MS IMSOFER MANUFACTURING INDIA PRIVATE LIMITED (NOW KNOWN AS FERRERO INDIA PRIVATE LIMITED),PUNE V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1)� PUNE AND NATIONAL FACELESS ASSESSMENT CENTRE, DELHI, PUNE AND NFAC (DELHI)

ITA 1316/PUN/2024

AI Insights

The case involves Imsofer Manufacturing India Private Limited (now Ferrero India Private Limited), which appealed against the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2012-13. The penalty was based on transfer pricing adjustments made by the Transfer Pricing Officer (TPO) and upheld by the CIT(A). The Tribunal had previously granted substantial relief to the assessee in the quantum appeal, which affected the basis of the penalty. The Tribunal decided to remand the penalty issue back to the Assessing Officer to align it with the findings of the quantum appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 24564 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMOL KHAIRNAR
• Assessee Lawyers: SIDDHESH CHAUGULE; NAGMA GUPTA
• Keywords: Difference of opinion; Opportunity of being heard; Transfer pricing; Principle of natural justice; Rectification of order; Wholly owned subsidiary
• Section: 250; 154; 271(1)(c); 251

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपील सं. / ITA No.1316/PUN/2024 िनधाᭅरण वषᭅ / Assessment Year : 2012-13 M/s. Imsofer Manufacturing India Private Limited (now known as Ferrero India Private Limited), World Trade Center, 8th Floor, Tower-3, Kharadi- 411014. PAN : AABCI6450N Vs. DCIT, Circle-1(1), Pune. Appellant Respondent आदेश / ORDER PER VINAY BHAMORE, JM: This appeal filed by the assessee is directed against the order dated 16.04.2024 passed by Ld. CIT(A)/NFAC for the assessment year 2012-13. 2. The appellant has raised the following grounds of appeal :- “General grounds: 1. On the facts and circumstances of the case and in law, the Hon. CIT(A) has erred in passing order under section 250 of the Act i.e. levying penalty of INR 3,55,82,949/-. Legal grounds: Assessee by : Shri Siddhesh Chaugule & Nagma Gupta Revenue by : Shri Amol Khairnar Date of hearing : 18.12.2024 Date of pronouncement : 11.03.2025 ITA No.1316/PUN/2024 2 2. On the facts and circumstances of the case and in law, the learned AO erred in not imposing penalty based on the additions as confirmed by the learned CIT(A) in quantum appeal of the Appellant. 3. On the facts and circumstances of the case and in law, the learned CTT(A) erred in violating the provisions of section 251 (1)(b) of the Act. Non-levy of penalty under section 271(1)(c); 2. On the facts and circumstances of the case and in law, the Hon'ble ITAT has heard the quantum appeal of the appellant. Accordingly, as per the section 275(1)(A), learned AO be directed to impose penalty based on the order of the Hon'ble ITAT in the quantum appeal of the Appellant. 3. On the facts and circumstances of the case and in law, the Hon. CIT(A) has erred in ignoring that there is absence of essential element for levy of penalty under section 271(1)(c) of the Act in the Appellant's case viz. ‘concealment of particulars of income' or 'furnishing of inaccurate particulars of income’. 4. On the facts and circumstances of the case and in law, the Hon. CIT(A) has erred in law and on facts in levying penalty without appreciating the fact that the Appellant has acted in good faith and with due diligence as mandated by Explanation 7 to Section 271(1)(c) of the Act. 5. On the facts and circumstances of the case, the Hon. CIT(A) has erred in ignoring that levy of penalty under section 271(1)(c) of the Act presupposes mens rea on part of the Appellant, which is absent in the Appellant's case 6. On the facts and circumstances of the case and in law, the Hon. CIT(A) has erred in levying penalty basis the addition to the income due to transfer pricing adjustments, as the disallowance is merely due to difference of opinion between the Appellant and the learned transfer pricing officer ('Ld. TPO’) Hon. CIT(A) with regard to the arm's length price and thus it does not lead to levy of penalty under section 271(1)(c) of the Act. 7. On the facts and circumstances of the case and in law, the Hon. CIT(A) has erred in passing an ex parte order without granting adequate opportunity of being heard to the Appellant thereby violating the principles of natural justice. 8. On the facts and circumstances of the case and in law, the Hon. CIT(A) has erred in levying penalty without passing the proper speaking order. The Appellant craves leave to add to, or alter, by deletion, substitution, modification or otherwise, the above grounds of appeal, either before or during the hearing of the appeal.” ITA No.1316/PUN/2024 3 3. Facts of the case, in brief, are that the assessee i.e. Imsofer Manufacturing India P Ltd (now known as Ferrero India P Ltd) ('Imsofer India' or 'the company' or the Appellant') was incorporated on 8th February 2007 and is wholly owned subsidiary of Ferreo S.p.A. with ultimate holding company being Ferrero International SO European Company, Ferrero Group is engaged in the business of manufacturing chocolate and other confectionary products. The appellant filed original return of income for the relevant assessment year on November, 30, 2012, disclosing total loss at Rs.81,69,63,455/- The Ld AO referred the case of the appellant to the Ld Transfer Pricing Officer (TPO) for determination of Arms' Length Price (ALP) of International transactions entered into by the appellant with its Associated Enterprises (AEs). During the course of transfer pricing (TP) Audit, the erstwhile TPO, proposed an adjustment of Rs.17,64,79,234/- on account of import of raw material and other transaction (Manufacturing segment) and an adjustment of Rs.2,03,65,830/- on account of availability of consultancy services (Receipts of service) in his TP order dated 24th Oct 2016. Hence, a total TP adjustment of Rs.19,68,45,064/- was proposed. The Appellant filed for rectification application u/s. 154 of the Act for reducing the TP adjustment on account of Manufacturing Segment ITA No.1316/PUN/2024 4 to Rs.16,90,85,442/-. Accordingly, rectification order was passed on 1st Feb 2017 with reduced TP adjustment of Rs.18,94,51,272/-. The Appellant filed an appeal to the CIT(A) against the order of TOP. After careful consideration, the Ld CIT(A) passed an order and decided the matter partly in favour of the appellant. The Assessing Officer initiated penalty proceedings u/s 271(1)(c) for concealment of particulars of income or furnished inaccurate particular of income and imposed penalty of Rs.6,14,67,466/- u/s 271(1)(c) of the IT Act. 4. After considering the reply of the assessee, Ld. CIT(A)/NFAC partly allowed the appeal by observing as under :- “4.1. The facts of the case were carefully considered. The appellant, through the said appeal has not contested the levy of penalty on its merits but only its quantification on the aspect of the arithmetic involved. With regards to the merits, the appellant has only stated that it has a fair chance to win the appeal before the Hon'ble ITAT and has not contested on the correctness of levy of penalty, on its merits. 4.2. According to the appellant, while the original adjustment made by TPO of Rs.18,94,51,272/- was reduced to Rs.10,96,71,595/-, the quantum to be considered for levy of penalty as per Explanation 7 to Section 271(1)(c) should follow suit and if done, the penalty u/.271(1)(c) has to reduced to Rs.3,55,82,949/-. 4.3. The claim of the appellant is squarely covered by the provisions of section 275(1A) and hence the JAO is directed to check the arithmetic accuracy in the claim of the appellant, and reduce the quantum of penalty demand accordingly and grant relief to the appellant.” 5. It is this order against which the assessee is in appeal before this Tribunal. ITA No.1316/PUN/2024 5 6. Ld. AR appearing from the side of the assessee submitted before us that the quantum assessment order for the same period was challenged before Ld. CIT(A) and thereafter before the Tribunal. It was submitted by Ld. AR that while deciding the quantum appeal, the Tribunal in its order dated 14.11.2024 has allowed substantial relief to the assessee and now it is the sole prayer of the assessee that the issue of penalty u/s 271(1)(c) may kindly be decided in the light of above order passed by the Tribunal in the quantum assessment case. 7. Ld. DR appearing from the side of the Revenue did not raised any serious objection to the request of Ld. Counsel of the assessee. 8. We have heard Ld. Counsels from both the sides and perused the material available on record. We find that the quantum assessment order for the same assessment year which was the basis for levy of impugned penalty u/s 271(1)(c) of the IT Act was also under challenge before Ld. CIT(A) and thereafter before the Tribunal. And the Tribunal has already allowed substantial relief to the assessee vide order dated 14.11.2024 in ITA No.7923/DEL/2019 for A.Y. 2012-13. Considering the totality of the facts of the case, we find force in the arguments of Ld. Counsel of the assessee that the penalty u/s 271(1)(c), if any, is to be imposed on the basis of quantum assessment order and since ITA No.1316/PUN/2024 6 Co-ordinate Bench of this Tribunal has already granted relief to the assessee, the penalty u/s 271(1)(c) is required to be imposed, if any, in the light of Tribunal’s order passed in quantum appeal. Accordingly, we set-aside the order passed by Ld. CIT(A)/NFAC and remand the matter back to the file of the Assessing Officer to decide the issue of penalty u/s 271(1)(c) afresh as per fact and law after providing reasonable opportunity of hearing to the assessee. 9. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced on this 11th day of March, 2025. Sd/- Sd/- (R. K. PANDA) (VINAY BHAMORE) VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; ᳰदनांक / Dated : 11th March, 2025. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The Pr. CIT concerned. 4. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 5. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune. "