Income tax Officer, V. M/s. Carraro Technologies India Pvt.Ltd, Pune

ITA 2776/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1354 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 08-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction
• Section: 92C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , ! , '# $ !% , ! & BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWAS THY, JM #. / ITA NO.2776/PUN/2016 ( )( / ASSESSMENT YEAR : 2010-11 THE INCOME TAX OFFICER, WARD-1(2), PUNE. ....... / APPELLANT / V/S. M/S. CARRARO TECHNOLOGIES INDIA PVT. LTD. C/O. CARRARO INDIA PVT. LTD., B2/2, MIDC, RANJANGAON, PUNE-412 220 PAN : AACCC8571D / RESPONDENT REVENUE BY : SHRI SUDHENDU DAS ASSESSEE BY : SHRI KISHORE PHADKE / DATE OF HEARING : 06.09.2018 / DATE OF PRONOUNCEMENT : 07.09.2018 * / ORDER PER VIKAS AWASTHY, JM THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-13, PUNE DATED 06.09.2016 WHEREBY P ENALTY LEVIED U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) HAS BEEN DELETED BY THE FIRST APPELLATE AUTHORITY. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORDS ARE: THE ASSESSEE IS ENGAGED IN PROVIDING DESIGN ENGINEERING AND ITES SERVICES TO ITS AES. DURING THE 2 ITA NO. 2776/PUN/2016 A.Y.2010-11 PERIOD RELEVANT TO ASSESSMENT YEAR UNDER APPEAL, THE AS SESSEE ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS AES. TO EXAMINE ARMS L ENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTIONS REFERENCE WAS MADE TO THE TRANSFER PRICING OFFICER (TPO). THE TPO AFTER ANALYSING THE TRANSACTIONS PROPOSE D ADJUSTMENT OF RS.72,79,939/-. ACCORDINGLY, THE ASSESSING OFFICER PASSED ASS ESSMENT ORDER MAKING ADDITION OF THE AFORESAID AMOUNT AND ALSO INITIATED PE NALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS O F INCOME. PENALTY OF RS.22,49,501/- U/S.271(1)(C) WAS LEVIED BY THE ASSESSING OFFIC ER VIDE ORDER DATED 26.03.2015. 3. AGAINST THE PENALTY ORDER, THE ASSESSEE FILED APPEAL B EFORE THE COMMISSIONER OF INCOME TAX(APPEALS). THE COMMISSIONER OF INCO ME TAX(APPEALS) VIDE IMPUGNED ORDER DELETED THE PENALTY PRIMA RILY ON THE GROUND THAT WHILE LEVYING PENALTY, THE PROVISIONS OF EXPLANATION-7 TO SECTION 271(1) WERE NOT INVOKED. AGAINST THE FINDINGS OF COMMISSIONER OF INCOME T AX (APPEALS), THE REVENUE IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 4. SHRI KISHORE PHADKE APPEARING ON BEHALF OF THE ASSESSE E VEHEMENTLY SUPPORTING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEA LS) CONTENDED THAT APART FROM THE FACT THAT WHILE LEVYING PENALTY IN RESPECT O F INTERNATIONAL TRANSACTIONS, EXPLANATION-7 TO SECTION 271(1)(C) WERE NOT INVOKED, THE ASSESSING OFFICER HAS ALSO NOT SPECIFIED THE CHARGE FOR LEVYING PENALTY IN THE PENALTY ORDER DATED 26.03.2015. THUS, THERE IS AMBIGUITY IN THE ORDER OF LEVYING PENALTY WITH RESPECT TO CHARGE. IT IS NOT EMANATING FROM THE PENALTY ORDER AS TO WHETHER PENALTY IS BEING LEVIED FOR FURNISHING INACCURATE PARTICULARS O F INCOME OR CONCEALING THE PARTICULARS OF INCOME. 5. ON THE OTHER HAND, SHRI SUDHENDU DAS REPRESENTING T HE DEPARTMENT VEHEMENTLY DEFENDED THE ORDER LEVYING PENALTY. THE LD. DR SUBMITTED THAT WHILE 3 ITA NO. 2776/PUN/2016 A.Y.2010-11 RECORDING SATISFACTION IN THE ASSESSMENT ORDER, THE ASSES SING OFFICER HAS CATEGORICALLY MENTIONED THAT PENALTY PROCEEDINGS ARE BEIN G INITIATED U/S.271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME. IN THE ORDER LEVYING PENALTY DATED 26.03.2015, THE ASSESSING OFFICE R HAS MENTIONED PRE-CONDITIONS FOR LEVYING PENALTY AND ALSO THE CHARGE FOR LEVYING PENALTY. THE LD.DR FURTHER CONTENDED THAT MERE NON-MENTIONING OF EXPLA NATION-7 IN THE PENALTY ORDER, WOULD NOT MAKE PENALTY PROCEEDINGS INVALID OR DEFECTIV E. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIV ES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. THE REVEN UE IN APPEAL HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX(APPEALS) IN DELETING PENALTY LEVIED U/S.271(1)(C) OF THE ACT. IT IS AN UNDISPUTED FACT THA T PENALTY PROCEEDINGS U/S.271(1)(C) WERE INITIATED IN RESPECT OF ADJUSTMENT PROPO SED BY THE TPO IN PROCEEDINGS U/S.92C OF THE ACT. 7. FOR INITIATING ANY PENALTY PROCEEDINGS U/S.271(1)(C) IN RESP ECT OF ADDITION MADE IN PROCEEDINGS U/S. 92C, WE FIND THAT EXPLANATION-7 TO SECTION 271(1)(C) COMES INTO PLAY. FOR THE SAKE OF COMPLETENESS, THE PROV ISIONS OF EXPLANATION 7 ARE REPRODUCED HEREIN BELOW: EXPLANATION-7-WHERE IN THE CASE OF AN ASSESSEE WHO HAS ENTERED INTO AN INTERNATIONAL TRANSACTION [OR SPECIFIED DOMESTIC TR ANSACTION] DEFINED IN SECTION 92B, ANY AMOUNT IS ADDED OR DISALLOWED IN C OMPUTING THE TOTAL INCOME UNDER SUB-SECTION (4) OF SECTION 92C, THEN T HE AMOUNT SO ADDED OR DISALLOWED SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNI SHED, UNLESS THE ASSESSEE PROVES TO THE SATISFACTION OF THE ASSESSIN G OFFICER OR THE COMMISSIONER (APPEALS) [OR THE [PRINCIPAL COMMISSION ER OR] COMMISSIONER] THAT THE PRICE CHARGED OR PAID IN SUCH TRANSACTION WAS COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION 92C AND IN THE MANNER PRESCRIBED UNDER THAT SECTION, IN GOOD FAITH AND WI TH DUE DILIGENCE. WE OBSERVE THAT NEITHER AT THE TIME OF RECORDING SATISFAC TION FOR INITIATING PENALTY PROCEEDINGS NOR AT THE TIME OF LEVY OF PENALTY, TH E ASSESSING OFFICER HAS MADE ANY REFERENCE TO EXPLANATION-7. 4 ITA NO. 2776/PUN/2016 A.Y.2010-11 WE FURTHER OBSERVE THAT IN THE PENALTY ORDER DATED 26 .03.2015, THE ASSESSING OFFICER HAS NOT SPECIFIED THE CHARGE FOR WHICH PEN ALTY IS BEING LEVIED I.E. CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. APART FROM PROVISIONS OF SECTION 271(1)(C), EXPLANATION-7 A LSO MANDATES THAT FOR LEVYING PENALTY IN RESPECT OF ANY ADDITION OR DISALLOWAN CE TO INTERNATIONAL TRANSACTIONS, PENALTY CAN BE LEVIED FOR EITHER OF THE TWO D EFAULTS I.E. CONCEALMENT OR FURNISHING INACCURATE PARTICULARS OF INCO ME. THE ORDER LEVYING PENALTY SUFFERS FROM INCURABLE DEFECT OF AMBIGUITY. WE DO NO T FIND ANY INFIRMITY IN THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). HENCE , THE GROUNDS OF APPEAL RAISED BY REVENUE ARE DISMISSED BEING DEVOID OF ANY MERIT. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 07 TH DAY OF SEPTEMBER, 2018. SD/- SD/- ( / ANIL CHATURVEDI ) ( $ !% /VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; !' / DATED : 07 TH SEPTEMBER, 2018 SB * + ,-$ .$) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS)-13, PUNE. 4. THE PR. CIT-1, PUNE. 5. %&' () , * () , +,- , / DR, ITAT, B BENCH, PUNE. 6. './ 01 / GUARD FILE. // TRUE COPY // *2 / BY ORDER, 3 (- / PRIVATE SECRETARY * () , / ITAT, PUNE.