CADBURY SCHWEPPES OVERSEAS LTD, MUMBAI V. ASST DIT (IT) 1(2), MUMBAI

ITA 5318/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8761 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 22-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 21-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Keywords: Transfer pricing; International transaction; Reasonable cause; Tax effect
• Section: 273B; 143(3); 92D

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 5318/MUM/2014 ASSESSMENT YEAR: 2008 - 09 CADBURY SCHWEPPES OVERSEAS LTD. C/O MONDELEZ HOUSE, UNIT NO. 2001, 20 TH FLOOR, TOWE R - 3 (WING - C), INDIA BULLS FINAN CE CENTRE, PAREL MUMBAI - 400026 VS. ADIT - 1 (2) MUMBAI PAN NO. AAACC4968N APPELLANT RESPONDENT ASSESSEE BY : MR. ARIJIT CHAKRAVARTY , AR REVENUE BY : MR. RAJAT MITTAL, DR DATE OF HEARING : 23 /08/2017 DATE OF PRONOUNCEMENT : 31/10/2017 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE . THE RELEVANT ASSESSMENT YEAR IS 2008 - 09 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 10 , MUMBAI AND ARISES OUT OF PENALTY U/S 271G OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER ('AO') HAS ERRED IN LEVYING AND THE HONBLE COMMISSIONER OF CADBURY SCHWEPPES OVERSEAS LTD. ITA NO. 5318/MUM/2014 2 INCOME - TAX APPEALS ['CIT(A)'] HAS ERRED IN CONFIRMING THE LEVY OF PENALTY UNDER SECTION 271G OF THE INCOME - TAX ACT, 1961 (' ACT') OF RS.48,70,467. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO ERRED IN LEVYING AND THE HON'BLE CIT(A) ERRED IN CONFIRMING THE LEVY OF PENALTY UNDER SECTION 271G OF THE ACT, EVEN THOUGH THE LEARNED TRANSFER PRICING OFF ICER IN THE TRANSFER PRICING ORDER HAS NOT DISTURBED THE ARM'S LENGTH PRICE DETERMINED BY THE APPELLANT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO ERRED IN LEVYING AND THE HONBLE CIT(A) ERRED IN CONFIRMING THE LEVY OF P ENALTY UNDER SECTION 271G OF THE ACT, EVEN THOUGH THE DEFAULT, AT BEST, CAN BE SAID TO BE TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT LEADING TO NO TAX EFFECT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO ERRED IN LEVYING AND THE HON'BLE CIT(A) ERRED IN CONFIRMING THE LEVY OF PENALTY UNDER SECTION 271G OF THE ACT WITHOUT APPRECIATING THE FACT THAT SINCE TRANSFER PRICING OFFICER HAS ACCEPTED THAT APPELLANT'S TRANSACTION ARE AT ARM'S LENGTH HENCE, THERE IS NO FAILURE ON THE PART OF THE APPELLANT IN FURNISHING INFORMATION / DETAILS AS REQUIRED FOR UNDER SECTION 92D OF THE ACT IN RESPECT OF ITS INTERNATIONAL TRANSACTIONS. 5. ON THE FACTS A ND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO ERRED IN LEVYING AND THE HONBLE CJT(A) ERRED IN CONFIRMING THE LEVY OF PENALTY UNDER SECTION 271G OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE TRANSACTIONS OF THE APPELLANT ARE REPLICA TR ANSACTIONS OF CADBURY INDIA LIMITED ('CIL') AND IT HAS RELIED ON THE INFORMATION / DOCUMENTATION MAINTAINED BY CIL WHICH WERE ALREADY SUBMITTED DURING CIL'S ASSESSMENT PROCEEDINGS. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED A O ERRED IN LEVYING AND THE HONBLE CIT(A) ERRED IN CONFIRMING THE LEVY OF PENALTY UNDER SECTION 271G OF THE ACT WITHOUT APPRECIATING THE PROVISIONS OF SECTION 273B OF THE ACT AND OTHER APPLICABLE PROVISIONS OF THE ACT HAVING CADBURY SCHWEPPES OVERSEAS LTD. ITA NO. 5318/MUM/2014 3 REGARD TO THE FACT THAT THERE W AS REASONABLE CAUSE FOR NOT BEING ABLE TO RESPOND TO THE NOTICES OF THE LEARNED AO. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY 2008 - 09 ON 30.09.2008 DECLARING TOTAL INCOME OF RS.24,35,23,345/ - . THE ASSESSING OFFICER (AO) MADE THE ASSESSMENT U/S 143(3) AT RS.24,35,23,350/ - . THE AO OBSERVED THAT THE ASSESSEE HAD FAILED TO FURNISH INFORMATION OR DOCUMENT U/S 92D BEFORE THE TRANSFER PRICING OFFICER (TPO). THEREFORE, THE AO IMPOSED A PENALTY OF RS.48,70,4 67/ - U/S 271G. 4. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) HAS DISMISSED THE APPEAL FILED BY THE ASSESSEE ON THE GROUND THAT THE ASSESSEE FAILED TO FILE BEFORE THE TPO INFORMATION OR DOCUMENT U/S 92D. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE TPO IN HIS ORDER DATED 28.10.2011 TOOK COGNIZANCE OF THE DOCUMENTS SUBMITTED IN THE CASE OF ITS ASSOCIATED ENTERPRISE IN INDIA I.E. CADBURY INDIA LTD. (CIL) AND ASSERTING THE FACT THAT SINCE THESE ARE REPLICA OF THE TRANSACTIONS OF CIL, WHEREIN THE ALP HAS BEEN DETERMINED OF THESE V E RY TRANSACTION, DID NOT DISTURB THE ALP AS DETERMINED BY THE ASSESSEE . THE LD. COUNSEL SUBMITS THAT NO NOTICE U/S 92D (3) HAS BEEN ISSUED BY THE TP O/AO. HE SPECIFICALLY RELIES ON THE DECISION IN THE CASE OF CIT VS. LEROY SOMER & CONTROLS (INDIA) (P) LTD. (2013) 37 TAXMANN.COM 407 (DEL) AND ITO VS. NETSOFT INDIA LTD . (2013) 35 TAXMANN.COM 579(MUMBAI - TRIB.) CADBURY SCHWEPPES OVERSEAS LTD. ITA NO. 5318/MUM/2014 4 6. ON THE OTHER HAND, THE LD. DR RELIES ON THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. AS MENTIONED HEREINBEFORE THE AO IN HIS ASSESSMENT ORDER DATED 27.12.2012 HAS ACCEPTED THE INC OME DECLARED BY THE ASSESSEE AT RS.24,35,23,345/ - . WE ALSO FIND THAT NEITHER THE TPO NOR THE AO HAS ISSUED NOTICE U/S 92D(3) TO THE ASSESSEE. A CONDITION PRECEDENT TO LEVY PENALTY U/S 271G IS FAILURE TO COMPLY WITH SPECIFIC REQUISITION MADE U/S 92D (3). IN THE CASE OF LEROY SOMER & CONTROLS (INDIA) (P) LTD . (SUPRA), THE HONBLE DELHI HIGH COURT HAS HELD AS UNDER: WHEN THERE IS GENERAL AND SUBSTANTIVE COMPLIANCE OF THE PROVISIONS OF RULE 10D, IT IS SUFFICIENT. THE LEGISLATURE WAS CONSCIOUS OF THIS FACT A ND, THEREFORE, HAD SPECIFICALLY STIPULATED IN SECTION 92D(3) THAT THE ASSESSING OFFICER OR COMMISSIONER (APPEALS) MAY REQUIRE A PERSON TO FURNISH ANY INFORMATION OR DOCUMENT IN RESPECT THEREOF AND ON FAILURE OF THE SAID PERSON TO FURNISH THE DOCUMENTATION WI THIN THE SPECIFIED TIME, PENALTY UNDER SECTION 271G CAN BE IMPOSED. THUS, FOR IMPOSING PENALTY THE REVENUE MUST FIRST MENTION THE DOCUMENT AND INFORMATION, WHICH WAS REQUIRED TO BE FURNISHED BUT WAS NOT FURNISHED BY THE ASSESSEE WITHIN THE SPECIFIC TIME. THE DOCUMENTATION OR INFORMATION SHOULD BE ONE SPECIFIED IN RULE 10D, WHICH HAS BEEN FORMULATED IN TERMS OF SECTION 92D(1) OF THE ACT. LOOKING FROM ANY QUARTER AND A NGLE, THE APPEAL OF THE REVENUE IS MISCONCEIVED, TOTALLY LACKING IN MERIT S AND IS, THEREFO RE, DISMISSED. 7.1 THE CO - ORDINATE BENCH IN NETSOFT INDIA LTD . (SUPRA) HAS HELD THAT PENALTY U/S 271G, FOR FAILURES TO FURNISH INFORMATION U/S 92D, CANNOT BE CADBURY SCHWEPPES OVERSEAS LTD. ITA NO. 5318/MUM/2014 5 IMPOSED UNLESS NOTICE IS ISSUED SPECIFYING INFORMATION TO BE PRODUCED BY PERSON ENTERING INTO AN INTERNATIONAL TRANSACTION. 7.2 IN THE INSTANT CASE, WE FIND THAT THAT NO NOTICE U/S 92D (3) HAS BEEN ISSUED BY THE TPO/AO. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN LEROY SOMER & CONTROLS (INDIA) (P) LTD . (SUPRA) , AND THE ORDER OF THE CO - ORDINATE BENCH IN NETSOFT INDIA LTD. (SUPRA) , WE DELETE THE PENALTY OF RS.48,70,467/ - IMPOSED BY THE AO U/S 271G. 8. IN THE RESULT THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/10/2017. SD/ - SD/ - ( JOGINDER SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 31/10/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI