ACIT, CHENNAI V. M/s. SSL-TTK Ltd., CHENNAI

ITA 544/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57966 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-02-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 25-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JUNIOR; ANIRUDH RAI
• Keywords: Transfer pricing; International transaction
• Section: 92D; 92E; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO. 544/MDS/2011 (ASSESSMENT YEAR : 2006-07) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(1), CHENNAI - 600 034 . (APPELLANT) V. M/S SSL-TTK LTD., NO.6, CATHEDRAL ROAD, CHENNAI - 600 086. PAN: AAFCS5498E (RESPONDENT) APPELLANT BY : SHRI ANIRUDH RAI, CIT DR & SHRI K.E.B. RENGARAJAN, JUNIOR STANDING COUNSEL RESPONDENT BY : SHRI R. VIJAYAR AGHAVAN, ADVOCATE SHRI S.P. CHIDAMBARAM, ADVOCATE DATE OF HEARING : 15.02.2012 DATE OF PRONOUNCEMENT : 15.02.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE, IT ASSAILS A N ORDER DATED 19.1.2011 OF COMMISSIONER OF INCOME TAX (APPEALS)-V , CHENNAI, FOR THE IMPUGNED ASSESSMENT YEAR, WHEREBY HE DELETED P ENALTY LEVIED ON ASSESSEE UNDER SECTION 271G OF INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). I.T.A. NO. 544/MDS/11 2 2. SHORT FACTS APROPOS ARE THAT ASSESSEE HAD FILED ITS RETURN FOR IMPUGNED ASSESSMENT YEAR ON 29.11.2006. THERE BEIN G SOME INTERNATIONAL TRANSACTIONS EXCEEDING THE LIMIT PRES CRIBED, THERE WAS A REFERENCE TO TRANSFER PRICING OFFICER FOR DETERMINA TION OF ARMS LENGTH PRICE. DURING THE COURSE OF PROCEEDINGS, THE TRANS FER PRICING OFFICER ISSUED A LETTER ON 25.11.2008 REQUIRING THE ASSESSE E TO FURNISH INFORMATION AS REQUIRED UNDER SECTION 92D AND 92E O F THE ACT, ON OR BEFORE 24.12.2008. HOWEVER, AS PER THE TPO, ASSES SEE DID NOT COMPLY WITH THE SAID LETTER NOR DID IT SEEK ANY ADJ OURNMENT. THEREAFTER, THE TPO ISSUED A LETTER ON 30.12.2008 W HEREBY ASSESSEE WAS INFORMED THE PENAL PROVISIONS FOR FAILURE TO PR ODUCE RECORDS CALLED UPON BY THE TPO. AS PER THE TPO, ASSESSEE F ILED ONLY PART OF THE DOCUMENTS ON 24.12.2008 AND MUCH OF INFORMATION REQUIRED UNDER SECTION 92D & 92E WERE NOT AVAILABLE. ACCORD ING TO HIM, ASSESSEE FILED DOCUMENTS ONLY ON 9.6.2009 AFTER THE STATUTORY TIME LIMIT OF 30 DAYS. BASED ON THE ABOVE OBSERVATIONS OF THE TPO, A.O. WAS OF THE OPINION THAT ASSESSEE WAS LIABLE FOR PEN ALTY UNDER SECTION 271G OF THE ACT. ASSESSEE WAS PUT ON NOTICE IN THI S REGARD. REPLY OF THE ASSESSEE WAS THAT IT HAD FILED THE REQUIRED INF ORMATION BEFORE THE TPO ON 24 TH DECEMBER, 2008 AND SUCH INFORMATION COVERED 12 ITE MS OUT OF 16 ITEMS REQUISITIONED IN THE NOTICE. AS PE R THE ASSESSEE, IT I.T.A. NO. 544/MDS/11 3 WAS THE INITIAL YEAR OF ITS OPERATIONS AND IT HAD N O EXPERIENCE REGARDING TRANSFER PRICING REGULATIONS. AS PER THE ASSESSEE, IT HAD MADE EVERY ENDEAVOUR TO FILE THE REQUIRED RECORDS W ITHIN THE TIME ALLOWED. HOWEVER, A.O. WAS OF THE OPINION THAT IG NORANCE OF LAW WAS NOT AN EXCUSE. HE PROCEEDED TO LEVY PENALTY UN DER SECTION 271G THE SUM EQUIVALENT TO 2% ON INTERNATIONAL TRAN SACTION. SUCH A LEVY CAME TO ` 2,31,32,759/-. 3. IN ITS APPEAL BEFORE LD. CIT(APPEALS), ARGUMENT OF THE ASSESSEE WAS THAT THE LETTER DATED 25.11.2008 OF TRANSFER PR ICING OFFICER WAS A GENERAL ONE REQUIRING IT TO FURNISH DOCUMENTS/ DETA ILS AS PRESCRIBED UNDER SECTION 92D AND 92E BY 24.12.2008. AS PER TH E ASSESSEE, IT HAD SUBSTANTIALLY COMPLIED WITH THE SAID LETTER SIN CE 12 OUT OF 16 ITEMS WERE FILED BEFORE THE TPO ON 24.12.208. THE ALLEGATION OF TPO THAT IT HAD FAILED TO COMPLY WITH THE NOTICE WAS, A S PER THE ASSESSEE, INCORRECT. ASSESSEE ALSO SUBMITTED THAT THE NOTICE ISSUED BY THE TPO WAS NOT ONE UNDER SECTION 92D(3) OF THE ACT AND LET TER OF THE TPO DATED 25.11.2008 WAS ONLY A NOTICE ISSUED UNDER SEC TION 92CA(3) OF THE ACT. RELIANCE WAS ALSO PLACED BY THE ASSESSEE ON THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF CARGILL INDIA PVT LTD VS DCIT (110 ITD 616). LD. CIT(APPEALS) WAS APPRECI ATIVE OF THESE CONTENTIONS. ACCORDING TO HIM, TPO S LETTER DATED 25.11.2008 DID NOT I.T.A. NO. 544/MDS/11 4 MENTION THAT IT WAS ISSUED UNDER SECTION 92D(3) OF THE ACT. LD. CIT(APPEALS) ALSO NOTED THAT THE TPO IN HIS TRANSF ER PRICING ORDER HAD ALSO MENTIONED THAT NOTICE UNDER SECTION 92CA O F THE ACT WAS ISSUED TO THE ASSESSEE ON 25.11.2008 AND THIS BY IM PLICATION CLEARLY MEANT THAT THE LETTER ISSUED BY THE TPO TO THE ASSE SSEE WAS NOT A NOTICE UNDER SECTION 92D(3) OF THE ACT. HE, THER EFORE, WAS OF THE OPINION THAT IT WAS NOT A FIT CASE FOR PENALTY UNDE R SECTION 271G OF THE ACT AND DELETED THE PENALTY IMPOSED BY THE A.O. 4. NOW BEFORE US, LEARNED D.R., STRONGLY ASSAILING THE ORDER OF LD. CIT(APPEALS), SUBMITTED THAT SECTION 271G CLEARLY G AVE POWER TO THE ASSESSING OFFICER TO LEVY PENALTY WHERE ASSESSEE HA D ENTERED INTO INTERNATIONAL TRANSACTION AND HAD FAILED TO FURNISH DOCUMENTS OR INFORMATION REQUIRED UNDER SUB-SECTION (3) OF SECTI ON 92D OF THE ACT. AS PER LEARNED D.R., THE TPO HAD ISSUED NOTICE TO T HE ASSESSEE ON 25.11.2008 AND SUCH NOTICE WAS NOTHING BUT A NOTICE ISSUED UNDER SECTION 92D(3) OF THE ACT. ACCORDING TO LEARNED D. R., ASSESSEE HAD ADMITTEDLY NOT FURNISHED THE INFORMATION REQUIRED W ITHIN 30 DAYS PERIOD UNDER SECTION 92D(3) OF THE ACT. THEREFORE, LEVY OF PENALTY WAS JUSTIFIED. 5. PER CONTRA, LEARNED A.R. SUPPORTED THE ORDER OF LD. CIT(APPEALS) . I.T.A. NO. 544/MDS/11 5 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THE FACTS ON RECORD ARE NOT DISPUTED. THE TPOS NO TICE DATED 25.11.2008 ISSUED TO THE ASSESSEE, WHICH APPEARS AT PAPER-BOOK PAGES 18 AND 19 FILED BY THE ASSESSEE, IS REPRODUCE D HEREUNDER:- SIR, SUB: REFERENCE TO TRANSFER PRICING OFFICER U/S.92CA OF THE INCOME-TAX ACT, 1961 MAINTENANCE AND KEEPING OF DOCUMENTS U/S.92D AND 92E OF THE ACT ASSESSMENT YEAR 2006-07 REG. *** YOUR CASE HAS BEEN REFERRED TO ME U/S.92CA BY YOUR ASSESSING OFFICER. IN THIS CONNECTION, YOU ARE REQ UESTED TO FURNISH CERTAIN INFORMATION IN TERMS OF SECTION 92D AND 92E OF THE ACT, AS GIVEN IN THE ENCLOSED QUESTIONNAIRE. T HESE DETAILS MAY PLEASE BE FURNISHED TO THIS OFFICE BY 24 TH DECEMBER, 2008. YOU ARE ALSO REQUESTED TO SEND THE COPIES OF ANNUAL REPORTS FOR THE LAST 3 YEARS AND ALSO THE COPY OF COMPUTATION O F TOTAL INCOME. SD/- (A.S. BINDHU) JOINT COMMISSIONER OF INCOME TAX TRANSFER PRICING OFFICER III (I/C) CHENNAI. ENCL: QUESTIONNAIRE. THE QUESTIONNAIRE MENTIONED WAS ENCLOSED AS AN ANNE XURE TO THE ABOVE LETTER AND SUCH QUESTIONNAIRE REQUIRED THE AS SESSEE TO PRODUCE RECORDS JUSTIFYING THE METHOD ADOPTED BY TH E ASSESSEE FOR DETERMINATION OF ARMS LENGTH PRICE. ARGUMENT OF T HE ASSESSEE IS THAT THE ABOVE LETTER COULD NOT BE CONSIDERED AS A NOTIC E ISSUED UNDER I.T.A. NO. 544/MDS/11 6 SECTION 92D(3) OF THE ACT. SUB-SECTION (3) OF SECT ION 92D READS AS UNDER:- (3) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) MAY, IN THE COURSE OF ANY PROCEEDING UNDER THIS ACT, REQUIR E ANY PERSON WHO HAS ENTERED INTO AN INTERNATIONAL TRANSACTION T O FURNISH ANY INFORMATION OR DOCUMENT IN RESPECT THEREOF, AS MAY BE PRESCRIBED UNDER SUB-SECTION (1), WITHIN A PERIOD O F THIRTY DAYS FROM THE DATE OF RECEIPT OF A NOTICE ISSUED IN THIS REGARD : PROVIDED THAT THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) MAY, ON AN APPLICATION MADE BY SUCH PERSO N, EXTEND THE PERIOD OF THIRTY DAYS BY A FURTHER PERIOD NOT EXCEE DING THIRTY DAYS. THE QUESTION HERE IS WHETHER THE LETTER ISSUED BY T HE TPO MENTIONED SUPRA CAN BE CONSIDERED AS A NOTICE UNDER SECTION 9 2D(3) OF THE ACT. THE FINDING OF THE LD. CIT(APPEALS) THAT TRANSFER P RICING OFFICER HIMSELF HAD MENTIONED IN THE TRANSFER PRICING ORDER THAT HIS LETTER DATED 25.11.208 WAS ONE ISSUED UNDER SECTION 92CA O F THE ACT HAS NOT BEEN REBUTTED BY THE REVENUE. IN ANY CASE, ASS ESSEE HAD BY 24.11.2008 MADE SUBSTANTIAL COMPLIANCE WITH THE REQ UIREMENTS BY FILING INFORMATION ON 12 OUT OF 16 ITEMS REQUIRED B Y THE LETTER DATED 25 TH NOVEMBER, 2008. THE SPECIFIC FAILURE OF THE ASSES SEE, IF ANY, HAS NOT BEEN POINTED OUT BY THE ASSESSING OFFICER. IF THE REVENUE ALLEGES THAT THERE HAS BEEN FAILURE OF THE ASSESSEE WITH REGARD TO PRODUCTION OF ANY OF THE RECORD, IT WAS REQUIRED TO POINT OUT WHICH RECORD IT HAD FAILED TO PRODUCE AND WHETHER SUCH RE CORD WAS ONE I.T.A. NO. 544/MDS/11 7 WHICH WAS PRESCRIBED UNDER SECTION 92D(1) TO BE MAI NTAINED BY AN ASSESSEE IN RESPECT OF THE INTERNATIONAL TRANSACTIO NS ENTERED INTO BY IT. IT IS ALSO NOT DISPUTED THAT FINALLY THE ARMS LENGTH PRICE ADOPTED BY THE ASSESSEE WAS ACCEPTED BY THE TPO. THIS, IN OTH ER WORDS, WOULD MEAN THAT EVEN OF WE PRESUME THERE WAS A PROCEDURAL VIOLATION, IT WAS A BENIGN ONE. LOOKED FROM ANY ANGLE, WE ARE OF THE OPINION THAT THIS WAS NOT A FIT CASE FOR LEVY OF PENALTY UNDER S ECTION 271G OF THE ACT. LD. CIT(APPEALS) WAS JUSTIFIED IN DELETING SU CH PENALTY. NO INTERFERENCE IS REQUIRED. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 15 TH FEBRUARY, 2012. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 15 TH FEBRUARY, 2012. KRI. COPY TO: APPELLANT/RESPONDENT/CIT(A)-V, CHENNAI-34 / CIT, CHENNAI-III, CHENNAI/D.R./GUARD FILE