PROCTER AND GAMBLE HEALTH PVT LTD,MUMBAI V. DCIT 8(2)(1), MUMBAI

ITA 328/MUM/2025

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Procter and Gamble Heath Ltd. appealed against the order of the Commissioner of Income-tax (Appeals) - National Faceless Appeal Centre, which had upheld penalties levied by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961. The penalties were related to disallowances made on account of free samples distributed to doctors, transfer pricing adjustments, and disallowances related to technical knowhow fees. The Tribunal found that the issues concerning the disallowances had been settled in favor of the appellant in previous ITAT orders, and the penalties were thus not sustainable. Additionally, the appellant's settlement under the Direct Tax Vivad Se Vishwas Scheme for the transfer pricing adjustment further supported the deletion of the penalty.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471392 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Other Referred Cases: ITA No. 1637, 1638 & 1639/Mum/2020, ITA No. 5596/Mum/2011
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOTIMUKUL SANTOSH KUMAR
• Assessee Lawyers: AJIT SHAH
• Keywords: Set aside; Transfer pricing
• Section: 250; 271(1)(c); 92CA

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAHUL CHAUDHARY (JUDICIAL MEMBER) ITA No. 328/MUM/2025 Assessment Year: 2005-06 Procter and Gamble Heath Ltd., P& G Plaza, Cardinal Gracias Road, Chakala Andheri (East), Mumbai-400099. Vs. The Dy. CIT-8(2)(1), Room No. 624, 6th floor, Aayakar Bhavan, Sir M.K. Road, Mumbai-400020. PAN NO. AAACE 2616 F Appellant Respondent Assessee by : Mr. Ajit Shah Revenue by : Mr. Gotimukul Santosh Kumar, Sr. DR Date of Hearing : 02/04/2025 Date of pronouncement : 04/04/2025 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 25.11.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2005-06, raising following grounds: 1. The Hon'ble Commissioner of Income Tax (Appeals) on facts and in law erred in: (a) dismissing the impugned grounds that all three quantum issues were settled under Direct Tax Vidad se Vishwas (DTVSV) Scheme, 2020 though however only one issue pertaining to Transfer Pricing was settled under DTVSV. (b) not appreciating the fact that Penalty was levied were not covered under settled under DTVSV, but two quantum issues were subsequently adjudicated by Hon'ble ITAT vide Orders dated 21st August 2013 (Against Original Order) and 16th December 2021 (Against Set aside order) in favour of the appellant and hence no Penalty could be levied in respect thereof. (c) not allowing the appeal and quashing the penalty on merits in respect of two issues (i.e., Disallowance of Physician Samples and Transfer Pricing Adjustme basis the Orders passed by Hon'ble ITAT dated 21st August 2013 (Against Original Order) and 16th December 2021 (Against Set aside order). (d) not quashing the entire penalty levied of Rs. 2,56,21,685/ in view of aforesaid appellant 2. The above grounds of appeal are distinct and separate and without prejudice 2. We have heard rival submissions of the parties and perused the relevant materials on record the Income-tax Act, 1961 (in short ‘the Act’) was levied for filing inaccurate particulars of the income in respect of three items. The relevant finding of the Assessing Officer is reproduced as “4. Penalty u/s 271(1)(c) is l (i) Disallowance on account of free samples and stock discrepancies of Rs.4,51,04.234/ representing 70% of the samples distributed to the doctors and physicians for want of sufficient proof as regards their distribut and the fact that the expenditure had been incurred for business Procter and Gamble Heath Ltd ITA No. 328/MUM/2025 1. The Hon'ble Commissioner of Income Tax (Appeals) on facts and in law erred in: (a) dismissing the impugned order u/s. 250 of the Act on grounds that all three quantum issues were settled under Direct Tax Vidad se Vishwas (DTVSV) Scheme, 2020 though however only one issue pertaining to Transfer Pricing was settled under (b) not appreciating the fact that all the said issues on which Penalty was levied were not covered under settled under DTVSV, but two quantum issues were subsequently adjudicated by Hon'ble ITAT vide Orders dated 21st August 2013 (Against Original Order) and 16th December 2021 aside order) in favour of the appellant and hence no Penalty could be levied in respect thereof. (c) not allowing the appeal and quashing the penalty on merits in respect of two issues (i.e., Disallowance of Physician Samples and Transfer Pricing Adjustment in respect of Technical Fees) basis the Orders passed by Hon'ble ITAT dated 21st August 2013 (Against Original Order) and 16th December 2021 (Against Set aside order). (d) not quashing the entire penalty levied of Rs. 2,56,21,685/ in view of aforesaid facts and circumstances of the case of the 2. The above grounds of appeal are distinct and separate and without prejudice to each other. We have heard rival submissions of the parties and perused the relevant materials on record. In the case penalty u/s 271(1)(c) of tax Act, 1961 (in short ‘the Act’) was levied for filing inaccurate particulars of the income in respect of three items. The relevant finding of the Assessing Officer is reproduced as “4. Penalty u/s 271(1)(c) is leviable on the following issues:- (i) Disallowance on account of free samples and stock discrepancies of Rs.4,51,04.234/-: The AO had made the said disallowance representing 70% of the samples distributed to the doctors and physicians for want of sufficient proof as regards their distribut and the fact that the expenditure had been incurred for business Procter and Gamble Heath Ltd 2 ITA No. 328/MUM/2025 1. The Hon'ble Commissioner of Income Tax (Appeals) on facts order u/s. 250 of the Act on grounds that all three quantum issues were settled under Direct Tax Vidad se Vishwas (DTVSV) Scheme, 2020 though however only one issue pertaining to Transfer Pricing was settled under all the said issues on which Penalty was levied were not covered under settled under DTVSV, but two quantum issues were subsequently adjudicated by Hon'ble ITAT vide Orders dated 21st August 2013 (Against Original Order) and 16th December 2021 aside order) in favour of the appellant and hence (c) not allowing the appeal and quashing the penalty on merits in respect of two issues (i.e., Disallowance of Physician Samples nt in respect of Technical Fees) basis the Orders passed by Hon'ble ITAT dated 21st August 2013 (Against Original Order) and 16th December 2021 (d) not quashing the entire penalty levied of Rs. 2,56,21,685/- facts and circumstances of the case of the 2. The above grounds of appeal are distinct and separate and We have heard rival submissions of the parties and perused enalty u/s 271(1)(c) of tax Act, 1961 (in short ‘the Act’) was levied for filing inaccurate particulars of the income in respect of three items. The relevant finding of the Assessing Officer is reproduced as under: - (i) Disallowance on account of free samples and stock discrepancies : The AO had made the said disallowance representing 70% of the samples distributed to the doctors and physicians for want of sufficient proof as regards their distribution and the fact that the expenditure had been incurred for business purpose could not be established by the assessee. The Ld. CIT(A) has upheld the said disallowance. In view of these facts, penalty u/s 271(1)(c) is leviable for filing inaccurate particul (ii) Addition u/s 92CA on account of transfer pricing adjustment of Rs.2,81,00,581/ 1,83,99,104i- Associated enterprise and an addition of Rs.97,01,477/ to payment of technical knowhow fees to Merck KGaA. The Ld. CIT(A) has upheld the said disallowance. In view of these facts, penalty u/s 271(1)® is leviable for filing inaccurate particulars of income. (iii) Disallowance u/s 14A: Penalty u/s 271( issue since it is 2.1 The Ld. CIT(A) however treated the appeal as infructuous in view of Direct Tax Vivad Se Vishwas Scheme opted by the assessee. The relevant finding of the Ld. CIT(A) is reproduced as under: “2.0 It is noted that the appellant opted for the Vivad Se Vishwas Scheme by filing Form 1 and Form 2 dated 01.10.2020. Pursuant thereto, the Pr. Commissioner of Income Tax, Mumbai certified the full and final payment of Rs. 0/ Form No. 5 dated 11.05.2021. In view of the above, the appeal is treated as infructuous as per Section 4(2) of the Direct Tax Vivad Se Vishwas Act, 2.2 Before us, the Ld. counsel for the assessee however pointed out that the assessee opted settleme transfer pricing adjustment Fumaret under the Direct Tax Vivad Se Vishwas Scheme respect of other two issues, the Tribunal has already deleted the addition. On perusal of the records, time of the penalty levied of the free sample, in second round of the proceedings, the Tribunal has deleted the addition observing in ITA No. 1637, 1638 & Procter and Gamble Heath Ltd ITA No. 328/MUM/2025 purpose could not be established by the assessee. The Ld. CIT(A) has upheld the said disallowance. In view of these facts, penalty u/s 271(1)(c) is leviable for filing inaccurate particulars of income. (ii) Addition u/s 92CA on account of transfer pricing adjustment of Rs.2,81,00,581/- : The AO has made an addition of Rs. in respect of import of raw materials from its Associated enterprise and an addition of Rs.97,01,477/- in to payment of technical knowhow fees to Merck KGaA. The Ld. CIT(A) has upheld the said disallowance. In view of these facts, penalty u/s 271(1)® is leviable for filing inaccurate particulars of income. (iii) Disallowance u/s 14A: Penalty u/s 271(1)© is not leviable on this issue since it is debatable issue.” The Ld. CIT(A) however treated the appeal as infructuous in view of Direct Tax Vivad Se Vishwas Scheme opted by the assessee. The relevant finding of the Ld. CIT(A) is reproduced as under: “2.0 It is noted that the appellant opted for the Vivad Se Vishwas Scheme by filing Form 1 and Form 2 dated 01.10.2020. Pursuant thereto, the Pr. Commissioner of Income Tax, Mumbai certified the full and final payment of Rs. 0/- as taxes in terms of Form No. 5 dated 11.05.2021. In view of the above, the appeal is treated as infructuous as per Section 4(2) of the Direct Tax Vivad Se 2020.” Before us, the Ld. counsel for the assessee however pointed out that the assessee opted settlement of dispute only transfer pricing adjustment in respect of import of Bisopeolol under the Direct Tax Vivad Se Vishwas Scheme respect of other two issues, the Tribunal has already deleted the addition. On perusal of the records, we find that in respect of first levied i.e. disallowance of 70% of the distribution in second round of the proceedings, the Tribunal has deleted the addition observing in ITA No. 1637, 1638 & Procter and Gamble Heath Ltd 3 ITA No. 328/MUM/2025 purpose could not be established by the assessee. The Ld. CIT(A) has upheld the said disallowance. In view of these facts, penalty u/s ars of income. (ii) Addition u/s 92CA on account of transfer pricing adjustment of : The AO has made an addition of Rs. in respect of import of raw materials from its in relation to payment of technical knowhow fees to Merck KGaA. The Ld. CIT(A) has upheld the said disallowance. In view of these facts, penalty u/s 271(1)® is leviable for filing inaccurate particulars of income. 1)© is not leviable on this The Ld. CIT(A) however treated the appeal as infructuous in view of Direct Tax Vivad Se Vishwas Scheme opted by the assessee. The relevant finding of the Ld. CIT(A) is reproduced as under: “2.0 It is noted that the appellant opted for the Vivad Se Vishwas Scheme by filing Form 1 and Form 2 dated 01.10.2020. Pursuant thereto, the Pr. Commissioner of Income Tax, Mumbai-8 has as taxes in terms of Form No. 5 dated 11.05.2021. In view of the above, the appeal is treated as infructuous as per Section 4(2) of the Direct Tax Vivad Se Before us, the Ld. counsel for the assessee however pointed only in respect of in respect of import of Bisopeolol under the Direct Tax Vivad Se Vishwas Scheme. In respect of other two issues, the Tribunal has already deleted the we find that in respect of first i.e. disallowance of 70% of the distribution in second round of the proceedings, the Tribunal has deleted the addition observing in ITA No. 1637, 1638 & 1639/Mum/2020 for asse 07 has deleted the addition observing as under : “11. On a perusal of material placed before us, it is noticed that the cost incurred by the assessee towards distribution of free samples in these assessment years is muc incurred in the earlier and subsequent assessment years. Thus, keeping in view the peculiar circumstances of the case, we hold that no disallowance out of the cost incurred towards free physician's samples is called for in Accordingly, we delete the additions. Ground 1 in all the appeals is allowed.” 2.3 Since the quantum addition has been deleted the penalty levied cannot survive. Accordingly, the penalty levied corresponding to the addition of disallowance of distribution of free sample is deleted. 2.4 The second item of the penalty levied pricing adjustment in relation to import of Bisoprolol Fumarte , which the assessee has settled under the Vivad Se Vishwas. This fact has not been disputed by the Ld. Departmental Representative also. Once, the assessee penalty is levied under the provisions of the scheme. Accordingly, penalty levied in respect of transfer pricing adjustment is also stands deleted. 2.5 The third item of levy adjustment in respect of made in this respect has been deleted by the Tribunal in ITA No. Procter and Gamble Heath Ltd ITA No. 328/MUM/2025 1639/Mum/2020 for assessment years 2004-05, 2005 07 has deleted the addition observing as under : “11. On a perusal of material placed before us, it is noticed that the cost incurred by the assessee towards distribution of free samples in these assessment years is much lesser than similar expenditure incurred in the earlier and subsequent assessment years. Thus, keeping in view the peculiar circumstances of the case, we hold that no disallowance out of the cost incurred towards free physician's samples is called for in any of these assessment years. Accordingly, we delete the additions. Ground 1 in all the allowed.” Since the quantum addition has been deleted the penalty levied cannot survive. Accordingly, the penalty levied corresponding of disallowance of distribution of free sample is The second item of the penalty levied is in respect of transfer in relation to import of Bisoprolol Fumarte , which the assessee has settled under the Vivad Se Vishwas. This fact has not been disputed by the Ld. Departmental Representative also. Once, the assessee has opted for Vivad Se Vishwas penalty is levied under the provisions of the scheme. Accordingly, penalty levied in respect of transfer pricing adjustment is also The third item of levy of the penalty is transfer pricing adjustment in respect of ‘technical knowhow fees made in this respect has been deleted by the Tribunal in ITA No. Procter and Gamble Heath Ltd 4 ITA No. 328/MUM/2025 05, 2005-06 & 2006- “11. On a perusal of material placed before us, it is noticed that the cost incurred by the assessee towards distribution of free samples h lesser than similar expenditure incurred in the earlier and subsequent assessment years. Thus, keeping in view the peculiar circumstances of the case, we hold that no disallowance out of the cost incurred towards free any of these assessment years. Accordingly, we delete the additions. Ground 1 in all the Since the quantum addition has been deleted the penalty levied cannot survive. Accordingly, the penalty levied corresponding of disallowance of distribution of free sample is in respect of transfer in relation to import of Bisoprolol Fumarte , which the assessee has settled under the Vivad Se Vishwas. This fact has not been disputed by the Ld. Departmental Representative opted for Vivad Se Vishwas scheme, no penalty is levied under the provisions of the scheme. Accordingly, penalty levied in respect of transfer pricing adjustment is also of the penalty is transfer pricing ow fees’. The addition made in this respect has been deleted by the Tribunal in ITA No. 5596/Mum/2011 for assessment year 2005 relevant part of decision is “79. The issue involved in Ground No. 1.2 are identical the issue in ITA No. 2393/M/09 for A.Y. 2004 No. 1.1 at paras 1 to 8, though quantum may differ, therefore, on similar lines, similar reasons, the appeal filed by the assessee in ITA No. 5596/M/11 for assessment year 2005-2006 is allowed 2.6 Since the transfer pricing knowhow has already been deleted by the Tribunal, the penalty levied by the AO in respect of same, 3. The grounds of appeal of the assessee are ac 4. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on Sd/ (RAHUL CHAUDHARY JUDICIAL MEMBER Mumbai; Dated: 04/04/2025 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Procter and Gamble Heath Ltd ITA No. 328/MUM/2025 5596/Mum/2011 for assessment year 2005-06. For ready refrence, relevant part of decision is reproduced as under: 79. The issue involved in Ground No. 1.2 are identical the issue in ITA No. 2393/M/09 for A.Y. 2004-05 in ground No. 1.1 at paras 1 to 8, though quantum may differ, therefore, on similar lines, similar reasons, the appeal filed by the assessee in ITA No. 5596/M/11 for assessment year 2006 is allowed for statistical purpose.” transfer pricing adjustment in respect of technical knowhow has already been deleted by the Tribunal, the penalty in respect of same, cannot survive. The grounds of appeal of the assessee are accordingly allowed. In the result, the appeal of the assessee is allowed. nounced in the open Court on 04/04/2025. Sd/- Sd/ RAHUL CHAUDHARY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Procter and Gamble Heath Ltd 5 ITA No. 328/MUM/2025 . For ready refrence, 79. The issue involved in Ground No. 1.2 are identical with 05 in ground No. 1.1 at paras 1 to 8, though quantum may differ, therefore, on similar lines, similar reasons, the appeal filed by the assessee in ITA No. 5596/M/11 for assessment year adjustment in respect of technical knowhow has already been deleted by the Tribunal, the penalty cannot survive. cordingly allowed. In the result, the appeal of the assessee is allowed. /04/2025. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai "