DCIT, New Delhi V. M/s. Honda Trading Corporation India Pvt. Ltd., Gurgaon

ITA 747/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4438 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 09-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR KEDIA
• Keywords: Transfer pricing; International transaction; Difference of opinion
• Section: 271(1)(c); 92C; 205

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SH. AMIT SHUKLA, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 747/DEL/2017 : ASSTT. YEAR : 2007-08 DCIT, CIRCLE-11(1), NEW DELHI VS M/S HONDA TRADING CORPORATION INDIA PVT. LTD., SIGMA CENTRE, A- 27, INFOCITY, SECTOR-34, GURGAON-122001 (APPELLANT) (RESPONDENT) PAN NO. AA BCH5556J CO NO. 101/DEL/2017 : ASSTT. YEAR : 2007-08 M/S HONDA TRADING CORPORATION INDIA PVT. LTD., SIGMA CENTRE, A-27, INFOCITY, SECTOR-34, GURGAON-122001 VS DCIT, CIRCLE-11(1), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AABCH5556J ASSESSEE BY : NONE REVENUE BY : SH. RAJESH KUMAR KEDIA, CIT DR DATE OF HEARING: 10.02.2020 DATE OF PRONOUNCEMENT: 20.02.2020 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE A ND CROSS OBJECTION BY THE ASSESSEE AGAINST THE ORDER O F THE LD. CIT(A)-19, NEW DELHI DATED 21.11.2016. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: 1. WHETHER ON THE FACTS & THE CIRCUMSTANCES OF THE CASE, LD. CIT (A) WAS CORRECT IN DELETING THE PENAL TY OF RS.86,09,925/- U/S 271(1)(C) MADE ON THE ADDITIO N ITA NO. 747/DEL/2017 & CO NO. 101/DEL/2017 HONDA TRADING CORPORATION INDIA PVT. LTD. 2 ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT OF RS.2,55,40,101/- MADE BY THE AO? 3. THE FACTS HAVE BEEN PRIMARILY TAKEN FROM THE REC ORD OF LD. CIT (A) WITH THE ASSISTANCE OF THE LD. CIT DR. 4. A TRANSFER PRICING ADJUSTMENT WAS MADE BY THE TP O IN RESPECT OF TRANSACTIONS OF RS.68,65,61,835/- WITH I TS ASSOCIATED ENTERPRISE AND ADJUSTED AMOUNT OF RS.8,64,78,406/- HAS BEEN ADDED TO THE TOTAL INCOME. 5. THE ASSESSEE WENT IN APPEAL BEFORE THE LD. DRP W HICH REDUCED THE TRANSFER PRICING ADJUSTMENT TO RS.4,30, 47,427/-. THEREAFTER, THE ASSESSEE WENT IN APPEAL BEFORE THE ITAT WHICH RESTORED THE MATTER TO THE ASSESSING OFFICER FOR CO NSIDERING THE FOREIGN EXCHANGE FLUCTUATION ARISING ON ACCOUNT OF ABNORMAL MOVEMENT OF THAI BHAT AGAINST THE INDIAN NATIONAL R UPEE, WHILE DETERMINING THE ARMS LENGTH PRICE. THE ASSESSING OF FICER WHILE GIVING EFFECT TO THE ORDER OF INCOME TAX APPELLATE TRIBUNAL, RETAINED THE ADJUSTMENT TO THE TUNE OF RS.2,55,40,1 01/-. THE AO, THEREAFTER, PROCEEDED TO IMPOSE THE PENALTY AMO UNTING TO RS.86,09,925/-. 6. WITH REGARD TO THE PENALTY LEVIED BEFORE THE LD. CIT (A) THE ASSESSEE EMPHASIZED ON THE FACT THAT ASSESSING OFFI CER HAD FAILED TO APPRECIATE THE OBSERVATIONS OF THE ITAT A ND THE ORDER GIVING EFFECT TO THE DIRECTIONS OF INCOME TAX APPEL LATE TRIBUNAL WAS ERRONEOUS. IT WAS ALSO EMPHASIZED THAT ASSESSEE DID NOT GO IN APPEAL AGAINST THIS ORDER ONLY TO SAVE ITSELF FR OM FURTHER LITIGATION IN THE MATTER. IT HAS BEEN ARGUED BEFORE THE LD. CIT (A) THAT ASSESSEE HAS NEITHER CONCEALED ANY INCOME NOR FILED ITA NO. 747/DEL/2017 & CO NO. 101/DEL/2017 HONDA TRADING CORPORATION INDIA PVT. LTD. 3 ANY INACCURATE PARTICULARS OF INCOME. FOR THIS PROP OSITION, THE ASSESSEE HAS RELIED ON THE FOLLOWING JUDICIAL DECIS IONS: K.C BUILDERS VS ACIT (265ITR 562) (SC) CIT VS INDIAN METALS AND FERRO ALLOYS LTD. (1995) 211 ITR 35 (ORISSA HC) HINDUSTAN STEEL LTD VS STATE OF ORISSA (1972) 83 IT R 26 (SC) COMMISSIONER OF INCOME-TAX VS SANTHOSH FINANCIERS (2001) 247 ITR 742 (KERALA) 7. IN CONNECTION WITH THE PENALTY LEVIED, WE HAVE P ERUSED THE OBSERVATION OF THE ITAT WITH REGARD TO THE FOREIGN EXCHANGE FLUCTUATION, WHICH IS AS UNDER: 21. FROM THE ABOVE SUBMISSIONS AND CAREFUL PERUSAL OF CITATIONS AND ALL OTHER RELEVANT JUDGMENTS WE OBSERVE THAT RULE 10B(1)(E) OF THE ACT ON THE ONE SIDE AND OTHER SUB-RULES IN THE CONTEXT OF TNMM NEE D TO BE ANALYZED FOR ELIMINATING THE DIFFERENCE, IF A NY, IN THE COMPARABLE UNCONTROLLED TRANSACTION WHICH MATERIALLY AFFECT THE PROFIT MARGIN OF THE ASSESSEE . HAVING NOTICED THE DIFFERENCES, THE REVENUE HAS TO QUANTITY THE DIFFERENCE, IF ANY, AND THEN REVENUE AUTHORITIES MUST DECIDE IF THAT DIFFERENCE CONSTITU TES MATERIALLY AFFECT THE PRICE IN OPEN MARKET. AS PE R THESE PROVISIONS, IF THE ANSWER OF THE ABOVE QUESTI ON IS IN THE AFFIRMATIVE, THEN THE IDENTIFIED DIFFEREN CE HAS TO BE REMOVED AND THE MARGIN HAS TO BE ADJUSTED FOR ARRIVING AT THE CREDIBLE COMPARABLE. IT IS A WE LL- ACCEPTED ACCOUNTING PRINCIPLE THAT NET MARGINS CAN BE INFLUENCED BY SOME OF SAME FACTORS WHICH CAN INFLUENCE PRICE OR GROSS MARGINS. IT IS THE EXPECTATIONS AND REQUIREMENTS OF THE RULES/PROVISIO NS THAT ANY DIFFERENCE WHICH IS LIKELY TO MATERIALLY A FFECT THE NET PROFIT MARGIN (NPM) IN THE OPEN MARKET HAS TO BE ELIMINATED. THE REVENUE AUTHORITIES AND TPO ARE DUTY BOUND TO KNOW THAT THE TNMM VISUALIZES THE UNDERTAKING OF A THOROUGH COMPARABILITY ANALYSIS AN D ELIMINATION OF THE DIFFERENCES THROUGH THE REQUISIT E ADJUSTMENTS. ITA NO. 747/DEL/2017 & CO NO. 101/DEL/2017 HONDA TRADING CORPORATION INDIA PVT. LTD. 4 22. IN THE CASE IN HAND, ADMITTEDLY, THE AVERAGE EXCHANGE RATE OF THAI BHAT DURING OCTOBER, 2005 TO MARCH 2006 WAS 100 THAI BHAT EQUIVALENT TO INR 110 AND AFTER CONSIDERATION OF SAID AVERAGE EXCHANGE RATE, PRICE OF SALE OF GOODS HAD TO BE AGREED UPON WITH THE CUSTOMERS. THE DR HAS NOT DISPUTED THE POINT THAT DURING APRIL, 2006 TO SEPTEMBER, 2006 AT THE TIME OF PURCHASE, THE EXCHANGE RATE OF THAI BHA T WAS SUBSTANTIALLY INCREASED AND THE AVERAGE EXCHANG E RATE OF THAI BHAT WAS INCREASED TO 100 THAI BHAT - INR 119. ACCORDINGLY, WE CANNOT RULE OUT AND IGNORE THIS FACTUAL MATRIX EMERGED FROM THE FLUCTUATION OF FOREIGN EXCHANGE RATES THAT WHILE PRICES OF PURCHAS ES AND IMPORT MADE BY THE APPELLANT HAVE INCREASED, TH E SALE PRICE OF EXPORTED GOODS REMAINED ON THE LOWER SIDE WHICH IS AN IMPORTANT ELEMENT TO MATERIALLY AFFECT THE PRICE IN THE OPEN MARKET. IN THIS SITUAT ION, WE ARE INCLINED TO HOLD THAT THE AUTHORITIES BELOW SHOULD HAVE CONSIDERED THE SAID DIFFERENCE DUE TO FOREIGN EXCHANGE RATE FLUCTUATION IN FAVOUR OF THAI BHAT AND AGAINST THE INR AND THE SAID DIFFERENCE HA S TO BE REMOVED AND THE MARGIN THEREON HAS TO BE ADJUSTED FOR ARRIVING AT THE CREDIBLE COMPARABLE THROUGH THE REQUISITE ADJUSTMENTS. 23. DURING THE COURSE OF ARGUMENTS, THE DR SUBMITTED THAT THE ISSUE OF FLUCTUATION IN FOREIGN EXCHANGE PRICE WAS CONSIDERED BY THE AUTHORITIES BELOW BUT FROM PERUSAL OF THE IMPUGNED ORDER, INTER ALIA, ORDER OF THE DRP, WE OBSERVE THAT THE AUTHORITIES BELOW HAVE NOT CONSIDERED THE ELEMENT O F ABNORMAL AND HUGE FLUCTUATION IN THE FOREIGN EXCHANGE FLUCTUATION IN FAVOUR OF THAI BHAT AND AGAINST THE INR AND THE SAID DIFFERENCE HAS TO BE REMOVED AND THE MARGIN THEREON HAS TO BE ADJUSTED FOR ARRIVING AT THE CREDIBLE COMPARABLE THROUGH THE REQUISITE ADJUSTMENTS. 24. ACCORDINGLY, IN VIEW OF THE OBSERVATIONS MADE HEREINABOVE, GROUND OF APPEAL NO. 2.7 AND 2.8 ARE ALLOWED WITH A DIRECTION TO THE ASSESSING OFFICER T HAT NECESSARY ADJUSTMENTS PERTAINING TO THE HUGE AND ABNORMAL FLUCTUATION IN THE FOREIGN EXCHANGE MAY BE ALLOWED TO THE ASSESSEE IN DETERMINING THE ALP OF T HE ITA NO. 747/DEL/2017 & CO NO. 101/DEL/2017 HONDA TRADING CORPORATION INDIA PVT. LTD. 5 INTERNATIONAL TRANSACTION UNDERTAKEN BY THE APPELLANT. 8. POST THE ORDER OF THE ITAT, THE ASSESSEE RE-WORK ED THE FOREIGN EXCHANGE FLUCTUATION AND OP/SALES HAS BEEN WORKED OUT AT 10.04%. THE WORKING OF THE ASSESSEE IS AS UNDER: PARTICULARS AMOUNT IN RS. SALES (TRADING SEGMENT) 80,86,24,823/ - OTHER OPERATING INCOME 3,74,22,103/ - PURCHASE PRICE LESS: ADJUSTMENT ON ACCOUNT OF EXCHANGE FLUCTUATIONS (62,13,64,728 - 51,23,81,455) 81,41,44,911/ - 10,88,83,273/- 70,51,31,638/ - OPERATING EXPENSES 5,96,65,854/ - NET PROFIT 8,12,49,434/ - OP/SAL ES 10.04% 9. THE ASSESSING OFFICER DID NOT AGREE WITH THE ARG UMENTS OF THE ASSESSEE AND HELD AS UNDER: ALONG WITH THIS REPLY, THE ASSESSEE COMPANY ALSO FILED A CHART FOR CALCULATION OF FLUCTUATIONS OF LO SS OF RS.10,89,83,273/- PERUSAL THEREOF REVEALS THAT THE ASSESSEE COMPANY HAS CALCULATED THIS LOSS ON HYPOTHETICAL BASIS BY REDUCING ACTUAL PURCHASE PRIC E BY QUOTATIONS RATES AND ON THIS BASIS THE ASSESSEE COMPANY CALCULATED QUOTATION PRICE OF PURCHASES OF RS.62,12,64,728/- AT RS.51,23,81,455/-. THE QUOTATION PRICE OF RS.51,23,81,455/- HAS NO BASIS. THE ASSESSEE COMPANY MAY HAVE QUOTED ANY PRICE BUT THE ACTUAL PURCHASES IS FOR RS.62,13,64,728/- AND THE FLUCTUATION LOSS ON ACCOUNT OF THIS PURCHAS E ONLY HAS TO BE CONSIDERED WHILE CALCULATING OPERATI VE COST WHILE DETERMINING ALP. IN OTHER WORDS, THE ASSESSEE COMPANY PURCHASED MATERIAL AND PAYMENT THEREOF WAS MADE ON THE LATER DATES AND ON THOSE DATES THE RATE OF BHAT WAS DIFFERENT FROM THE PURCHASE RATE AND ON THAT ACCOUNT THE ASSESSEE COMPANY IS REQUIRED TO PAY EXTRA AMOUNT THAN THE PURCHASE PRICE AND THAT PAYMENT HAS ALREADY BEEN MADE OR CONSIDERED WHILE FINALIZING BALANCE SHEET A S ITA NO. 747/DEL/2017 & CO NO. 101/DEL/2017 HONDA TRADING CORPORATION INDIA PVT. LTD. 6 ON 31.03.2007 BY MAKING ADJUSTMENT OF CREDITORS ON THE BASIS OF RATES OF BHAT ON THAT DATE. ACCORDINGL Y THE ASSESSEE COMPANY INCURRED FLUCTUATION LOSS OF RS.1,13,13,274/- AND I.E. APPEARING AS DEBITED IN T HE PROFIT & LOSS ACCOUNT AS FLUCTUATION LOSS EXPENSES. ACTUALLY, THIS AMOUNT HAS TO BE CONSIDERED WHILE CALCULATING OPERATING COST WHILE DETERMINING ALP AN D ACCORDINGLY THE OPERATING COST OF THE ASSESSEE COMPANY IS CALCULATED AS UNDER:- SALES 80,86,24,823/ - OTHER OF INCOME 3,74,22,103/ - TOTAL 84,60,46,926/ - LESS: PURCHASE PRICE 81,41,14,911/ - OPERATING EXPENSES 5,96,65,854/ - LESS: EXCHANGE FLUCTUATIONS 1,13,13,274/ - 4,83,52,580/ - 86,24,67,491/ - LESS: (OP) 1,64,20,565/ - OP/SALES ( - ) 1.94% COMPARABLE 1.78% 3.72% THEREBY THE ASSESSING OFFICER/TPO RETAINED AN ADJUSTMENT OF RS.2,55,40,101/-. 10. THE MAIN ARGUMENTS TAKEN UP BEFORE THE TRIBUNAL DURING THE QUANTUM PROCEEDINGS WAS THAT THERE WAS AN ABNOR MAL EXCHANGE FLUCTUATION IN THE RATE OF THAI BHAT AND I NDIA NATIONAL RUPEE DURING THE YEAR UNDER CONSIDERATION. ACCORDIN GLY, WHEN THE ORDERS WERE BOOKED FOR PURCHASES, 100 THAI BHAT WERE EQUIVALENT TO RS. 110/-, WHILE WHEN THE PAYMENT WAS MADE, 100 THAI BHAT WAS EQUAL TO RS. 119/-, THEREBY PRICE OF PURCHASES WENT UP WHILE THE SALES WERE ALREADY COMMITTED AT T HE OLD SETTLED PRICE. THE INCOME TAX APPELLATE TRIBUNAL AP PRECIATED THE FACT THAT SIMILAR FLUCTUATIONS WERE NOT BORNE B Y THE COMPARABLE ENTITIES THAT WERE SELECTED BY THE TPO F OR BENCH MARKING THE ACTIVITIES OF THE ASSESSEE SINCE THEY W ERE HAVING ITA NO. 747/DEL/2017 & CO NO. 101/DEL/2017 HONDA TRADING CORPORATION INDIA PVT. LTD. 7 NEGLIGIBLE IMPORT COMPONENTS. THE ITAT, THEREFORE, DIRECTED THAT FOR PROPER COMPARABILITY UNDER 10B(1)(E), SUCH ABNORMAL DIFFERENCES SHOULD BE REDUCED AND THE RESULTS ACCOR DINGLY ADJUSTED. 11. THEREAFTER, THE ASSESSEE BEFORE THE ASSESSING O FFICER WORKED OUT AN ADJUSTMENT OF RS. 10,89,83,273/- BY E LIMINATING THE EFFECT OF FLUCTUATIONS IN RESPECT OF ACTUAL PUR CHASES & SALES MADE BY IT. THE ASSESSING OFFICER, HOWEVER, ONLY AL LOWED THE BENEFIT OF EXCHANGE FLUCTUATIONS AS APPEARING IN TH E PROFIT & LOSS ACCOUNT. THE AMOUNT OF EXCHANGE FLUCTUATIONS A PPEARING IN THE PROFIT & LOSS ACCOUNT ARE AS PER THE ACCOUNTING STANDARDS, IN RELATION TO TRANSLATION OF FOREIGN EXCHANGE ASSE TS INTO RUPEE TERMS AT THE CLOSE OF THE YEAR. IT GENERALLY DOES N OT TAKE INTO ACCOUNT THE EXCHANGE FLUCTUATIONS ARISING ON ACCOUN T OF PURCHASE & SALE OF GOODS WHICH ARE INCLUDED IN THE PURCHASE PRICE & SALE PRICE. THE ASSESSEE HAS FURNISHED DETA ILED LIST OF PURCHASES & SALES SHOWING THE EFFECT OF EXCHANGE FL UCTUATIONS. THE ASSESSEE HAS CLAIMED THE FLUCTUATIONS EFFECT ON LY IN RESPECT OF HIGH SEA SALES WHICH WERE MADE TO M/S. LUMAX IND USTRIES LTD. IT IS FURTHER SEEN THAT AFTER GIVING EFFECT TO THE EXCHANGE FLUCTUATIONS ARISING ON ACCOUNT OF SALE & PURCHASE OF GOODS IS GIVEN, THE PLI OF THE ASSESSEE WOULD BE MUCH HIGHER THAN THE PLI OF THE COMPARABLES AND NO ADDITION WOULD BE SUS TAINABLE. THEREFORE, IT IS PLEADED BEFORE THE LD. CIT (A) THA T ON MERITS ITSELF, SINCE NO ADDITION ON ACCOUNT OF TRANSFER PR ICING IS SUSTAINABLE NO PENALTY WOULD BE LEVIABLE. 12. AGAINST THESE FACTS AVAILABLE ON RECORD, THE LD . DR ARGUED THAT PENALTY U/S 271(1)(C) IS LEVIABLE EVEN IF THE INCOM E IS ESTIMATED AND SINCE ITA NO. 747/DEL/2017 & CO NO. 101/DEL/2017 HONDA TRADING CORPORATION INDIA PVT. LTD. 8 THE TRANSFER PRICING ADJUSTMENT IS MUCH MORE THAN T HE ESTIMATION OF INCOME THE PENALTY LEVIED IS OUGHT TO HAVE BEEN CON FIRMED. HE ARGUED THAT EVEN WHEN ADDITION IS BASED ON ESTIMATE, CONCEALMEN T PENALTY CAN BE LEVIED. HE ARGUED THAT OMISSION ON THE PART OF THE ASSESSEE TO MAINTAIN ACCOUNTS AND CORRECT TP STUDY CANNOT BE REGARDED IN LAW AS A GROUND FOR EXONERATING THE LIABILITY OF THE ASSESSEE FROM CULP ABILITY U/S 271(1)(C). REGARDING THE QUESTION OF WHETHER THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. LD. DR ARGUED THAT ONCE AN ASSESSMENT HAS B EEN DONE, WHETHER IT IS BEST JUDGMENT OR OTHERWISE, THE FIGURE ASSESS ED REPRESENTS THE INCOME OF THE ASSESSEE HENCE THERE IS A FAILURE TO FURNISH THE CORRECT TP STUDY WHICH SHOWS THE INTENTION OF ASSESSEE TO CONC EAL INCOME. LD. DR ARGUED THAT IN EVERY CASE FALLING WITHIN THE MISCHI EF OF EXPL. 1 TO SECTION 271(1)(C) AND EXPLANATION 7 TO SECTION 271(1)(C), A PRESUMPTION OF DELIBERATE CONCEALMENT HAS TO BE RAISED. 13. HE ALSO RELIED ON THE FOLLOWING CASE LAWS: ADDL. CIT VS CHANDRAKANTHA AND ANOTHER (MP) 205 ITR 607 CIT VS MD. WARASAT HUSSAIN (PATNA) 171 ITR 405 A.M. SHAH & CO. VS CIT (GUJ.) 238 ITR 415 CIT VS KRISHNASWAMY AND SONS (MAD.) 219 ITR 157 14. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PER USED THE MATERIAL AVAILABLE ON RECORD. 15. WE HAVE GONE THROUGH THE EXPLANATION 7 TO SECTI ON 271(1)(C) DEALS WITH PENALTY IN RESPECT OF ADJUSTME NT ON ACCOUNT OF TRANSFER PRICING. THE PROVISIONS OF THE SECTION READ AS UNDER: [EXPLANATION 7.WHERE IN THE CASE OF AN ASSESSEE W HO HAS ENTERED INTO AN INTERNATIONAL TRANSACTION [OR S PECIFIED DOMESTIC TRANSACTION] DEFINED IN SECTION 92B, ANY A MOUNT ITA NO. 747/DEL/2017 & CO NO. 101/DEL/2017 HONDA TRADING CORPORATION INDIA PVT. LTD. 9 IS ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOM E UNDER SUB-SECTION (4) OF SECTION 92C, THEN, THE AMO UNT SO ADDED OR DISALLOWED SHALL, FOR THE PURPOSES OF C LAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNI SHED, UNLESS THE ASSESSEE PROVES TO THE SATISFACTION OF T HE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) [OR THE [PRINCIPAL COMMISSIONER OR] COMMISSIONER] THAT THE PRICE CHARGED OR PAID IN SUCH TRANSACTION WAS COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION 92C AND IN THE MANNER PRESCRIBED UNDER THAT SECTION , IN GOOD FAITH AND WITH DUE DILIGENCE.] 16. HAVING GONE THROUGH THE RECORD AND THE ARGUMENT S, WE ARE TOTALLY IN AGREEMENT WITH THE OBSERVATION OF THE LD .CIT (A) WHO HELD THAT ON PERUSAL OF THE PROVISIONS OF EXPLANATI ON 7 TO SECTION 271(1)(C) SHOWS THAT PENALTY WOULD BE LEVIA BLE UNLESS THE ASSESSEE PROVES THAT TRANSACTIONS WERE REPORTED AS PER THE PROVISIONS CONTAINED IN SECTION 92C IN GOOD FAITH A ND WITH DUE DILIGENCE. IT IS AN UNDOUBTED FACT THAT ASSESSEE HA D REPORTED THE TRANSACTIONS OF PURCHASE & SALE AT THE ACTUAL P RICE AT WHICH THE TRANSACTION WAS UNDERTAKEN. THE ASSESSEE HAD BO NAFIDE BELIEF THAT LOWER MARGIN OBTAINED BY IT WAS ON ACCO UNT OF ADVERSE FLUCTUATIONS WHICH WERE OF AN ABNORMAL CHAR ACTER AND AFTER ELIMINATING THE EFFECT THEREOF, ITS TRANSACTI ONS WOULD REFLECT AN ARMS LENGTH PRICE. IN FACT, THE DISCUSS ION ABOVE & AFTER CONSIDERING THE DIRECTIONS OF ITAT, IT IS OBS ERVED THAT TRANSACTIONS WERE INDEED AT AN ARMS LENGTH AND NO ADDITION ON ACCOUNT OF ANY TRANSFER PRICING ADJUSTMENTS, ARE RE QUIRED TO BE RETAINED. THE CASE OF THE ASSESSEE, THEREFORE, DOES NOT FALL WITHIN EXPLANATION 7 TO SECTION 271(1)(C). EVEN OTH ERWISE, THE ASSESSEE HAD NOT CONCEALED ANY INCOME OR FILED ANY INACCURATE ITA NO. 747/DEL/2017 & CO NO. 101/DEL/2017 HONDA TRADING CORPORATION INDIA PVT. LTD. 10 PARTICULARS OF INCOME. THE ADDITION AROSE ONLY ON A CCOUNT OF DIFFERENCE OF OPINION BETWEEN THE ASSESSING OFFICER AND THE ASSESSEE REGARDING THE COMPARABLES AND ALSO THE PLI OF THE ASSESSEE. JUST BECAUSE THE ASSESSEE HAS NOT FILED A N APPEAL AGAINST THE APPEAL EFFECT ORDER OF THE ASSESSING OF FICER, IT DOES NOT TANTAMOUNT TO AGREEING WITH THE ADJUSTMENT MADE BY THE TPO AND FURTHERMORE TO ENTAIL ANY PENALTY UNDER SEC TION 271(1)(C). THEREFORE, WE HEREBY DIRECT THAT THE PEN ALTY LEVIED ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT BE DELETE D AND HEREBY CONFIRM THE WELL REASONED ORDER OF THE LD. CIT(A). 17. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND CROSS OBJECTION OF THE ASSESSEE IS TREATED AS INFRU CTUOUS OWING TO THE ADJUDICATION ON MERITS OF THE CASE. ORDER PRONOUNCED IN THE OPEN COURT ON 20/02/2020. SD/- SD/- (AMIT SHUKLA) (DR. B. R. R. KUMAR) JUDICIAL MEMBER ACCOUNT ANT MEMBER DATED: 20/02/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR