M/s Halcrow Cansulting India Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 2647/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3749 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 05-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 10-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Initiation of penalty proceedings
• Section: 92C; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 2647/DEL/2016 AY: 2010-11 M/S HALCROW CONSULTING INDIA PVT. LTD., REVENUE-27, 2 ND FLOOR, PRATAP MARKET, JANGPURA B, NEW DELHI-110014 (PAN: AABCH3579B) VS DCIT, CIRCLE 11(1), NEW DELHI. APPELLANT BY: SHRI SALIL KAPOOR, MS ANANYA KAPOOR, ADVOCATES RESPONDENT BY : SHRI ATIQ AHMAD, SR. DR DATE OF HEARING 13.10.2017 DATE OF PRONOUNCEMENT 31.10.2017 ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-44, NEW DELHI WHEREIN VIDE ORDER DATED 20.01.2016, THE LD. CIT(A) HAS UPHELD THE PENALTY O F RS. 1,14,76,281/- IMPOSED U/S 271(1)( C) OF THE INCOME TAX ACT, 1961 PERTAINING TO ASSESSMENT YEAR 2010-11. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS ENGAGED IN PROVIDING PLANNING, DESIGN AND MANAGEMEN T SERVICES IN THE AREA OF INFRASTRUCTURE CONSULTANCY. THE RET URN OF INCOME WAS FILED DECLARING LOSS OF RS. 1,53,16,395/-. THE CASE WAS I.T.A. NO. 2647/DEL/2016 ASSESSMENT YEAR 2010-11 2 SELECTED FOR SCRUTINY AND REFERENCE WAS MADE TO THE TRANSFER PRICING OFFICER (TPO). THE TPO PROPOSED A DISALLOW ANCE OF RS. 3,31,83,409/- IN RESPECT OF INTERNATIONAL TRANSACTI ONS UNDERTAKEN BY THE ASSESSEE WITH RESPECT OF ARMS L ENGTH PRICE OF BUSINESS SUPPORT SERVICES. THE DISALLOWANCES WERE ALSO MADE IN RESPECT OF BALANCES WRITTEN OFF, ADVANCES WRITTEN O FF AND MISCELLANEOUS EXPENSES. SUBSEQUENTLY, PENALTY PROC EEDINGS U/S 271(1)(C) OF THE ACT WERE ALSO INITIATED AND PENALT Y WAS IMPOSED FOR FURNISHING INACCURATE PARTICULARS LEADING TO CO NCEALMENT OF INCOME. ON THE ASSESSEE APPROACHING THE LD. CIT (A ), NO RELIEF WAS ALLOWED TO THE ASSESSEE AND THE ASSESSEES APPE AL WAS DISMISSED. NOW, THE ASSESSEE HAS APPROACHED THE IT AT CHALLENGING THE CONFIRMATION OF IMPOSITION OF PENAL TY AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE NOTICE ISSUED U/S 271 (1) (C) AND ORD ER IMPOSING PENALTY UNDER SAID SECTION ARE ILLEGAL, BA D IN LAW, AND WITHOUT JURISDICTION. 2. THAT THE AO HAS FAILED TO APPRECIATE THAT NO SA TISFACTION WAS RECORDED BEFORE INITIATION OF PENALTY PROCEEDIN GS U/S 271 (1) (C) AND AS SUCH THE NOTICE ISSUED U/S 271 ( 1) (C) AND THE PENALTY ORDER PASSED UNDER SAID SECTION ARE WIT HOUT JURISDICTION AND ARE LIABLE TO BE QUASHED. 