DCIT CIRCLE 12(1)(1), MUMBAI vs. M/S AMORE JEWELS PVT. LTD., MUMBAI

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ITA 85/MUM/2019Status: DisposedITAT Mumbai12 March 2020AY 2013-145 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal dismissed the revenue's appeal, following its own earlier decision in the assessee's own case for different assessment years. The earlier decision had upheld the deletion of penalty under Section 271G by the CIT(A) under similar circumstances.

What were the facts?

The assessee, engaged in diamond and jewellery business, was levied a penalty under Section 271G for failing to maintain documentation required under Section 92D(3) and Rule 10D(1). Despite the Transfer Pricing Officer (TPO) accepting the transactions at Arm's Length Price, the penalty was imposed for non-compliance.

What were the issues?

Whether penalty under Section 271G was rightly deleted by the CIT(A) despite the assessee's failure to maintain required documentation for transfer pricing purposes.

Which sections of the Income-tax Act were involved?

Section 271G,Section 92D

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

Before: HON’BLE SHRI MAHAVIR SINGH, VP & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

For Appellant: Ms. Aarti Vissanji-Ld.AR
For Respondent: Shri Michael Gerald-Ld. DR

आयकरअपील सं./ (िनधा"रण वष" / Assessment Year: 2013-14) DCIT-Circle 12(1)(1) M/s. Amore Jewels Private Ltd. Room no.223, 2nd Floor, 3A, Pandit Motilal Nehru Marg बनाम/ ITT Bhatti, Western Express Highway Aaykar Bhavan, Churchgate Vs. Off Aarey Road, Goregaon East, Mumbai- 400 020. Mumbai-400 063. "थायीलेखासं./जीआइआरसं./PAN/GIR No. AAECA-7184-J (अपीलाथ"/Appellant) (""थ" / Respondent) : Assessee by : Ms. Aarti Vissanji-Ld.AR Revenue by : Shri Michael Gerald-Ld. DR सुनवाई की तारीख/ : 19/02/2020 Date of Hearing घोषणा की तारीख / : 12/03/2020 Date of Pronouncement आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by revenue for Assessment Year [in short referred to as ‘AY’] 2013-14 contest the order of Ld. Commissioner of Income- Tax (Appeals)-55, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No.CIT(A)-55/DCIT-12(1)(1)/17-18, dated 05/10/2018 on following grounds: - 2 M/s. Amore Jewels P.Ltd. Assessment Year:2013-14 i) Whether in the facts and circumstances of the case and in law the CIT(A) was right in deleting the penalty u/s 271G in the assessees case even when the assessee had clearly failed in maintaining the documentation as required u/s 92D(3) of the act. ii) Whether the decision of CIT(A) is not vitiated for the reason that the CIT(A) has not given any findings on how the assessee has complied with the clause (d), (g) and (m) of rule 10D(1), that has been specifically invoked by the TPO. iii) Whether the CIT(A) was not incorrect in stating that the TPO should have asked for copies of profit and loss accounts and balance sheets of AEs to make an overall comparison with the gross profitability levels of the assessee with the AE's to ascertain diversion of profits, if any ignoring the findings of the ITAT in the case of Aztec Software Technology services Ltd. Vs ACIT Vs. in which it has been held that there is no legal requirement for the AO to prima facie demonstrate tax avoidance before invoking the provisions of section 92 and 92CA of the act. The Id. CIT(A) erred in holding that there was reasonable cause for non-compliance of sec. 92D r/w rule 10D(1) without specifying the cause of such non compliance or demonstrating how the same was reasonable. The Id. CIT(A) erred in deleting the penalty for the reason that no adjustment was made to the ALP, failing to note that by not producing the material documents necessary to determine the ALP under any of the prescribed methods u/s 92C(1), the assessee effectively prevented the TPO to make determination as recorded by the TPO in para 5 of the order u/s 92CA(3). Whether the Id. CIT(A) was correct in ignoring the ratio laid down in the decision of Hon'ble Bombay High Court in the case of M/s. Shatrunjay Diamonds (261 ITR 258) holding that the initial burden was cast upon the assessee? iv) Whether on the facts and circumstances of the case and in law the CIT(A) was right in arriving at the conclusion that the TPO could have tried to work out the gross profits and net profits by averaging the purchase prices and the expenses in proportion of export sales of each one of the segments to arrive at average profitability of each segment and then to compare the same with the average profitability of other public companies whose details were available in public domain, when it was not possible to do so in the absence of proper documentation. v) The appellant prays that the order of the Ld. CIT(A) on the grounds be set aside and that of the Assessing Officer be restored.”

2.

The Ld. Counsel for the assessee (AR), at the outset, submitted that similar issue of penalty u/s 271G stood covered in assessee’s favor by the decision of this Tribunal in assessee’s own case for AYs 2009-10 & 2012-13, ITA Nos.6009/Mum/2017 & 716/Mum/2018, common order dated 10/04/2019. A copy of the order has been placed on record. When 3 M/s. Amore Jewels P.Ltd. Assessment Year:2013-14 the same was confronted to Ld. DR, he could not point any distinguishing feature. 3.1 Facts leading to imposition of penalty are that assessee being resident corporate assessee is stated to be engaged in the business of manufacturing & trading of diamonds and studded Jewellery. An assessment was framed u/s 143(3) r.w.s. 92CA(4) on 29/12/2016. Certain international transactions carried out by the assessee with its Associate Enterprises (AE), during the year under consideration, were referred to Learned Transfer Pricing Officer (TPO) u/s 92CA(1) for determination of Arm’s Length Prices. These transactions were in the nature of purchase / sale of rough as well as polished diamonds with overseas group entities. The assessee applied entity level TNMM to benchmark the stated transactions, which was rejected by Ld. TPO. The assessee was asked to produce complete break up of both the transactions in terms of quality as well as prices. However, the said information could not be furnished by the assessee. Although finally Ld. TPO accepted the transactions to be at Arm’s Length Price, but initiated penalty u/s 271G in view of the fact that the assessee was unable to submit profitability at net margin level, separate stock record or production record was not produced for AE and non-AE segmental analysis and for quantitative reconciliation. 3.2 The assessee explained that the benchmarking done by the assessee was well accepted as well as suitable method keeping in view the assessee’s nature of business. The assessee drew attention to the detailed records maintained by the assessee with respect to the stated 4 M/s. Amore Jewels P.Ltd. Assessment Year:2013-14 transactions. However, concluding that the assessee failed to maintain documentation as required under Clause (d), (g), (h) & (i) of Rule 10D (1), the aforesaid penalty u/s 271G was initiated and finally, the assessee was saddled with impugned penalty of Rs.123.63 Lacs vide order dated 28/04/2017.

4.

The learned first appellate authority, after analyzing the manufacturing process and nature of trade, opined that levy of penalty would neither be fair nor reasonable since substantial compliance was made by the assessee. Therefore, the penalty was deleted. Aggrieved, the revenue is in further appeal before us.

5.

Upon perusal of cited order of Tribunal for AYs 2009-10 & 2012-13 in revenue’s appeals, we find that the assessee was saddled with penalty u/s 271G for those years under similar factual matrix. The same was deleted by learned first appellate authority, against which the department was in appeal for both these years. However, the co-ordinate bench, relying upon the decision of Tribunal in ACIT V/s D. Navinchandra Exports Pvt. Ltd. (2017 87 Taxmann.com 306), dismissed the appeals. Since fact are pari-materia the same in this year, respectfully following the earlier decision, we dismiss the revenue’s appeal.

6.

Resultantly, the appeal stands dismissed.

Order pronounced in the open court on 12th March, 2020. (Mahavir Singh) (Manoj Kumar Aggarwal) उपा"" / Vice President लेखा सद" / Accountant Member

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