. 7067/DEL/2014 A.Y. 2010-11, ITA NO. 6166/DEL/2015 A.Y. 2011-12 AND ITA NO. 6167/DEL/201 4 A.Y. 2012-13. THE HONBLE DELHI HIGH COURT HAS CONFIRMED THE ORDER OF THE ITAT AS PER SUBMISSION OF THE LD. AR. ALL THESE FACTUAL ASPECT WAS TAKEN INTO CONSIDERATION BY THE CIT(A) AND HELD AS UNDER IN THE PRESENT ASSE SSMENT YEAR:- 3.3 VIDE ORDER DATED 29/10/2010 IN THE APPELLANTS OWN CASE IN ITA NO. 1270, 1271, 1272 & 1273 FOR AY 2001-02 TO AY 2004-0 5, THE HONBL E ITAT, DELHI HAS HELD AS UNDER: 32. THE NEXT ISSUE FOR CONSIDERATION, WHICH IS COM MON IN ALL THE FOUR YEARS RELATES TO ESTIMATED DISALLOWANCE OF 20 PER C ENT OUT OF ADVERTISEMENT AND PUBLICITY EXPENSES. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE AD VERTISEMENT EXPENSES WERE DISPROPORTIONATELY HIGH BEING MORE THAN 10 PER CENT OF THE TURNOVER. HE FURTHER NOTED THAT IN ALL ADVERTISEMENTS MADE BY THE ASSESSEE IN PRINT AND VISUAL MEDIA, THE NAME OF ITS PROMOTER, DIRECTO R, MR. DHARMA PAL GULATI WAS EQUALLY AND PROMINENTLY DISPLAYED AND AD VERTISED. THEREFORE, 7 ITA NOS. 5667, 1799, 2374 & 1800/DEL/2015 AN ATTEMPT HAS BEEN MADE BY THE COMPANY TO PROMOTE SHRI DHARAM PAL GULATI AND NOT THE PRODUCTS. THE BRAND OF MDH ACTUA LLY REFERS TO MR. DHARAM PAL GULATI AND THE OWNERSHIP OF THE BRAND IS NOT IN PROPORTION TO THE INCREASE IN ADVERTISEMENT EXPENSES. HE, THEREFO RE, DISALLOWED 20 PER CENT OF THE TOTAL EXPENDITURE IN EACH YEAR AS EXPEN DITURE WAS INCURRED TO PROMOTE, MAHASHAYA DHARAM PAL GULATI, THE CM D OF T HE ASSESSEE COMPANY. 33. BEFORE THE ID. CIT (A) IT WAS SUBMITTED THAT HE NAM E, MAHASHAYA DHARAM PAL GULATI IS NEVER MENTIONED EVEN ONCE IN A NY OF THE ADVERTISEMENTS WHETHER IN PRINT OR TV MEDIA THEN HO W CAN HE PROMOTED PERSONALLY THROUGH THESE ADVERTISEMENTS AS HAS BEEN ALLEGED IN THE ASSESSMENT ORDER. IN THE ADVERTISEMENT OF THE ASSES SEES PRODUCTS, MAHASHAYA DHARAM PAL GULATI JUST APPEARS AS AN ACTO R AND PROMINENCE IS PLACED ON THE PRODUCT AND THEIR USEFUL QUALITIES. I T WAS ALSO SUBMITTED THAT IN ADVERTISEMENT OF VARIOUS CONSUMER GOODS IN THE M ARKET THE DISPLAY OF PRODUCT IS OF A VERY SHORT DURATION, BUT THE CONCEN TRATION IS MAINLY GIVEN TO THE CELEBRITY THEREIN. THE ASSESSEE IS ENGAGED IN T HE BUSINESS OF CONSUMER HOUSE-HOLD PRODUCE HAVING A VERY STIFF COMPETITION FROM THE ORGANIZED AS WELL AS THE UNORGANIZED SECTORS. A CONSUMER HAS TO BE REMINDED ABOUT THE AVAILABILITY OF THE PRODUCT CONSTANTLY SO THAT THEY DO NOT SHIFT TO ANY OTHER BRAND/PRODUCT. IT WAS ALSO SUBMITTED THAT THERE WAS MANY- FOLD INCREASE IN THE TURNOVER AS WELL AS N THE NET PROFIT IN ABSO LUTE AS WELL AS PERCENTAGE TERMS EVERY YEAR. IN THIS CASE MAHASHAYA DHARAM PAL GULATI IS NOT ONLY THE PIONEER OF PACKAGED SPECIES IN INDIA, BUT IS AL SO MOST RESPECTED NAME IN THE TRADE AND HAS BUILT BUSINESS BY HIS SHEER VI SION AND HARD WORK IN LAST SIXTY YEARS. THEREFORE, WHO COULD BE A BETTER BRAND-AMBASSADOR THAN MAHASHAYA DHARAM PAL GULATI HIMSELF. IF THE ASSESSE E HAD ENAGAGED THE SERVICES OF SOME BIG STARS, LIKE AMITABH BACHHAN OR ANY OTHER CELEBRITY TO PROMOTE HIS PRODUCT, THEN THE AMOUNT OF EXPENSES IN CURRED ON SUCH ADVERTISEMENT WOULD HAVE BEEN ALLOWED BY THE AO AS REASONABLE, BUT 8 ITA NOS. 5667, 1799, 2374 & 1800/DEL/2015 WHEN THE - SERVICES OF THE CMD WERE OBTAINED FREE OF COST, THE AO CHOOSES TO DISALLOW 20 I PER CENT OF THE EXPENSES. HE ALSO REFERRED TO ADVERTISEMENT CAMPAIGNS IN OTHER COMPANIES, SUCH AS, VIJAY MALLAY A FOR KINGFISHER AIRLINES AND MR. SINGHANIA FOR RAYMONDS, THE ID. CI T(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITIO N 34. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH TH E MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT THE E XPENDITURE INCURRED ON ADVERTISEMENT IS GENUINE. THE DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER MERELY ON THE GROUND THAT INSTEAD OF PRODUCTS, THE CMD OF THE COMPANY IS BEING PROMOTED. IN OUR CONSIDERED OPINION, THIS IS A SILLY PROPOSITION ON THE PART OF THE ASSESSING OFFICER. H AD THE ASSESSEE ENGAGED A BIG CELEBRITY FOR PROMOTION OF ITS PRODUCTS, THE ASSESSEE WOULD HAVE INCURRED HUGE EXPENDITURE AND THAT WOULD HAVE BEEN ALLOWED IN FULL BY THE ASSESSING OFFICER. THE EXPENDITURE HAS BEEN INCURRE D ON PROMOTION OF THE PRODUCT. THEREFORE, IN OUR CONSIDERED OPINION, THE ID. CIT(A) IS JUSTIFIED IN DELETING THE ADDITION. MERELY BECAUSE MR. DHARAM PA L GULATI NAME COMES TO PROMINENCE, IT CANNOT BE SAID THAT THE EXPENDITU RE WAS NOT INCURRED FOR THE PURPOSE OF BUSINESS. THE ISSUE IS COVERED IN FA VOUR OF THE ASSESSEE BY THE DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF S TAR INDIA P. LTD. VS ADIT 103 LTD.73 (MUM.) (TM) WHEREIN IT HAS BEEN HEL D THAT ADVERTISEMENT EXPENSES INCURRED FOR THE BUSINESS PURPOSES ARE ALL OWABLE AND IT DOES NOT MATTER THAT ADVERTISEMENT EXPENSES INCURRED FOR THE BUSINESS PURPOSES ARE ALLOWABLE AND IT DOES NOT MATTER THAT OTHER PARTY I S ALSO BENEFITED BY SUCH ADVERTISEMENT. 35. IN THE RESULT , THE APPEALS FILED BY THE ASSESSEE FOR ALL THE FOU R YEARS ARE ALLOWED AND THE APPEALS FILED BY THE REVENUE FO R ALL THE FOUR YEARS, ARE DISMISSED. 