M/s. McDonald's India Private Limited, New Delhi V. DCIT, New Delhi

ITA 2520/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7542 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 02-08-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 24-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: LAW
• Keywords: Transfer pricing; Difference of opinion
• Section: 143(3)

Judgement Text

ITA NO. 2520/DEL/2014 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI ANADI N MISHRA, ACCOUNTANT MEMBER ITA NO.:- 2520/DEL/2014 ASSESSMENT YEAR: 2003-04 M/S. MCDONALDS INDIA PRIVATE LIMITED, 202-206, TOLSTOY HOUSE, 15, TOLSTOY MARG, NEW DELHI. PAN AAACM2007J VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 6(1), NEW DELHI. (APPELLANT) (RESPONDENT) O R D E R PER ANADI N MISHRA, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)-XX, NEW DELHI DATED 3.2.2014 FOR A.Y 200 3-04. THE GROUNDS OF APPEAL ARE AS UNDER :- 6.1 GROUND 1: THAT THE LEARNED COMMISSIONER OF INC OME-TAX (APPEAL) - XXI LEARNED ASSESSING OFFICER - CIRCLE 6 (1), NEW DELHI (HEREINAFTER REFERRED TO AS 'THE LEARNED CIT(A)' AN D 'THE LEARNED AO') HAS ERRED IN FACTS AND LAW BY SUBJECTI VELY CONCLUDED THAT THE APPELLANT HAS FURNISHED INACCURA TE ASSESSEE BY : SHRI ROHIT TIWARI , CA DEPARTMENT BY: SHRI U C DUBEY, SR. DR DATE OF HEARING 03/08 /2016 DATE OF PRON OUNCEMENT /08 /2016 ITA NO. 2520/DEL/2014 2 PARTICULARS OF INCOME IN ORDER TO EVADE TAXES, AND HAS THEREBY ERRED IN LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT WITHOUT AFFORDING ADEQUATE OPPORTUNITY OF BEING HEA RD THUS VIOLATING THE WELL-ESTABLISHED PRINCIPLES OF NATURA L JUSTICE. THUS, THE PENALTY ORDER ISSUED IS BAD IN LAW AND VO ID AB INITIO. 6.2 GROUND 2:THAT THE LEARNED CIT(A)I LEARNED AO HA S ERRED ON FACTS AND CIRCUMSTANCES WHICH WERE GERMANE OF THE I NSTANT CASE THAT DISALLOWANCE I ADDITIONS MADE DURING SCRUTINY ASSESSMENT PROCEEDINGS WERE MERELY ON ACCOUNT OF DIFFERENCE IN OPINION ON CERTAIN CONTENTIOUS ISSUES AND NOT ON ACCOUNT OF AN Y DELIBERATE MISREPRESENTATION OF FACTS OR FURNISHING OF INACCUR ATE PARTICULARS BY THE APPELLANT. 6.3.GROUND 3:THAT THE LEARNED CIT(A)/LEARNED AO HAS FAILED TO APPRECIATE THAT THE APPELLANT HAS ACTED IN BONA FID E INTENTIONS AND HAS MADE FULL AND CORRECT DISCLOSURE IN THE BOO KS OF ACCOUNTS, RETURN OF INCOME, TAX AUDIT REPORT AND FI NANCIAL STATEMENTS. 6.4. GROUND 4: THAT THE LEARNED CIT(A)/LEARNED AO H AS ERRED IN LAW AND HAS FAILED TO APPRECIATE THAT MERE DISALLOW ANCE OF CERTAIN EXPENSES DURING THE COURSE OF SCRUTINY ASSE SSMENT PROCEEDINGS DO NOT IPSO FACTO ATTRACT IMPOSITION OF PENALTY UNDER SECTION 271(1)(C), UNLESS THE APPELLANT IS SH OWN TO HAVE DELIBERATELY FURNISHED ANY INACCURATE PARTICULAR OF INCOME I EXPENSE (HAVING RESULT OF EVASION OF TAXES). THE LE ARNED CIT(A)/LEARNED AO HAS FAILED TO DISCHARGE HIS STATU TORY DUTY TO SHOW / PROVE THAT THE APPELLANT HAS DELIBERATELY CO NCEALED ANY PARTICULARS OF ITS INCOME / EXPENSE OR FURNISHED IN ACCURATE PARTICULARS. 6.5. GROUND 5: THAT THE LEARNED CIT(A)/ LEARNED AO ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE BY NOT APPRECIA TING THAT PENALTY CANNOT BE LEVIED ON THE DISALLOWANCES UNLES S THE APPELLANT IS SHOWN TO HAVE DELIBERATELY FURNISHED A NY INACCURATE PARTICULAR OF INCOME/EXPENSE (HAVING RES ULT OF EVASION OF TAXES). 2. ALL THE GROUNDS OF APPEAL ARE RELATED TO PEN ALTY LEVIED BY LD. AO AMOUNTING TO RS. 16,51,000/- AND ARE TAKEN UP TOGET HER FOR THE SAKE OF CONVENIENCE. ASSESSMENT ORDER WAS PASSED BY THE LD. AO VIDE ORDER DATED 27.3.2006 U/S 143(3) OF INCOME TAX ACT. IN TH E ASSTT. ORDER, ADDITIONS WERE MADE INCLUDING ADDITION ON ACCOUNT O F TRANSFER PRICING ADJUSTMENTS AMOUNTING TO RS. 44,89,948/-. PENALTY P ROCEEDINGS U/S ITA NO. 2520/DEL/2014 3 271(1)(C) OF I.T. ACT WERE ALSO INITIATED BY THE LD . AO. ORDER LEVYING PENALTY U/S 271(1)(C) OF I.T. ACT WAS PASSED BY THE AO VIDE ORDER DATED 25.3.2011 WHEREIN PENALTY AMOUNTING TO RS. 16 50055/- IN RESPECT OF TRANSFER PRICING ADJUSTMENTS AMOUNTING T O RS. 4489948/-. NO PENALTY WAS LEVIED IN RESPECT OF REMAINING ADDIT IONS. THE ASSESSEE IS IN APPEAL BEFORE ITAT AGAINST LEVY OF AFORESAID PENALTY U/S 271(1)(C) OF I.T. ACT, AMOUNTING TO RS. 1650055/-, U/S 271(1)(C) OF I.T. ACT. 3. IN THE COURSE OF HEARING BEFORE US, THE ASSES SEE WAS REPRESENTED BY SHRI ROHIT TIWARI, LD. AR AND REVENUE WAS REPRE SENTED BY SHRI U.C. DUBEY, LD. SR. DR. WE HAVE HEARD BOTH SIDES CAREFULLY. WE HAVE ALSO PERUSED THE MATERIAL ON RECORD. LD. AR OF THE ASSESSEE BROUGHT TO OUR NOTICE THAT THE ADDITION OF RS. 4405505/- IN RE SPECT OF WHICH PENALTY AMOUNTING TO RS. 1651000/- WAS LEVIED BY TH E LD. AO HAS BEEN DELETED BY ITAT VIDE ORDER DATED 12.4.2016 IN ITA N O. 961/DEL/2010. IN VIEW OF THE ABOVE, THE LD. AR FOR ASSESSEE PLEAD ED THAT PENALTY SHOULD BE DELETED. LD DR AGREED THAT THE ADDITION O N THE BASIS OF WHICH PENALTY U/S 271(1)(C) HAS BEEN LEVIED, HAS BE EN DELETED BY THE ITAT. HOWEVER, HE RELIED ON THE ORDER OF THE LD. AO . AS THE QUANTUM OF ADDITION (TRANSFER PRICING ADJUSTMENTS AMOUNTING TO RS. 4405505) ON THE BASIS OF WHICH PENALTY AMOUNTING TO RS. 1651 000/- WAS LEVIED U/S 271(1)(C) OF I.T. ACT, HAS BEEN DELETED BY ITAT , PENALTY LEVIED U/S 271(1)(C) OF ITAT HAS NO LEGS TO SURVIVE. THEREFORE WE CANCEL THE PENALTY U/S 271(1)(C) OF I.T. ACT AND ALLOW THE APP EAL OF THE ASSESSEE. ITA NO. 2520/DEL/2014 4 FOR COMING TO THIS CONCLUSION, WE DERIVE SUPPORT F ROM DECISION OF HONBLE SUPREME COURT IN THE CASE OF K.C. BUILDERS VS. ACIT (2004) 135 TAXMAN 461 (SC) IN WHICH HONBLE APEX COURT HELD THAT WHERE AN ORDER OF ASSESSMENT OR REASSESSMENT ON THE BASIS OF WHICH PENALTY HAS BEEN LEVIED ON THE ASSESSE HAS ITSELF BEEN FINALLY SET ASIDE OR CANCELLED BY THE TRIBUNAL OR OTHERWISE, THE PENALTY CANNOT STAND BY ITSELF AND IS LIABLE TO BE CANCELLED. IN THE RESULT THIS APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 9 TH AUGUST, 2016. SD/- SD/- (H.S. SIDHU) (ANADI N MISHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 9 TH AUGUST, 2016. * VEENA * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR