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

are distinct and separate and 2. The above grounds of appeal are distinct and separate and 2. The above grounds of appeal are distinct and separate and without prejudice without prejudice to each other.

2. We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused the relevant materials on record the relevant materials on record. In the case penalty u/s 271(1)(c) of enalty u/s 271(1)(c) of the Income-tax Act, 1961 (in short ‘the Act’) was levied for filing tax Act, 1961 (in short ‘the Act’) was levied for filing tax Act, 1961 (in short ‘the Act’) was levied for filing inaccurate particulars of the income in respect of three items. The inaccurate particulars of the income in respect of three items. The inaccurate particulars of the income in respect of three items. The relevant finding of the Assessing Officer is reproduced as under: relevant finding of the Assessing Officer is reproduced as relevant finding of the Assessing Officer is reproduced as “4. Penalty u/s 271(1)(c) is l “4. Penalty u/s 271(1)(c) is leviable on the following issues:- - (i) Disallowance on account of free samples and stock discrepancies (i) Disallowance on account of free samples and stock discrepancies (i) Disallowance on account of free samples and stock discrepancies of Rs.4,51,04.234/ of Rs.4,51,04.234/-: The AO had made the said disallowance : The AO had made the said disallowance representing 70% of the samples distributed to the doctors and representing 70% of the samples distributed to the doctors and representing 70% of the samples distributed to the doctors and physicians for want of sufficient proof as regards their distribut physicians for want of sufficient proof as regards their distribut physicians for want of sufficient proof as regards their distribution and the fact that the expenditure had been incurred for business and the fact that the expenditure had been incurred for business and the fact that the expenditure had been incurred for business purpose could not be established by the assessee. The Ld. CIT(A) purpose could not be established by the assessee. The Ld. CIT(A) 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 has upheld the said disallowance. In view of these facts, penalty u/s has upheld the said disallowance. In view of these facts, penalty u/s 271(1)(c) is leviable for filing inaccurate particul 271(1)(c) is leviable for filing inaccurate particulars of income. ars of income. (ii) Addition u/s 92CA on account of transfer pricing adjustment of (ii) Addition u/s 92CA on account of transfer pricing adjustment of (ii) Addition u/s 92CA on account of transfer pricing adjustment of Rs.2,81,00,581/ Rs.2,81,00,581/- : The AO has made an addition of Rs. : The AO has made an addition of Rs. 1,83,99,104i- in respect of import of raw materials from its in respect of import of raw materials from its Associated enterprise and an addition of Rs.97,01,477/ Associated enterprise and an addition of Rs.97,01,477/- in in relation to payment of technical knowhow fees to Merck KGaA. The Ld. CIT(A) to payment of technical knowhow fees to Merck KGaA. The Ld. CIT(A) 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 has upheld the said disallowance. In view of these facts, penalty u/s has upheld the said disallowance. In view of these facts, penalty u/s 271(1)® is leviable for filing inaccurate particulars of income. 271(1)® is leviable for filing inaccurate particulars of income. 271(1)® is leviable for filing inaccurate particulars of income. (iii) Disallowance u/s 14A: Penalty u/s 271( (iii) Disallowance u/s 14A: Penalty u/s 271(1)© is not leviable on this 1)© is not leviable on this issue since it is issue since it is debatable issue.” 2.1 The Ld. CIT(A) however treated the appeal as infructuous in The Ld. CIT(A) however treated the appeal as infructuous in The Ld. CIT(A) however treated the appeal as infructuous in view of Direct Tax Vivad Se Vishwas Scheme opted by the assessee. view of Direct Tax Vivad Se Vishwas Scheme opted by the assessee. view of Direct Tax Vivad Se Vishwas Scheme opted by the assessee. The relevant finding of the Ld. CIT(A) is reproduced as under: The relevant finding of the Ld. CIT(A) is reproduced as under: 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 “2.0 It is noted that the appellant opted for the Vivad Se Vishwas “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 Scheme by filing Form 1 and Form 2 dated 01.10.2020. Pursuant Scheme by filing Form 1 and Form 2 dated 01.10.2020. Pursuant thereto, the Pr. Commissioner of Income Tax, Mumbai thereto, the Pr. Commissioner of Income Tax, Mumbai thereto, the Pr. Commissioner of Income Tax, Mumbai-8 has certified the full and final payment of Rs. 0/ certified the full and final payment of Rs. 0/- as taxes in terms of as taxes in terms of Form No. 5 dated 11.05.2021. In view of the above, the appeal is Form No. 5 dated 11.05.2021. In view of the above, the appeal is 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 treated as infructuous as per Section 4(2) of the Direct Tax Vivad Se treated as infructuous as per Section 4(2) of the Direct Tax Vivad Se Vishwas Act, 2020.” 2.2 Before us, the Ld. counsel for the assessee however pointed Before us, the Ld. counsel for the assessee however pointed Before us, the Ld. counsel for the assessee however pointed out that the assessee opted settleme out that the assessee opted settlement of dispute only only in respect of transfer pricing adjustment transfer pricing adjustment in respect of import of Bisopeolol in respect of import of Bisopeolol Fumaret under the Direct Tax Vivad Se Vishwas Scheme under the Direct Tax Vivad Se Vishwas Scheme under the Direct Tax Vivad Se Vishwas Scheme. In respect of other two issues, the Tribunal has already deleted the respect of other two issues, the Tribunal has already deleted the respect of other two issues, the Tribunal has already deleted the addition. On perusal of the records, addition. On perusal of the records, we find that in respect of first we find that in respect of first time of the penalty levied levied i.e. disallowance of 70% of the distribution i.e. disallowance of 70% of the distribution of the free sample, in second round of the proceedings, the Tribunal in second round of the proceedings, the Tribunal in second round of the proceedings, the Tribunal has deleted the addition observing in 1638 & has deleted the addition observing in 1638 & has deleted the addition observing in ITA No. 1637, 1638 & 1639/Mum/2020 for asse 1639/Mum/2020 for assessment years 2004-05, 2005 05, 2005-06 & 2006- 07 has deleted the addition observing as under : 07 has deleted the addition observing as under :

11. On a perusal of material placed before us, it is noticed that the “11. On a perusal of material placed before us, it is noticed that the “11. On a perusal of material placed before us, it is noticed that the cost incurred by the assessee towards distribution of free samples cost incurred by the assessee towards distribution of free samples cost incurred by the assessee towards distribution of free samples in these assessment years is muc in these assessment years is much lesser than similar expenditure h lesser than similar expenditure incurred in the earlier and subsequent assessment years. Thus, incurred in the earlier and subsequent assessment years. Thus, incurred in the earlier and subsequent assessment years. Thus, keeping in view the peculiar circumstances of the case, we hold keeping in view the peculiar circumstances of the case, we hold keeping in view the peculiar circumstances of the case, we hold that no disallowance out of the cost incurred towards free that no disallowance out of the cost incurred towards free that no disallowance out of the cost incurred towards free physician's samples is called for in physician's samples is called for in any of these assessment years. any of these assessment years. Accordingly, we delete the additions. Ground 1 in all the Accordingly, we delete the additions. Ground 1 in all the Accordingly, we delete the additions. Ground 1 in all the appeals is allowed. allowed.” 2.3 Since the quantum addition has been deleted the penalty Since the quantum addition has been deleted the penalty Since the quantum addition has been deleted the penalty levied cannot survive. Accordingly, the penalty levied corresponding levied cannot survive. Accordingly, the penalty levied corresponding levied cannot survive. Accordingly, the penalty levied corresponding to the addition of disallowance of distribution of free sample is of disallowance of distribution of free sample is of disallowance of distribution of free sample is deleted.

2.4 The second item of the penalty levied The second item of the penalty levied is in respect of transfer in respect of transfer pricing adjustment in relation to import of Bisoprolol Fumarte , in relation to import of Bisoprolol Fumarte , in relation to import of Bisoprolol Fumarte , which the assessee has settled under the Vivad Se Vishwas. This which the assessee has settled under the Vivad Se Vishwas. This which the assessee has settled under the Vivad Se Vishwas. This fact has not been disputed by the Ld. Departmental Representative fact has not been disputed by the Ld. Departmental Representative fact has not been disputed by the Ld. Departmental Representative also. Once, the assessee also. Once, the assessee has opted for Vivad Se Vishwas opted for Vivad Se Vishwas scheme, no penalty is levied under the provisions of the scheme. Accordingly, penalty is levied under the provisions of the scheme. Accordingly, penalty is levied under the provisions of the scheme. Accordingly, penalty levied in respect of transfer pricing adjustment is also penalty levied in respect of transfer pricing adjustment is also penalty levied in respect of transfer pricing adjustment is also stands deleted.

2.5 The third item of levy The third item of levy of the penalty is transfer pricing of the penalty is transfer pricing adjustment in respect of adjustment in respect of ‘technical knowhow fees ow fees’. The addition made in this respect has been deleted by the Tribunal in in this respect has been deleted by the Tribunal in in this respect has been deleted by the Tribunal in ITA No. 5596/Mum/2011 for assessment year 2005 5596/Mum/2011 for assessment year 2005-06. For ready refrence, . For ready refrence, relevant part of decision is relevant part of decision is reproduced as under:

79. The issue involved in Ground No. 1.2 are identical 79. The issue involved in Ground No. 1.2 are identical 79. The issue involved in Ground No. 1.2 are identical with the issue in for A.Y. 2004 the issue in for A.Y. 2004-05 in ground 05 in ground No. 1.1 at paras 1 to 8, though quantum may differ, No. 1.1 at paras 1 to 8, though quantum may differ, No. 1.1 at paras 1 to 8, though quantum may differ, therefore, on similar lines, similar reasons, the appeal filed therefore, on similar lines, similar reasons, the appeal filed therefore, on similar lines, similar reasons, the appeal filed by the assessee in ITA No. 5596/M/11 for assessment year by the assessee in ITA No. 5596/M/11 for assessment year by the assessee in ITA No. 5596/M/11 for assessment year 2005-2006 is allowed 2006 is allowed for statistical purpose.

2.6 Since the transfer pricing transfer pricing adjustment in respect of technical adjustment in respect of technical knowhow has already been deleted by the Tribunal, the penalty knowhow has already been deleted by the Tribunal, the penalty knowhow has already been deleted by the Tribunal, the penalty levied by the AO in respect of same, in respect of same, cannot survive. cannot survive.