3.4. THE FACTS OF THE PRESENT CASE ARE EXACTLY SIMILAR T O THE FACTS AS IN AY 2001-02 TO AY 2004-05. THE HONBLE ITAT, DELHI HAS DELETED THE DISALLOWANCE 9 ITA NOS. 5667, 1799, 2374 & 1800/DEL/2015 OUT OF ADVERTISEMENT EXPENDITURE FOR ALL THE YEARS VIDE THE ORDER DATED 29/10/2010 IN ITA NO. 1270, 1271, 1272 & 1273(SUPRA ). RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE ITAT, DELHI, THE AO IS DIRECTED TO DELETE THE DISALLOWANCE OF RS.2,16,81,541/- OUT OF THE ADV ERTISEMENT EXPENDITURE. THIS GROUND OF APPEAL IS ALLOWED. THEREFORE, THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE FOR PREVIOUS YEARS AND SUBSEQUENT YEARS. THUS , THERE IS NO NEED TO INTERFERE WITH THE FINDINGS OF THE CIT(A). THEREFOR E, GROUND NO.2 OF THE REVENUES APPEAL IS DISMISSED. 11. AS REGARDS GROUND NO.3 RELATING TO ADDITION OF RS. 3,97,06,202/- ON ACCOUNT OF ARMS LENGTH PRICING, THE CIT (A) HELD A S UNDER:- 4.13 DURING THE COURSE OF THE APPELLATE PROCEEDINGS, THE APPELLANT HAS SUBMITTED THE FOLLOWING DOCUMENTS IN RESPECT OF THE SECOND ROUND OF TRANSFER PRICING ASSESSMENT PROCEEDINGS UNDERTAKEN BEFORE TH E TPO FOR THE AYS 2005- 06 TO 2007-08 AS PER THE ORDER OF THE HONBLE ITAT, DELHI IN ITA NOS 4576, 4577 4578/DEL/2010 AND FOR THE REGULAR TRANSFER PRI CING ASSESSMENT PROCEEDINGS FOR THE AY 2010-11: 1. PHOTOCOPIES OF THE WRITTEN SUBMISSIONS DATED 06/01/ 14 AND 15/01/14 FURNISHED TO THE TPO ALONG WITH THEIR ANNE XURES BY THE APPELLANT- COMPANY FOR THE ABOVE SAID ASSESSMENT YE ARS. 2. PHOTOCOPIES OF THE TPO ORDER DATED 23/01/14 PASSED U/S 92 CA(3) OF THE INCOME-TAX ACT, 1961 FOR EACH OF THE ABOVE S AID ASSESSMENT YEARS. IT IS OBSERVED THAT WHILE PASSING THE ORDERS U/S 92 CA(3) FOR AYS 2005-06 TO 2007-08 AS PER THE DIRECTION OF THE HONBLE ITAT, D ELHI IN ITA NO.S 4576, 4577 8& 4578/DEL/2010, THE TPO HAS ACCEPTED THE SIM ILAR TP ANALYSIS BASED ON TNMM. IN THE REGULAR ORDER PASSED U/S 92CA 13) FOR AY 2010-11, THE TPO HAS ALSO ACCEPTED THE SIMILAR TP ANALYSIS BASED ON TNMM . THE TPO 10 ITA NOS. 5667, 1799, 2374 & 1800/DEL/2015 HAS NOT DRAWN ANY ADVERSE INFERENCE FOR THESES ASSE SSMENT YEARS. THE FACTS OF THE PRESENT CASE ARE EXACTLY SIMILAR TO THE FAC TS AS IN AYS 2005-06 TO 2007- 08 AND A.Y 2010-11. THE DECISION OF THE HONBLE ITA T, DELHI IN ITA NOS 4576, 4577 & 4578/DEL/2010 FOR THE AYS 2005-06 TO 2007-08 IS ALSO SQUARELY APPLICABLE TO THE PRESENT CASE. ACCORDINGLY, I HOLD THAT THE TNMM IS THE MOST APPROPRIATE METHOD IN THE PRESENT CASE. CONSIDERING THE TP ANALYSIS SUBMITTED' BY THE APPELLANT DURING THE APPELLATE PROCEEDINGS, I H OLD THAT THE SELLING PRICES CHARGED BY THE APPELLANT FROM ITS AE S ARE AT ARMS LENGTH. ACCORDINGLY, THE AO/TPO IS DIRECTED TO DELETE THE A DDITION OF RS, 3,97,06,202/- ON ACCOUNT OF TP ADJUSTMENT ON AN EXP ORT TURNOVER OF RS.9,77,24,705/- TO ITS AES. THIS GROUND OF APPEAL IS ALLOWED. THUS, THE ISSUE IS SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE BY EARLIER ASSESSMENT YEARS. THEREFORE, THERE IS NO NEED TO I NTERFERE WITH THE FINDINGS OF THE CIT(A). HENCE, GROUND NO.3 IS DISMISSED. 