Genpact Infrastructure (Hyderabad) Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 6588/DEL/2016

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7590 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2008-2009
• Appeal Filed On: 26-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ JAIN SENIOR
• Assessee Lawyers: REEMA MALIK
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Initiation of penalty proceedings; Difference of opinion; Set aside
• Section: 271(1)(c); 92C; 143(3); 144C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-1 : NEW DELHI) BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCE) ITA NO.6588/DEL./2016 (ASSESSMENT YEAR : 2008-09) M/S. GENPACT INFRASTRUCTURE (HYDERABAD) VS. DCIT, C IRCLE 10(1), PRIVATE LIMITED, NEW DELHI. (NOW MERGED WITH GENPACT INDIA PVT.LTD.), DELHI INFORMATION TECHNOLOGY PARK, SHASTRI PARK, DELHI 110 053. (PAN : AACCG6568Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. REEMA MALIK, ADVOCATE REVENUE BY : SHRI DHEERAJ JAIN, SENIOR DR DATE OF HEARING : 10.12.2020 DATE OF ORDER : 21.01.2021 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, M/S. GENPACT INFRASTRUCTURE (HYDERABAD) PRIVATE LIMITED (HEREINAFTER REFERRED TO AS THE ASSESSEE) , BY FILING THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED OR DER DATED 25.10.2016 PASSED BY THE COMMISSIONER OF INCOME-T AX (APPEALS)-37, NEW DELHI AFFIRMING THE PENALTY ORDER DATED ITA NO.6588/DEL./2016 2 27.06.2012 PASSED UNDER SECTION 271(1)(C) OF THE IN COME-TAX ACT, 1961 (FOR SHORT THE ACT), QUA THE ASSESSMENT YEAR 2008-09 ON THE GROUNDS INTER ALIA THAT :- 1. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY THE HON'BLE COMMISSIONER O F INCOME TAX (APPEALS) CCIT(A)')/LD. AO IS BAD IN LAW. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, WHILE ACKNOWLEDGING THAT THE ASSESSMENT PROCEEDINGS UNDERTAKEN BY THE LD. AO WERE NOT IN ACCORDANCE' WITH THE SCHEME OF SECTION 144C OF THE ACT AND CONSIDERING THAT THE ASSESSMENT ORDE R GIVING EFFECT TO DRP DIRECTIONS WAS NOT PASSED WITHIN THE PERMITTED TIME PERIOD, THE HON'BLE CIT(A) ERRED IN NOT EXPLICITLY QUASHING THE 'IMPUGNED ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS, BEI NG VOID AB INITIO. 3. THAT ON THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY THE LD. AO UNDER SECTIO N 271(1)(C) OF THE ACT LEVYING PENALTY OF INR 3,15,00,000/- FOR ALLEGE D FURNISHING OF INACCURATE PARTICULARS OF INCOME IS ARBITRARY, BASE D ON INCORRECT APPRECIATION OF FACTS AND THE LEGAL POSITION, WITHO UT CONSIDERING THE SUBMISSIONS/ DIRECTIONS OF HON'BLE DRP AND WITHOUT GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE APPELLANT, AND CO NSEQUENTLY DESERVES TO BE QUASHED. 4. THAT THE ORDER PASSED BY THE LD. AO UNDER SECTIO N 271(1)(C) OF THE ACT DOES NOT SATISFY THE ESSENTIAL CONSTITUE NT OF BEING A SPEAKING ORDER AND ON THIS GROUND ALONE DESERVES TO BE QUASHED. A) THAT THE LD. AO GROSSLY ERRED IN SENDING THE NOT ICE OF HEARING OF INITIATION OF PENALTY PROCEEDINGS DATED DECEMBER 28, 2012 AT THE PREVIOUS REGISTERED OFFICE ADDRESS OF THE AP PELLANT, EVEN AFTER BEING COMMUNICATED ABOUT THE NEW REGISTERED OFFICE ADDRESS. B) THAT THE LD. AO FAILED TO APPRECIATE THE FACT TH AT THE NOTICE OF HEARING DATED JUNE 20, 2012 WAS RECEIVED BY THE APPELLANT IN THE EVENING OF JUNE 26, 2012 I.E. THE DATE OF HEARING A ND THUS, THE APPELLANT WAS NOT PROVIDED SUFFICIENT TIME TO FILE ITS SUBMISSION TO THE SHOW CAUSE NOTICE. 5. THAT THE LD. AO GROSSLY ERRED IN LAW IN LEVYING PENALTY SINCE THE CONSTITUENTS OF EXPLANATION 7 TO SECTION 271(1) OF THE ACT WERE SATISFIED IN THE PRESENT CASE AND DOES NOT JUSTIFY A LEVY OF PENALTY. A) THAT THE LD. AO WAS GROSSLY IN ERROR IN NOT APPR ECIATING THAT ALL THE NECESSARY CONSTITUENTS OF SECTION 92C OF TH E ACT WERE SATISFIED IN THE PRESENT CASE AND NO GROUNDS EXISTED FOR LEVY OF PENALTY. ITA NO.6588/DEL./2016 3 6. THAT THE LD. AO GROSSLY ERRED ON FACTS AND IN LA W IN CONCLUDING THAT THE APPELLANT HAD FURNISHED INACCUR ATE PARTICULARS OF ITS INCOME. A) THAT THE LD. AO GROSSLY FAILED TO BRING ANY MATE RIAL ON RECORD, WHICH COULD ESTABLISH THAT THE APPELLANT HA S FURNISHED INACCURATE PARTICULARS OF ITS INCOME EXCEPT REITERA TING THE ADJUSTMENT RECOMMENDED BY THE TRANSFER PRICING OFFI CER (TPO). 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO HAS ERRED IN LEVYING PENALTY OF INR 315, 00,000 UNDER SECTION 271(1)(C) OF THE ACT IN RESPECT OF THE FOLL OWING ADDITIONS AND DISALLOWANCES WITHOUT APPRECIATING THE FACTS OF THE CASE AND ADEQUATE DISCLOSURES MADE BY THE APPELLANT IN ITS R ETURN OF INCOME, TRANSFER PRICING REPORT AND /OR DURING THE COURSE O F ASSESSMENT PROCEEDINGS FOR THE SUBJECT YEAR: A) ADDITIONS ON ACCOUNT OF DETERMINATION OF ARM'S L ENGTH PRICE IN RESPECT OF PROVISION OF IT ENABLED SERVICES AMOU NTING TO INR 8,38,57,011/-; AND B) ADDITION ON ACCOUNT OF DETERMINATION OF ARM'S LE NGTH PRICE IN RESPECT OF INTEREST ON OUTSTANDING RECEIVABLES A MOUNTING TO INR 85,51,748/-. 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD AO HAS ERRED IN HOLDING THAT THE APPELLANT H AS NOT PROVIDED ANY EXPLANATION, AND THAT THE ONUS AS PER EXPLANATI ON 1 OF SECTION 271(1)(C) OF THE ACT HAS NOT BEEN DISCHARGED BY THE APPELLANT. 9. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. AO FAILED TO APPRECIATE THAT PENALTY P ROCEEDINGS ARE SEPARATE AND DISTINCT FROM THE ASSESSMENT PROCEEDIN GS, AND ANY ADDITIONS / ENHANCEMENTS MADE IN THE ASSESSMENT COU LD NOT MECHANICALLY LEAD TO LEVY OF PENALTY, UNLESS IT IS PROVED THAT THE APPELLANT HAS DELIBERATELY FURNISHED ANY INACCURATE PARTICULARS OF ITS INCOME. 10. THAT THE LD. AO ERRED IN LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON ACCOUNT OF MERE DIFFERENCE IN OPINION BETWEEN THE LD. TPO AND THE APPELLANT RELATING TO THE DETER MINATION OF THE ARMS' LENGTH PRICE OF THE INTERNATIONAL TRANSACTION . 11. THAT THE LD. AO GROSSLY ERRED ON FACTS AND IN L AW IN LEVYING PENALTY UNDER SECTION 271 (L)(C) OF THE ACT WITHOUT ESTABLISHING ANY MENS REA ON THE PART OF THE APPELLANT WITHOUT WHICH PENALTY COULD NOT HAVE BEEN LEVIED. 12. THE LD. AO HAVE GROSSLY ERRED BY DISREGARDING J UDICIAL PRONOUNCEMENTS IN INDIA IN LEVYING PENALTY. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ON THE BASIS OF ASSESSMENT ORDER FRAMED U/S ITA NO.6588/DEL./2016 4 143(3) ON 28.12.2011 AT AN INCOME OF RS.9,29,74,270 /-/- FOR ASSESSMENT YEAR 2008-09 BY MAKING ADDITIONS OF RS.8 ,38,57,011/- & RS.85,51,748/- ON ACCOUNT OF ARMS LENGTH ADJUSTM ENT ON ACCOUNT OF IT ENABLED SERVICES AND ARMS LENGTH ADJ USTMENT ON ACCOUNT OF INTEREST ON OUTSTANDING RECEIVABLES RESP ECTIVELY, THE PENALTY PROCEEDINGS WERE INITIATED U/S 271(1)(C) OF THE ACT BY WAY OF ISSUANCE OF NOTICES DATED 28.12.2011 & 20.06.201 2. NOBODY ATTENDED ON BEHALF OF THE ASSESSEE NOR ANY REPLY WA S FILED TO THE NOTICES. ASSESSING OFFICER (AO) PROCEEDED TO INITIA TE THE PENALTY PROCEEDINGS AND LEVIED THE PENALTY OF RS.3,15,00,000/- U/S 271(1)(C) OF THE ACT. 3. ASSESSEE CHALLENGED THE PENALTY ORDER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS AFFIRMED THE PENALTY ORDER BY DISMISSING THE APPEAL. FEELING AGGRIEVED, THE ASSE SSEE HAS COME UP BEFORE THE TRIBUNAL BY CHALLENGING THE PENALTY O RDER PASSED U/S 271(1)(C) OF THE ACT. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. AT THE VERY OUTSET, IT IS BROUGHT TO OUR NOTICE BY THE LD. AR FOR THE ASSESSEE THAT ADDITIONS MADE IN THE QUANTUM HAS SIN CE BEEN DELETED BY ITA NO.6588/DEL./2016 5 THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.6587/DEL/2016 FOR AY 2008-09 VIDE ORDER DATED 03.11.2020 AND AS SUCH, PENALTY LEVIED IS NOT SUSTAINABLE AND BROUGHT ON RECORD THE COPY OF THE O RDER OF THE TRIBUNAL DATED 03.11.2020 (SUPRA). 6. UNDISPUTEDLY, COORDINATE BENCH OF THE TRIBUNAL V IDE ORDER DATED 03.11.2020 (SUPRA) DELETED THE ADDITIONS. IN THESE CIRCUMSTA NCES, THE PENALTY LEVIED BY THE AO AND CONFIRMED BY LD. CIT ( A) IS NOT SUSTAINABLE IN VIEW OF THE LAW LAID DOWN BY THE HON BLE APEX COURT IN CASE CITED AS K.C. BUILDERS & ANR VS. ACIT 265 ITR 562 (SC) BY HOLDING THAT WHEN THE ADDITION MADE IN THE ASSESSMENT ORDER ON THE BASIS OF WHICH PENALTY FOR CONCEALMENT IS LEVIED HA VE BEEN DELETED THERE REMAINS NO BASIS AT ALL FOR LEVYING THE PENALTY FOR CONCEALMENT AND IN SUCH CASE, NO PENALTY CAN SURVIVE AND THE PENALTY I S LIABLE TO BE CANCELLED. SO, IN VIEW OF THE MATTER, PENALTIES LEVIED BY TH E AO AND CONFIRMED BY THE LD. CIT (A) IS ORDERED TO BE DELET ED. CONSEQUENTLY, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 21 ST DAY OF JANUARY , 2021. SD/- SD/- (ANIL CHATURVEDI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 21 ST DAY OF JANUARY, 2021 TS ITA NO.6588/DEL./2016 6 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-37, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.