REDINGTON DISTRIBUTIONS PTE LTD.,SINGAPORE V. ACIT, INTL TAXN CIRCLE-2(1), CHENNAI

ITA 1216/CHNY/2025

AI Insights

The case involves M/s. Redington Distribution Pte. Ltd., a foreign company, appealing against penalties levied for under-reporting income attributed to a Permanent Establishment (PE) in India for the assessment years 2017-18, 2018-19, and 2020-21. The penalties were based on the company's failure to report certain incomes which were later attributed to a PE in India following a survey and subsequent assessments. The Tribunal considered previous rulings, the Mutual Agreement Procedure (MAP) under the India-Singapore DTAA, and the debatable nature of the PE's existence in India, leading to the decision to cancel the penalties.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 793537 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2018-2019
• Appeal Filed On: 29-04-2025
• Other Referred Cases: Enrica Enterprises (P.) Ltd. Vs DCIT, CIT v. Liquid Investment and Trading Co., Smt. Hemalatha Rajan, DCIT v. Raytheon Company
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANITHA
• Assessee Lawyers: ASHIK SHAH
• Keywords: Set aside; Difference of opinion; Transfer pricing; International transaction; Question of law; Bonafide belief; Capital receipt; Principle of natural justice; TDS; Competent authority; Wholly owned subsidiary; Double taxation relief; Permanent establishment
• Section: 148; 271(1)(c); 139; 14A; 133A; 260A

Judgement Text

"आयकर अपीलीय अिधकरण, ’सी’ \u0001यायपीठ, चे ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI \u0001ी एबी टी. वक , ाियक सद\u0011 एवं एवं एवं एवं \u0001ी एस. आर. रघुनाथा, लेखा सद क े सम\u001b BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI S.R.RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos.1215, 1216 & 1217/Chny/2025 िनधा\u000eरण वष\u000e/Assessment Years: 2017-18, 2018-19 & 2020-21 M/s. Redington Distribution Pte. Ltd., 60, Robinson Road, #12-02, BEA Building, Singapore-068892. v. The ACIT, International Taxation Circle- 2(1), Chennai. [PAN: AAECR 7054 E] (अपीलाथ\u0016/Appellant) (\u0017\u0018यथ\u0016/Respondent) अपीलाथ\u0016 क\u001a ओर से/ Appellant by : Mr.Ashik Shah, CA \u0017\u0018यथ\u0016 क\u001a ओर से /Respondent by : Ms.Anitha, Addl.CIT सुनवाईक\u001aतारीख/Date of Hearing : 14.08.2025 घोषणाक\u001aतारीख /Date of Pronouncement : 26.09.2025 आदेश / O R D E R PER ABY T. VARKEY, JM: These are appeals preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), (hereinafter referred to as ‘Ld.CIT(A)‘), Chennai-16, dated 20.03.2025 for the Assessment Year (hereinafter referred to as ‘AY‘) 2017-18, 2018-19 & 2020-21. 2. At the time of hearing, both the parties agreed that the issues permeating in all the appeals are against the penalty levied u/s 270A(2) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') for Printed from counselvise.com ITA Nos.1215 to 1217/Chny/2025 (AYs 2017-18, 2018-19 & 2020-21) M/s. Redington Distribution Pte. Ltd. :: 2 :: under-reporting of income on the common addition(s) made on account of the profits of the assessee attributed to be taxed in India. With the consent of both the parties, we take up the appeal for AY 2017-18 as the lead case, result of which will apply mutatis- mutandis for the other two (2) appeals. 3. The Ld. AR for the assessee, at the outset, pointed out that, this Tribunal in their own case for AYs 2011-12 to AY 2016-17 in ITA Nos. 889-894/Chny/2025 has deleted the penalty which was levied by the AO under section 271(1)(c) of the Act on the same facts and circumstances and accordingly claimed that the impugned issue was squarely covered in favour of the assessee. Per contra, the Ld. DR vehemently supported the order of the lower authorities and didn’t agree that the lis in question was covered by our order cited by AR. 4. Heard both the parties. It is noted that, the assessee, M/s. Redington Distribution Pte Ltd ('RDPL'), is a foreign company incorporated in Singapore and a wholly owned subsidiary of M/s. Redington Limited (formerly known as 'Redington (India) Limited') ('RIL'). A survey u/s 133A of the Act was conducted at the premises of their parent company, RIL, in India in the month of December, 2017. For the years under appeal, the assessee was of the view that it does not have any PE in India and had filed return of income under section 139 of the Act offering to tax the Printed from counselvise.com ITA Nos.1215 to 1217/Chny/2025 (AYs 2017-18, 2018-19 & 2020-21) M/s. Redington Distribution Pte. Ltd. :: 3 :: royalty income earned in India, under the head ‘Income from Other Sources’. In the course of survey, the survey team identified a team of employees termed as 'Dollar Business' which