12. IN RESULT, ITA NO. 1799/DEL/2015 FILED BY THE R EVENUE FOR A.Y. 2008-09 IS DISMISSED. 13. AS REGARDS TO ITA NO. 1800/DEL/2015 FOR A.Y. 2 009-10 IS IDENTICAL TO THE FACTS OF EARLIER A.Y. 2008-09, HENCE THE APPEAL OF THE REVENUE FOR A.Y. 2009-10 IS ALSO DISMISSED. 14. AS REGARDS PENALTY APPEAL FOR A.Y. 2008-09 BEIN G ITA NO. 5667/DEL/2015, THE ASSESSING OFFICER COULD NOT MAKE OUT THE CASE THAT THE ASSESSEE WAS NOT MAINTAINING BOOKS AS PER SUB-RULE 1(A) TO 1(M) OF RULE 10D OF THE INCOME TAX RULES, 1962, THEREFORE, PROVISIONS O F SECTION 271AA ARE NOT ATTRACTED IN THE PRESENT CASE. THE CIT(A) HELD AS UNDER:- 3.3. DECISION:- I HAVE CONSIDERED THE IMPUGNED PEN ALTY ORDER WRITTEN SUBMISSION AND ORAL ARGUMENT OF THE LD. AR CAREFULL Y. THE PENALTY U/S 271AA HAS BEEN LEVIED BY THE ASSESS ING OFFICER FOR NOT 11 ITA NOS. 5667, 1799, 2374 & 1800/DEL/2015 MAINTAINING DOCUMENTS AS PER CLAUSE (E) TO (M) OF S UB -RULE (1) OF 10D A.O WAS OF THE VIEW THAT THE APPELLANT HAS NOT SUPPORTED DU RING TRANSFER PRICING PROCEEDINGS AS TO HOW TNMM METHOD IS BEST SUITED FO R BENCHMARKING ITS TRANSACTIONS WITH ITS AES. THE TPO HAS FOUND CUP ME THOD AS MOST SUITABLE METHOD FOR BENCHMARKING TRANSACTIONS WITH ITS AES. THEREFORE, THE ASSESSING OFFICER HELD THAT IN THE CASE OF APPELLANT, PENALTY U/S 271AA IS LIABLE AND PENALTY WAS LEVIED. THE MAIN ARGUMENTS OF THE LD. AR IS THAT THE QUANTU M ADDITIONS FOR ENHANCEMENT OF ALP U/S 92CA(3) HAS BEEN DELETED BY CIT(A) VIDE ORDER NO.ITA NO. 32/ 12-13/CIT(A)-44/709 DATED 22.01.2015 CONSIDERING THE ORDER OF HONB LE ITAT IN ITA NO. 4576 TO 4578/DEL/2010 AND ALSO A CCEPTANCE BY THE ASSESSING OFFICER THE ALP OF THE INTERNATIONAL TRAN SACTIONS ON TNM METHOD AS APPLIED BY THE APPELLANT FOR A.Y. 2010-11. THE RELE VANT FINDINGS OF CIT(A) ARE AS UNDER:- 4.13 DURING THE COURSE OF THE APPELLATE PROCEEDINGS, THE APPELLANT HAS SUBMITTED THE FOLLOWING DOCUMENTS IN RESPECT OF THE SECOND ROUND OF TRANSFER PRICING ASSESSMENT PROCEEDINGS UNDERTAKEN BEFORE TH E TPO FOR THE AYS 2005- 06 TO 2007-08 AS P ER THE ORDER OF THE HONBLE ITAT, DELHI IN ITA NOS 4576, 4577 & 4 578/DEL/2010 AND FOR THE REGULAR TRANSFER PRICING A SSESSMENT PROCEEDINGS FOR THE AY 2010-11: 1. PHOTOCOPIES OF THE WRITTEN SUBMISSIONS DATED 06/01/ 14 AND 15/01/14 FURNISHED TO THE TPO ALONG WITH THEIR ANNEXURES BY THE APPELLANT- COMPANY FOR THE ABOVE SAID ASSESSMENT YEARS. 2. PHOTOCOPIES OF THE TPO ORDER DATED 23/01/14 PASSED U/S 92 CA(3) OF THE INCOME-TAX ACT, 1961 FOR EACH OF THE ABOVE SAID ASS ESSMENT YEARS. IT IS OBSERVED THAT WHILE PASSING THE ORDERS U/S 92 CA(3) FOR AYS 2005-06 TO 2007-08 AS PER THE DIRECTION OF THE HONBLE ITAT, D ELHI IN ITA NO.S 4576, 4577 12 ITA NOS. 5667, 1799, 2374 & 1800/DEL/2015 & 4578/DEL/2010, THE TPO HAS ACCEPTED THE SIMILAR T P ANALYSIS BASED ON TNMM. IN THE REGULAR ORDER PASSED U/S 92CA(3) FOR A Y 2010-11, THE TPO HAS ALSO ACCEPTED THE SIMILAR TP ANALYSIS BASED ON TNMM . THE TPO HAS NOT DRAWN ANY ADVERSE INFERENCE FOR THESES ASSESSMENT Y EARS. THE FACTS OF THE PRESENT CASE ARE EXACTLY SIMILAR TO THE FACTS AS IN AYS 2005-06 TO 2007-08 AND AY 2010-11. THE DECISION OF THE HONB LE ITAT, DELHI IN ITA NOS 4576, 4577 & 4578/DEL/2010 FOR THE AYS 2005-06 TO 2007-08 IS ALS O SQUARELY APPLICABLE TO THE PRESENT CASE. ACCORDINGLY, I HOLD THAT THE TNMM IS THE MOST APPROPRIATE METHOD IN THE PRESENT CASE. CONSIDERING THE TP ANAL YSIS SUBMITTED BY THE APPELLANT DURING THE APPELLATE PROCEEDINGS, I HOLD THAT THE SELLING PRICES CHARGED BY THE APPELLANT FROM ITS AES ARE AT ARMS LENGTH. ACCORDINGLY, THE AO/TPO IS DIRECTED TO DELETE THE ADDITION OF RS. 3, 97,06,202/- ON ACCOUNT OF TP ADJUSTMENT ON AN EXPORT TURNOVER OF RS. 9,77,24, 705/- TO ITS AES. THIS GROUND OF APPEAL IS ALLOWED. I HAVE PERUSED THE ORDER OF HONBLE ITAT FOR EARLIE R ASSESSMENT YEAR NAMELY 2005-06 TO 2007-08 WHICH HAS SET ASIDE THE ORDER PA SSED BY THE AO/TPO FOR DETERMINATION OF ALP OF INTERNATIONAL TRANSACTIONS DENOVA SUBSEQUENTLY THE ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER F OR ALL THE ASSESSMENT YEARS ON 25.02.2014 WHERE REFERENCE IS MADE TO THE FRESH TRANSFER PRICING PROCEEDINGS BEFORE THE TPO WHO HAVE ACCEPTED THE AP PELLANT TRANSFER PRICING DOCUMENTATION AND THE FUNCTIONAL AND ECONOMIC ANALY SIS CONTAIN THERE IN AND NO ADVERSE INFLUENCE WAS DRAWN. THE RELEVANT PORTIO N OF FINDINGS OF THE ASSESSING OFFICER IS REPRODUCED AS UNDER:- 3. THE TP ADJUSTMENT ON ACCOUNT OF ARMS LENGTH PRICING SHOWN BY THE ASSESSEE FOR EXPORT TO THE ASSOCIATED ENTERPRISES W AS REFERRED TO THE TRANSFER PRICING OFFICER TO BE DECIDE AFRESH IN THE LIGHT OF THE HONBLE ITATS ORDER U/S. 92CA(3) OF THE IT ACT WAS PASSED BY THE TRANSFER PRICING OFFICER VIDE F.NO. DDIT/TPO/1(4)/2013-14/637 DATED 23.01.20 14. NOTICE U/S 143(2) WAS ISSUED TO THE ASSESSEE ON 30-0102014 FIX ING THE DATE FOR 13 ITA NOS. 5667, 1799, 2374 & 1800/DEL/2015 COMPLIANCE ON 10-02-2014. SHRI ARVIND MITTAL CA ON BEHALF THE ASSESSEE COMPANY ATTENDED THE PROCEEDINGS AND FILED WRITTEN SUBMISSIONS. THE CASE WAS DISCUSSED WITH HIM. THE TRANSFER PRICING OFFICE R VIDE F.NO. DDIT/TPO/1(4)/2013-14/637 DATED 23.01.2014 HAS OBSE RVED THAT: THE COMPANYS TRANSFER PRICING DOCUMENTATION AND TH E FUNCTIONAL AND ECONOMIC ANALYSIS CONTAINED THEREIN WERE EXAMINED. IN VIEW OF THE SUBMISSIONS AND CIRCUMSTANCES OF THE CASE, NO ADVER SE INFERENCE IS PRESENTLY CALLED FOR. CONSIDERING THE ENTIRE FACTS IT APPEARS THE TPO/A.O FOR THE A.Y. 2005-06 TO 2007-08 AND IN SUBSEQUENT ASSESSMENT YEAR 2010-11 H AS ACCEPTED THAT THE APPELLANT COMPANIES TP DOCUMENTS AND FUNCTIONAL ECONOMIC ANALYSIS WERE PROPER AND NO ADJUSTMENT HAS BEEN MADE. ON THA T BASIS MY PREDECESSOR CIT(A) -44 HAS DELETED THE ADDITION MAD E IN RESPECT OF ADJUSTMENT IN ALP U/S 92CA(3). FURTHER, THE LD. AR HAS ALSO ARGUED AS TO HOW THE DOCUMENTATION AS REQUIRED UNDER CLAUSE (E) TO (M) OF SUB-RULE (1) OF RULE 10D WERE MAINTAINED. IN CASE WHERE NO SUCH DOC UMENTATION IS POSSIBLE, THE LD. AR HAS EXPLAINED THAT SUCH DOCUME NTATION IS NOT REQUIRED FOR DETERMINATION OF ALP. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF T HE CASE ESPECIALLY THE QUANTUM ADDITION ON ENHANCEMENT OF ALP U/S 92CA(3) DELETED BY CIT(A) AND ACCEPTANCE OF TRANSFER PRICING DOCUMENTATION ON SIMILAR FACTS FOR EARLIER ASSESSMENT YEARS NAMELY 2005-06 TO 2007-08 AND SUBS EQUENT A.Y 2010- 11 BY AO/TPO, THERE IS NO CASE FOR LEVY THE PENALTY U/S 271AA OF THE I.T. ACT. I RELY ON THE DECISION IN THE CASE OF DCIT VS. BEBO T ECHNOLOGIES (P) LTD. (2014) 148 ITD 122 (CHD.)(TRIB.) WHILE ARRIVING AT THE ABO VE CONCLUSION AS PENALTY U/S 271AA IS NOT LEVIABLE BECAUSE INTERNATI ONAL -TRANSACTION ENTERED UPON BY THE APPELLANT WITH ITS ASSOCIATES CONCERN HAS BEEN HELD TO BE AT. ARMS LENGTH. ACCORDINGLY, PENALTY LEVIED BY THE ASSESSING OFFICER U/S 14 ITA NOS. 5667, 1799, 2374 & 1800/DEL/2015 '271AA IS HEREBY QUASHED. THESE GROUNDS OF APPEALS ARE ALLOWED. THE CIT(A) HAS GIVEN CATEGORICAL FINDING THAT CONSI DERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE ESPECIALLY THE QUANTUM AD DITION ON ENHANCEMENT OF ALP U/S 92CA(3) DELETED BY CIT(A) AND ACCEPTANCE OF TRANSFER PRICING DOCUMENTATION ON SIMILAR FACTS FOR EARLIER ASSESSME NT YEARS NAMELY 2005-06 TO 2007-08 AND SUBSEQUENT A.Y 2010-11 BY AO/TPO, THERE IS NO CASE FOR LEVY THE PENALTY U/S 271AA OF THE I.T. ACT. THE PENALTY DOES NOT SURVIVE. ITA NO. 2374/DEL/2016 IS IDENTICAL TO THAT OF ITA NO. 5667/ DEL/2015, THEREFORE, BOTH PENALTY APPEALS FILED BY THE REVENUE ARE DISMI SSED. 14. IN RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29TH OCTOBE R, 2018 . SD/- SD/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 29/10/2018 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 15 ITA NOS. 5667, 1799, 2374 & 1800/DEL/2015 DATE OF DICTATION 26 .10.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 26 .10.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 2 9 .10.2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 2 9 .10.2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 2 9 .10.2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER 16 ITA NOS. 5667, 1799, 2374 & 1800/DEL/2015