ACIT CIR 4(2), MUMBAI V. FORMENICH AROMATICS (INDIA) P. LTD, MUMBAI

ITA 4654/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2167 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2003-2004
• Appeal Filed On: 07-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KESHAV SAXENA
• Keywords: Transfer pricing; International transaction; Difference of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH: MUMBAI BEFORE SHRI R S PADVEKAR, JUDICIAL MEMBER AND SHRI B RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO 4654/MUM/2009 (ASSESSMENT YEAR: 2003-04) ACIT CIRCLE 4(2), ROOM 642, 6TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI -400 020 VS M/S FIRMENICH AROMATICS (INDIA) PVT LTD , 74/11, C CROSS ROAD, MIDC, ANDHERI (E), MUMBAI -400 093 PAN : AAACF 1621 M APPELLANT RESPONDENT APPELLANT BY: SHRI KESHAV SAXENA RESPONDENT BY: NONE ORDER PER B RAMAKOTAIAH, AM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER OF THE CIT (A)-IV MUMBAI DATED 8.5.2009. THE REVENUE IS AGGRIEVED ON THE DE LETION OF PENALTY OF RS 2,35,314/- LEVIED BY THE ASSESSING OFFICER ON ACCOU NT OF DISALLOWANCE OF COMMISSION PAID OF RS 1,65,911/- AND AN ADDITION OF RS 4,74,40 0/- ON ACCOUNT OF SALES TO ASSOCIATED CONCERNS BASED ON THE ORDER UNDER SECTIO N 92CA(3) DATED 3.1.2006 PASSED BY THE TRANSFER PRICING OFFICER (TPO) MUMBAI -2. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER REFERRED THE TRANSACTIONS TO TPO WHO PASSED AN ORDER AND ON THE BASIS OF THE ABOVE SAID ORDER, THE ASSESSING OFFICER DISALLOWED AN AMOUNT O F RS 6,43,311/-. THIS AMOUNT WAS ARRIVED AT BY ADOPTING COMPARABLE UNCONTROLLED PRIC E METHOD ON (CUP METHOD) AS AGAINST TNMM METHOD ADOPTED BY THE ASSESSEE. THIS DIFFERENCE OF THE AMOUNT ARRIVED AT BY THE TPO WAS CONSIDERED AS ADDITION AN D PENALTY WAS LEVIED INVOKING THE PROVISIONS OF SECTION 271(1)(C) HOLDING THAT ASSESS EE HAS FURNISHED INACCURATE PARTICULARS OF INCOME THEREBY CONCEALING THE INCOME . ITA 4654/M/09 M/S FIRMENICH AROMATICS (INDIA) PVT LTD 2 3. THE CIT (A), IN APPEAL, ACCEPTED THE ASSESSEES CONTENTIONS THAT THE DISALLOWANCE OF AMOUNTS DOES NOT AMOUNT TO FURNISHI NG INACCURATE PARTICULARS AND ADDITIONS HAVE BEEN MADE IN COMPUTING THE ARMS LENG TH PRICE IN DIFFERENT METHODS AND THIS DIFFERENCE OF OPINION CAN BE CONSIDERED AS BONA FIDE DIFFERENCE OF OPINION AND THE SAME DOES NOT TANTAMOUNT FURNISHING INACCUR ATE PARTICULARS OF INCOME. ACCORDINGLY, HE CANCELLED THE PENALTY. 4. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATI VE RELIED ON THE ORDERS OF THE ASSESSING OFFICER. THE ASSESSEE HAS NOT APPEAR ED INSPITE OF ISSUING A NOTICE, HENCE THE ISSUE IS CONSIDERED EX-PARTE-RESPONDENT . 5. AFTER CONSIDERING THE ARGUMENTS OF DEPARTMENTAL REPRESENTATIVE AND EXAMINING THE RECORD, WE ARE OF THE OPINION THAT TH E ORDER OF THE CIT (A) IS TO BE UPHELD. AS SEEN FROM THE FACTS, THE ONLY ADDITION MADE IS WITH REFERENCE TO THE ORDER PASSED U/S 92(3) BY THE TPO WHILE ARRIVING AT THE V ALUE OF INTERNATIONAL TRANSACTION. THE ASSESSEE ADOPTED TNMM METHOD WHEREAS THE TPO AD OPTED CUP METHOD. THIS CAN ONLY BE CONSIDERED AS BONA FIDE DIFFERENCE OF OPINION WHICH CANNOT LEAD TO LEVY OF PENALTY U/S 271(1)(C). 6. THE HONBLE SUPREME COURT IN THE CASE OF RELIANC E PETROPRODUCTS PVT LTD REPORTED IN 322 ITR 158 (SC) HAS HELD AS UNDER:- A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE H AS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDL Y, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. TH E MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRA CE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF F URNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PE NALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROV ISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT C LAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICU LARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LI ABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NO T BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. ITA 4654/M/09 M/S FIRMENICH AROMATICS (INDIA) PVT LTD 3 WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THE RE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO F URNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTI CULARS. 7. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF HON BLE SUPREME COURT, WE HOLD THAT THERE IS NO CASE FOR LEVY OF PENALTY ON THE FA CTS OF THE CASE. EVEN OTHERWISE THE ASSESSEE CAN NOT BE EXPECTED TO VISUALISE INVOKING A DIFFERENT METHOD BY THE TPO IN VALUEING AN INTERNATIONAL TRANSACTION AND ARRIVE AT A DISALLOWANCE. THE BASIC DATA HAS BEEN FURNISHED ON THE BASIS OF WHICH ONLY TOP I NVOKED THE CUP METHOD. IT CAN NOT BE STATED THAT ASSESSEE FURNISHED INACCURATE PA RTICULARS. ACCORDINGLY, THE ORDER OF THE CIT (A) IS UPHELD. 8. IN THE RESULT, REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED ON 17TH DAY OF MAY 2010. SD/- (R S PADVEKAR) JUDICIAL MEMBER SD/- (B RAMAKOTAIAH) ACCOUNTANT MEMBER MUMBAI, DATE: 17TH MAY 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-IV, MUMBAI. 4) THE CIT -4, MUMBAI. 5) THE D.R. F BENCH, ITAT, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T., MUMBAI ITA 4654/M/09 M/S FIRMENICH AROMATICS (INDIA) PVT LTD 4 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 3.5.2010 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 3.5.2010 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/A M 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER