IL & FS MARITIME INFRASTRUCTURE COMPANY LTD, MUMBAI V. ASST CIT 10(1), MUMBAI

ITA 4177/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4028 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2009-2010
• Appeal Filed On: 14-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: P V LAKHANI
• Keywords: Transfer pricing; International transaction; Bonafide belief; Reasonable cause; Tax effect; Bonafide mistake
• Section: 273B; 92B; 92E; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER & SHRI SANJAY GARG, JUDICIAL MEMBER ITA NOS. 4177/MUM/2012 ASSESSMENT YEARS: 2009-10 IL & FS MARITIME INFRASTRUCTURE COMPANY LTD. THE IL & FS FINANCIAL CENTRE, PLOT C-22, G-BLOCK, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400 051 PAN:AABC17029R VS. ASSISTANT COMMISSIONER OF INCOME TAX-10(1), MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.V. LAKHANI REVENUE BY : SHRI O.P. SINGH DATE OF HEARING : 15.07.2013 DATE OF PRONOUNCEMENT : 24.07.2013 O R D E R PER SANJAY GARG, JM: THIS PRESENT APPEAL IS DIRECTED AGAINST THE ORDER D ATED 09.04.2012 OF THE LEARNED CIT(A) CONFIRMING THE IMPOSITION OF PENALTY BY THE AO ON THE ASSESSEE UNDER SECTION 271BA OF THE INCOME TAX ACT, 1961. 2. THE GROUNDS OF APPEAL ARE REPRODUCED AS UNDER:- 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE A PPELLANT WAS UNDER BONAFIDE BELIEF THAT THE PROVISIONS OF SECTIO N 92B ARE NOT APPLICABLE TO THE TRANSACTION OF INVESTMENTS MADE B Y THE APPELLANT IN THE SHARES OF SUBSIDIARY COMPANIES. BASED ON THIS B ONAFIDE BELIEF THE APPELLANT DID NOT OBTAIN THE REPORT IN FORM 3CEB ON OR BEFORE 30 TH SEPTEMBER, 2009. THE APPELLANT PRAYS THAT THERE WAS A REASONABLE CAUSE FOR NOT OBTAINING THE REPOT WITHIN THE PRESCR IBED TIME LIMIT AND THE PENALTY LEVIED U/S 271BA MAY BE DELETED. 3. ON THE ACTS AND CIRCUMSTANCES OF THE CASE THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN R EJECTING THE CLAIM ITA NO. 4177 /MUM/2012 IL & FS MARITIME INFRASTRUCTURE COMPANY LTD. ASSESSMENT YEAR: 2009-10 2 OF THE APPELLANT AND THERE WAS A REASONABLE CAUSE I N DELAY IN OBTAINING THE REPORT U/S 92E OF THE INCOME TAX ACT, 1961. THE APPELLANT THEREFORE PRAYS THAT PENALTY LEVIED U/S 2 71BA IS BAD IN LAW AND MAY BE DELETED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME WAS FILED BY THE ASSESSEE-COMPANY ON 23.09.2009. SUBSEQUENTLY, ON 19 .08.2011, THE ASSESSEE- COMPANY FILED TRANSFER PRICING REPORT IN FORM NO. 3 CEB DATED 16.08.2011 WHEREIN INTERNATIONAL TRANSACTIONS OF RS. 143,89,81,125/- W ERE REPORTED. THE AO INITIATED PENALTY PROCEEDINGS AGAINST THE ASSESSEE UNDER SECT ION 271BA OF THE INCOME TAX ACT AND ISSUED NOTICE IN THIS RESPECT TO THE ASSESS EE. THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE, HENCE IMPOSE D PENALTY OF RS. 1,00,000/- UNDER SECTION 271BA OF THE ACT UPON THE ASSESSEE. T HE LEARNED CIT(A) FURTHER CONFIRMED THE SAID PENALTY. THE ASSESSEE IS, THUS, IN APPEAL BEFORE US. 4. WE HAVE HEARD THE LEARNED REPRESENTATIVE OF THE BOTH THE PARTIES. THE LEARNED REPRESENTATIVE OF THE ASSESSEE BEFORE US HA S SUBMITTED THAT THE EXECUTIVE INCHARGE OF TAXATION MATTERS OF THE ASSESSEE-COMPAN Y WAS UNDER A BONAFIDE BELIEF THAT THE TRANSACTIONS OF INVESTMENTS IN SHARES OF S UBSIDIARY COMPANY DID NOT FALL WITHIN THE SCOPE OF SECTION 92B. SUBSEQUENTLY, THE APPELLANT WAS ADVISED THAT EVEN FOR THE TRANSACTION OF INVESTMENTS IN SUBSIDIARIES, REPORT U/S 92E HAS TO BE OBTAINED. THE APPELLANT VOLUNTARILY OBTAINED A REPORT U/S 92E ON 16 TH AUGUST, 2011 AND SUBMITTED THE SAME BEFORE THE LEARNED ASSESSING OFF ICER ON 19 TH AUGUST, 2011. HE HAS FURTHER SUBMITTED THAT THE DELAY IN OBTAINING T HE REPORT UNDER SECTION 92E WAS NOT INTENTIONAL, RATHER WAS DUE TO BONAFIDE MISTAKE N BELIEF. HE HAS FURTHER SUBMITTED THAT TECHNICALLY THERE WAS NO TAX EFFECT UPON THE A SSESSEE-COMPANY IN NOT FURNISHING THE SAID REPORT IN TIME, HENCE THE SAID DEFAULT OF THE ASSESSEE WAS NOT INTENTIONAL. HE HAS FURTHER SUBMITTED THAT ONLY ONE TRANSACTION OF INVESTMENT IN EQUITY SHARES WAS MADE WITH ITS SUBSIDIARY COMPANY BY THE ASSESSE E. HE HAS BROUGHT OUR ATTENTION TO THE ORDER OF THE AO PASSED UNDER SECTI ON 271BA TO CONTEND THAT THE AO HAD FAILED TO CONSIDER THE EXPLANATION OF ASSESSEE OF HIS REASONABLE CAUSE OF BONAFIDE BELIEF THAT TRANSACTION OF INVESTMENT IN E QUITY SHARES OF SUBSIDIARY COMPANY DID NOT FALL WITHIN THE SCOPE OF SECTION 92B. ON TH E OTHER HAND, THE LEARNED DR, ITA NO. 4177 /MUM/2012 IL & FS MARITIME INFRASTRUCTURE COMPANY LTD. ASSESSMENT YEAR: 2009-10 3 BEFORE US, HAS SUBMITTED THAT PENALTY HAD BEEN IMPO SED BY THE AO DUE TO TECHNICAL DEFAULT IN SUBMITTING THE REPORT AS PER SECTION 92E OF THE ACT BY THE ASSESSEE- COMPANY AND THERE WAS NO DISCRETION AVAILABLE TO TH E AO FOR NOT IMPOSING THE PENALTY. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY THE LEARNED REPRESENTATIVE OF THE PARTIES BEFORE US. 6. IN CASE OF INTERNATIONAL TRANSACTIONS AS DEFIN ED UNDER SECTION 92B OF THE INCOME TAX ACT, IT IS MANDATORY UNDER SECTION 92E O F THE ACT FOR A PERSON ENTERING INTO AN INTERNATIONAL TRANSACTION/TRANSACTIONS TO F ILE A REPORT FROM AN ACCOUNTANT SETTING FORTH THE PARTICULARS OF SUCH INTERNATIONAL TRANSACTIONS. AS PER SECTION 271BA, IN DEFAULT OF FURNISHING A REPORT FROM AN AC COUNTANT AS REQUIRED BY SECTION 92E, THE ASSESSING OFFICER MAY IMPOSE PENALTY OF A SUM OF RS. 1,00,000/-. IT MAY BE OBSERVED THAT IN SECTION 273B OF THE ACT, IT HAS BEEN PROVIDED THAT NO PENALTY SHALL BE IMPOSABLE ON THE CONCERNED PERSON OR THE A SSESSEE FOR ANY FAILURE REFERRED TO THE PROVISIONS IN QUESTION (AS ARE MENTIONED IN SECTION 273B, WHICH INCLUDES SECTION 271BA ALSO), IF THE CONCERNED PERSON/ASSESS EE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. FOR THE SHAK E OF CONVENIENCE SECTIONS 271BA & 273B ARE REPRODUCED AS UNDER:- 271BA. IF ANY PERSON FAILS TO FURNISH A REPORT FRO M AN ACCOUNTANT AS REQUIRED BY SECTION 92E, THE ASSESSING OFFICER MAY DIRECT THAT SUCH PERSON SHALL PAY, BY WAY OF PENALTY, A SUM OF ONE H UNDRED THOUSAND RUPEES. 273B. NOTWITHSTANDING ANYTHING CONTAINED IN THE PR OVISIONS OF [CLAUSE (B) OF SUB-SECTION (1) OF] [SECTION 271, SECTION 27 1A, [SECTION 271AA,] SECTION 271B [SECTION 271BA], (SECTION 271BB,] SECT ION 271C, [SECTION 271CA,] SECTION 271D, SECTION 271E, [SECTION 271F, [SECTION 271FA,] [SECTION 271FB,] [SECTION271G,]] CLAUSE (C) OR CLAU SE (D) OF SUB-SECTION (1) OR SUB-SECTION (2) OF SECTION 272A, SUB-SECTION (1) OF SECTION 272AA] OR [SECTION 272B OR] [SUB-SECTION (1) [OR SUB-SECTI ON (1A) OF SECTION 272BB OR] [SUB-SECTION (1) OF SECTION 272BBB OR] CL AUSE (B) OF SUB- SECTION (1) OR CLAUSE (B) OR CLAUSE (C) OF SUB-SECT ION (2) OF SECTION 273, NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE, AS THE CASE MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PRO VISIONS IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE.] ITA NO. 4177 /MUM/2012 IL & FS MARITIME INFRASTRUCTURE COMPANY LTD. ASSESSMENT YEAR: 2009-10 4 7. NOW, COMING TO THE CASE IN HAND, IT MAY BE OBSER VED THAT AS PER THE WORDING OF SECTION 271BA, THE AO MAY DIRECT THE CONCERNED P ERSON TO PAY THE PENALTY. THE WORD MAY USED IN THE SECTION DENOTES THAT IT IS T HE DISCRETION OF THE AO TO IMPOSE OR NOT TO IMPOSE THE PENALTY. THIS DISCRETION IS SU BJECT TO THE RESTRICTIONS AS IMPOSED BY SECTION 273B OF THE ACT. THE WORD MAY ALSO INC LUDES THE WORD MAY NOT. RELIANCE CAN BE PLACED ON AN AUTHORITY OF THE HONB LE SUPREME COURT OF INDIA IN MALIK RAM V. STATE OF RAJASTHAN 1961 AIR 1575, WH EREIN, THE HONBLE SUPREME COURT WHILE INTERPRETING THE SECTION 68-D(2) OF THE MOTOR VEHICLES ACT, 1939 HAS HELD THAT THE WORDS MAY APPROVE IN THE SECTION, PROPER LY CONSTRUED, MUST ALSO INCLUDE MAY NOT APPROVE. THE WORD SHALL HAS NOT BEEN USED IN THE SECTION 271BA OF THE ACT, WHICH OTHERWISE, WOULD HAVE MADE THE IMPOSITION OF PENALT Y MANDATORY. OUR INTERPRETATION OF WORD MAY FINDS JUSTIFICATION FROM THE PROVISIO NS OF SECTION 273B OF THE ACT, WHEREIN IT HAS BEEN SPECIFICALLY PROVIDED THAT .. NO PENALTY SHALL BE IMPOSABLE ..IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. SO, THE RELEVANT PROVISIONS UNDER CONSIDERATION REVEALS THA T THOUGH THE IMPOSITION OF PENALTY IS DISCRETIONARY, HOWEVER, THE WORD SHALL USED IN SECTION 273B PROVIDES THAT IT IS MANDATORY NOT TO IMPOSE PENALTY, IF THE ASSESSEE GI VES A REASONABLE CAUSE FOR HIS FAILURE IN FURNISHING THE PARTICULARS AS REQUIRED B Y THE PROVISIONS OF THE SECTION 271BA. IT MAY BE FURTHER OBSERVED THAT IN THE CASE IN HAND , THE AO DID NOT CONSIDER THE EXPLANATION OF REASONABLE CAUSE OF BONAFIDE BEL IEF GIVEN BY THE ASSESSEE IN ITS FAILURE TO FURNISH THE REPORT UNDER SECTION 92E IN TIME. EVEN, THE LEARNED CIT(A) DID NOT BOTHER TO LOOK INTO OR CONSIDER THE SAID EXPLAN ATION GIVEN BY THE ASSESSEE. THE AUTHORITIES BELOW HAVE IMPOSED THE PENALTY HOLDING THAT THE SAME IS MANDATORILY IMPOSABLE UNDER THE PROVISIONS OF SECTION 271BA OF THE ACT. THE AUTHORITIES BELOW FAILED TO TAKE NOTE OF PROVISIONS OF SECTION 273B A S WELL AS THE USE OF WORD MAY IN SECTION 271BA. 8. WE ARE SATISFIED WITH THE EXPLANATION GIVEN BY T HE REPRESENTATIVE OF THE ASSESSEE TO THE EFFECT THAT THE DELAY IN FURNISHING THE REPORT UNDER SECTION 92E WAS NOT INTENTIONAL, RATHER DUE TO MISTAKEN BONAFIDE BE LIEF THAT THE TRANSACTION INVOLVING ITA NO. 4177 /MUM/2012 IL & FS MARITIME INFRASTRUCTURE COMPANY LTD. ASSESSMENT YEAR: 2009-10 5 THE INVESTMENT OF MONEY IN EQUITY SHARES OF ITS SUB SIDIARY COMPANY BY THE ASSESSEE- COMPANY WAS NOT WITHIN THE SCOPE OF INTERNATIONAL T RANSACTIONS AS DEFINED UNDER SECTION 92B OF THE ACT. AS SOON AS, THE ASSESSEE-CO MPANY CAME TO KNOW THAT IT WAS REQUIRED TO FURNISH THE REPORT UNDER SECTION 92E, I T FILED THE SAME BEFORE THE AO. THE EXPLANATION PUT FORTH BY THE ASSESSEE-COMPANY, IN OUR VIEW, FALLS WITHIN THE SCOPE OF PHRASE REASONABLE CAUSE AS PROVIDED UNDE R SECTION 273B OF THE INCOME TAX ACT, 1961. SO, IN VIEW OF OUR OBSERVATIONS MADE ABOVE, THE PENALTY IMPOSED UPON THE ASSESSEE BY THE AO AND FURTHER CONFIRMED B Y THE CIT(A) IS HEREBY ORDERED TO BE DELETED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF JULY, 2013. SD/- SD/- (P.M. JAGTAP) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 24.07.2013. *KKM COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR I BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.