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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI ANIL CHATURVEDI, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER VIKAS AWASTHY, JM
This appeal by Revenue is directed against the order of Commissioner of Income Tax (Appeals)-13, Pune dated 06.09.2016 whereby penalty levied u/s.271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) has been deleted by the First Appellate Authority.
The brief facts of the case as emanating from records are: The assessee is engaged in providing design engineering and ITeS services to its AEs. During the
2 ITA No. 2776/PUN/2016 A.Y.2010-11
period relevant to assessment year under appeal, the assessee entered into
international transactions with its AEs. To examine arms length price (ALP) of
the international transactions reference was made to the Transfer Pricing Officer
(TPO). The TPO after analysing the transactions proposed adjustment of
Rs.72,79,939/-. Accordingly, the Assessing Officer passed assessment order
making addition of the aforesaid amount and also initiated penalty proceedings
u/s.271(1)(c) of the Act for furnishing inaccurate particulars of income. Penalty
of Rs.22,49,501/- u/s.271(1)(c) was levied by the Assessing Officer vide order
dated 26.03.2015.
Against the penalty order, the assessee filed appeal before the
Commissioner of Income Tax(Appeals). The Commissioner of Income
Tax(Appeals) vide impugned order deleted the penalty primarily on the ground
that while levying penalty, the provisions of Explanation-7 to section 271(1) were
not invoked. Against the findings of Commissioner of Income Tax (Appeals), the
Revenue is in second appeal before the Tribunal.
Shri Kishore Phadke appearing on behalf of the assessee vehemently
supporting the findings of Commissioner of Income Tax (Appeals) contended that
apart from the fact that while levying penalty in respect of international
transactions, ‘Explanation-7’ to section 271(1)(c) were not invoked, the Assessing
Officer has also not specified the charge for levying penalty in the penalty order
dated 26.03.2015. Thus, there is ambiguity in the order of levying penalty with
respect to charge. It is not emanating from the penalty order as to whether
penalty is being levied for furnishing inaccurate particulars of income or
concealing the particulars of income.
On the other hand, Shri Sudhendu Das representing the Department
vehemently defended the order levying penalty. The ld. DR submitted that while
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recording satisfaction in the assessment order, the Assessing Officer has
categorically mentioned that penalty proceedings are being initiated
u/s.271(1)(c) of the Act for furnishing inaccurate particulars of income. In the
order levying penalty dated 26.03.2015, the Assessing Officer has mentioned
pre-conditions for levying penalty and also the charge for levying penalty. The
ld.DR further contended that mere non-mentioning of ‘Explanation-7’ in the
penalty order, would not make penalty proceedings invalid or defective.
We have heard the submissions made by representatives of rival sides and
have perused the orders of Authorities below. The Revenue in appeal has
assailed the findings of Commissioner of Income Tax(Appeals) in deleting penalty
levied u/s.271(1)(c) of the Act. It is an undisputed fact that penalty proceedings
u/s.271(1)(c) were initiated in respect of adjustment proposed by the TPO in
proceedings u/s.92C of the Act.
For initiating any penalty proceedings u/s.271(1)(c) in respect of addition
made in proceedings u/s. 92C, we find that ‘Explanation-7’ to section 271(1)(c)
comes into play. For the sake of completeness, the provisions of Explanation 7
are reproduced herein below:
“Explanation-7-Where in the case of an assessee who has entered into an international transaction [or specified domestic transaction] defined in section 92B, any amount is added or disallowed in computing the total income under sub-section (4) of section 92C, then the amount so added or disallowed shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed or inaccurate particulars have been furnished, unless the assessee proves to the satisfaction of the Assessing Officer or the Commissioner (Appeals) [or the [Principal Commissioner or] Commissioner] that the price charged or paid in such transaction was computed in accordance with the provisions contained in section 92C and in the manner prescribed under that section, in good faith and with due diligence.”
We observe that neither at the time of recording satisfaction for initiating
penalty proceedings nor at the time of levy of penalty, the Assessing Officer has
made any reference to ‘Explanation-7’.
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We further observe that in the penalty order dated 26.03.2015, the Assessing Officer has not specified the charge for which penalty is being levied i.e. ‘concealment of income’ Or ‘furnishing inaccurate particulars of income’. Apart from provisions of section 271(1)(c), ‘Explanation-7’ also mandates that for levying penalty in respect of any addition or disallowance to international transactions, penalty can be levied for either of the two defaults i.e. ‘concealment’ or ‘furnishing inaccurate particulars’ of income. The order levying penalty suffers from incurable defect of ambiguity. We do not find any infirmity in the order of Commissioner of Income Tax (Appeals). Hence, the grounds of appeal raised by Revenue are dismissed being devoid of any merit.
In the result, appeal of the Revenue is dismissed. 8.
Order pronounced on Friday, the 07th day of September, 2018.
Sd/- Sd/- (अ�नल चतुव�द� /ANIL CHATURVEDI) (�वकास अव�थी /VIKAS AWASTHY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER पुणे / Pune; �दनांक / Dated : 07th September, 2018 SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeals)-13, Pune. 4. The Pr. CIT-1, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, 5. पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.