ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 9,, PUNE vs. M/S. MAHLE BEHR INDIA PVT. LTD.,, PUNE

This appeal by the Revenue against the order dated 28-02-2017 passed by the Commissioner of Income Tax (Appeals)-9, Pune [„CIT(A)‟] for assessment year 2003-04 wherein he deleted the penalty imposed by the AO u/s. 271(1)(c) of the Act.

The only issue is to be decided is as to whether the CIT(A) justified in deleting the addition made by AO u/s. 271(1)(c) of the Act in the facts and circumstances of the case.

Heard both parties and perused the material available on record. The AO imposed penalty of Rs.74,46,316/- on the TP addition of Rs.2,48,21,053/- on account of imports of components and raw material, product testing, export of evaporators and condensers and export of IT enabled design engineering services. The said TP adjustment to the ALP of international transactions arose due to difference in the interpretation of statutory provisions. The assessee had computed the ALP of international transactions with its AEs in accordance with the said provisions as the TPO nor the Assessing Officer disputed the same. The TPO has not only accepted the some variables due to application of different criteria which resulted in re-working of the ALP of international transactions. The CIT(A) sustained the said upward TP adjustment. The ld. AR placed on record the order of ITAT and referred to para 15 wherein we find the Tribunal in assessee‟s own case in quantum proceedings for A.Y. 2003-04 vide order dated 22-09-2017 remanded the matter to the file of AO to re-adjudicate the issue of benchmarking the international transactions of the import sub-segments of the manufacturing segment of the assessee. For ready reference the para 15 of the order dated 22-09-2017 in assessee own case of A.Y. 2003-04 is reproduced here-in-below : “15. Considering the above functional differences, we are of the view that there is prima-facie mistake in comparing the above said companies to that of the assessee. Considering the said mistakes, we are of the view that the judgment of Hon’ble jurisdictional High Court in the case of CIT Vs. Tata Power Solar Systems Ltd., is applicable to the above referred legal proposition and in support of remanding the issue to the file of the AO/TPO. Following the preceding in the assessee’s own case for the A.Y. 2002-03, we are of the view that the assessee’s request for remanding this issue for exclusion of these 3 comparables to the file of the AO with identical directions is approved. Accordingly, without adjudicating Ground Nos. 1 to 4 on merits, we remand the said issue to the file of the AO to re-adjudicate the issue of benchmarking the International Transactions of the Import sub-segment of the Manufacturing segment of the assessee. Accordingly, Ground Nos. 1 to 4 by the assessee are allowed for statistical purposes.”

Shri S.P. Walibme, the ld. DR did not dispute the above observation by the ITAT and taking into consideration the facts and circumstances, we deem it proper to remand the matter to the file of AO to decide the penalty on such adjustment in conformity with the view taken by the AO in proceedings pursuant to the directions given by the Tribunal. The assessee shall be given reasonable opportunity of hearing. Thus, only ground raised by the Revenue is allowed for statistical purpose.

In the result, the appeal of Revenue is allowed for statistical purpose.