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Income Tax Appellate Tribunal, PUNE BENCH, ‘B’ PUNE
Before: SHRI S.S.VISWANETHRA RAVI & SHRI DR. DIPAK P. RIPOTE
ORDER
PER DR. DIPAK P. RIPOTE, AM :
This appeal is against Commissioner of Income Tax (Appeals)- 13, Pune’s order dated 24.04.2019 for assessment year 2009-10.
The Revenue raised the following grounds of appeal : “1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in directing the Assessing Officer to delete the penalty of Rs 1,72,26,710/- levied by the A.O. as the issue of addition is under adjudication before the High Court of Judicature at Bombay.
2. For this and such other reasons as may be urged at the time of hearing, the order of the CIT(A) may be vacated and that of the Assessing Officer be restored.
3. The appellant craves, leave to add, amend, alter or delete any of the above grounds of appeal during the course of appellate proceedings before the Hon'ble Tribunal.”
3. Briefly, the facts of the case are that the assessee is a private limited company engaged in the business of providing market support services for sale of textile machinery, components and equipments manufactured and sold by its group of companies. The return of income for the assessment year 2009-10 was filed on 30.09.2009 declaring total loss of Rs.16,42,18,155/-. Against the said return of income, the assessment was completed by Dy. Commissioner of Income Tax, Circle-15(1), New Delhi (‘the Assessing Officer’) vide order dated 15.04.2013. During the course of assessment proceedings, the Assessing Officer, based on the TPO’s order dated 31.01.2013, made an upward adjustment of Rs.5,06,81,685/- to the income of the assessee, being the difference between the arm’s length price determined by the TPO and the price charged by the assessee from its AEs for provision of market support services. The Assessing Officer initiated the penalty proceedings under the provisions of section 271(1)(c) of the Act by alleging that the assessee concealed the particulars of income and furnished inaccurate particulars of income and subsequently levied the penalty of Rs.1,72,26,710/- vide order dated 30.03.2018.
Being aggrieved by the above penalty order, the assessee preferred an appeal before the ld. CIT(A). The ld. CIT(A) deleted the penalty because Hon’ble ITAT vide order dated 25.01.2019 has set-aside the issue of transfer pricing adjustment to the file of the TPO for fresh adjudication.
Being aggrieved by the decision of the ld. CIT(A), the Revenue is in appeal before us.
Before us, the ld. CIT-DR submitted that the ld. CIT(A) ought not to have deleted the penalty as the issue of addition is under adjudication before the Hon’ble Bombay High Court. The ld. CIT-DR further prayed that the order of the ld. CIT(A) may be vacated and that of the Assessing Officer be restored.
On the other hand, ld. AR relied on the order of CIT(A). He further contended that the Hon’ble Tribunal in assessee’s own case vide order dated 25.01.2019 for assessment year 2009-10 has principally deleted the adjustment subject to verification by the TPO. In pursuance to the same, the TPO passed the order giving effect to the ITAT’s order on 14.12.2020 and deleted the entire transfer pricing adjustment.
Hence, he contended that the penalty levied cannot be sustained and the appeal of the Revenue be dismissed.
We heard the rival submissions and perused the material on record. The only issue in the present appeal relates to the validity of the penalty levied u/s 271(1)(c) of the Act. The Hon’ble ITAT in for A.Y. 2009-10 vide order dated 25.01.2019 has held as under :- “12. Applying the parity of reasoning to the issue raised in the present appeal, we hold that though CUP method is to be applied but Kirloskar Toyoda cannot be taken as comparable. The other concern which was held to be functionally comparable with the business module of assessee in the preceding year was LMW. The TPO during initial proceedings had called for the results of said concern but in the final analysis had only applied margins of Kirloskar Toyoda. In such circumstances, we direct the Assessing Officer/TPO to apply CUP method and compare commission rate charged by LMW with the commission rates charged by the assessee during the year under consideration and compute arm's length price of international transactions undertaken by assessee.
Before parting, we may also state that CUP method has to be applied and not internal TNMM method as the transactions with associated enterprises were to the extent of 97% and with non-associated enterprises were to the extent of 3% and since the transactions with non-associated enterprises were minuscule, internal TNMM method cannot be applied.
The Assessing Officer / TPO shall afford reasonable opportunity of hearing to the assessee. It may be kept in mind that commission earned by assessee in addition to the commission income includes charges for installation, commissioning and warranty support services and the said commission in total is to be applied to work out the rate in the hands of assessee and the same is to be compared with commission rate charged by LMW. Reasonable opportunity of hearing shall be given to the assessee in this regard. The grounds of appeal
raised by assessee are thus, partly allowed.
15. Though the grounds of appeal differently numbered but the issue raised in assessment year 2009-10 is similar to the issue raised in assessment year 2010-11 and our decision in assessment year 2010-11 would apply mutatis mutandis to assessment year 2009-10.”
9. The TPO passed an order on 14.12.2020 u/s 92CA(3) r.w.s. 254 of the I.T. Act, 1961 to give effect to ITAT order. Copy of the same was filed by the ld. AR. Vide the said order, TPO determined that international transactions entered by the assessee were at ALP. From the evidence on record, it is clear that since in the quantum appeal, the Tribunal deleted the adjustment subject to verification by the TPO, the surviving of penalty u/s 271(1)(c) of the Act does not arise. Accordingly, the appeal filed by the Revenue is dismissed.