were managing the USD business of Indian customers. It was noticed by the survey authorities that, for this 'Dollar Business', the Indian employees were overseeing the import requirements of the Indian customers who wanted the billings to be done in USD instead of INR so as to avail the import duty benefits. According to the survey team, the employees of the 'Dollar Team' were actually identifying the customers, negotiating and fixing the prices, undertaking the sales and also collecting the receivables and that, the assessee was only raising the invoices from Singapore to meet the import requirements (USD billing) of the Indian customers. Based on these documents and details gathered in the course of survey inter alia including e-mails and correspondences between the employees of RIL in India and the assessee, and also the statements obtained from the employees of the 'Dollar Team', the survey team was of the view that the assessee had a permanent establishment (in short 'PE') in India. On the basis of the findings of the survey team, it is noted that the case of the assessee was reopened u/s 148 of the Act for AYs 2011-12 to 2018-19 on different dates and that the case for AY 2020-21 was taken up for regular scrutiny u/s 148 of the Act. The AO after making necessary enquiries is noted to have concluded that, the assessee had both a fixed place PE and Printed from counselvise.com ITA Nos.1215 to 1217/Chny/2025 (AYs 2017-18, 2018-19 & 2020-21) M/s. Redington Distribution Pte. Ltd. :: 4 :: a dependent agent PE in India. The AO thereafter attributed the profits to this PE on the basis of the total employee cost of RIL and the assessee, and also the asset base across all the AYs. It is noted that, the AO inter- alia attributed the following rate of the profits to the alleged PE in India in the AYs 2017-18, 2018-19 & 2020-21 which are impugned before us. Assessment Year Profit attribution rate Impugned addition made by the AO Assessed Income 2017-18 90.7% INR 64,52,20,406 INR 80,01,77,664 2018-19 89.86% INR 56,69,66,044 INR 79,90,03,308 2020-21 90.63% INR 56,38,96,273 INR 72,23,40,563 5. Aggrieved by the order(s) of the AO, the assessee filed objections before the DRP. It is noticed that, the DRP in principle upheld the AO's finding that regarding existence of PE in India, but, as regards the attribution of profits, the DRP found certain infirmities in the calculation for which, necessary directions were issued to the AO. It was brought to our notice that, in the lead case for AY 2011-12, this Tribunal in their order in IT(TP) No. 14/Chny/2020 dated 16.11.2022 had confirmed the existence of PE in India, but had remitted the matters back to the AO to redo the calculation of profits attributable to India. Aggrieved by the order of this Tribunal in AY 2011-12, the assessee had filed appeal before the Hon’ble High Court; and the Hon’ble High Court had admitted the appeal after framing the question involving the existence of PE in India or not in Printed from counselvise.com ITA Nos.1215 to 1217/Chny/2025 (AYs 2017-18, 2018-19 & 2020-21) M/s. Redington Distribution Pte. Ltd. :: 5 :: assessee’s case, by way of a substantial question of law. In the meanwhile, and during the pendency of this entire dispute, the assessee is noted to have simultaneously opted for resolution of the impugned dispute in terms of the Mutual Agreement Procedure (in short 'MAP') under Article 27 of the India-Singapore DTAA and mutual agreement was arrived at between the two Competent Authorities and, two separate orders were passed, one for AYs 2011-12 to 2016-17, and the second for AYs 2017-18, 2018-19 & 2020-21. It was brought to our notice that, the Competent Authorities categorically agreed to disagree on the question of existence of a permanent establishment of the assessee in India and agreed to set aside the same, and further agreed on the terms of resolution. It is noticed that, the Competent Authority at India agreed to a downward adjustment to the addition(s) made by the AO in India. The relevant extracts of the MAP order for AYs 2017-18, 2018-19 & 2020-21 is as follows:- Printed from counselvise.com ITA Nos.1215 to 1217/Chny/2025 (AYs 2017-18, 2018-19 & 2020-21) M/s. Redington Distribution Pte. Ltd. :: 6 :: 6. It is noted that, the above mutual agreement is based on the same terms which was earlier agreed for AYs 2011-12 to 2016-17. Hence, the assessee is noted to have withdrawn the appeal(s) which was pending before the Hon’ble High Court and also the appeals pending before this Tribunal for AYs 2011-12 to 2016-17 and the years impugned before us i.e. AYs 2017-18, 2018-19 & 2020-21. It is seen that, the AO had also passed the order(s) giving effect to the MAP resolution in which more than 80% of the attributed profits was withdrawn and the remaining was confirmed, as agreed between the Competent authorities of both the countries. The AO is noted to have initiated and levied penalty u/s 271(1)(c) in relation to the addition finally confirmed under the MAP resolution for AYs 2011-12 to 2016-17 and penalty under the new penal provisions of Section 270A(2) in AYs 2017-18, 2018-19 & 2020-21. It is observed that, the reasoning given for levying penalty was similar viz., the assessee didn’t offer the said income in its original return of income and that the MAP resolution didn’t reduce the adjustment to NIL. The AO accordingly held that the assessee had under-reported the income in AYs 2017-18, 2018-19 & 2020-21 and levied penalty qua the addition confirmed. The action of the AO was confirmed by the Ld. CIT(A) and the assessee is now in appeal before us. Printed from counselvise.com ITA Nos.1215 to 1217/Chny/2025 (AYs 2017-18, 2018-19 & 2020-21) M/s. Redington Distribution Pte. Ltd. :: 7 :: 7. It is well-settled jurisprudence that penalty proceedings are separate and distinct from the assessment proceedings. The levy of penalty is also not automatic and only because any addition/disallowance has been made in an assessment does not ipso facto lead to imposition of penalty under section 270A of the Act. This is evident from the language used in Section 270A of the Act where the term ‘may’ has been used which suggests that, the AO has discretion whether to levy penalty under this provision or not. Our view is supported by the decision rendered by this Tribunal in the case of Enrica Enterprises (P.) Ltd. Vs DCIT [2024] 163 taxmann.com 105 wherein it was held as under :- “The order imposing penalty u/s.270A of the Act, is an appealable order u/s.246A of the Act before the First Appellate Authority. If penalty u/s.270A of the Act, has been mandatory, there have not been any provision of appeal u/s.246A of the Act. Since, the order imposing penalty Sec.270A of the Act, is an appealable order, then, it cannot be said that penalty u/s.270A of the Act, is not mandatory in nature. Since, penalty u/s.270A of the Act, is not mandatory in nature, the AO is required to give an opportunity to the assessee to show cause 'as to why' penalty should not be levied in terms of sec.274 of the Act. Admittedly, the AO issued notice u/s.274 r.w.s.270A of the Act. Sec.274 of the Act deals with the procedure for levy of penalty, wherein, it directs that no order imposing penalty shall be made unless the assessee has been heard or has been given a reasonable opportunity of hearing. Thus, it is evident that the penalty u/s.270A of the Act, cannot be imposed unless the assessee has given a reasonable opportunity and the assessee is being heard. Once, the AO is bound to act to hear the assessee and give reasonable opportunity to explain its case, then, there is no mandatory requirement of imposing penalty, because the opportunity of hearing is not a mere formality, but it is to adhere to the principle of natural justice. Therefore, in our considered view, the penalty u/s.270A of the Act, is not mandatory and it is based on the facts and merits placed before the AO.” Printed from counselvise.com ITA Nos.1215 to 1217/Chny/2025 (AYs 2017-18, 2018-19 & 2020-21) M/s. Redington Distribution Pte. Ltd. :: 8 :: 8. The Ld. AR thereafter invited our attention to provisions of Section 270A(6) of the Act which contains exceptions and scenarios where penalty u/s 270A of the Act shall not be levied, which reads as under:- “(6) The under-reported income, for the purposes of this section, shall not include the following, namely:— (a) the amount of income in respect of which the assessee offers an explanation and the Assessing Officer or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, is satisfied that the explanation is bona fide and the assessee has disclosed all the material facts to substantiate the explanation offered; (b) the amount of under-reported income determined on the basis of an estimate, if the accounts are correct and complete to the satisfaction of the Assessing Officer or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, but the method employed is such that the income cannot properly be deduced therefrom; (c) the amount of under-reported income determined on the basis of an estimate, if the assessee has, on his own, estimated a lower amount of addition or disallowance on the same issue, has included such amount in the computation of his income and has disclosed all the facts material to the addition or disallowance; (d) the amount of under-reported income represented by any addition made in conformity with the arm's length price determined by the Transfer Pricing Officer, where the assessee had maintained information and documents as prescribed under section 92D, declared the international transaction under Chapter X, and, disclosed all the material facts relating to the transaction; and (e) the amount of undisclosed income referred to in section 271AAB.” (emphasis supplied) 9. It was also brought to our notice that, Section 270A(6)(a) of the Act inter alia provides that, penalty will not be levied where the assessee has offered a bonafide explanation and disclosed all facts to substantiate the Printed from counselvise.com ITA Nos.1215 to 1217/Chny/2025 (AYs 2017-18, 2018-19 & 2020-21) M/s. Redington Distribution Pte. Ltd. :: 9 :: explanation offered. We note that, this Tribunal while deleting the penalty which was levied u/s 271(1)(c) in AYs 2011-12 to 2016-17 inter alia held that, the main issue as to whether the assessee had PE in India or not, involved a substantial question of law in the light of Hon’ble High Court admitting appeal against Tribunal order and framing the same, and therefore the issue was debatable in nature. The Tribunal also held that the assessee had submitted all the material facts and offered a bonafide explanation qua their claim and therefore it was not a case of furnishing of inaccurate particulars of income. According to us, this decision rendered in assessee’s own case for AYs 2011-12 to 2016-17 is applicable with equal force in the context of the impugned penalty levied u/s 270A(2) of the Act as well, and the relevant findings being relied upon by us, are as under:- “16. We have heard both the parties and perused the material placed before us. It is well settled in law that, the penalty proceedings are separate and independent from the assessment proceedings. Only because an addition or a disallowance which was made in the assessment has attained finality may not ispo facto warrant levy of penalty. The levy of penalty is not automatic and it also cannot be levied solely on a presumption. The provisions of Section 271(1)(c) of the Act provides that only where the AO is satisfied that, the assessee has either concealed the particulars of his income or furnished inaccurate particulars of income that, the AO may direct levy of penalty. In the present case, the AO has sought to levy penalty by holding the assessee to be guilty of furnishing inaccurate particulars of income. In our considered view, in order to do so, it is necessary for the AO to show with material that, there was inaccurate reporting of the particulars of income by the assessee. In the present case, we find that, it is not in dispute between the parties that, the employees of RIL also known as 'RIL Dollar Team' was providing certain business support services to the Printed from counselvise.com ITA Nos.1215 to 1217/Chny/2025 (AYs 2017-18, 2018-19 & 2020-21) M/s. Redington Distribution Pte. Ltd. :: 10 :: assessee. It is noticed that, the assessee had disclosed all material facts relating to this aspect in the course of assessment. According to the assessee, the support services rendered by the 'RIL Dollar Team' did not give rise to any fixed place PE or dependent agency PE in India. This bonafide belief of the assessee is found to have emanated from their interpretation of the decisions of E- Funds IT Solution Inc. (supra) & Morgan Stanley & Co (supra) amongst several other decisions, which were also cited before us. The Revenue however was of the view that the nature of services rendered by the 'RIL Dollar Team' was not back office or auxiliary or preparatory services, as claimed by the assessee, but it constituted the back bone of the business model of the assessee and therefore the Revenue was of the view that the 'RIL Dollar Team' constituted both fixed place PE and also a dependent agent PE of the assessee in India. We find that, the coordinate bench of this Tribunal upheld the Revenue's finding that there did exist a PE of the assessee in India, and answered the question against the assessee. However, we note that, the Hon'ble High Court has admitted the appeal of the assessee on the issue of existence of a PE in India as and by way of a substantial question of law, which, for the sake of convenience, is again reproduced below:- …… 17. We find force in the contention of the Ld. Senior counsel Shri Percy Pardiwala, that, when the impugned issue has been admitted by way of a substantial question of law by the Hon'ble High Court, it does suggest that, the issue as to whether the assessee can be said to have a PE in India or not, is debatable on which two views are possible. Therefore, there is merit in the assessee's plea that, it had acted on a bonafide belief that, it didn't have any PE in India; and only because, their interpretation of the definition of PE was not acceded to by the coordinate bench of this Tribunal, it cannot lead to a presumption that, the assessee had furnished inaccurate particulars of income, which would warrant levy of penalty. The Ld. Senior Counsel has rightly relied on the decision of the Hon'ble Delhi High Court in the case of CIT v. Liquid Investment and Trading Co. (supra) wherein the Hon'ble High Court deleted the penalty levied by the AO by observing that the substantive appeal against the addition made in the quantum proceedings had been admitted by the Hon'ble High Court, which itself showed that the issue is debatable. The relevant portion of the judgment is as follows: \"Both the CIT(A) as well as the ITAT have set aside the penalty imposed by the Assessing Officer under section 271(1)(c) of the Income-tax Act. 1961 on the ground that the issue of deduction under section 14A of the Act was a debatable issue. We may also Printed from counselvise.com ITA Nos.1215 to 1217/Chny/2025 (AYs 2017-18, 2018-19 & 2020-21) M/s. Redington Distribution Pte. Ltd. :: 11 :: note that against the quantum assessment whereunder deduction under section 14A of the Act was prescribed to the appellant. The appellant has preferred an appeal in this Court under section 260A of the Act which has also been admitted and substantial question of law framed. This itself shows that the issue is debatable. For these reasons. we are of the opinion that no question of law arises in the present case. This appeal is accordingly dismissed.\" 18. We find that similar view was expressed by the coordinate bench of this Tribunal in the case of Smt. Hemalatha Rajan (ITA No. 2/Mds/2016) dated 30.11.2016. In the decided case, the assessee had received certain payments from a foreign company upon agreeing to withdraw the legal proceedings instituted against them. The amount so received was claimed to be capital receipt and therefore it was not offered to tax. The AO however observed that the impugned receipt was revenue in nature which arose from cancellation of a business contract and was therefore taxable u/s 28(v) of the Act. The impugned addition was confirmed by the Ld. CIT(A) as well as this Tribunal. Later on, the AO levied penalty u/s 271(1)(c) of the Act on the ground that the assessee had furnished inaccurate particulars of income. On appeal, it was brought to the notice of the Tribunal that, though the quantum was confirmed by the coordinate bench of the Tribunal, but subsequently, the Hon'ble High Court had admitted the main issue by way of a substantial question of law. Taking note of the same, and referring to the above decision of the Hon'ble Delhi High Court (supra), this Tribunal held that the admission of the appeal by the High Court evidenced that the issue was debatable and therefore, the question of levy of penalty would not arise. The Tribunal accordingly deleted the penalty, having regard to the complexity and issue being debatable 19. In light of the above decisions (supra), we again revert back to the given facts of the present case before us. It is noted that, the Ld. CIT(A) while confirming the penalty had emphasized on the TDS survey which was conducted upon RIL, which according to him, led to discovery of evidence that the assessee had a PE in India. The Ld. CIT(A) was of the view that the analysis of evidences unearthed in the course of survey had revealed that the assessee was having a PE in India, which was also affirmed by this Tribunal. According to him, had the survey not been conducted, the impugned addition would not have been made and thus it was a case of furnishing of inaccurate particulars by the assessee. We however are unable to countenance these findings of the Ld. CIT(A) in light of the facts placed before us. It is noticed that, the assessee had never claimed that RIL or its employees were not rendering support services to it. Instead, it was the assessee's case that the services rendered by RIL did not lead to formation of a PE in India. The assessee is noted to have co-operated with the AO in the course of assessment Printed from counselvise.com ITA Nos.1215 to 1217/Chny/2025 (AYs 2017-18, 2018-19 & 2020-21) M/s. Redington Distribution Pte. Ltd. :: 12 :: and had disclosed all material facts relating to the impugned issue. It is observed that, there was a difference of opinion between the assessee and the Revenue regarding the existence of a PE in India, having regard to the nature of services rendered by the 'RIL Dollar Team'. The assessee has been able to demonstrate before us that, it was under a bonafide belief that it did not have a PE in India and therefore, as a corollary, it did not disclose any income in India. Hence, only because the impugned addition finally retained, was not declared in the return of income cannot be viewed as an inaccurate reporting by the assessee. We find that, the matter of existence of PE in India was being all along agitated by the assessee and the same was pending adjudication before the Hon'ble High Court. It is also observed that, having regard to the prima facie case made out by the assessee, not only had the Hon'ble High Court granted interim stay on the operation of assessment order passed by the AO, pursuant to the directions of the Tribunal, but it had admitted this very precise issue regarding the question of PE in India by way of substantial question of law. In the meanwhile, as the assessee had also simultaneously opted for an alternate dispute resolution mechanism by way of a MAP under Article 27 of the DTAA between India and Singapore and mutual agreement was reached between the parties, the appeal before the Hon'ble High Court stood rendered academic. However, the fact that the Hon'ble High Court had admitted the appeal on a substantial question of law being involved did show that the issue was debatable. 20. The Ld. CIT(A) is noted to have also relied upon the MAP resolution to justify the levy of penalty by observing that, the assessee had entered into MAP resolution only because evidences against it had been gathered by the Revenue which suggested that it had a PE in India. We find these observations to be based on suspicion and surmise. Rather, according to us, the MAP resolution and the agreed terms supports the case of the assessee that the impugned issue was a debatable one. It is noticed that, under the MAP resolution, the Competent Authorities of both the countries had mutually arrived at a settlement, in terms of which, both the parties agreed to disagree on the question of existence of a PE of the assessee in India. This particular agreement between the parties reveals that even though the coordinate bench of this Tribunal had confirmed the Revenue's view that, the assessee had a PE in India, and the Competent Authority of India having agreed to disagree on its existence proceeded solely on an assumption to make adjustment to the assessee's total income in India. It is found that, in fact a substantial downward adjustment to the addition confirmed in the assessment / appeal of the assessee was made, which as noted earlier, is not even 15% of the original addition. The Ld. Senior Counsel also pointed out that, the Singapore tax authority also made equivalent downward adjustment to the assessee's taxable income in Singapore to ensure Printed from counselvise.com ITA Nos.1215 to 1217/Chny/2025 (AYs 2017-18, 2018-19 & 2020-21) M/s. Redington Distribution Pte. Ltd. :: 13 :: avoidance of double taxation in Singapore on the income being brought to tax in India. We thus observe that, the alternate remedy was availed by the assessee only for settling the issue, without admitting that PE existed in India; and the final settlement agreed upon not only ensured a substantially low estimated adjustment to their taxable income in India, but the assessee was also allowed corresponding adjustment to their income in Singapore which resulted in lower tax liability in that State. Thus, according to us therefore, the agreed terms of MAP resolution doesn't in any manner suggest that, the assessee had acceded to existence of a PE in India. 21. Also, as rightly pointed out by the Ld. Senior Counsel, the agreed downward adjustment under MAP is found to be based on an ad-hoc estimate arrived at pursuant to mutual settlement and it didn't have any cogent basis. The downward adjustment, which was finally retained, was not based on any cost base or asset base or employee count etc. Rather, it is noted to be an ad-hoc percentage of profits mutually agreed upon between the Competent Authorities. 22. The above material facts as noted from the MAP Resolution coupled with the admission of the assessee's appeal by way of substantial question of law by the Hon'ble High Court, does lend credence to the Ld. Sr Counsel's submission that, the impugned addition confirmed in the quantum proceedings was based on estimate, which has inherent subjectivity involved; and the issue was debatable in nature; and in light of the complexities of the facts and divergent jurisprudence available on this subject, we thus are of the considered view that, the quantum addition confirmed by the AO pursuant to MAP resolution, on the given facts, cannot be said to be a case of inaccurate reporting by the assessee and thus does not warrant levy of penalty. 23. The Ld. CIT, DR had stressed on the decision of Toyota Kirloskar (supra) relied upon by the lower authorities to justify the levy of penalty. Having perused the said judgment, it is noted that, in the decided case, the assessee had filed a writ petition against the validity of initiation of penalty by the AO on the addition which was confirmed under a MAP resolution. The Hon'ble High Court is noted to have dismissed the writ petition challenging the constitutional validity of Section 271(1)(c) in so far as it related to imposition of penalty on the amount determined pursuant to mutual agreement in terms of the DTAA. The Hon'ble High Court only held that, the AO is not prohibited from initiating penalty in relation to amount adjusted after incorporating the decision under MAP resolution. The Hon'ble High Court at the same time is noted to have clarified that, the penalty proceedings are distinct and independent from the assessment proceedings and it remained open for the assessee to show that the addition confirmed in MAP resolution Printed from counselvise.com ITA Nos.1215 to 1217/Chny/2025 (AYs 2017-18, 2018-19 & 2020-21) M/s. Redington Distribution Pte. Ltd. :: 14 :: was not due to concealment of income or furnishing of inaccurate particulars and therefore, it was not liable to penalty. In our considered view, on the given facts before us, this decision is of no assistance to the Revenue. Rather, it supports the case of the assessee, as the Hon'ble High Court had observed that, only because an adjustment is made pursuant to MAP resolution, will not automatically lead to penalty. As noted by us above, the assessee has made out a case that, there was no inaccurate reporting of particulars qua the adjustment made pursuant to MAP resolution, and for that reason, we hold the imposition of penalty to be unjustified. 24. Before parting, we also find the reliance placed by the assessee on the decision of DCIT v. Raytheon Company (supra) to be relevant and applicable to their case. In the decided case also, the assessee, a foreign company had filed NIL return of income in India. The AO in the course of assessment was of the view that the assessee had a PE in India and that the royalty income was liable to tax in India. The assessee agitated the matter in appeal, which was deleted by the Ld. CIT(A) who held that the assessee did not have a PE in India. The Revenue preferred appeal against the same before the Tribunal. The assessee, in order to buy peace of mind, approached the Competent Authorities for settling the issue under MAP. Under the terms of the settlement, it was assumed that, the assessee had a PE in India and 30% of their profits was subjected to tax in India. The AO levied penalty on such addition. The Tribunal still observed that, it was not a case of concealment of any particulars of income and at best, it was a difference of opinion on the existence of a PE in India. It was held that, the PE was simply assumed by the Competent Authorities and that there was no corroborative material brought on record for supporting such an assumption. The Tribunal therefore found deleted the penalty by holding as under: … 25. In the circumstances discussed supra, we are of the considered view that the assessee in the facts and circumstance of the case cannot be held to have furnished inaccurate particulars of income and thus, we direct the AO to delete the penalty levied in AY 2011-12. Our decision in the lead case would apply to remaining AYs 2012-13 to 2016-17 as well and thus the AO is directed to delete the penalty imposed in these AYs as well.” 10. Following the above, we hold that the case of the assessee squarely falls within the exception set out in Section 270A(6)(a) of the Act and, Printed from counselvise.com ITA Nos.1215 to 1217/Chny/2025 (AYs 2017-18, 2018-19 & 2020-21) M/s. Redington Distribution Pte. Ltd. :: 15 :: therefore we direct the AO to cancel the penalty(s) levied u/s 270A of the Act in AYs 2017-18, 2018-19 & 2020-21. 11. In the result, all the appeals of the assessee are allowed. Order pronounced on the 26th day of September, 2025, in Chennai. Sd/- (एस. आर. रघुनाथा) (S.R.RAGHUNATHA) लेखा सद\u0003य/ACCOUNTANT MEMBER Sd/- (एबी टी. वक ) (ABY T. VARKEY) \u0005याियक सद\u0003य/JUDICIAL MEMBER चे ई/Chennai, !दनांक/Dated: 26th September, 2025. TLN आदेश क\u001a \u0017ितिलिप अ$ेिषत/Copy to: 1. अपीलाथ /Appellant 2. \u000e\u000fथ /Respondent 3. आयकरआयु\u0015/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय\u000eितिनिध/DR 5. गाड फाईल/GF Printed from counselvise.com "