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Income Tax Appellate Tribunal, MUMBAI BENCH “J”, MUMBAI
ORDER PER GAGAN GOYAL, A.M: This appeal by Revenue is directed against the order of National Faceless Appeal Centre, Mumbai [for short ‘NFAC’] passed under section 250 of the Income Tax Act, 1961 [for short ‘the Act’] vide order dated 21.12.2021 for Assessment Year (AY) 2016-17. The Revenue has raised the following grounds of appeal:
M/s Toshiba Johnson Elevators India Pvt. Ltd. “1. Whether, on the facts and circumstances of the case and as per law, the Ld. CMA) is justified in deleting the penalty when the requisite information and supporting documentation which was mandatorily to be provided by the assessee as obligatory compliance of the Rules has been violated even though the reasonable cause has not been established to invoke section 273B of the IT Act and when the Transfer Pricing Study Report submitted by assessee was nothing but a summary of the Transfer Pricing study.
2. Whether on the facts and in circumstances of the case and in law, the Ld. CITIA) is justified in deleting the penalty u/s 271G stating that TPO has not made any TP adjustment and thus penalty cannot be upheld and thereby erroneously linking levy of penalty u/s 271G with that of TP adjustment for which separate penalty is provided for." Order of Ld. CIT (A) dated 21.12.2021 was received by Revenue on same day but the authorization memo from the office of Ld. PCIT-3, Mumbai was received on 14.03.2022 as per Form 36 and appeal was filed on 16.03.2022. It is noticed that the appeal is barred by limitation by 25 days. The Hon'ble Supreme Court of India to mitigate the hardship caused by pandemic took suo-moto cognizance for Extension of Limitation reported as 441 ITR 722. Honourable Supreme Court held that due to the outbreak of the covid-19 pandemic in March, 2020, the Supreme Court took suo motu cognizance of the difficulties that might be faced by litigants in filing petitions or applications or suits or appeals or all other proceedings within the period of limitation prescribed and directed extension of the period of limitation in all proceedings with effect from March 15, 2020 till further orders. Further orders were passed on March 8, 2021, April 27, 2021 and September 23, 2021. On an application, the Supreme Court passed further orders considering the impact of the surge of the virus on public health and adversities faced by litigants in the prevailing conditions directing : (i) that the order dated March 23, 2020 was to be restored and the period from March 15, 2020 till February 28, 2022 was to be excluded for the purposes of limitation as M/s Toshiba Johnson Elevators India Pvt. Ltd. might be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings ; (ii) consequently, the balance period of limitation remaining as on October 3, 2021, if any, was to become available with effect from March 1, 2022 ; (iii) in cases where the limitation would have expired during the period between March 15, 2020 till February 28, 2022 notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from March 1, 2022. In the event the actual balance period of limitation remaining, with effect from March 1, 2022 was greater than 90 days, that longer period to apply ; (iv) that the period from March 15, 2020 till February 28, 2022 also to be excluded in computing the periods prescribed under sections 23(4) and 29A of the Arbitration and Conciliation Act, 1996 , section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe periods of limitation for instituting proceedings, outer limits (within which the court or Tribunal could condone delay) and termination of proceedings. Referred Cognizance For Extension of Limitation, In Re (2020)424 ITR 314 (SC), Cognizance For Extension of Limitation, In Re (2020)432 ITR 206 (SC), Cognizance For Extension of Limitation, In Re (2021) 226 Comp Case 127 (SC), Extension of Limitation, In Re (2021) 438 ITR 296 (SC). In term of the aforesaid decision of Hon'ble Supreme Court, we condone the delay in filing of this appeal by assessee and admit the appeal for adjudication.
Brief facts of the case are that assessee’s case was referred under section 92CA (1) of the Act by the AO to TPO. In view of this reference a notice under section 92CA (2)/92D (3) of the Act was issued to the assessee on 06.09.2018, 12.11.2018 and 05.10.2019 requiring the assessee to furnish all the necessary M/s Toshiba Johnson Elevators India Pvt. Ltd. details and documents in support of the Arm’s Length Price (ALP).In response to these notices, assessee responded vide letter dated 17.09.2018 to know the TP parameters under which the reference was made by the AO with reference to Instruction No.3 of 2016 issued by CBDT. Without prejudice, assessee submitted basic details such as copy of annual report, copy of acknowledgement for return of income and copy of Form No. 3CEB. Case was adjourned to 25.09.2018. Assessee again vide its letter submitted Transfer Pricing Study Report (TPSR) vide its letter dated 22.11.2018.
We have gone through the order of TPO under section 92CA(3) dated 01.11.2019 wherein TPO accepted the submissions of the assessee and agreed with the value of International Transactions with AE in regard to ALP disclosed by assessee i.e. the value of ALP adopted by assessee were not being disturbed by the TPO. These facts are part of record and are not under challenge by the Revenue also. Thereafter the AO issued a show cause notice under section 271G of the Act on 11.03.2019.
In response to show cause notice under section 271G of the Act, assessee submitted its reply on 19.03.2019. A further reminder to the penalty notice under section 271G of the Act was issued to the assessee vide notice dated 06.09.2019. In response to this reminder, assessee filed its explanation dated 17.09.2019. AO was not convinced with the explanations/submissions made by the assessee and levied a penalty of Rs. 1,71,01,350/- under section 271G of the Act @ 2% of International Transactions worth Rs. 85,50,67,549/-. Aggrieved with this order of AO, assessee preferred an appeal before the Ld. CIT (A)-58, Mumbai. The Ld. CIT (A) after going through the order of AO, order of TPO and submissions of the M/s Toshiba Johnson Elevators India Pvt. Ltd. assessee allowed the appeal of assessee and deleted the amount of penalty imposed by the AO.
Revenue being aggrieved with the order of ld. CIT (A) filed this appeal before ITAT. We have thoroughly considered the order of penalty under section 271G of the Act passed by the AO, order of TPO under section 92CA (3) of the Act and submissions of the assessee before the authorities below.
It is observed that there was no observation in the order of TPO passed under section 92CA (3), specifying the failure on the part of the assessee to keep and maintain any information required by section 92D(1) r.w.r. 10D of the Income Tax Rules, 1962. It is also not pointed out which information was not furnished by the assessee under section 92D (3) which were necessary for determination of ALP on International Transactions. We further observed that assessee duly submitted TP Study Report as prescribed in Chapter –X of the Income Tax Act, 1961, report of Chartered Accountant (CA) in Form No. 3CEB under section 92E along with Annual Report, copy of ITR and audited financial reports. Based on these information submitted by assessee, TPO passed a clear order under section 92CA(3) of the Act and there is no mention of any deficiency on the part of assessee in terms of information sharing which is necessary to pass order under section 92CA(3) of the Act.
It is pertinent to mention that ultimately the TPO has accepted the bench marking done by the assessee and no variation / adjustment was made by him to the ALP. Nothing prevented the TPO in disregarding the benchmarking done by the assessee and determines the ALP of the International Transaction with the AE by applying anyone of the prescribed methods.