DCIT - (LTU) - 1 , MUMBAI V. RELIANCE INDUSTRIES LTD., MUMBAI

ITA 6267/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3321 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 01-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Assessee Lawyers: H N SINGH
• Keywords: Depreciation; Transfer pricing; International transaction; Retrospective amendment; Question of law; Wrong claim; Difference of opinion; Reassessment proceedings; Set aside
• Section: 271(1)(c); 92C; 143(3); 92B; 115JB; 195; 274; 9(1); 9(1); 9(1); 13; 22; 68; 27; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER & SHRI RAVISH SOOD, JUDICIAL MEMBER SL. NO. ITA / CO NO. A.Y APPELLANT RESPONDENT 1 6267/MUM/2018 2009-10 DCIT (LTU) -1 WORLD TRADE CENTRE, CENTRE NO -1, 29 TH FLOOR, CUFEE PARADE, MUMBAI 400 005. RELIANCE INDUSTRIES LTD, 3 RD FLOOR, MAKER CHAMBER IV, NARIMAN POINT, MUMBAI 400 021. 2 6268/MUM/2018 2008-09 3 6269/MUM/2018 2007-08 4 CO.243/MUM/2019 (IN ITA NO. 6269/MUM/2018) 2007-08 RELIANCE INDUSTRIES LTD, 3 RD FLOOR, MAKER CHAMBER IV, NARIMAN POINT, MUMBAI 400 021. DCIT (LTU) -1 WORLD TRADE CENTRE, CENTRE NO -1, 29 TH FLOOR, CUFEE PARADE, MUMBAI 400 005. 5 CO.244/MUM/2019 (IN ITA NO. 6268/MUM/2018) 2008-09 6 CO.245/MUM/2019 (IN ITA NO. 6267/MUM/2018) 2009-10 ./ ./ PAN/GIR NO. : AAACR5055K / APPELLANT BY : SHRI JITENDRA YADAV & SHRI JITENDRA JAIN / RESPONDENT BY : SHRI H.N. SINGH (CIT-DR) / DATE OF HEARING 11/12/2019 / DATE OF PRONOUNCEMENT 04/03 /2020 / O R D E R PER G. MANJUNATHA- AM: THESE THREE APPEALS FILED BY THE REVENUE AND THREE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DIRECTED AGAINST ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 2 - SEPARATE, BUT IDENTICAL ORDERS OF THE LD. CIT(A) -5 7, MUMBAI, ALL DATED 20.08.2018 AND THEY PERTAINS TO T HE A.YS 2007-08-, 2008-09 AND 2009-10. SINCE, THE FACTS AR E IDENTICAL AND ISSUES ARE COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. 2. THE REVENUE, HAS MORE OR LESS RAISED COMMON GROU NDS OF APPEAL FOR ALL ASSESSMENT YEARS. THEREFORE, FOR THE SAKE OF BREVITY, GROUNDS OF APPEAL FILED FOR A.Y 2008-09 IN ITA NO.6268/MUM/2018 ARE REPRODUCED AS UNDER: 1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCE O F THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN APPLYING THE CB DT CIRCULAR 25/2015 DATED 31.12.2015 EVEN THOUGH THE ASSESSEE WAS ASSESSED TO PAY TAX UNDER THE NORMAL PROVISIONS OF THE ACT IN ORIGINAL ASSESSMENT ORDER?. 2. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) IS RIGHT IN DELETING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON STEEL PURCHASE EVEN THOUGH THE AO, IN ASSESSMENT ORDER, HELD ALREADY CAPITALIZED ASSETS T O BE NON- GENUINE? 3. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) IS RIGHT IN DELETING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT ON ACCOUNT OF DISALLOWANCE OF PROFESSIONAL FEES PAID TO SHRI S.K. GUPTA GROUP OF COMPANIES, EVEN THOUGH THE DOCUMENTARY EVIDENCE REGARDING REND ERING OF ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 3 - SERVICES SEIZED DURING SEARCH OPERATION MANIFESTED THAT PROFESSIONAL FEES PAID BY THE APPELLANT WAS BOGUS, AS NO RELEVANT SERVICES WERE RENDERED BY SUCH COMPANIES? 4. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) IS RIGHT IN DELETING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT, ON ACCOUNT OF ADDITION MA DE U/S 92C OF THE ACT EVEN THOUGH ASSESSEE FURNISHED INACCURATE P ARTICULARS OF INCOME AND CONCEALED THE PARTICULARS OF INCOME, AND DID NOT SUBMIT ANY NEW FACTS / MATERIAL TO SUBSTANTIATE ITS CLAIM FOR NON- LEVY OF PENALTY. 5. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PE NALTY U/S 271(1)(C) OF THE ACT EVEN THOUGH THE A.O DULY SUBST ANTIATED THAT ASSESSEE HAD KNOWINGLY AND DELIBERATELY MADE FALSE CLAIMS AND FURNISHED INACCURATE PARTICULARS OF HIS INCOME? 3. THE ASSESSEE, HAS MORE OR LESS RAISED COMMON GROUNDS OF CROSS OBJECTION FOR ALL ASSESSMENT YEARS . THEREFORE, FOR THE SAKE OF BREVITY GROUNDS OF CROSS OBJECTIONS FILED FOR THE A.Y 2008-09 IN CROSS OBJECTION NO. 244/MUM/2019 ARE REPRODUCED AS UNDER: 1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCE O F THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN APPLYING T HE CBDT CIRCULAR 25/2015 DATED 31.12.2015 EVEN THOUGH THE A SSESSEE WAS ASSESSED TO PAY TAX UNDER THE NORMAL PROVISIO NS OF THE ACT IN ORIGINAL ASSESSMENT ORDER?. 2. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) IS RIGHT IN DELETING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT ON ACCOUNT OF DISALLOWANCE OF ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 4 - DEPRECIATION ON STEEL PURCHASE EVEN THOUGH THE AO, IN ASSESSMENT ORDER, HELD ALREADY CAPITALIZED ASSETS T O BE NON- GENUINE? 3. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) IS RIGHT IN DELETING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT ON ACCOUNT OF DISALLOWANCE OF PROFESSIONAL FEES PAID TO SHRI S.K. GUPTA GROUP OF COMPANIES, EVEN THOUGH THE DOCUMENTARY EVIDENCE REGARDING REND ERING OF SERVICES SEIZED DURING SEARCH OPERATION MANIFESTED THAT PROFESSIONAL FEES PAID BY THE APPELLANT WAS BOGUS, AS NO RELEVANT SERVICES WERE RENDERED BY SUCH COMPANIES? 4. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) IS RIGHT IN DELETING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT, ON ACCOUNT OF ADDITION MA DE U/S 92C OF THE ACT EVEN THOUGH ASSESSEE FURNISHED INACCURATE P ARTICULARS OF INCOME AND CONCEALED THE PARTICULARS OF INCOME, AND DID NOT SUBMIT ANY NEW FACTS / MATERIAL TO SUBSTANTIATE ITS CLAIM FOR NON- LEVY OF PENALTY. 5. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PE NALTY U/S 271(1)(C) OF THE ACT EVEN THOUGH THE A.O DULY SUBST ANTIATED THAT ASSESSEE HAD KNOWINGLY AND DELIBERATELY MADE FALSE CLAIMS AND FURNISHED INACCURATE PARTICULARS OF HIS INCOME? 4. THE BRIEF FACTS OF THE CASE EXTRACTED FROM ITA N O. 6268/MUM/2018 FOR THE A.Y 2008-09 ARE THAT, THE ASSESSEE IS A PUBLIC LIMITED COMPANY, ENGAGED IN TH E BUSINESS OF OIL EXPLORATION, MANUFACTURING AND TRAD ING OF PETRO CHEMICALS, POLYESTER, FIBER INTERMEDIATE TEXT ILES, GENERATION AND DISTRIBUTION OF POWER AND OPERATION OF JETTIES ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 5 - AND RELATED INFRASTRUCTURE AND INVESTMENT ACTIVITIE S. THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR THE A.Y 2008-09 ON 30.09.2008 DECLARING TOTAL INCOME AT RS. 7846,22,57,374/- UNDER NORMAL PROVISIONS OF THE INC OME TAX ACT, 1961, AND RS. 22944,76,85,176/- UNDER THE PROVISIONS OF SEC. 115JB OF THE ACT. THE ASSESSMEN T HAS BEEN COMPLETED U/S 143(3) OF THE ACT, ON 31.08.2010 DETERMINING THE TOTAL INCOME AT RS. 9033,85,80,777/ - UNDER NORMAL PROVISIONS OF THE ACT, AND RS. 23069,36,91,462/- UNDER THE PROVISIONS OF SEC. 115J B OF THE ACT, BY MAKING VARIOUS ADDITIONS, INCLUDING ADD ITIONS TOWARDS DISALLOWANCE OF DEPRECIATION ON STEEL PURCH ASES, DISALLOWANCE OUT OF PROFESSIONAL FEES PAID TO VARIO US PARTIES AND ADDITIONS TOWARDS TRANSFER PRICING ADJUSTMENT U /S 92C OF THE ACT, TOWARDS INTEREST ON LOAN TO SUBSIDIARIE S. 5. THEREAFTER, THE A.O HAS INITIATED PENALTY PROCE EDINGS U/S 271(1)(C) OF THE ACT, WITH REFERENCE TO ADDITIO NS / DISALLOWANCE MADE IN THE ASSESSMENT ORDER, AND CALL ED UPON THE ASSESSEE TO EXPLAIN AS TO WHY PENALTY SHAL L NOT BE LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME AND FOR FURNISHING INACCURATE PARTICULARS OF INCOME. IN RE SPONSE, THE ASSESSEE VIDE LETTER DATED 14.03.2014 HAS FILED A ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 6 - DETAILED WRITTEN SUBMISSIONS AND EXPLAINED THAT CONCEALMENT OF PENALTY PROVIDED U/S 271(1)(C) IS NO T ATTRACTED IN RESPECT OF ADDITIONS MADE TOWARDS DISA LLOWANCE OF DEPRECIATION ON STEEL PURCHASE, ADDITIONS TOWARD S DISALLOWANCE OUT OF PROFESSIONAL CHARGES PAID TO VA RIOUS PARITIES AND ADDITIONS TOWARDS TRANSFER PRICING ADJ USTMENT U/S 92C OF THE ACT, IN RESPECT OF INTEREST ON LOAN TO SUBSIDIARIES. THE LD. A.O DID NOT FIND MERIT IN TH E SUBMISSIONS OF THE ASSESSEE AND BY FOLLOWING VARIOU S JUDICIAL PRECEDENTS, INCLUDING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PVT LTD. AND OTHERS (306 ITR 277 ) HAS HELD THAT THE ASSESSEE COMPANY HAS FILED INACCURATE PARTICULARS OF ITS INCOME AND CONCEALED THE PARTICU LARS OF ITS INCOME WITHIN THE MEANING THE SEC. 271(1)(C) READ W ITH EXPLANATION (1) THERETO OF THE ACT, IN RESPECT OF A DDITIONS MADE TOWARDS DISALLOWANCE OF DEPRECIATION ON STEEL PURCHASE, DISALLOWANCE OUT OF PROFESSIONAL FEES PAI D TO VARIOUS PARTIES AND ADDITIONS TOWARDS TRANSFER PRIC ING ADJUSTMENT ON ACCOUNT OF INTEREST ON LOANS TO SUBSI DIARIES. THEREFORE, HE OPINED THAT IT IS A PIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) READ WITH EXPLANATION (1) OF THE ACT THERETO AND ACCORDINGLY LEVIED PENALTY OF RS. 5,48,58,500/- WHICH IS ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 7 - EQUAL TO 100% OF TAX SOUGHT TO BE EVADED FOR FURNIS HING INACCURATE PARTICULARS OF INCOME. 6. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), TH E ASSESSEE HAS CHALLENGED LEVY OF PENALTY U/S 271(1)(C) OF THE ACT, ON THE GROUND THAT THE A.O HAS LEVIED PENALTY U/S 271( 1)(C) READ WITH EXPLANATION (1) THERETO WHICH IS APPLICAB LE FOR CONCEALMENT OF PARTICULARS OF INCOME, WHEREAS, WHIL E CONCLUDING PENALTY PROCEEDINGS, HE HAD LEVIED PENAL TY FOR FURNISHING INACCURATE PARTICULARS OF INCOME. ON ME RITS, THE ASSESSEE HAS SUBMITTED THAT IT HAS NEITHER CONCEALE D PARTICULARS OF INCOME NOR FURNISHED INACCURATE PART ICULARS OF INCOME, BUT THE ADDITIONS MADE DURING ASSESSMENT PROCEEDINGS IN RESPECT OF DISALLOWANCE OF DEPRECIAT ION ON STEEL PURCHASES WAS ONLY ON ACCOUNT OF DIFFERENT VI EW TAKEN ON SAME SET OF FACTS WHICH COULD BE AT BEST BE TERM ED AS DIFFERENCE OF OPINION AND CERTAINLY NOT FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. THE ASSESSE E, FURTHER, SUBMITTED THAT IN RESPECT OF OTHER ADDITIO NS MADE BY THE A.O TOWARDS DISALLOWANCE OF PROFESSIONAL FEE S, THE LD. CIT(A) HAS SET SAID THE ISSUE TO THE FILE OF TH E A.O TO DECIDE THE MATTER AFRESH AFTER HEARING THE ASSESSEE , ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 8 - THEREFORE, ONCE THE ISSUE HAS BEEN SET ASIDE, THE P ENALTY THERETO CANNOT BE LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. IN SO FAR AS, ADDITIONS TOW ARDS TRANSFER PRICING ADJUSTMENT U/S 92C OF THE ACT, TOW ARDS INTEREST ON LOAN TO SUBSIDIARIES, THE ASSESSEE SUBM ITTED THAT THE ISSUE IS DEBATABLE, BECAUSE THERE ARE DIVERGENT VIEWS WHERE, SOME COURTS AND TRIBUNALS HAVE HELD IN FAVOU RE OF THE ASSESSEE THAT SAID TRANSACTIONS ARE NOT AN INTE RNATIONAL TRANSACTIONS, CONSEQUENTLY TRANSFER PRICING ADJUSTM ENT CANNOT BE MADE ON LOANS TO SUBSIDIARIES, WHEREAS, I N SOME CASES THE ISSUE HAS BEEN DECIDED IN FAVOURE OF THE REVENUE AND HELD THAT TRANSACTION REQUIRES TRANSFER PRICING ADJUSTMENT IN RESPECT OF LOANS TO SUBSIDIARIES. TH EREFORE, FROM THE ABOVE IT IS VERY CLEAR THAT, THE MATTER IS DEBATABLE AND ALWAYS TWO VIEWS ARE POSSIBLE, THEREFORE, ON SU CH ISSUES PENALTY CANNOT BE LEVIED U/S 271(1)(C) OF TH E ACT, WHEN THE ASSESSEE HAS DECLARED NECESSARY FACTS FOR COMPUTATION OF INCOME IN THE RETURN FILED FOR THE R ELEVANT ASSESSMENT YEARS. 7. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO TAKEN NOTE OF THE FACT THAT THE ITAT HAS DELETED PENALTY LEVIED ON DISALLOWANCE OF DEPRECIAT ION ON ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 9 - STEEL PURCHASE FOR A.Y 2003-04 TO 2006-07 IN ITA N O. 7219 TO 7221/MUM/2011, VIDE ORDER DATED 11.12.2013, HAS DELETED PENALTY LEVIED ON ADDITIONS TOWARDS DEPRECI ATION ON STEEL PURCHASES. IN SO FAR AS, ADDITIONS TOWARDS DISALLOWANCE OF PROFESSIONAL FEES, THE LD. CIT(A) H AS DELETED PENALTY ON THE GROUND THAT ONCE THE ISSUE HAS BEEN RESTORED BACK TO THE FILE OF THE A.O FOR DECIDING THE ISSUE AFRESH, THE PENALTY ON SUCH ADDITIONS CANNOT BE SURVIVED IN VIE W OF THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF RANCHHODBHAI HARIBHAI JADAV VS ACIT (238 ITR 949), ACCORDINGLY DELETED PENALTY LEVIED BY THE A.O. AS REGARDS, PENALTY LEVIED ON TRANSFER PRICING ADJUSTMENT IN RE SPECT OF INTEREST ON LOANS TO SUBSIDIARIES, THE LD. CIT(A) B Y FOLLOWING VARIOUS JUDICIAL PRECEDENTS INCLUDING THE DECISION OF ITAT DELHI IN THE CASE OF HCL PEROT SYSTEMS LTD., VS. A CIT (SUPRA) HELD THAT ONCE THE ISSUE IS DEBATABLE, THE ASSESSEE CONTENTION CANNOT BE SHUT DOWN THAT IT HAS DISCLOSE D NECESSARY FACTS IN RESPECT OF LOANS IN THE RETURN O F INCOME, SIMPLY BECAUSE IN ASSESSMENT TRANSFER PRICING ADJUS TMENT MADE BY THE A.O HAS BEEN UPHELD BY THE TRIBUNAL. H E, FURTHER, NOTED THAT, FINDING IN ASSESSMENT PROCEEDI NGS CANNOT BE THE SOLE BASIS TO JUSTIFY IMPOSITION OF P ENALTY AND ALSO OBSERVED THAT IN THE INSTANT CASE WHERE ASSESS EE ACTS ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 10 - IN A BONAFIDE MANNER / IN GOOD FAITH AND EXERCISE D O DILIGENCE, NO PENALTY CAN BE LEVIED EVEN TRANSFER P RICING ADJUSTMENT HAS BEEN SUSTAINED BY THE APPELLATE AUTH ORITIES. ACCORDINGLY, DELETED PENALTY LEVIED BY THE A.O. AG GRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN APPEAL BEFORE U S. 8. THE LD. DR SUBMITTED THAT, THE LD. CIT(A) HAS ER RED IN DELETING THE PENALTY LEVIED U/S 271(1)(C) OF THE AC T, IN RESPECT OF DISALLOWANCE OF DEPRECIATION ON STEEL PU RCHASES, EVEN THOUGH THE A.O HAS BROUGHT OUT CLEAR FACTS TO THE EFFECT THAT STEEL PURCHASE HAS BEEN CAPITALIZED INT O FIXED ASSET WITH A NON-GENUINE TRANSACTIONS AND THE SAID ADDITIONS HAS BEEN FINALLY CONFIRMED BY THE TRIBUNA L. THE LD. DR FURTHER SUBMITTED THAT, THE LD. CIT(A) HAS E RRED IN DELETING PENALTY IN RESPECT OF DISALLOWANCE OF PROF ESSIONAL FEES PAID TO SHRI S.K. GUPTA GROUP OF COMPANIES, EV EN THOUGH THE DOCUMENTARY EVIDENCE REGARDING RENDERING OF SERVICES SEIZED DURING THE SEARCH OPERATION MANIFES TED THAT THE PROFESSIONAL FEES PAID BY THE ASSESSEE WAS BOGU S, AS NO RELEVANT SERVICES WERE RENDERED BY SUCH COMPANIES. HE FURTHER SUBMITTED THAT, AS REGARDS ADDITIONS TOWARD S TRANSFER PRICING ADJUSTMENTS, THE LD. CIT(A) HAS FA ILED TO APPRECIATE THE FACTS IN RIGHT PERSPECTIVE OF PROVIS IONS OF SEC. ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 11 - 92C OF THE ACT, EVEN THOUGH THE ASSESSEE HAS FURNIS HED INACCURATE PARTICULARS OF INCOME AND CONCEALED THE PARTICULARS OF INCOME AND ALSO DID NOT SUBMIT ANY N EW FACTS / MATERIALS TO SUBSTANTIATE ITS CLAIM FOR NON LEVY OF PENALTY. THEREFORE, HE SUBMITTED THAT THE LD. CIT(A) HAS DEL ETED PENALTY WITHOUT CONSIDERING RELEVANT FACTS AND HENC E THE PENALTY LEVIED BY THE A.O SHOULD BE UPHELD. 9. THE LD. AR FOR THE ASSESSEE, ON THE OTHER HAND, STRONGLY SUPPORTING THE ORDER OF THE LD. CIT(A), SU BMITTED THAT, IN SO FAR AS, PENALTY LEVIED ON ADDITIONS TOW ARDS DEPRECIATION ON STEEL PURCHASES, THE ISSUE HAS BEEN COVERED IN FAVOURE OF THE ASSESSEE BY THE DECISION OF THE I TAT IN ASSESSEES OWN CASE FOR A.Y 2003-04 TO 2006-07 IN I TA NOS. 7219 TO 7221/MUM/2011, WHERE UNDER IDENTICAL SET OF FACTS THE PENALTY LEVIED HAS BEEN DELETED. IN SO F AR AS, ADDITIONS TOWARDS DISALLOWANCE OF PROFESSIONAL FEES PAID TO SHRI S.K GUPTA GROUP OF COMPANIES, THE ITAT HAS DEL ETED QUANTUM DISALLOWANCES MADE BY THE A.O IN ITA NO. 4361/MUM/2012, VIDE ORDER DATED 12.04.2017 AND ONCE ADDITIONS HAS BEEN DELETED, PENALTY LEVIED ON SAID ADDITION CANNOT SURVIVE IN THE EYES OF LAW. AS REGARDS PENA LTY LEVIED TOWARDS TRANSFER PRICING ADJUSTMENT ON LOANS TO ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 12 - SUBSIDIARIES, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IS A HIGHLY DEBATABLE WHICH IS EVIDE NT FROM THE FACT THAT THE HONBLE BOMBAY HIGH COURT VIDE IT S ORDER DATED 02.11.2019 IN THE CASE OF PIRAMAL GLASS LTD., VS. DCIT IN INCOME TAX APPEAL NO. 1255 OF 2017 HAS ADMI TTED THE QUESTION OF LAW ON WHETHER TRANSFER PRICING ADJ USTMENT IS REQUIRED TO BE MADE ON LOANS GIVEN TO THE AE TO INCREASE AND EXPAND THE BUSINESS OF THE ASSESSEE. HE, FURTH ER, SUBMITTED THAT ADMISSION OF THIS APPEAL INDICATES T HAT THE QUESTION IS AN ARGUABLE POINT IN LAW ON WHICH TWO V IEWS ARE POSSIBLE AND THEREFORE, IT IS NOT A CASE OF PENALTY U/S 271(1)(C) OF THE ACT. IN THIS REGARD, HE RELIED UP ON THE DECISION OF DELHI TRIBUNAL IN THE CASE OF HCL PEROT SYSTEMS LTD., VS. ACIT IN ITA NO. 2200/DEL/2011. HE, FURTH ER SUBMITTED THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PCIT VS. DHARIWAL INDUSTRIES LTD., IN INCOME TAX APPEAL NO. 1133 OF 2016 HELD THAT, WHEN QUESTION OF LAW IS ADMITTED THERE IS NO QUESTION OF LEVYING PENALTY. IN THIS CASE, ON PERUSAL OF DETAILS, IT IS NOTED THAT THERE ARE DIVERGENT VIEWS IN RESPECT OF TRANSFER PRICING ADJU STMENT ON LOANS TO SUBSIDIARIES, WHERE IN SOME CASES THE ISSU E HAS BEEN DECIDED IN FAVOURE OF THE ASSESSEE AND IN SOME CASES THE ISSUE HAS BEEN DECIDED IN FAVOURE OF THE REVENU E. BUT, ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 13 - THE FACT REMAINS THAT THE SUBSTANTIAL QUESTION OF L AW HAS BEEN ADMITTED BY HONBLE JURISDICTIONAL HIGH COURT AND HENCE, FROM THE ABOVE IT IS VERY CLEAR THAT THE MAT TER IS HIGHLY DEBATABLE AND ALWAYS TWO VIEWS ARE POSSIBLE. ONCE THE MATTER IS DEBATABLE AND TWO VIEWS ARE POSSIBLE, THEN ON SUCH ISSUES PENALTY PROVIDED U/S 271(1)(C) OF THE A CT FOR CONCEALMENT OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME CANNOT BE LEVIED. IN THIS REGARD, HE HAS FILED A DETAILED WRITTEN SUBMISSIONS WHICH HAS BEEN REPRODU CED AS UNDER: 7. OUR SUBMISSIONS, IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO EACH OTHER, ON WHY THE PENALTY DELETED BY CIT(A) SHOULD NOT BE REINSTATED ARE AS UNDER: A) IT IS RESPECTFULLY SUBMITTED THAT THE HON'BLE BO MBAY HIGH COURT VIDE ITS LATEST ORDER DATED 8TH NOVEMBER 2019 IN THE CASE OF PIRAMAL GLASS LIMITED VS THE DEPUTY COMMISS IONER OF INCOME TAX (INCOME TAX APPEAL NO. 1255 OF 2017) HAS ADMITTED THE QUESTION OF LAW ON WHETHER TRANSFER PR ICING ADJUSTMENT IS REQUIRED TO BE MADE ON LOANS GIVEN TO THE AE TO INCREASE AND EXPAND THE BUSINESS OF THE ASSES SEE. IT IS SUBMITTED THAT AS NARRATED IN OUR CASE, THE ASSE SSEE HAD ALSO LENT MONEY TO ITS AE ON ACCOUNT OF BUSINESS EXPEDIE NCY. IT IS FURTHER SUBMITTED THAT ADMISSION OF THIS APPEAL INDICATES T HAT THE QUESTION IS AN ARGUABLE POINT IN LAW ON WHICH TWO VIEWS ARE POSSIBLE AND THEREFORE IT IS NOT A CASE OF PENALTY U/S 271(1)(C) OF THE ACT. ON SIMILAR LINES, THE DELHI TRIBUNAL IN THE CASE OF PEROT SYSTEMS TSI (INDIA) PVT LTD V/S ACIT [ITA NO. 2200 AND ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 14 - 2201/DE1/2011] HAS DELETED THE PENALTY AND HELD THA T SINCE THE TP ADJUSTMENT ON THE ISSUE OF INTEREST FREE LOAN IS ADMITTED AS SUBSTANTIAL QUESTION OF LAW NO PENALTY CAN BE LEVIE D. THAT IS FURTHER FORTIFIED BY THE JURISDICTIONAL HIGH COURT IN THE C ASE OF THE PR. COMMISSIONER OF INCOME TAX VS. DHARIWAL INDUSTRIES LTD. [INCOME TAX APPEAL NO. 1133/1136/1129 OF 2016] THAT WHEN QUESTION OF LAW IS ADMITTED, THERE IS NO QUESTION OF LEVYING PENALTY. C) IT IS SUBMITTED THAT THE RETURN OF INCOME U/S 13 9(1) FOR A.Y. 2008- 09 WAS FILED ON 30-09-2008. THE ISSUE WHETHER TP AD JUSTMENT CAN BE MADE IN RESPECT OF INTEREST FREE LOAN TO A S UBSIDIARY IS A SUBJECT MATTER WHICH FALLS INTO DEBATABLE ISSUE. THIS IS EVIDENT FROM THE FACT THAT THE ITAT HAD TO CONSTITU TE A SPECIAL BENCH OF 3 MEMBERS TO ADJUDICATE THE SAID ISSUE. TH E SPECIAL BENCH, AFTER DELIBERATING IN DEPTH VARIOUS ARGUMENT S, IN THE CASE OF INSTRUMENTARIUM CORPORATION LTD. V. ADIT REPORTED I N [2016] 71 TAXMANN.COM 193 (KOLKATA - TRIB.) (SB) ON 15 TH JULY 2016 HELD THAT _ SUCH A TRANSACTION REQUIRES TP ADJUSTMENT. THE HON' BLE BOMBAY HIGH COURT IN THE CASE OF TOOLTECH GLOBAL ENGINEERI NG (P) LTD. VS. ACIT REPORTED IN (2018) 254 TAXMAN 0241 (BOMBAY) ON 5 TH MARCH 2018 HAS ALSO HELD THAT SUCH A TRANSACTION REQUIRES TP ADJUSTMENT. B) IT IS SETTLED POSITION OF LAW AS HELD BY THE HON'BL E SUPREME COURT IN BRIJ MOHAN V. CIT REPORTED IN 120 ITR 1 AND CIT V. ONKAR SARAN & SONS REPORTED IN 195 ITR I THAT LAW ON THE DATE OF FILIN G THE RETURN SHOULD BE SEEN FOR ADJUDICATING WHETHER PENALTY SHOULD BE LEV IED. IT IS, THEREFORE, RESPECTFULLY SUBMITTED THAT AT THE POINT OF FILING OF RETURN OF INCOME, THE ISSUE WAS A DEBATABLE ONE AND HAS ACHIE VED FINALITY MUCH LATER. FURTHER THE TP PROVISIONS WERE FIRST INTRODUCED IN THE STATUTE IN THE CURRENT FORMAT IN FY 01-02 AN D THE LAW WAS IN AN INCIPIENT STAGE AT THE POINT OF FILING RETURN OF IN COME FOR FY 06-07 WHEN THE ISSUES FIRST AROSE. IN FACT THE FIRST ASSE SSMENT CYCLE UNDER THE TP PROVISIONS FOR AY 2002-03 WAS COMPLETE D BY 31ST ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 15 - MARCH 2005 AND HENCE BY THE TIME OF FILING THE RETU RN OF INCOME FOR AY 2008-09, THERE WAS NOT MUCH JUDICIAL CLARITY AVAILABLE. FURTHER NO GUIDELINES WERE ISSUED BY THE CBDT ON THIS ISSUE. IT IS THEREFORE SUBMITTED THAT AS THE I SSUE IS A DEBATABLE ISSUE, PENALTY U/S 271(1)(C) SHOULD NOT B E LEVIED. D) THE ASSESSEE HAD ADVANCED INTEREST FREE LOAN TO RIME DMCC FOR EXPANDING ITSELF IN THE INTERNATIONAL MARKET TH ROUGH ACQUISITION OF MAJORITY STAKE IN GAPCO GROUP WHICH WAS ENGAGED IN MARKETING OF PETROLEUM PRODUCTS IN AFRIC AN COUNTRIES. (REFER PGS 230-231 OF THE PAPER BOOK.) T HE SAID EXPLANATION HAS NOT BEEN DISPUTED BY THE REVENUE AUTHORITIES. THIS TRANSACTION AMOUNTS TO CAPITAL FI NANCING AND THE SAID CAPITAL FINANCING WAS BROUGHT WITHIN THE D EFINITION OF 'INTERNATIONAL TRANSACTION' BY INSERTING EXPLANATIO N TO SECTION 92B BY THE FINANCE ACT, 2012 W.R.E.F. 01-04 -2002. IT IS SUBMITTED THAT NO PENALTY SHOULD BE LEVIED ON ACCOU NT OF RETROSPECTIVE AMENDMENT WHICH AMENDMENT WAS NOT AVA ILABLE AT THE TIME OF FILING THE RETURN AND THE ASSESSMENT ORDER. RELIANCE IS PLACED ON THE DECISION OF THE HON'BLE S UPREME COURT IN THE CASE OF CIT V. HINDUSTAN ELECTRO GRAPHITES LTD. , REPORTED IN 243 ITR 48. D) IT IS FURTHER SUBMITTED THAT EVEN POST RETROSPECTIV E AMENDMENT, THE HON'BLE TRIBUNAL IN THE CASE OF SIRO CLINPHARM PVT. LTD., ITA 2618/M12014 HAS HELD THAT THE RETROS PECTIVE AMENDMENT TO THE DEFINITION OF 'INTERNATIONAL TRANS ACTION' BY THE FINANCE ACT, 2012 WOULD BE APPLICABLE ONLY P OST 2012 AND NOT PRIOR THERETO. THIS ALSO SHOWS THAT EV EN AFTER THE RETROSPECTIVE AMENDMENT THE ISSUE IS HIGH LY DEBATABLE. E) IT IS SUBMITTED THAT THE PETITIONER HAD DUSIIIC5.5 RCIATIONCHIP WITH ITS AE, RIME DMCC SINCE THE PETIT IONER HAD SOLD HIGH-SPEED DIESEL, AVIATION TURBINE FUEL AND M OTOR SPIRIT AS EVIDENT FROM PGS 203, 204, 214, 216 AND 218. IT IS SUBMITTED THAT IF AN INTEREST FREE LOAN IS GIVEN TO ITS ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 16 - SUBSIDIARY WITH WHOM THE ASSESSEE HAS BUSINESS RELATIONSHIP THEN THE PARAMETERS RELEVANT FOR MAKIN G ADJUSTMENT ON ACCOUNT OF PURE LENDING WOULD NOT BE APPLICABLE BECAUSE EVEN IN CASE OF BUSINESS RELATIO NSHIP WITH NON-RELATED PARTIES, A BUSINESSMAN WOULD GIVE INTEREST FREE LOAN LOOKING AT HIS BUSINESS INTERESTS. THEREFORE, NO TP ADJUSTMENT COULD BE MADE AS HELD BY THE AHMADABAD BENCH OF THE TRIBUNAL IN THE CASE OF MICRO INKS LTD . V. ACIT REPORTED IN 157 TTJ 289 AND THE DISCUSSION IS AT PA RAS 10 TO 17 WHERE ON AN IDENTICAL SITUATION NO ADJUSTMENT WA S MADE ON ACCOUNT OF INTEREST FREE LOAN BECAUSE OF BUSINES S TRANSACTIONS. SIMILAR VIEW IS ALSO TAKEN IN THE FOL LOWING DECISIONS UCAL FUEL SYSTEMS LTD VS THE ASST. COMMISSIONER OF INCOME-TAX [I.T.A.NO.688/MDS/2014, 723, 724 &725/MDS/2015] THE BOMBAY DYEING & MFG. CO. LIMITED VS DY. COMMISSIONER OF INCOME TAX, RANGE 2(1)(1), MUMBAI [ITA NO. 1716/MUM/2017] DLF HOTEL HOLDINGS LTD. VS DCIT, CIRCLE-10(1), NE W DELHI [I.T.A .NO.-6336/DEI/2012] G) IT IS SUBMITTED THAT THE AO HAS WRONGLY LEVIED PENA LTY UNDER EXPLANATION 1 TO SECTION 271(1)(C) FOR TP ADJUSTMEN T. IN FACT EXPLANATION 7 TO SECTION 271(1)(C) PROVIDES FO R PENALTY ON TP ADJUSTMENT. BOTH THE EXPLANATIONS OPERATE IN TWO DIFFERENT FIELDS AND SEPARATE PARAMETERS ARE REQUIR ED TO BE TESTED FOR LEVYING PENALTY UNDER THESE 2 EXPLANATIO NS. EXPLANATION 7 IS A SPECIAL PROVISION DEALING WITH P ENALTY ON TRANSFER PRICING ADJUSTMENT WHEREAS EXPLANATION 1 IS A GENERAL PROVISION DEALING WITH PENALTY ON ALL TYP ES OF ADDITIONS/DISALLOWANCES. SINCE EXPLANATION 7 HAS BE EN INTRODUCED FOR COVERING SPECIAL CIRCUMSTANCES, THE GENERAL PROVISION OF EXPLANATION 1 CANNOT BE MADE APPLICABL E IN CASE ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 17 - OF TP ADJUSTMENTS. SPECIAL PROVISIONS WILL PREVAIL OVER GENERAL PROVISIONS. THEREFORE, THE PENALTY ON THIS ACCOUNT IS BAD IN LAW. IT IS SUBMITTED THAT ON A TRUE AND PRO PER CONSTRUCTION AND HARMONIOUS READING OF SECTION 271( 1)(C) AND SECTION 92C, THE PENALTY U/S SECTION 271(1)(C) CAN BE LEVIED ONLY IF THE EXERCISE OF TRANSFER PRICING ADJ USTMENT IS DONE BY THE AO AND NOT WHEN THE SAID EXERCISE IS DO NE BY THE TPO U/S 92CA, AND THE AO UNDER THE SCHEME OF TH E ACT HAS MERELY ADOPTED WHAT IS STATED BY THE TPO IN HIS ORDER. THIS IS ALSO FORTIFIED BY EXPLANATION 7 TO SECTION 271(1)(C) WHERE THE REFERENCE IS TO SECTION 92C(4) WHICH PROV IDES FOR ADJUSTMENT TO BE MADE BY THE AO WHEREAS THE TPO MAK ES ADJUSTMENT U/S 92CA. IT IS SUBMITTED THAT IT IS THE TPO WHO HAS DONE THE EXERCISE OF TP ADJUSTMENT, WHO CAN FORM A SATISFACTION ON THE INGREDIENTS OF PENALTY. IN THE INSTANT CASE, THE EXERCISE OF TP ADJUSTMENT IS MADE BY THE TPO, AND ON A READING OF THE TPO'S ORDER THE INGREDIENTS OF SATISFACTION CANNOT BE ASCERTAINED. HOWEVER THE AO, WHO HAS NOT DONE THE EXERCISE OF TP ADJUSTMENT, HAS INITIATED PENALTY. IT IS, THEREFORE, SUBMITTED THAT IN SUCH A SCENARIO PENALTY CANNOT BE LEVIED BY THE AO WHEN TH E ADJUSTMENT IS MADE BY THE TPO AND NO SATISFACTION I S RECORDED BY THE TPO. THE AG WILL HAVE POWER TO LEVY PENALTY, IF HE HIMSELF DOES THE EXERCISE OF TP ADJU STMENT U/S 92G. RELIANCE IS PLACED ON THE DECISION OF THE HON' BLE GUJARAT HIGH COURT IN THE CASE OF PANKAJBHAI SHAH V. ACIT REPORTED IN 110 TAXMANN.COM 51 WHERE THE REASSESSMENT NOTICE WAS ISSUED BY AN O FFICER WHO DID NOT RECORD THE REASONS BUT THE REASONS WERE RECORDED BY ANOTHER OFFICER, AND THE HON 1 BLE GUJARAT HIGH COURT QUASHED THE REASSESSMENT PROCEEDINGS ON THE G ROUND THAT THE PERSON RECORDING THE REASONS FOR ESCAPEMEN T OF INCOME SHOULD BE THE SAME PERSON WHO CAN ISSUE ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 18 - REASSESSMENT NOTICE. FURTHER THE LEGISLATURE ITSELF HAS PROVIDED FOR LEVY OF PENALTY BY THE TPO UNDER SECTI ON 271G WHEN THE TP REFERENCE TO THE TPO IS MADE BY THE AO AND THE ASSESSEE FAILS TO FURNISH INFORMATION/DOCUMENTATION UNDER SECTION 92D(3). I) IT IS FURTHER SUBMITTED THAT IN THE ASSESSMENT ORDE R AT PG 51 OF THE PAPER BOOK NO SATISFACTION CAN BE SAID TO HA VE BEEN RECORDED MERELY BECAUSE THE OFFICER HAS WRITTEN THA T PENALTY IS TO BE INITIATED. THE HON'BLE DELHI HIGH COURT IN THE CASE OF MS. MADHUSHREE GUPTA V. UQI REPORTED IN 317 ITR 107 AT PARA 19 HAS HELD THAT EVEN AFTER INSERTION OF SECTION 27 1(1B) OF THE ACT, THE AG HAS TO RECORD PRIMA FACIE SATISFACT ION FOR INITIATING PENALTY. HOWEVER ON READING OF THE ASSES SMENT ORDER IT IS SEEN THAT NO SUCH PRIMA FACIE SATISFACT ION IS RECORDED AND THEREFORE EVEN ON THIS ACCOUNT THE PEN ALTY ORDER IS BAD IN LAW. FURTHER THE DECISION IN THE CASE OF ZOOM RELIED UPO N BY THE AO IS NOT APPLICABLE TO THE FACTS OF THE PRESEN T APPEAL. THE BOMBAY HIGH COURT IN THE CASE OF CIT V. DALMIA DYECHEM INDUSTRIES LTD. REPORTED IN 377 ITR 133 HAS ALSO NE GATIVED THE CONTENTION OF THE REVENUE THAT MERELY BECAUSE LESS NUMBER OF CASES ARE SELECTED FOR SCRUTINY AND HAD IT NOT B EEN FOR SCRUTINY ASSESSMENT THE ADDITION WOULD HAVE GONE UNNOTICED. IT IS FURTHER SUBMITTED THAT THE CASE OF THE PETITIONER IS ASSESSED U/S 143(3) EVERY YEAR ON ITS BEING AN ASSE SSEE FALLING UNDER LTU. THE CASE LAWS RELIED BY THE AG IN THE PE NALTY ORDER ARE DISTINGUISHABLE ON FACTS INASMUCH AS THER E IS NO SUPPRESSION OR CONCEALMENT OR FURNISHING OF INACCUR ATE PARTICULARS OR MAKING A WRONG CLAIM WHICH IS FOUND TO BE FALSE. THERE IS NO SUPPRESSION, CONCEALMENT OR FURN ISHING OF ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 19 - INACCURATE PARTICULARS NOR THE AG HAS STATED AS TO WHAT IS THE SUPPRESSION, CONCEALMENT OR FURNISHING OF INACC URATE PARTICULARS AND THEREFORE EVEN ON THIS ACCOUNT THE PENALTY IS BAD IN LAW. K. IN ANY CASE, THE TPG ADOPTED 7.5% AND BENCHMARKE D THE TRANSACTION WHEREAS THE SAME WAS REJECTED BY TH E ITAT AND THE HAS ADOPTED LIBOR PLUS 150 TO BENCHMAR K THE TRANSACTION. IT IS SUBMITTED THAT ON SUCH AN ISSUE WHERE THERE IS A DIFFERENCE OF OPINION NO PENALTY CAN BE LEVIED UNDER SECTION 271(1)(C) OF THE ACT. IT IS FURTHER SUBMITT ED THAT THERE HAS BEEN A COMPLETE DISCLOSURE IN THE COURSE OF THE ASSESSMENT PROCEEDINGS OF THE REASONS FOR NON-CHARG ING OF INTEREST AND THEREFORE THE ALLEGATION OF SUPPRESSIO N, CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS DOES NOT ARISE. THE INITIATION IF AT ALL WAS ON THE BASI S OF ALP ADJUSTMENT OF 7.5% MADE BY THE TPO WHICH HAS TOTALL Y BEEN REJECTED BY THE TRIBUNAL WHO ADOPTED LIBOR PLU S 150 BPS. IT IS SUBMITTED THAT THE AO/TPO HAVE NOT RECOR DED ANY SATISFACTION ON LIBOR PLUS 150 BPS AND THEREFOR E PENALTY IS BAD IN LAW. EVEN OTHERWISE THE APPROACH OF 7.5% IS INCORRECT BECAUSE THE SAID INTEREST RATE OF 7.5% IS ADOPTED BY THE TPO BY TAKING THE CONTROLLED TRANSACTION AS A COMPARABLE. I. IT IS FURTHER SUBMITTED THAT BASED ON THE ABOVE SUBMISSIONS, THE ASSESSEE HAS DISCHARGED ITS ONUS CAST BY EXPLAN ATION 7 TO SECTION 271(1)(C) OF THE ACT WHICH STATES THAT I F THE ASSESSEE ACTED IN GOOD FAITH AND WITH DUE DILIGENCE THEN NO PENALTY SHOULD BE LEVIED. M) IN ANY VIEW OF THE MATTER AND WITHOUT PREJUDICE TO ABOVE, IT IS SUBMITTED THAT THE AG WAS NOT JUSTIFIED IN LE VYING PENALTY ON TP ADJUSTMENT OF RS. 9.22 CR. SINCE THE ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 20 - ADJUSTMENT SUSTAINED AFTER THE TRIBUNAL'S ORDER WAS RS. 7.64 CR. ONLY. N. RELIANCE IS PLACED ON FOLLOWING DECISIONS WHERE THE PENALTY U/S EXPLANATION 7 R/W 271(1)(C) WAS DELETED ON SIMI LAR GROUNDS AS STATED ABOVE: I. GIESECKE AND DEVRIENT (I) PVT. LTD. V. DCIT REPO RTED IN 53 CCH 240 (DEL). II. HARLCROW CONSULTING INDIA PVT. LTD. VS. DCIT REPORT ED IN 51 CCH 644 (DEL). III. VERIZON COMMUNICATION INDIA P. LTD. VS. DCIT REPORT ED IN 33 CCH 277 (DEL). O) THE SHOW CAUSE NOTICE AT PAGE 6 OF THE PAPERBOOK SH OWS THAT THE AO HAS NOT STRUCK OFF EITHER OF THE LIMBS OF SECTION 271(1)(C). HENCE ON THIS GROUND ITSELF PENALTY UNDE R SECTION 271(1)(C) CANNOT BE LEVIED. RELIANCE IS PLACED IN T HE FOLLOWING DECISIONS - CIT VS SSA'S EMERALD MEADOWS (SC). ITA NO 380 OF 2015 CIT VS SAMSON PERINCHERY (SLP)(392 ITR 4) (BOM) CIT VS MANJUNATHA COTTON & GINNING FACTORY (359 I TR 565) (KAR) P) THE FINAL PENALTY IS IMPOSED BY INVOKING EXPLANATIO N 1 FOR FURNISHING INACCURATE PARTICULARS OF INCOME. IT IS SUBMITTED THAT EXPLANATION 1 DOES NOT APPLY FOR CHA RGING PENALTY FOR FURNISHING INACCURATE PARTICULARS OF IN COME BUT SAME APPLIES FOR CONCEALMENT OF PARTICULARS OF INCO ME AND THEREFORE PENALTY IS BAD IN LAW. RELIANCE IS PLACED IN THE DECISION BY THE KOLKATA TRIBUNAL IN THE CASE OF CHA NDRA PRAKASH BUBNA VS. INCOME TAX OFFICER, WARD 27(3), K OLKATA [ITA APPEAL NO. 289 (KOL.) OF 2012]. 8. IN VIEW OF ABOVE, IT IS RESPECTFULLY SUBMITTED T HAT NO ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 21 - PENALTY CAN BE CONFIRMED ON THE TP ADJUSTMENT MADE WITH RESPECT TO TRANSACTION OF INTEREST FREE LOAN GIVEN BY THE ASSESSEE TO ITS AE, RIME DMCC. 10. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT, AS REGARDS, PENAL TY LEVIED ON DISALLOWANCE OF DEPRESSION ON STEEL PURCHASES, T HE ISSUE HAS BEEN CONSIDERED BY THE COORDINATE BENCH OF THE ITAT IN ASSESSEES OWN CASE FOR THE A.Y 2003-04 TO 2006-07 IN ITA NO. 7219 TO 7221/MUM/2011, WHERE UNDER IDENTICAL SE T OF FACTS THE PENALTY LEVIED ON ADDITIONS TOWARDS DEPRE CIATION ON STEEL PURCHASES HAS BEEN DELETED. THIS FACT HAS NOT BEEN DISPUTED BY THE LD. DR. THEREFORE, BY FOLLOWING TH E DECISION OF COORDINATE BENCH, IN ASSESSEES OWN CASE FOR EAR LIER YEARS, WE ARE OF THE CONSIDERED VIEW THAT THE LD. C IT(A) WAS RIGHT IN DELETING PENALTY ON ADDITIONS TOWARDS DISA LLOWANCE OF DEPRECIATION ON STEEL PURCHASES AND HENCE, WE AR E INCLINED TO UPHOLD THE FINDING AND REJECT THE GROUN D TAKEN BY THE REVENUE. 10.1 IN SO FAR AS, PENALTY LEVIED ON ADDITIONS TOWA RDS DISALLOWANCE OF PROFESSIONAL FEES, WE FIND THAT THE ADDITIONS MADE BY THE A.O TOWARDS DISALLOWANCE OF PROFESSIONA L FEES ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 22 - TO S.K GUPTA GROUP OF COMPANIES HAS BEEN FINALLY DE LETED BY THE ITAT IN QUANTUM PROCEEDINGS IN ITA NO. 4361/MUM/2012 VIDE ORDER DATED 12.04.2017, WHERE TH E ADDITIONS MADE BY THE A.O TOWARDS DISALLOWANCE OF PROFESSION FEES HAS BEEN DELETED. ONCE THE ADDITIO N ON WHICH THE PENALTY LEVIED HAS BEEN DELETED BY THE A PPELLATE AUTHORITIES, THEN PENALTY LEVIED ON SAID ADDITION C ANNOT SURVIVE. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO ERROR IN FINDINGS RECORDED BY THE LD. CIT(A) WHILE DELETING PENALTY LEVIED IN RESPECT OF DISALLOWANCE OF PROFESSIONAL FEES AND HENCE, WE REJECT THE GROUND T AKEN BY THE REVENUE. 10.2 AS REGARDS, THE PENALTY LEVIED ON ADDITIONS TO WARDS TRANSFER PRICING ADJUSTMENT U/S 92C OF THE ACT, TOW ARDS INTEREST ON LOANS TO SUBSIDIARIES, WE FIND THAT ALT HOUGH THE A.O HAS LEVIED PENALTY FOR FURNISHING INACCURATE PA RTICULARS OF INCOME, BUT FACT REMAINS THAT THE ASSESSEE HAS D ISCLOSED NECESSARY FACTS REQUIRED FOR COMPUTATION OF TOTAL I NCOME IN THE RETURN OF INCOME FILED FOR THE YEAR WHICH IS EV IDENT FROM THE FACT THAT DETAILED NOTE HAS BEEN ANNEXED TO STA TEMENT OF TOTAL INCOME FILED FOR THE YEAR AND EXPLAINED THE F ACTS WITH REGARD TO LOANS TO SUBSIDIARIES. WE FURTHER NOTED THAT ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 23 - WHETHER TRANSFER PRICING ADJUSTMENTS CAN BE MADE IN RESPECT OF LOANS TO SUBSIDIARIES WHEN SUCH LOAN HAS BEEN GIVEN TO THE AE TO INCREASE AND EXPAND THE BUSINESS OF THE ASSESSEE IS A DEBATABLE ISSUE, WHICH IS EVIDENT FRO M THE FACT THAT THE JURISDICTIONAL HIGH COURT OF BOMBAY IN THE CASE OF PIRAMAL GLASS LIMITED VS. DCIT IN INCOME TAX APPEAL NO. 1255 OF 2017 VIDE ORDER DATED 08.09.2018 HAS ADMITT ED THE QUESTION OF LAW ON WHETHER TRANSFER PRICING ADJUSTM ENT IS REQUIRED TO BE MADE ON LOANS GIVEN TO AE TO INCREAS E AND EXPAND THE BUSINESS OF THE ASSESSEE. IN THIS CASE, ON PERUSAL OF FACTS, IT IS NOTED THAT THE ASSESSEE HAD ALSO LEND MONIES TO ITS AE ON ACCOUNT OF BUSINESS EXPEDIENCY. FURTHER, ADMISSION OF APPEAL BY THE HONBLE HIGH CO URT INDICATES THAT THE QUESTION IS AN ARGUABLE POINT IN LAW, ON WHICH TWO VIEWS ARE POSSIBLE AND THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT IT IS NOT A CASE FOR PENALTY U /S 271(1)(C) OF THE ACT, FOR FURNISHING INACCURATE PAR TICULARS OF INCOME. IN THIS REGARD, WE TOOK SUPPORT FROM THE D ECISION OF ITAT DELHI BENCH IN THE CASE OF HCL PEROT SYSTEM S LTD., VS. ACIT (SUPRA), WHERE IT HAS BEEN HELD THAT SINCE THE TRANSFER PRICING ADJUSTMENT ON THE ISSUE OF INTERES T FREE LOAN IS ADMITTED AS SUBSTANTIAL QUESTION OF LAW BY THE H ONBLE HIGH COURT, NO PENALTY CAN BE LEVIED. THIS IS FURT HER ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 24 - FORTIFIED BY THE DECISION OF JURISDICTIONAL HIGH CO URT OF BOMBAY IN THE CASE OF PCIT VS. DHARIWAL INDUSTRIES PVT LTD., IN INCOME TAX APPEAL NO. 1133/1136/1129 OF 20 16, WHERE IT WAS HELD THAT WHEN THE QUESTION OF LAW IS ADMITTED THERE IS NO QUESTION OF LEVYING PENALTY. WE FURTHE R NOTED THAT THE ISSUE WHETHER TRANSFER PRICING ADJUSTMENT CAN BE MADE IN RESPECT OF INTEREST FREE LOAN TO A SUBSIDIA RY IS A SUBJECT MATTER WHICH FALLS INTO DEBATABLE ISSUE. THIS IS EVIDENT FROM THE FACT THAT THE ITAT HAD CONSTITUTED A SPECIAL BENCH OF THREE MEMBERS TO ADJUDICATE THIS A DDITION. THE SPECIAL BENCH AFTER DELIBERATING IN DEPTH VARIO US ARGUMENTS IN THE CASE OF INSTRUMENTARIUM CORP. LTD. , VS. ADIT REPORTED IN (2016) 71 TAXMAN.COM 193 (KOL TRI B) (SB), HELD THAT SUCH A TRANSITION REQUIRES TRANSFER PRICI NG ADJUSTMENT. FURTHER, THE HONBLE BOMBAY HIGH COURT IN THE CASE OF TOOLTECH GLOBAL ENGINEERING PVT LTD., V S. ACIT REPORTED IN [2018] 254 TAXMAN 241 (BOMBAY) ALSO HEL D THAT SUCH A TRANSACTION REQUIRES TRANSFER PRICING ADJUST MENT. FURTHER, THE ITAT, IN THE CASE OF SIRO CLINPHARMA P VT. LTD., IN ITA NO. 2618/MUM/2014 HAS HELD THAT THE RETROSPE CTIVE AMENDMENT TO THE DEFINITION OF INTERNATIONAL TRANSA CTION BY THE FINANCE ACT 2012 WOULD BE APPLICABLE ONLY POST 2012 AND NOT PRIOR THERETO. THIS IS ALSO SHOWS THAT EVE N AFTER ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 25 - RETROSPECTIVE AMENDMENT THE ISSUE IS HIGHLY DEBATAB LE. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT, ONCE THERE ARE DIVERGENT VIEWS ON THE ISSUE BY VARIOUS COURTS AND TRIBUNALS, THEN IT CLEARLY SHOWS THAT THE SAID ISSU E IS DEBATABLE ISSUE AND ALWAYS TWO VIEWS ARE POSSIBLE. WHEN THE ISSUE IS DEBATABLE AND ALWAYS TWO VIEWS ARE POS SIBLE, THEN ON SUCH ISSUES THE PENALTY PROVIDED U/S 271(1) (C) OF THE ACT CANNOT BE INVITED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 10.3 IT IS SETTLED POSITION OF LAW, HAS HELD BY THE HONBLE SUPREME COURT IN CIT VS. ONKAR SARAN AND SONS REPOR TED IN 120 ITR 01 (SC) AND CIT VS. ONKAR SARAN & SONS REPORTED 195 ITR 01 (SC) THAT LAW ON THE DATE OF FI LING THE RETURN SHOULD BE SEEN FOR ADJUDICATING WHETHER PENA LTY SHOULD BE LEVIED. IT IS THEREFORE, NECESSARY TO EX AMINE THE POSITION OF LAW AS PREVAILED AT THE TIME OF FILING OF RETURN OF INCOME TO DECIDE THE ISSUE WHETHER SAID ADJUSTMENT IS REQUIRED TO BE MADE AND ALSO IT COMES UNDER THE PUR VIEW OF THE PROVISIONS OF SEC. 271(1)(C) OF THE ACT TO LEVY OF PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME. I T IS AN ADMITTED FACT THAT, AT THE TIME OF FILING OF RETURN OF INCOME THE ISSUE IS DEBATABLE AND WHICH HAS ATTAINED FINA LITY ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 26 - MUCH LATER. FURTHER, THE TRANSFER PRICING PROVISIO NS WERE FIRST INTRODUCED IN THE STATUE IN THE FY 2001-02 AN D THE LAW WAS IN AN INCIPIENT STAGE AT THE POINT OF FILING RE TURN OF INCOME, WHEN THE ISSUES FIRST AROSE. IN FACT, THE FIRST ASSESSMENT CYCLE UNDER THE TRANSFER PRICING PROVISI ONS FOR A.Y 2002-03 WAS COMPLETED BY 31.03.2005 AND HENCE B Y THE TIME, FILING OF RETURN OF INCOME FOR A.Y 2008-0 9, THERE WAS NOT MUCH JUDICIAL CLARITY ON THE ISSUE. FURTHE R, NO GUIDELINES WERE ALSO ISSUED BY THE CBDT ON THIS ISS UE. FROM THE ABOVE, IT IS VERY CLEAR THAT THE ISSUE OF TRANSFER PRICING ADJUSTMENT U/S 92C OF THE ACT, IN RESPECT O F LOANS TO SUBSIDIARIES IS A DEBATABLE ISSUE AND ON SUCH ISSUE PENALTY U/S 271(1)(C) OF THE ACT SHOULD NOT BE LEVIED. 10.4 WE FURTHER NOTED THAT THE ASSESSEE HAD ADVANCE D INTEREST FREE LOAN TO ITS SUBSIDIARY FOR EXPANDING ITSELF IN THE INTERNATIONAL MARKET FOR ACQUISITION OF MAJORITY ST AKE IN GAPCO GROUP WHICH WAS ENGAGED IN MARKETING OF PETRO LEUM PRODUCTS IN AFRICAN COUNTRIES. THE SAID EXPLANATIO N HAS NOT BEEN DISPUTED BY THE REVENUE AUTHORITIES AND THE TRANSACTION AMOUNTS TO CAPITAL FINANCING AND THE SA ID CAPITAL FINANCING WAS BROUGHT WITHIN THE DEFINITION OF INTERNATIONAL TRANSACTION BY INSERTING EXPLANATION TO SEC. ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 27 - 92B BY THE FINANCE ACT 2012 WITH RETROSPECTIVE EFFE CT FROM 01.04.2002. UNTIL THE RETROSPECTIVE AMENDMENT WAS BROUGHT TO THE PROVISIONS OF SEC. 92B OF THE ACT, T HERE WAS NO CLARITY ON THE ISSUE WHETHER IT CONSTRUEDS AN INTERNATIONAL TRANSACTION OR NOT. EVEN AFTER AMEND MENT THERE ARE CERTAIN JUDICIAL PRECEDENTS WHICH SAYS TH AT THE AMENDMENT BROUGHT INTO THE STATUE BY THE FINANCIAL ACT 2012 WITH RETROSPECTIVE EFFECT FROM 01.04.2002 IS A PPLICABLE ONLY POST 2012 AND NOT PRIOR THERETO. THEREFORE, W E ARE OF THE CONSIDERED VIEW THAT THE MATTER INVOLVED IN THE PRESENT CASE I.E TRANSFER PRICING ADJUSTMENT TOWARDS LOAN T O SUBSIDIARIES IS A DEBATABLE ISSUE AND THERE IS ALWA YS TWO VIEWS ARE POSSIBLE. ONCE THE ISSUE IS DEBATABLE AN D TWO VIEWS ARE POSSIBLE AND ALSO SAID ISSUE HAS BEEN ADM ITTED BY THE HONBLE HIGH COURT FOR DECIDING THE QUESTION OF LAW, THEN THE SAME CANNOT BE CONSIDERED FOR THE PURPOSE OF LEVYING PENALTY U/S 271(1)(C) OF THE ACT, FOR FURNI SHING INACCURATE PARTICULARS OF INCOME. WE, FURTHER, NOT ED THAT IN ANY CASE THE TPO ADOPTED 7.5% RATE OF INTEREST FOR BENCH MARKING THE TRANSACTION, WHEREAS THE SAME WAS REJEC TED BY THE ITAT AND THE ITAT HAS ADOPTED LIBOR+150 BASIS T O BENCH MARK THE TRANSACTION. THEREFORE, ON THIS IS SUE WHEN THERE IS A DIFFERENCE OF OPINION, NO PENALTY CAN BE LEVIED U/S ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 28 - 271(1)(C) OF THE ACT. WE FURTHER NOTED THAT THE A SSESSEE HAS DISCLOSED COMPLETE DETAILS IN RESPECT OF LOANS TO SUBSIDIARIES AND REASONS FOR NON-CHARGING OF INTERE ST ON SAID LOANS. THEREFORE, THE ALLEGATION OF THE A.O T HAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME OR FUR NISHED INACCURATE PARTICULARS OF INCOME IN RESPECT OF LOAN S TO SUBSIDIARIES IS INCORRECT. THEREFORE, WE ARE OF TH E CONSIDERED VIEW THAT THE ASSESSEE HAS DISCHARGED IT S ONUS CAST UPON BY EXPLANATION 271(1)(C) OF THE ACT, WHIC H STATES THAT, IF THE ASSESSEE ACTS WITH GOOD FAITH AND DUE DILIGENCE THEN NO PENALTY SHOULD BE LEVIED. HENCE, WE ARE OF THE CONSIDERED VIEW THAT THE A.O WAS ERRED IN LEVIED PE NALTY U/S 271(1)(C) OF THE ACT, IN RESPECT OF TRANSFER PRICIN G ADJUSTMENT MADE U/S 92C OF THE ACT, TOWARDS INTERES T ON LOAN TO SUBSIDIARIES. THE LD. CIT(A) AFTER CONSIDE RING THE RELEVANT FACTS HAS RIGHTLY DELETED PENALTY LEVIED B Y THE A.O, AND HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS O F THE LD. CIT(A) AND REJECT GROUND TAKEN BY THE REVENUE. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 29 - ITA NOS. 6269 & 6267/MUM/2018 12. IN THESE TWO APPEALS, FACTS ARE EXACTLY IDENTIC AL TO THE FACTS AND ISSUES WHICH WE HAD ALREADY CONSIDERED IN ITA NO. 6268/MUM/2018, EXCEPT TO THE LIMITED EXTENT OF DETERMINATION OF INCOME FOR THE YEAR UNDER THE PROV ISIONS OF SECTION115JB OF THE ACT. THEREFORE, THE LD. AR FOR THE ASSESSEE HAS MADE AN ARGUMENT IN LIGHT OF CBDT CIRC ULAR NO. 25/2015 DATED 31.12.2015 THAT IF INCOME TAX PAY ABLE ON THE TOTAL INCOME AS COMPUTED UNDER NORMAL PROVIS IONS OF THE ACT, IS LESS THAN THE TAX PAYABLE ON THE BOO K PROFITS U/S 115JB OF THE ACT, THEN THE PENALTY U/S 271(1)(C ) OF THE ACT IS NOT ATTRACTED WITH REFERENCE TO ADDITIONS / DISALLOWANCES MADE UNDER NORMAL PROVISIONS OF THE I NCOME TAX ACT, 1961. THE LD. AR FURTHER SUBMITTED THAT I N THIS CASE AS PER THE LATEST ORDER ISSUED U/S 154 DATED 20.07.2017, THE ASSESSEE WAS ASSESSED TO TAX UNDER MAT PROVISIONS OF 115JB OF THE ACT AND IN VIEW OF CIRCU LAR OF CBDT NO. 25/2015, NO PENALTY CAN BE LEVIED IN RESPE CT OF ADDITIONS MADE TO THE TOTAL INCOME COMPUTED UNDER N ORMAL PROVISIONS OF THE INCOME TAX ACT, 1961. 13. LD. DR ON THE OTHER HAND, FAIRLY ACCEPTED THAT FOR THESE TWO YEARS PENALTY LEVIED BY THE A.O U/S 271(1 )(C) OF ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 30 - THE ACT, CANNOT BE SURVIVED, BECAUSE THE INCOME TAX PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THE N ORMAL PROVISIONS OF THE ACT, IS LESS THAN THE TAX PAYABLE ON THE BOOK PROFITS COMPUTED U/S 115JB OF THE ACT. 14. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NALWA INVESTMENTS LTD. , [2010] 327 ITR 543 (DEL) HAD CONSIDERED ON IDENTICAL ISSUE AND AFTER CONSIDERING THE RELEVANT PROVISIONS OF THE AC T, HELD THAT WHEN TAX PAYABLE ON INCOME COMPUTED UNDER NORM AL PROVISIONS OF THE ACT IS LESS THAN TAX PAYABLE UNDE R THE PROVISIONS OF SEC. 115JB OF THE ACT, THEN PENALTY U /S 271(1)(C) OF THE ACT COULD NOT BE IMPOSED WITH REFE RENCE TO ADDITIONS / DISALLOWANCES MADE UNDER NORMAL PROVISI ONS OF THE INCOME TAX ACT 1961. THE CBDT HAD ISSUED A CIR CULAR NO. 25/2015 DATED 31.12.2015, WHERE IT HAS ACCEPTED THE JUDGMENT OF HONBLE DELHI HIGH COURT AND ACCORDINGL Y ISSUED A CIRCULAR EXPLAINING THE POSITION OF LAW BE FORE INSERTION OF EXPLANATION 4 TO SUB SEC. (1) OF SEC. 271(1)(C) OF THE INCOME TAX ACT, 1961 BY THE FINANCE ACT 2015, W HICH PROVIDES FOR METHOD OF CALCULATION OF AMOUNT OF TAX SOUGHT ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 31 - TO BE EVADED FOR SITUATIONS, WHERE THE INCOME DETER MINED UNDER THE NORMAL PROVISION IS LESS THAN THE INCOME DECLARED FOR THE PURPOSE OF MAT PROVISION U/S 115JB OF THE A CT. ACCORDINGLY, IT HAS CLARIFIED THAT WHERE THE INCOME TAX PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THE N ORMAL PROVISIONS IS LESS THAN THE TAX PAYABLE ON THE BOOK PROFITS COMPUTED U/S 115JB OF THE ACT, THEN PENALTY U/S 271 (1)(C) OF THE ACT IS NOT ATTRACTED WITH REFERENCE TO ADDIT IONS / DISALLOWANCES MADE UNDER NORMAL PROVISIONS OF THE I NCOME TAX ACT, 1961. IN THIS CASE, IT IS AN ADMITTED FAC T THAT, AS PER THE ORDER OF THE A.O U/S 154 OF THE ACT, DATED 20.07.2016 THE ASSESSEE WAS ASSESSED TO TAX UNDER PROVISIONS OF 115JB OF THE INCOME TAX, 1961, ALTHOU GH THE A.O HAS MADE VARIOUS ADDITIONS TOWARDS TOTAL INCOME COMPUTED UNDER NORMAL PROVISIONS OF THE INCOME TAX ACT, 1961. THEREFORE, WE ARE OF THE CONSIDERED VIEW THA T PENALTY U/S 271(1)(C) OF THE ACT CANNOT BE LEVIED WITH REFE RENCE TO ADDITIONS / DISALLOWANCES MADE TO INCOME COMPUTED U NDER NORMAL PROVISIONS OF THE INCOME TAX ACT, 1961. 15. WE FURTHER NOTED THAT AN IDENTICAL ISSUE HAS BE EN CONSIDERED BY THE COORDINATE BENCH OF THE ITAT MUMB AI IN THE CASE OF KAPIL RAYON INDIA PVT LTD., VS. ITO I N ITA NO. ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 32 - 5946/MUM/2018, WHERE UNDER IDENTICAL SET OF FACTS I T HAS BEEN HELD THAT WHEN INCOME IS COMPUTED UNDER THE PROVISIONS OF SEC. 115JB OF THE ACT, THEN PENALTY U /S 271(1)(C) OF THE ACT CANNOT BE LEVIED IN RESPECT OF ADDITIONS MADE TOWARDS TOTAL INCOME COMPUTED UNDER THE NORMAL PROVISIONS OF INCOME TAX ACT, 1961. THE RELEVANT F INDINGS OF THE TRIBUNAL ARE AS UNDER: 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE HONBLE DELHI H IGH COURT, IN THE CASE OF NALWA SONS INVESTMENTS LTD. V S CIT (SUPRA) HELD THAT WHEN, THE TAX PAYABLE ON INCOME COMPUTED UNDER NORMAL PROVISIONS OF THE ACT IS LESS THAN, THE TAX PAYABLE UNDER THE DEEMING PROVISIONS OF SEC TION 115JB OF THE ACT, THEN PENALTY U/S 271(1)(C) OF THE I.T.ACT, 1961 COULD NOT BE IMPOSED WITH REFERENCE TO ADDITIONS/DISALLOWANCES MADE UNDER NORMAL PROVISION S OF THE ACT. THE CBDT HAD ISSUED A CIRCULAR NO. 25/2 015, DATED 31/12/2015, WHERE IT HAS ACCEPTED THE JUDGMEN T OF HONBLE DELHI HIGH COURT AND ACCORDINGLY, ISSUED A CIRCULAR EXPLAINING THE POSITION OF LAW BEFORE INSE RTION OF EXPLANATION 4 TO SUB SECTION (1) OF SECTION 271(1)( C) OF THE I.T.ACT, 1961 BY THE FINANCE, ACT, 2015, WHICH PROV IDE FOR METHOD OF CALCULATING THE AMOUNT OF TAX SOUGHT TO B E EVADED FOR SITUATIONS, WHERE THE INCOME DETERMINED UNDER THE NORMAL PROVISION IS LESS THAN THE INCOME DECLARED FOR THE PURPOSE OF MAT PROVISIONS U/S 115J B OF THE ACT. ACCORDINGLY, IT HAS CLARIFIED THAT WHERE T HE INCOME TAX PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT IS LESS THAN THE TAX ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 33 - PAYABLE ON THE BOOK PROFITS U/S 115JB OF THE ACT, T HEN PENALTY U/S 271(1)(C) OF THE ACT IS NOT ATTRACTED W ITH REFERENCE TO ADDITIONS/DISALLOWANCES MADE UNDER NOR MAL PROVISIONS OF THE ACT. IN THIS CASE, IT IS AN ADMIT TED FACT THAT THE LD. AO HAS MADE ADDITIONS TOWARDS UNEXPLAI NED CASH CREDIT U/S 68 OF THE ACT TO INCOME COMPUTED UN DER NORMAL PROVISIONS OF THE ACT. FURTHER, EVEN AFTER ADDITIONS, THE TAX PAYABLE UNDER NORMAL PROVISIONS OF THE ACT IS LESS THAN, THE TAX PAYABLE UNDER THE PROVISI ONS OF SECTION 115JB OF THE I.T.ACT, 1961. THEREFORE, WE A RE OF THE CONSIDERED VIEW THAT PENALTY U/S 271(1)(C) OF T HE ACT, CANNOT BE LEVIED WITH REFERENCE TO ADDITIONS/ DISALLOWANCES MADE TO TOTAL INCOME COMPUTED UNDER NORMAL PROVISIONS OF THE ACT. HENCE, WE DIRECT THE LD. AO TO DELETE PENALTY LEVIED U/S 271(1)(C) OF THE I.T.A CT, 1961 16. IN THIS VIEW OF THE MATTER AND BY FOLLOWING THE DECISION OF COORDINATE BENCH AT ITAT, MUMBAI IN THE CASE OF KAPIL ROYAN INDIA PVT LTD., VS ITO (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT(A) WAS RIGHT IN DE LETING PENALTY LEVIED U/S 271(1)(C) OF THE ACT FOR A.YS 20 07-08 & 2009-10. HENCE, WE ARE INCLINED TO UPHOLD THE FIND INGS OF THE LD. CIT(A) AND DISMISSED APPEAL FILED BY THE RE VENUE FOR BOTH ASSESSMENT YEARS. 17. AS A RESULT, APPEAL FILED BY THE REVENUE FOR A. Y 2007- 08, 2008-09 AND 2009-10 ARE DISMISSED. ITA NO S. 6267 TO 6269/MUM/2018 & CO NOS. 243 TO 245/MUM/2019 - 34 - CO NOS. 243, 244 & 245/MUM/2018 18. THE ASSESSEE HAS FILED THESE CROSS OBJECTIONS I N SUPPORT OF ORDER OF THE LD. CIT(A). ALTHOUGH, THE ASSESSEE HAS FILED ONE MORE GROUND CHALLENGING VALIDITY OF P ENALTY PROCEEDINGS INITIATED U/S 271(1)(C) OF THE ACT, IN LIGHT OF SHOW CAUSE NOTICE ISSUED BY THE A.O U/S 274 R.W.S 2 71 OF THE ACT, BUT FACT REMAINS THAT THE PENALTY LEVIED B Y THE A.O U/S 271(1)(C) HAS BEEN DELETED FOR ALL ASSESSMENT Y EARS. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE C ROSS OBJECTIONS FILED BY THE ASSESSEE FOR ALL ASSESSMENT YEARS BECOMES INFRUCTUOUS AND HENCE, THE SAME WERE DISMIS SED AS NOT MAINTAINABLE. 19. IN THE RESULT, THE APPEALS FILED BY THE REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSE D. THIS ORDER PRONOUNCED IN OPEN COURT ON 04/03/2020 SD/- SD/- (RAVISH SOOD) ( G. MANJUNATHA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 04/03/2020