A.C.I.T., Circle-4(1), Agra V. M/s Sankalp Exports Pvt. Ltd., Agra

ITA 311/AGR/2013

• Counselvise Citation: 31120314 RSA 2013
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 16-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction; Reasonable cause; Non compliance
• Section: 92

Judgement Text

I.T.A. NOS.: 310 AND 311/AGRA/2013 ASSESSMENT YEAR: 2007-08 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA [CORAM : BHAVNESH SAINI JM AND PRAMOD KUMAR AM] I.T.A. NO.: 310 AND 311/AGR/2013 ASSESSMENT YEAR: 2007-08 ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 4 (1), AGRA .....APPELLANT VS. SANKALP EXPORTS PVT LTD .RESPONDENT 25/161, GANDHI NAGAR, BYE PASS ROAD AGRA 282 003 [PAN: AAECS2544J] APPEARANCES BY: K K MISHRA, FOR THE APPELLANT K K JAIN, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : DECEMBER 17, 201 3 DATE OF PRONOUNCING THE ORDER : DECEMBER 20, 2013 O R D E R PER PRAMOD KUMAR: 1. THESE TWO APPEALS PERTAIN TO THE ASSESSEE, INVOL VE INTERCONNECTED ISSUES ARISING OUT OF COMMON MATERIAL FACTS, AND WERE HEAR D TOGETHER. AS A MATTER OF CONVENIENCE, THEREFORE, BOTH OF THESE APPEALS ARE B EING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. 2. IN ITA NO. 310/AGRA/2013, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF LEARNED COMMISSIONER (APPEALS)S ORD ER DATED 20 TH MAY 2013, DELETING PENALTY IMPOSED UNDER SECTION 271 G OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR THE ASSE SSMENT YEAR 2007-08 ON THE FOLLOWING GROUND: I.T.A. NOS.: 310 AND 311/AGRA/2013 ASSESSMENT YEAR: 2007-08 PAGE 2 OF 5 THAT LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE PENALTY OF RS 4,02,791 IMPOSED BY THE AO UNDER SECTION 271 G WITHOUT APPRECIATING THE FACTS OF THE CASE TH AT THE ASSESSEE ITSELF HAS CHALLENGED THE APPLICABILITY OF SECTION 92 MEANING THEREBY IT HAD NOT MAINTAINED ANY REQUISIT ION DETAILS AS PER RULE 10 D OF THE IT ACT, 1961. AS SUCH, THE QUESTION OF PRODUCTION OF SUCH DETAILS DOES NOT ARISE. 3. IN ITA NO 311/AGRA/2013, THE ASSESSING OFFICER H AS CHALLENGED CORRECTNESS OF LEARNED COMMISSIONER (APPEALS)S ORD ER DATED 23 RD MAY 2013, DELETING PENALTY IMPOSED UNDER SECTION 271 AA OF TH E INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2007-08 ON THE FOLLOWING GROUND : THAT LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE PENALTY OF RS 4,02,791 IMPOSED BY THE AO UNDER SECTION 271 AA WITHOUT APPRECIATING THE FACTS OF THE CASE T HAT THE ASSESSEE ITSELF HAS CHALLENGED THE APPLICABILITY OF SECTION 92 MEANING THEREBY IT HAD NOT MAINTAINED ANY REQUISIT ION DETAILS AS PER RULE 10 D OF THE IT ACT, 1961. 4. THE MATERIAL FACTS OF THE CASE, SO FAR AS RELEVA NT FOR DISPOSING OF THESE APPEALS, ARE LIKE THIS. THE ASSESSEE BEFORE US IS E NGAGED IN THE BUSINESS OF EXPORTS OF VARIOUS TYPES OF NATURAL STONES LIKE MAR BLE, GRANITE, SLATE STONES ETC. THE ENTIRE SALES IS EXPORTS SALES AND IS MADE TO IT S ASSOCIATED ENTERPRISES BY THE NAME OF SANKALP SIDHANT INC USA. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT WHILE THE ASSESSEE HAS ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS AE, THE AS SESSEE HAS NOT FILED THE AUDIT REPORT ON FORM 3CEB. THE ASSESSING OFFICER REQUIRE D THE ASSESSEE TO FURNISH THE SAME, AS ALSO OTHER INFORMATION, INCLUDING THIN GS LIKE GLOBAL TRANSFER PRICING POLICY OF THE AE AND THE TRANSFER PRICING STUDY REP ORT, SPECIFIED IN THIS REQUISITION DATED 9 TH NOVEMBER 2009. WHILE THE ASSESSEE DID FURNISH A C OPY OF THE REPORT DATED 25 TH OCTOBER 2007, AND COMPLIED WITH OTHER PARTS OF REQUISITION, THE ASSESSEE DID NOT FURNISH THE GLOB AL TRANSFER PRICING POLICY ON THE GROUND THAT THE ASSESSEE IS NOT A MULTINATIONAL GROUP NOR DID THE ASSESSEE ANY SPECIFIC TP STUDY REPORT OVER AND ABOVE THE AUD IT REPORT ON FORM 3CEB. ON THESE FACTS, WHEN THE ASSESSEE WAS ASKED BY THE TRA NSFER PRICING OFFICER TO I.T.A. NOS.: 310 AND 311/AGRA/2013 ASSESSMENT YEAR: 2007-08 PAGE 3 OF 5 SUBMIT THE FAR ANALYSIS, HE REGRETTED THE SAME ON T HE GROUND THAT THE ASSESSEE BEING A SMALL EXPORTER, A DETAILED REPORT ON THE SA ME WAS NOT AVAILABLE. 5. THE ASSESSEE ALSO RAISED AN OBJECTION TO THE EFF ECT THAT SINCE THE TOTAL VOLUME OF TRANSACTIONS WITH AES WAS LESS THAN RS 5 CRORE, THE ASSESSEES CASE CANNOT BE REFERRED TO THE TPO. THIS ARGUMENT WAS, H OWEVER, REJECTED BY THE TPO BUT THAT ASPECT OF THE MATTER IS NOT REALLY RELEVAN T FOR THE PRESENT ADJUDICATION. 6. WHEN THE MATTER WAS REFERRED TO THE TPO, HE ACC EPTED THE COST PLUS METHOD PRICE FOR DETERMINING THE ALP AND DID NOT MA KE ANY ADJUSTMENT TO THE SAME. HE, HOWEVER, ADDED THAT, AS NO TRANSFER PRI CING DOCUMENTS HAVE BEEN MAINTAINED BY THE ASSESSEE, AO MAY LEVY PENALTY UND ER SECTION 271AA, 271BA AND 271 G OF THE INCOME TAX ACT, 1961, IN ACCORDANC E WITH (ASSESSEES) EXPLANATIONS ON THE SAME. IT WAS IN THIS BACKDRO P THAT THE PENALTY PROCEEDINGS UNDER SECTION 271 AA AND 271 G WERE INITIATED AGAIN ST THE ASSESSEE. IN THE COURSE OF THESE PROCEEDINGS, THE ASSESSING OFFICER REJECTED THE ASSESSEES SUBMISSIONS AND HELD THAT SINCE THE ASSESSEE HIMSEL F HAD CHALLENGED APPLICATION OF SECTION 92, THERE CANNOT BE ANY OCCASIONS FOR HI M FOR MAINTAINING REQUISITE TRANSFER PRICING DOCUMENTATIONS. AS FOR THE TRANSFE R PRICING AUDIT REPORT DATED 25 TH OCTOBER 2007 FILED BY THE ASSESSEE, WHICH EVIDENCE D MAINTENANCE OF REQUISITE RECORDS ON THE GROUND THAT ITS GENUINENES S COULD NOT BE VERIFIED. ACCORDINGLY, PENALTIES UNDER SECTION 271 G AND 271 AA WERE IMPOSED. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BE FORE THE CIT(A) WHO DELETED THE IMPUGNED PENALTIES BY OBSERVING THAT NOT ONLY T HAT THE REQUISITE RECORDS WERE DULY MAINTAINED BUT WERE ALSO PRODUCED, FROM T IME TO TIME, IN RESPONSE TO THE REQUISITIONS MADE BY THE AUTHORITIES. A CATEGOR ICAL FINDING ABOUT THE DATEWISE COMPLIANCE WAS ALSO SET OUT IN THE CIT(A) S ORDER. AGGRIEVED BY THE DELETION OF THESE PENALTIES, NOW THE ASSESSING OFFI CER IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. I.T.A. NOS.: 310 AND 311/AGRA/2013 ASSESSMENT YEAR: 2007-08 PAGE 4 OF 5 8. AS THE GROUNDS OF APPEAL BEFORE US CLEARLY SHOW , THE SHORT GRIEVANCE BEFORE US IS THAT SINCE THE ASSESSEE HIMSELF HAD CH ALLENGED APPLICABILITY OF SECTION 92, IT HAS TO BE CONCLUDED THAT THE ASSESSE E COULD NOT HAVE, AND DID NOT, MAINTAIN THE REQUISITE DOCUMENTATION TO SUBSTANTIAT E THE ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTIONS. THIS GRIEVANCE OVERLOOK S THE FACT THAT THERE IS AN AUDIT REPORT DATED 25 TH OCTOBER 2007 ON RECORD AND THERE IS NOTHING, SAVE AND EXCEPT FOR THE UNSUBSTANTIATED DOUBTS ABOUT ITS BON AFIDES, TO DEMONSTRATE THAT THIS AUDIT REPORT IS NOT GENUINE. IN THESE CIRCUMST ANCES, THE VERY FOUNDATION OF THE ASSESSING OFFICERS GRIEVANCES CEASE TO HAVE A LEGALLY SUSTAINABLE BASIS. THE OTHER ASPECT OF THE MATTER IS THAT THERE ARE CATEGO RICAL FINDINGS BY THE CIT(A) DEMONSTRATING COMPLIANCES OF THE ASSESSEE TO THE RE QUISITIONS MADE BY THE AUTHORITIES FROM TIME TO TIME, AND THAT LEARNED DEP ARTMENTAL REPRESENTATIVE HAS NOT BROUGHT ON RECORD ANY MATERIAL WHATSOEVER T O DISLODGE THESE FINDINGS. IN THE TPO ORDER, THERE IS INDEED A MENTION ABOUT T HE ASSESSEES INABILITY TO PROVIDE FORMAL FAR ANALYSIS BUT THEN IT IS NOT IN D ISPUTE THAT THE ASSESSEE HAS EXPLAINED ALL THE RELATED FACTS AND TPO HAS NO ISSU ES ON THE INFORMATION SO FURNISHED. ONE ALSO HAS TO BEAR IN MIND THE FACT TH AT THE ASSESSEE IS A SMALL EXPORTER AND HE HAS INHERENT LIMITATIONS OF THE SCA LE OF ITS OPERATIONS AND WORK. IN ANY CASE, THE TPO HIMSELF HAS ACCEPTED THE ALP D ETERMINED BY THE ASSESSEE AND HAS NOT DRAWN ANY ADVERSE INFERENCE ON THE SAME . NO DOUBT, TPO HAS MADE AN OBSERVATION TO THE EFFECT THAT PENALTIES UNDER S ECTION 271AA, 271 BA AND 271 G CAN BE ATTRACTED IN THIS CASE, AS ALSO ABOUT NON COMPLIANCE WITH THE REQUIREMENT OF MAINTENANCE OF DOCUMENTATION, BUT TH ESE OBSERVATIONS PER SE CANNOT BE REASON ENOUGH TO IMPOSE THE IMPUGNED PENA LTIES. THE MATTER IS TO BE EXAMINED ON MERITS AND IN OBJECTIVE MANNER. ONCE IT IS ON RECORD THAT REQUISITIONS HAVE BEEN COMPLIED WITH, THERE CANNOT BE ANY BASIS TO COME TO THE CONCLUSION THAT THE RECORDS WERE NOT MAINTAINED. 9. IT IS ALSO ELEMENTARY THAT THE PROVISIONS OF SE CTION 271AA AND 271 G ARE SUBJECT TO THE PROVISIONS OF SECTION 273 B WHICH UN AMBIGUOUSLY SETS OUT THE LEGAL POSITION THAT WHERE ASSESSEE CAN DEMONSTRATE THAT THERE WAS A REASONABLE CAUSE FOR FAILURE TO COMPLY WITH THE FAILURE IN QUE STION. IN THIS VIEW OF THE I.T.A. NOS.: 310 AND 311/AGRA/2013 ASSESSMENT YEAR: 2007-08 PAGE 5 OF 5 MATTER, EVEN IF WE ARE TO PROCEED ON THE BASIS THAT THE ASSESSEE INDEED HAD AN OBLIGATION TO MAINTAIN FORMAL RECORDS IN RESPECT OF FAR ANALYSIS, THERE SEEMS TO A REASONABLE CAUSE, IN THE LIGHT OF THE SCALE OF OP ERATIONS OF THE ASSESSEE, FOR SUCH A FAILURE. 10, FOR THE REASONS SET OUT ABOVE, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE DEEM IT FIT AND PROPER TO UPHOLD THE ORDERS OF T HE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 11. IN THE RESULT, THE APPEALS ARE DISMISSED. PRONO UNCED IN THE OPEN COURT TODAY ON 20 TH DAY OF DECEMBER, 2013. SD/- SD/- BHAVNESH SAINI PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AGRA, THE 20 TH DAY OF DECEMBER, 2013 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA