Appeal Details
Counselvise Citation
[2020] 111 COUNSELVISE.COM (IT) 3168 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 2 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
12-03-2020
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Assessment Year
2013-2014
Appeal Filed On
07-01-2019
Judgement Text
ITA NO.85/MUM/2019 M/S. AMORE JEWELS P.LTD. ASSESSMENT YEAR:2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, VP AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.85/MUM/2019 ( / ASSESSMENT YEAR : 2013-14 ) D CIT - CIRCLE 12(1)(1) ROOM NO.223, 2 ND FLOOR, AAYKAR BHAVAN, CHURCHGATE MUMBAI- 400 020. / VS. M/S. AMORE JEWELS PRIVATE L TD. 3A, PANDIT MOTILAL NEHRU MARG ITT BHATTI, WESTERN EXPRESS HIGHWAY OFF AAREY ROAD, GOREGAON EAST, MUMBAI-400 063. %& ./ ./PAN/GIR NO. AAECA-7184-J ( &( /APPELLANT ) : ( )*&( / RESPONDENT ) ASSESSEE BY : MS. AARTI VISSANJI-LD.AR REVENUE BY : SHRI MICHAEL GERALD-LD. DR / DATE OF HEARING : 19/02/2020 / DATE OF PRONOUNCEMENT : 12/03/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2013-14 CONTEST THE ORDER OF LD. COMMIS SIONER OF INCOME- TAX (APPEALS)-55, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO.CIT(A)-55/DCIT-12(1)(1)/17-18, DATED 05/10/2018 ON FOLLOWING GROUNDS: - ITA NO.85/MUM/2019 M/S. AMORE JEWELS P.LTD. ASSESSMENT YEAR:2013-14 2 I) WHETHER IN THE FACTS AND CIRCUMSTANCES O F THE CASE AND IN LAW THE CIT(A) WAS RIGHT IN DELETING THE PENALTY U/S 271G IN THE A SSESSEES CASE EVEN WHEN THE ASSESSEE HAD CLEARLY FAILED IN MAINTAINING THE DOCU MENTATION AS REQUIRED U/S 92D(3) OF THE ACT. II) WHETHER THE DECISION OF CIT(A) IS NOT VIT IATED FOR THE REASON THAT THE CIT(A) HAS NOT GIVEN ANY FINDINGS ON HOW THE ASSESSEE HAS COMPLIED WITH THE CLAUSE (D), (G) AND (M) OF RULE 10D(1), THAT HAS BEEN SPECIFICA LLY INVOKED BY THE TPO. III) WHETHER THE CIT(A) WAS NOT INCORRECT IN STATING THAT THE TPO SHOULD HAVE ASKED FOR COPIES OF PROFIT AND LOSS ACCOUNTS AND BA LANCE SHEETS OF AES TO MAKE AN OVERALL COMPARISON WITH THE GROSS PROFITABILITY LEV ELS OF THE ASSESSEE WITH THE AE'S TO ASCERTAIN DIVERSION OF PROFITS , IF ANY IGNORING THE FINDINGS OF THE ITAT IN THE CA SE OF AZTEC SOFTWARE TECHNOLOGY SERVICES LTD. VS ACIT VS. ITA NO. 584/BANG/2006, IN WHICH IT HAS BEEN HELD THAT THERE IS NO LEGAL REQUI REMENT FOR THE AO TO PRIMA FACIE DEMONSTRATE TAX AVOIDANCE BEFORE INVOKING THE PROVI SIONS OF SECTION 92 AND 92CA OF THE ACT. THE ID. CIT(A) ERRED IN HOLDING THAT THERE WAS REAS ONABLE CAUSE FOR NON-COMPLIANCE OF SEC. 92D R/W RULE 10D(1) WITHOUT SPECIFYING THE CAUSE OF SUCH NON COMPLIANCE OR DEMONSTRATING HOW THE SAME WAS REASONABLE. THE ID. CIT(A) ERRED IN DELETING THE PENALTY FOR TH E REASON THAT NO ADJUSTMENT WAS MADE TO THE ALP, FAILING TO NOTE THAT BY NOT PRODUC ING THE MATERIAL DOCUMENTS NECESSARY TO DETERMINE THE ALP UNDER ANY OF THE PRE SCRIBED METHODS U/S 92C(1), THE ASSESSEE EFFECTIVELY PREVENTED THE TPO TO MAKE DETERMINATION AS RECORDED BY THE TPO IN PARA 5 OF THE ORDER U/S 92CA(3). WHETHER THE ID. CIT(A) WAS CORRECT IN IGNORING THE RATIO LAID DOWN IN THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF M/S. SHATR UNJAY DIAMONDS (261 ITR 258) HOLDING THAT THE INITIAL BURDEN WAS CAST UPON THE A SSESSEE? IV) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) WAS RIGHT IN ARRIVING AT THE CONCLUSION THAT THE TP O COULD HAVE TRIED TO WORK OUT THE GROSS PROFITS AND NET PROFITS BY AVERAGING THE PURC HASE PRICES AND THE EXPENSES IN PROPORTION OF EXPORT SALES OF EACH ONE OF THE SEGME NTS TO ARRIVE AT AVERAGE PROFITABILITY OF EACH SEGMENT AND THEN TO COMPARE T HE SAME WITH THE AVERAGE PROFITABILITY OF OTHER PUBLIC COMPANIES WHOSE DETAI LS WERE AVAILABLE IN PUBLIC DOMAIN, WHEN IT WAS NOT POSSIBLE TO DO SO IN THE ABSENCE OF PROPER DOCUMENTATION. V) THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 2. THE LD. COUNSEL FOR THE ASSESSEE (AR), AT THE OU TSET, SUBMITTED THAT SIMILAR ISSUE OF PENALTY U/S 271G STOOD COVERE D IN ASSESSEES FAVOR BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR AYS 2009-10 & 2012-13, ITA NOS.6009/MUM/2017 & 716/MUM/2018, CO MMON ORDER DATED 10/04/2019. A COPY OF THE ORDER HAS BEEN PLAC ED ON RECORD. WHEN ITA NO.85/MUM/2019 M/S. AMORE JEWELS P.LTD. ASSESSMENT YEAR:2013-14 3 THE SAME WAS CONFRONTED TO LD. DR, HE COULD NOT POI NT ANY DISTINGUISHING FEATURE. 3.1 FACTS LEADING TO IMPOSITION OF PENALTY ARE THAT ASSESSEE BEING RESIDENT CORPORATE ASSESSEE IS STATED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURING & TRADING OF DIAMONDS AND STUDDED JEW ELLERY. AN ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 92CA(4) ON 29/12/2016. CERTAIN INTERNATIONAL TRANSACTIONS CARRIED OUT BY T HE ASSESSEE WITH ITS ASSOCIATE ENTERPRISES (AE), DURING THE YEAR UNDER C ONSIDERATION, WERE REFERRED TO LEARNED TRANSFER PRICING OFFICER (TPO) U/S 92CA(1) FOR DETERMINATION OF ARMS LENGTH PRICES. THESE TRANSAC TIONS WERE IN THE NATURE OF PURCHASE / SALE OF ROUGH AS WELL AS POLIS HED DIAMONDS WITH OVERSEAS GROUP ENTITIES. THE ASSESSEE APPLIED ENTIT Y LEVEL TNMM TO BENCHMARK THE STATED TRANSACTIONS, WHICH WAS REJECT ED BY LD. TPO. THE ASSESSEE WAS ASKED TO PRODUCE COMPLETE BREAK UP OF BOTH THE TRANSACTIONS IN TERMS OF QUALITY AS WELL AS PRICES. HOWEVER, THE SAID INFORMATION COULD NOT BE FURNISHED BY THE ASSESSEE. ALTHOUGH FINALLY LD. TPO ACCEPTED THE TRANSACTIONS TO BE AT ARMS LENGTH PRICE, BUT INITIATED PENALTY U/S 271G IN VIEW OF THE FACT THAT THE ASSES SEE WAS UNABLE TO SUBMIT PROFITABILITY AT NET MARGIN LEVEL, SEPARATE STOCK RECORD OR PRODUCTION RECORD WAS NOT PRODUCED FOR AE AND NON-A E SEGMENTAL ANALYSIS AND FOR QUANTITATIVE RECONCILIATION. 3.2 THE ASSESSEE EXPLAINED THAT THE BENCHMARKING DO NE BY THE ASSESSEE WAS WELL ACCEPTED AS WELL AS SUITABLE METH OD KEEPING IN VIEW THE ASSESSEES NATURE OF BUSINESS. THE ASSESSEE DRE W ATTENTION TO THE DETAILED RECORDS MAINTAINED BY THE ASSESSEE WITH RE SPECT TO THE STATED ITA NO.85/MUM/2019 M/S. AMORE JEWELS P.LTD. ASSESSMENT YEAR:2013-14 4 TRANSACTIONS. HOWEVER, CONCLUDING THAT THE ASSESSEE FAILED TO MAINTAIN DOCUMENTATION AS REQUIRED UNDER CLAUSE (D), (G), (H ) & (I) OF RULE 10D (1), THE AFORESAID PENALTY U/S 271G WAS INITIATED A ND FINALLY, THE ASSESSEE WAS SADDLED WITH IMPUGNED PENALTY OF RS.12 3.63 LACS VIDE ORDER DATED 28/04/2017. 4. THE LEARNED FIRST APPELLATE AUTHORITY, AFTER ANA LYZING THE MANUFACTURING PROCESS AND NATURE OF TRADE, OPINED T HAT LEVY OF PENALTY WOULD NEITHER BE FAIR NOR REASONABLE SINCE SUBSTANT IAL COMPLIANCE WAS MADE BY THE ASSESSEE. THEREFORE, THE PENALTY WAS DE LETED. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 5. UPON PERUSAL OF CITED ORDER OF TRIBUNAL FOR AYS 2009-10 & 2012-13 IN REVENUES APPEALS, WE FIND THAT THE ASSESSEE WAS SADDLED WITH PENALTY U/S 271G FOR THOSE YEARS UNDER SIMILAR FACT UAL MATRIX. THE SAME WAS DELETED BY LEARNED FIRST APPELLATE AUTHORITY, A GAINST WHICH THE DEPARTMENT WAS IN APPEAL FOR BOTH THESE YEARS. HOWE VER, THE CO-ORDINATE BENCH, RELYING UPON THE DECISION OF TRIBUNAL IN ACIT V/S D. NAVINCHANDRA EXPORTS PVT. LTD. (2017 87 TAXMANN.COM 306), DISMISSED THE APPEALS. SINCE FACT ARE PARI-MATERIA THE SAME IN THIS YEAR, RESPECTFULLY FOLLOWING THE EARLIER DECISION, WE DIS MISS THE REVENUES APPEAL. 6. RESULTANTLY, THE APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH MARCH, 2020. SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER ITA NO.85/MUM/2019 M/S. AMORE JEWELS P.LTD. ASSESSMENT YEAR:2013-14 5 MUMBAI; DATED : 12/03/2020 SR.PS, JAISY VARGHESE !'! / COPY OF THE ORDER FORWARDED TO : 1. &( / THE APPELLANT 2. )*&( / THE RESPONDENT 3. 1 ( ) / THE CIT(A) 4. 1 / CIT CONCERNED 5. 23),4 , 4 , / DR, ITAT, MUMBAI 6. 3567 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.
Other Referred Cases
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Laws Referred To
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Expert Summary
The assessee was a resident corporate assessee engaged in the business of manufacturing and trading of diamonds and studded jewellery. An assessment was framed u/s 143(3) r.w.s. 92CA(4) with respect to certain international transactions carried out by the assessee with its Associated Enterprises (AE) in the nature of purchase/sale of rough as well as polished diamonds with overseas group entities during the year under consideration, which were referred to the Transfer Pricing Officer (TPO) to determine the Arm’s Length Price (ALP) u/s 92CA(1). In spite of applying the entity-level Transactional Net Margin Method (TNMM) for the said transactions, the Ld. TPO rejected the same and asked for a complete break-up with regard to quality and price, which could not be produced by the assessee. In the end, the Ld. TPO accepted the transactions to be at ALP but initiated penalty u/s 271G on account of the assessee’s inability to submit profitability at the net margin level, separate stock method/production method for AE and non-AE segmental analysis, and quantitative reconciliation. On appeal, the Ld. CIT(A) deleted the penalty on the basis of substantial compliance made by the assessee after analysing the manufacturing process and nature of trade. On the Revenue’s appeal before the second appellate authority, the Hon’ble Tribunal upheld the order of the Ld. CIT(A) and dismissed the appeal of the Revenue.
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