M/S RAKHRA TECHNOLOGIES PVT. LTD.,PATIALA vs. ACIT, CIRCLE, PATIALA

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ITA 1053/CHANDI/2018Status: DisposedITAT Chandigarh19 February 2019AY 2005-064 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that not every addition to income amounts to furnishing inaccurate particulars or concealment of income. Since the assessee had made the transfer pricing study in good faith and the additions were substantially reduced, the penalty was not leviable.

What were the facts?

The assessee's appeal was filed with a delay of three days, which was condoned. The Assessing Officer made transfer pricing adjustments, which were significantly reduced by the Tribunal. The penalty under Section 271(1)(c) was levied on these adjustments.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable when transfer pricing adjustments are made, despite the assessee acting in good faith and the additions being significantly reduced by the Tribunal.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

आदेश/Order

Per Sanjay Garg, Judicial Member :

The present appeal has been preferred by the assessee against the order dated 04.05.2018 of the Commissioner of Income Tax (Appeals)Patiala, [hereinafter referred to as CIT(A)] relating to assessment year 2005-06 agitating confirmation of penalty u/s 271(1)(c) of the Income Tax Act, 1961 ( hereinafter referred to as 'the Act').

2.

The appeal is barred by three days. The assessee in this respect has moved separate application for condonation of delay wherein it has been pleaded that despite due diligence, the appeal could not be filed within stipulated period and that due to the reason beyond the control of the assessee, there occurred a delay of three days.

ITA-1053/CHD/2018 A.Y. 2005-06 Page 2 of 4

3.

Considering shortness of the delay period and the

reasons explained, delay in filing the present appeal is hereby

condoned.

4.

Now coming to merit of the case, the ld. counsel for the

assessee has invited our attention to the impugned

assessment order of the Assessing Officer (hereinafter referred

to as ‘AO) to point out that the quantum additions were made

by the AO on account of transfer pricing adjustments. The AO

did not agree with the contention of the assessee that it was a

small turnover company and no comparables were available,

however, the TPO himself introduced 11 comparables and

made the transfer pricing adjustments. The AO also disagreed

with the method of computation of profits made by the AO and

made certain additions by adopting 35.26% of comparative

cost ratio. The ld. Counsel further submitted that the

assessee contested aforesaid additions and the matter

travelled to the Tribunal wherein the Tribunal considering

several aspects of the case has restricted addition to Rs. 14.09

lacs as against addition of Rs. 79.84 lacs made by the TPO.

The ld. Counsel has further submitted that the assessee has

given transfer pricing study after due application of mind in

good faith and with due diligence. However, due to certain

dis-agreement with the study given by the assessee, the TPO

made adjustments which were considerably reduced by the

Tribunal and that there was no act of furnishing of inaccurate

particulars of income or concealment of income on the part of

the assessee.

ITA-1053/CHD/2018 A.Y. 2005-06 Page 3 of 4

5.

On the other hand, ld. Sr.DR has invited our attention to

Explanation-7 to Section 271 of the Income Tax Act to state

that where adjustment is made on account of transfer pricing,

same tantamount to concealment of income.

6.

We have considered the rival submissions. We find that

as per the provisions of Explanation-7 to Section 271 of the

Act, if it is found that the claim was made by the assessee in

good faith with due diligence, then the provisions of Section

271(1)(c) of the Act will not attract. As observed above, claim

made by the assessee has not been rejected in toto rather,

after considering the submissions of the assessee, the

additions have been reduced to a large extent. It has been

held time and again that each and every addition made into

income of an assessee does not itself tantamount to the act of

furnishing of inaccurate particulars of income or concealment

of income. Considering facts and circumstances of the case,

we do not find it a fit case for levy of penalty u/s 271(1)(c) of

the Act and the same is accordingly, deleted.

7.

In the result, appeal of the assessee is hereby allowed.

Order dictated and pronounced in the Open Court immediately on completion of hearing on 19.02.2019.

Sd/- Sd/-

( अ�नपूणा� गु�ता ) (संजय गग�) ( ANNAPURNA GUPTA) (SANJAY GARG ) लेखा सद�य/ Accountant Member �याय�क सद�य/ Judicial Member ‘Poonam’ आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant 1. ��यथ�/ The Respondent 2. आयकर आयु�त/ CIT 3. आयकर आयु�त (अपील)/ The CIT(A) 4. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File 6.

ITA-1053/CHD/2018 A.Y. 2005-06 Page 4 of 4

आदेशानुसार/ By order सहायक पंजीकार/ Assistant Registrar

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