3. THAT THE INFORMATION FILED AND THE MATERIAL AVA ILABLE ON RECORD ARE NOT PROPERLY CONSIDERED AND AS SUCH THE ORDER IMPOSING PENALTY U/S 271 (1) (C) IS ILLEGAL AND BAD IN LAW. I.T.A. NO. 2647/DEL/2016 ASSESSMENT YEAR 2010-11 3 4. THE ASSESSING OFFICER HAS, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, GROSSLY ERRED IN LAW AND ON FACTS IN INITIATING AND IMPOSING PENALTY PROCEEDINGS U/S 271(L)(C) WITHOUT ANY SPECIFIC CHARGE. THE AO HAS ERRED IN LA W AND ON FACTS IN ISSUING NOTICE AND LEVYING PENALTY ON THE BOTH THE CHARGES. 5. THAT AO HAS, IN VIEW OF THE FACTS AND CIRCUMSTA NCES OF THE CASE, GROSSLY ERRED IN LAW AND ON FACTS IN IMPO SING PENALTY IN HASTE AND WITHOUT GIVING ANY OPPORTUNITY OF BEING HEARD ON THE CHARGES ON WHICH PENALTY WERE IMPOSED. 6. THAT THE DISALLOWANCE OF CLAIM OF THE APPELLANT PROPOSED BY THE TPO OF RS. 3,31,83,409/- WERE DUE TO DIFFERE NT INTERPRETATION ADOPTED BY HIM. THE ASSESSEE HAS COM PUTED ALP IN GOOD FAITH AND APPLICATION OF A DIFFERENT BA SIS BY THE TPO IN COMPUTING ALP HIGHER THAN ASSESSEE DOES NOT AMOUNT TO CONCEALMENT OF PARTICULARS BY THE ASSESSEE OR FU RNISHING OF INACCURATE PARTICULARS OF INCOME. 7. THAT THE ADDITION ON ACCOUNT OF DISALLOWANCE OF BALANCE WRITTEN OFF OF RS. 2,81,738 & ADDITION ON ACCOUNT O F DISALLOWANCE OF ADVANCES WRITTEN OFF OF RS. 3,47,02 2/- ARE NOT CALLED FOR AND COMPLETE DISCLOSURE OF THE SAME HAS BEEN MADE BY THE ASSESSEE. 8. THAT THE ADDITION ON ACCOUNT OF DISALLOWANCE OF MISC. EXPENSES OF RS.2,33,267/- SHOULD NOT BE CONSIDERED AS NO OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO EXPLAIN HI S POSITION FOR THIS DISALLOWANCE. THE EXPENSES INCURRED WERE F OR BUSINESS PURPOSES AND ARE ALLOWABLE EXPENSES. THE A O HAS FAILED TO ESTABLISH ANY CONCEALMENT OF INCOME OR FU RNISHING OF INACCURATE INCOME ON BEHALF OF THE APPELLANT. 9. THAT THE ADDITION/DISALLOWANCE SHOULD NOT BE CO NSIDERED AT PAR WITH CONCEALMENT OF INCOME OR FURNISHING INA CCURATE PARTICULARS OF INCOME. 10. THAT THE ADDITION/DISALLOWANCE MADE BY THE AO WERE NOT LEGALLY SUSTAINABLE UNDER THE INCOME TAX ACT, 1961. 11. THAT IN ANY CASE THE PENALTY IMPOSED IS UNJUST , ARBITRARY AND HIGHLY EXCESSIVE. I.T.A. NO. 2647/DEL/2016 ASSESSMENT YEAR 2010-11 4 3. LD. AR SUBMITTED THAT THE INITIATION OF PENALTY PROCEEDINGS WAS ILLEGAL AND BAD IN LAW AS NO SATISFACTION HAD B EEN RECORDED BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSES SMENT AND, THEREFORE, THE NOTICE U/S 274 OF THE ACT AND THE SU BSEQUENT ORDER PASSED U/S 271(1)(C) WERE ILLEGAL, BAD IN LAW AND W ITHOUT JURISDICTION. IT WAS FURTHER SUBMITTED THAT THE PE NALTY HAD BEEN INITIATED AND IMPOSED WITHOUT THERE BEING ANY SPECI FIC CHARGE OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT WAS ALSO SUBMITTED THAT THE NOTICE ISSUED U/S 274 D ID NOT SPECIFICALLY MENTION THE CHARGE FOR WHICH THE PENAL TY WAS BEING INITIATED AND, THEREFORE, SINCE THE NOTICE ITSELF W AS DEFECTIVE, NO PENALTY COULD BE IMPOSED. IT WAS ALSO SUBMITTED TH AT EXPLANATION 1 TO SECTION 271(1)(C) HAD BEEN WRONGLY INVOKED AS THE CASE OF THE ASSESSEE WAS NOT COVERED BY THE EXP LANATION 1 TO SECTION 271(1)(C). IT WAS FURTHER SUBMITTED THAT B OTH THE LOWER AUTHORITIES HAD ERRED IN NOT CONSIDERING THE CONDIT IONS MENTIONED IN EXPLANATION 7 TO SECTION 271(1)(C) BEF ORE INVOKING THE SAME AS THE ASSESSING OFFICER HAD NOT BEEN ABLE TO ESTABLISH THAT GOOD FAITH AND DUE DILIGENCE WAS NOT EXERC ISED BY THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE ASSESS ING OFFICER HAD FAILED TO DISCHARGE THE ONUS CAST UPON HIM AND BOTH THE LOWER I.T.A. NO. 2647/DEL/2016 ASSESSMENT YEAR 2010-11 5 AUTHORITIES HAD ALSO IGNORED THE BINDING JUDICIAL P RECEDENTS FOLLOWING WHICH THE PENALTY COULD NOT HAVE BEEN IMP OSED. IT WAS ALSO SUBMITTED THAT MERELY BECAUSE THE TPO WAS OF T HE VIEW THAT A DIFFERENT METHOD SHOULD HAVE BEEN ADOPTED FOR DET ERMINING THE ARMS LENGTH PRICE (ALP) THAN THAT ADOPTED BY THE A SSESSEE, IT COULD NOT, IPSO FACTO LEAD TO THE CONCLUSION THAT THIS WAS A CASE OF CONCEALMENT OR FURNISHING INACCURATE PARTICULARS OF INCOME. IT WAS ALSO SUBMITTED THAT THE DETERMINATION OF ARMS LENGTH PRICE WAS A DEBATABLE ISSUE. PENALTY U/S 271(1)(C) COULD NOT BE IMPOSED ON DEBATABLE ISSUES. IT WAS ALSO SUBMITTED THAT BOTH THE LOWER AUTHORITIES DID NOT FOLLOW THE SETTLED JU DICIAL PRINCIPLE THAT PENALTY CANNOT BE IMPOSED AUTOMATICALLY MERELY BECAUSE THERE WAS A TRANSFER PRICING ADJUSTMENT AND THE ASS ESSEE HAD NOT APPEALED AGAINST IT. 3.1 ON THE PENALTY IMPOSED ON CORPORATE TAX ADDITIO N, THE LD. AR SUBMITTED THAT THE ADDITIONS PERTAINED TO WRITIN G OFF OF ADVANCES AND DISALLOWANCES OF MISCELLANEOUS EXPENSE S WITHOUT THE ASSESSING OFFICER RECORDING ANY BASIS OF A CASE OF CONCEALMENT OR FURNISHING INACCURATE PARTICULARS OF INCOME. IT WAS ALSO SUBMITTED THAT THE EVIDENCES AND DETAILS R EGARDING CORPORATE TAX ADDITIONS WERE FILED BEFORE BOTH THE LOWER I.T.A. NO. 2647/DEL/2016 ASSESSMENT YEAR 2010-11 6 AUTHORITIES BUT THE SAME WERE NOT CONSIDERED. THE LD. AR ALSO PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRECEDENT S:- I) TRISTAR INTECH (P) LTD. VS ACIT IN ITA NO. 1457/D/2010 OF ITAT DELHI II) DCIT VS RBS EQUITIES INDIA LTD. IN ITA NO. 2570/MUM/2010 OF ITAT MUMBAI III) ACIT VS BOSTON SCIENTIFIC INDIA PVT. LTD. IN ITA NO . 1062/D/2013 OF ITAT DELHI IV) CIT VS MANJUNATHA COTTON & GINNING FACTORY REPORTED IN 359 ITR 565 (KARNATAKA) OF THE HONBLE KARNATAKA HIGH COURT V) CHINTELS INDIA LTD. VS ACIT IN ITA NO.3791- 93/DEL/2016 OF ITAT DELHI VI) MITSUI PRIME ADVANCED COMPOSITES INDIA PVT. LTD. VS DCIT IN ITA NO. 550/DEL/2016 OF ITAT DELHI VII) PR. COMMISSIONER OF INCOME TAX VS VERIZON INDIA PVT . LTD. IN ITA NO. 460/2016 OF THE HON'BLE DELHI HIGH COURT VIII) PR. COMMISSIONER OF INCOME TAX VS MITSUI PRIME ADVANCED COMPOSITES INDIA PVT. LTD. IN ITA NO. 91/2016 OF THE HON'BLE DELHI HIGH COURT I.T.A. NO. 2647/DEL/2016 ASSESSMENT YEAR 2010-11 7 IX) M.S MINDMILL SOFTWARE LTD. VS ITO IN ITA NO. 242/DEL/2016 OF ITAT DELHI 3.2 IT WAS SUBMITTED THAT THE PENALTY IMPOSED BE DE LETED IN LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE SETTLED JUDICIAL PRECEDENTS REFERRED TO ABOVE. 4. IN RESPONSE, THE LD. SR. DR WHILE PLACING HEAVY RELIANCE ON THE ORDER OF THE LD. CIT (A) VEHEMENTLY ARGUED THAT THE PENALTY IMPOSED WAS JUSTIFIED ON THE FACTS AND CIRCUMSTANCE S OF THE CASE. LD. SR. DR READ OUT EXTENSIVELY FROM ORDERS OF BOTH THE AUTHORITIES TO SUPPORT THE CASE OF THE DEPARTMENT T HAT THE PENALTY HAD BEEN CORRECTLY IMPOSED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS FAR AS THE PENALTY LEVIED ON TRANSFER PRICING ADJUSTMENT IS CONCERNED, IT IS SEE N THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD ENTE RED INTO FOLLOWING INTERNATIONAL TRANSACTIONS:- 1. PROVISIONS OF TECHNICAL SERVICES (RECEIVABLES FROM ASSOCIATED ENTERPRISES) 2. AVAILING OF TECHNICAL SERVICES (PAYABLE TO ASSOCIAT ED ENTERPRISES) I.T.A. NO. 2647/DEL/2016 ASSESSMENT YEAR 2010-11 8 THE ASSESSEE SELECTED COST PLUS METHOD FOR BOTH THE SE TRANSACTIONS. FURTHER, THERE WAS ALSO APPORTIONMEN T OF EXPENSES TOWARDS BUSINESS SUPPORT SERVICES PAYABLE TO THE AS SOCIATED ENTERPRISES (AE), FOREIGN CURRENCY COMPONENT OF SAL ARY OF EXPATRIATE EMPLOYEES PAYABLE TO THE FOREIGN AE AND REIMBURSEMENT OF VARIOUS EXPENSES RECEIVABLE FROM T HE AE. ALL THESE THREE WERE AT COST. IT WAS THE ASSESSEES VI EW THAT NO BENCHMARKING WAS REQUIRED IN RESPECT IF THESE THREE TRANSACTIONS. HOWEVER, DURING THE TRANSFER PRICING PROCEEDINGS, THE TPO WAS OF THE VIEW THAT WHILE COMPUTING PROFIT LEVEL INDICATOR (PLI) USING COST PLUS METHOD, THE ASSESSE E HAD CLAIMED IDLE CAPACITY ADJUSTMENT OF RS. 2,46,46,065/- WHICH WAS REDUCED FROM THE DIRECT COST WAS NOT TO BE INCLUDED AND, AC CORDINGLY, THE TPO EXCLUDED THE SAME. THE TPO ALSO REQUIRED THE A SSESSEE TO SHOW CAUSE AS TO WHY COST PLUS METHOD SHOULD NOT BE REJECTED AND TNMM SHOULD NOT BE APPLIED AS THE MOST APPROPRI ATE METHOD. THE TPO ALSO ASKED THE ASSESSEE TO SHOW CA USE AS TO WHY THE INTRA GROUP SERVICES PAYABLE TO THE ASSESSE E SHOULD NOT BE TREATED AS NIL BY APPLYING CUP METHOD. THEREAFTE R, THE TPO PROCEEDED TO MAKE ADJUSTMENT WITH RESPECT TO IDLE C APACITY AMOUNTING TO RS. 2,46,46,065/- AND OF RS. 1,56,32,2 67/- WITH I.T.A. NO. 2647/DEL/2016 ASSESSMENT YEAR 2010-11 9 RESPECT TO INTRA GROUP SERVICES BY TAKING THE ALP O F INTRA GROUP SERVICES AT NIL. 5.1 IT IS SEEN THAT THE ASSESSING OFFICER, WHILE IM POSING THE PENALTY, SIMPLY RELIED ON THE ADDITION/ADJUSTMENT M ADE BY THE TPO AND DID NOT EXAMINE IN DETAIL AS TO WHETHER PEN ALTY WAS IMPOSABLE ON SUCH ADJUSTMENTS OR NOT. ON APPEAL, T HE LD. CIT (A) ALSO NOTED THAT THE ASSESSEE HAD NOT ACTED IN G OOD FAITH WHILE COMPUTING THE ALP. THE LD. CIT (A) ALSO TOOK NOTE OF THE FACT THAT THE ASSESSEE HAD NOT PREFERRED ANY APPEAL AGAINST T HE ALP ADJUSTMENT AND, THEREFORE, THE ASSESSEE HAD ACCEPTE D THAT THE ALP HAD NOT BEEN COMPUTED CORRECTLY BY HIM AND AS S UCH, THE PENALTY WAS IMPOSABLE. 5.2 THE MAIN ARGUMENT OF THE LD. AR AGAINST THE LEV Y OF PENALTY ON THE DIFFERENCE IN DETERMINATION OF ALP IS THAT I T IS A DEBATABLE ISSUE AND, THEREFORE, THE PENALTY CANNOT BE SUSTAIN ED. THE SCHEME OF EXPLANATION 7 TO SECTION 271(1)( C) OF TH E ACT MAKES IT CLEAR THAT THE ONUS ON THE ASSESSEE IS ONLY TO SHOW THAT THE ALP WAS COMPUTED BY THE ASSESSEE IN ACCORDANCE WITH THE SCHEME OF SECTION 92 C OF THE ACT IN GOOD FAITH AND DUE DILIG ENCE. IT IS NOT IN DISPUTE HERE THAT THE ALP WAS COMPUTED IN ACCORD ANCE WITH THE SCHEME OF SECTION 92C INASMUCH AS COST PLUS MET HOD WAS I.T.A. NO. 2647/DEL/2016 ASSESSMENT YEAR 2010-11 10 USED. THE TPO ONLY SUBSTITUTED COST PLUS METHOD WI TH TNMM AND ALSO COMPUTED THE ALP OF INTRA GROUP SERVICES B Y TAKING THE ALP AS NIL BY APPLYING THE CUP METHOD. WHATEVER MA Y BE THE MERITS IN THE ACTION OF THE TPO CHANGING THE METHOD OF COMPUTATION OF ALP, THE SAME CANNOT BE A FIT CASE F OR IMPOSITION OF PENALTY INASMUCH AS IT CANNOT BE SAID THAT THE A LP HAD NOT BEEN COMPUTED BY THE ASSESSEE UNDER THE SCHEME OF S ECTION 92C. THE SCOPE OF CONNOTATIONS OF EXPRESSED IN GOOD FAI TH AND APPEARING IN EXPLANATION 7 CAN BE FOUND FROM SECTIO N 3(22) OF THE GENERAL CLAUSES ACT WHICH STATES THAT A THING SHALL BE DEEMED TO BE DONE IN GOOD FAITH WHERE IT IS IN FA CT DONE HONESTLY. THEREFORE, IT IS NOT EVEN NECESSARY WHETH ER IN DOING THAT THING THE ASSESSEE HAS BEEN NEGLIGENT OR NOT. THUS, THERE IS NO WAY THAT THE ASSESSEE CAN PROVE HIS HONESTY, BEC AUSE HONESTY, IN PRACTICAL TERMS, ONLY IMPLIES LACK OF D ISHONESTY, AND PROVING NOT BEING DISHONEST IS ESSENTIALLY PROVING A NEGATIVE, WHICH AS THE HONBLE SUPREME COURT HAS OBSERVED IN THE CASE OF K.P. VERGHESE VS ITO REPORTED IN 131 ITR 597 IS ALM OST IMPOSSIBLE. HOWEVER, AS THE EXPRESSION GOOD FAITH IS USED ALONG WITH DUE DILIGENCE WHICH REFERS TO PROPER CARE. IT IS ALSO ESSENTIAL THAT NOT ONLY THE ACTION OF THE ASSESSEE SHOULD BE IN I.T.A. NO. 2647/DEL/2016 ASSESSMENT YEAR 2010-11 11 GOOD FAITH BUT ALSO WITH PROPER CARE. AN ACT DONE WITH DUE DILIGENCE WOULD MEAN THE ACT DONE WITH AS MUCH AS C ARE AS A PRUDENT PERSON WOULD TAKE IN SUCH CIRCUMSTANCES. T HUS, AS LONG AS NO DISHONESTY IS FOUND IN THE CONDUCT OF THE ASS ESSEE, AS LONG AS HE HAS DONE WHAT A REASONABLE MAN WOULD HAVE DO NE IN HIS CIRCUMSTANCES, TO ENSURE THAT THE ALP WAS DETERMINE D IN ACCORDANCE WITH THE SCHEME OF SECTION 92C, DEEMING FICTION UNDER EXPLANATION 7 TO SECTION 271(1)(C) CANNOT BE INVOKED. 5.3 IT IS SEEN THAT THE GROUNDS ON WHICH THE ALP DETERMINED BY THE ASSESSEE HAS BEEN REJECTED ARE REASONABLY DEBAT ABLE. THE ASSESSEE HAD OBTAINED A TRANSFER PRICING STUDY FROM AN OUTSIDE EXPERT AND THE OBJECTIVITY OF THE SAME WAS NOT CALL ED INTO QUESTION. THEREFORE, LACK OF DUE DILIGENCE IN DETE RMINING THE ALP IS NEITHER INDICATED NOR CAN BE INFERRED. IN SUCH A SITUATION, IT CANNOT BE SAID THAT THE ASSESSEE HAD NOT DETERMINED THE ALP IN ACCORDANCE WITH THE SCHEME OF SECTION 92C IN GOOD F AITH AND WITH DUE DILIGENCE AND ACCORDINGLY, THE CONDITIONS PRECE DENT FOR INVOKING EXPLANATION 7 TO SECTION 271(1)(C) DID NOT EXIST ON THE FACTS OF THE INSTANT CASE. WE ALSO FIND THAT THE A SSESSEES CASE IS COVERED BY THE ORDER OF THE ITAT MUMBAI BENCH IN TH E CASE OF DCIT VS RBS EQUITIES INDIA LTD. IN ITA NO. 2570/MUM /2010 IN I.T.A. NO. 2647/DEL/2016 ASSESSMENT YEAR 2010-11 12 WHICH THE PENALTY U/S 271(1)(C) HAD BEEN DELETED IN A SOMEWHAT SIMILAR CIRCUMSTANCE. IF WE ACCEPT THE CONTENTION S OF THE DEPARTMENT THAT ADDITION ON ACCOUNT OF TRANSFER PRI CING ADJUSTMENT INVARIABLY MEANS ABSENCE OF GOOD FAITH A ND DUE DILIGENCE, THEN EACH AND EVERY CASE INVOLVING TRANS FER PRICING ADJUSTMENT WOULD CALL FOR IMPOSITION OF PENALTY US/ 271(1)(C) OF THE ACT. ITAT DELHI HAD ALSO TAKEN A SIMILAR VIEW ON IDENTICAL FACTS IN CASE OF MITSUI PRIME ADVANCED COMPOSITES I NDIA PVT. LTD. IN ITA NO. 550/DEL/2016 AND HAD DELETED THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT. THE HON'BLE HIGH COURT O F DELHI HAS ALSO UPHELD THIS ORDER OF THE ITAT ON THE APPEAL OF THE DEPARTMENT IN ITA NO. 913/2016 VIDE ORDER DATED 17. 01.2017. FURTHER, THE HON'BLE HIGH COURT OF DELHI HAS HELD I N THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX VS VERIZON IND IA LTD. IN ITA NO. 4602/2016 THAT IN ABSENCE OF ANY OVERT ACT, WHICH INDICATES CONSCIOUS AND MATERIAL SUPPRESSION, INVOC ATION OF EXPLANATION 7 IN A BLANKET MANNER COULD NOT ONLY BE INJURIOUS TO THE ASSESSEE BUT ULTIMATELY WOULD BE CONTRARY TO TH E PURPOSE FOR WHICH IT WAS ENGRAFTED IN THE STATUTE. THE HONBL E DELHI HIGH COURT FURTHER OBSERVED THAT IT MIGHT LEAD TO A RATH ER PECULIAR SITUATION WHERE THE ASSESSEE WHO MIGHT OTHERWISE AC CEPT SUCH I.T.A. NO. 2647/DEL/2016 ASSESSMENT YEAR 2010-11 13 DETERMINATION MAY BE FORCED TO LITIGATE FURTHER TO ESCAPE THE CLUTCHES OF EXPLANATION 7. THEREFORE, IN VIEW OF T HE FACTUAL CIRCUMSTANCES AND RESPECTFULLY FOLLOWING THE RATIO OF THE DECISIONS OF THE VARIOUS JUDICIAL AUTHORITIES, WE A RE OF THE OPINION THAT THE ASSESSEE CANNOT BE VISITED WITH PENALTY U/ S 271(1)(C) OF THE ACT ON THIS ISSUE AND ACCORDINGLY, THE IMPUGNED ORDER IS SET ASIDE AND PENALTY IS DELETED. 5.4 AS FAR AS THE SECOND WHICH ON WHICH THE PENALTY HAS BEEN IMPOSED, IT IS SEEN THAT PENALTY HAS BEEN IMPOSED O N DISALLOWANCE OF ADVANCES/BALANCES WRITTEN OFF AND D ISALLOWANCE OUT OF MISCELLANEOUS EXPENSES. THE LD. CIT (A) HAS CONFIRMED THE PENALTY ON THESE ADDITIONS ON THE GROUND THAT THE A SSESSEE HAD ACCEPTED THESE ADDITIONS AND THAT THE ASSESSEE DID NOT FURNISH ANY EVIDENCE IN SUPPORT OF THE WRITE OFF OF ADVANCE S. THE PENALTY ON MISCELLANEOUS EXPENSES HAS BEEN CONFIRMED ON THE GROUND THAT SOME PERSONAL ELEMENT IN THE EXPENDITURE COULD NOT BE RULED OUT. HOWEVER, IT IS CLEAR THAT IN THE INSTANT CASE IT CANNOT BE SAID THAT THE ASSESSEE HAD WITHHELD ANY RELEVANT INFORMA TION REGARDING MISCELLANEOUS EXPENSES OR ADVANCES/BALANC ES WRITTEN OFF. THE ASSESSEE HAS DULY DISCLOSED THESE AMOUNTS IN ITS PROFIT/LOSS ACCOUNT AND HAS ALSO SUBMITTED DETAILS THEREOF DURING I.T.A. NO. 2647/DEL/2016 ASSESSMENT YEAR 2010-11 14 THE ASSESSMENT PROCEEDINGS. THE ONLY REASON THE PEN ALTY WAS IMPOSED WAS THAT THE LOWER AUTHORITIES DID NOT ACCE PT THE EXPLANATION OF THE ASSESSEE AND IMPOSED PENALTY FOR CONCEALMENT OF INCOME. THUS, THE BONA FIDES OF THE ASSESSSEE CANNOT BE DOUBTED IN SUCH CIRCUMSTANCES. WITH REGARD TO THE P ROVISIONS OF SECTION 271(1)(C ) OF THE ACT PERTAINING TO PENALTY , THE HONBLE APEX COURT HAS AUTHORITATIVELY LAID DOWN THAT MAKIN G OF A CLAIM BY THE ASSESSEE WHICH IS NOT SUSTAINABLE WILL NOT T ANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. IN CIT VS. RELIA NCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC), THE HONB LE APEX COURT HAS HELD AS FOLLOWS: A GLANCE AT THIS PROVISION WOULD SUGGEST THAT IN O RDER TO BE COVERED, THERE HAS TO BE CONCEALMENT OF PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY , THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE PRESENT IS NOT A CAS E OF CONCEALMENT OF INCOME. THAT IS NOT THE CASE OF THE REVENUE EITHER. HOWEVER, THE LD. COUNSEL FOR THE REVENUE SUGGESTED THAT BY MAKING INCORRECT CLAIM FO R THE EXPENDITURE ON INTEREST, THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. AS PER LAW LEXICON, THE MEANING OF THE WORD 'PARTICULAR' IS A DETAIL OR DETAILS (IN PLURAL SENSE); THE DETAILS OF A CLAIM, OR THE SEPARATE ITEMS OF AN ACCOUNT. THEREFO RE, THE WORD 'PARTICULARS' USED IN THE SECTION 271 (1) (C) WOULD EMBRACE THE MEANING OF THE DETAILS OF THE CLA IM MADE. IT IS AN ADMITTED POSITION IN THE PRESENT CAS E THAT NO INFORMATION GIVEN IN THE RETURN WAS FOUND T O BE INCORRECT OR INACCURATE. IT IS NOT AS IF ANY STATEM ENT MADE OR ANY DETAIL SUPPLIED WAS FOUND TO BE FACTUAL LY INCORRECT. HENCE, AT LEAST, PRIMA FACIE, THE ASSESS EE I.T.A. NO. 2647/DEL/2016 ASSESSMENT YEAR 2010-11 15 CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. THE LEARNED COUNSEL ARGUED THAT 'SUBMITTING AN INCORRECT CLAIM IN LAW FOR THE EXPENDITURE ON INTEREST WOULD AMOUNT TO GIVING INACCURATE PARTICULARS OF SUCH INCOME.' WE DO NOT THINK THAT SUCH CAN BE THE INTERPRETATION OF THE CONCERNED WORDS. THE WORDS ARE PLAIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENA LTY PROVISION CANNOT BE INVOKED. BY ANY STRETCH OF IMAGINATION, MAKING AN INCORRECT CLAIM IN LAW CANNO T TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. 5.5 ALTHOUGH BOTH THE LOWER AUTHORITIES HAVE HELD T HAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME, ON A CONSIDERATION ON THE FACTS, SUCH A VIEW IS NOT TENABLE IS THE PRE SENT APPEAL. THEREFORE, RESPECTFULLY FOLLOWING THE JUDGMENT OF T HE HONBLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LT D. (SUPRA) WE SET ASIDE THE ORDER OF THE LD. CIT (APPEALS) AND DI RECT THE AO TO DELETE THE PENALTY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2017. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) PRESIDENT JUDICIAL MEMBER DT. 31ST OCTOBER 2017 GS I.T.A. NO. 2647/DEL/2016 ASSESSMENT YEAR 2010-11 16 COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR