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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI RAJENDRA, AM & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 30.10.2015 passed by the Commissioner of Income Tax (Appeals) 18, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2008-09.
The assessee has raised the following grounds:-
ITA No.5634/M/2015 A.Y.2008-09
“1. Levy of penalty u/s.271(1)(c) of the Act a) The Commissioner of Income Tax (Appeals)- 18, Mumbai, [CIT(A)] has erred in upholding the validity of the Notice issued u/s.274 of the Income tax Act, 1961 (Act) dated 31/01/2012 despite of the fact that the said notice did not specify whether the penalty proceedings are initiated for (a) concealment or (b) furnishing inaccurate particulars of income. The CIT(A)’s reliance on section 271(1B) of the Act and the explanation to section 271 of the Act are completely irrelevant to the Ground of appellant. b) The CIT(A) has erred in sustaining the penalty levied by Assessing Officer (AO) merely on a difference of opinion as to the appellant’s claim of expenditure. c) The CIT(A) has erred in ignoring the observations on the Ld. CIT(A) and the Hon’ble Income Tax Appellate Tribunal (ITAT) in the quantum appeal that the discrepancies pointed out by the AO are insignificant. The CIT(A) has erred in confirming the penalty on erroneously attributing the observations of the AO as that of the Ld. CIT(A) in his order dated 12.07.2012. “2. Levy of penalty u/s.271(1)(c) of the Act The appellant craves leaves to add, alter, amend and / or supplement any ground or grounds, if necessary, at the time of hearing of the appeal.”
The brief facts of the case are that the assessment of the assessee was completed u/s.143(3) of the Income Tax Act, 1961 ( in short “the Act”) on 31.01.2012 determining total income to the tune of Rs.55,21,40,070/- under the normal provisions of the Act, as against the returned income of Rs.54,87,03,860/- The difference between the returned income and the assessed income was on account of adjustment of Rs.1,21,597/- to the Arm’s Length Price in relation to international transactions with Associated Enterprises and disallowance of expenses of Rs.33,14,610/-. The penalty
ITA No.5634/M/2015 A.Y.2008-09 proceeding was initiated u/s.271(1)(c) of the Act. Accordingly, a show cause notice u/s.274 read with section 271(1)(c) dated 31.01.2012 was issued in this regard and served upon the assessee. Assessee also filed the reply to the notice by virtue of letter dated 28.02.2012 with request to drop the proceedings in view of the judgment passed by the Apex Court in the case of Thiru Arooran Sugars Ltd. and Reliance Petroproducts Pvt. Ltd.. Since the assessee had filed an appeal on 06.03.2012, therefore, the penalty proceeding was kept in abeyance. Subsequently, the CIT(A), Mumbai, vide order bearing no. CIT(A)-18/ACIT-8(3)/IT-221/2011-12 dated 12.07.2012, partly confirmed the disallowance. Thereafter, an another show cause notice dated 04.10.2013 was issued and served upon the assessee and assessee also replied for the same vide letter dated 14.10.2013 and reiterated its submissions made earlier on 28.02.2012. The assessee company was a part of Samsonite Group of companies a world leader in the luggage industry and was engaged in the business of manufacturing and distribution of moulded luggage (hard luggage). The CIT(A) confirmed the disallowance of expenses to the tune of Rs.6,62,922/- and also disallowed the contention of the assesse on account of addition of adjustment of Rs.1,21,597/- in Arm’s Length Price. In view of this the Assessing Officer levied the penalty to the tune of Rs.2,67,000/-. On appeal the CIT(A) confirmed the said penalty, therefore, the assessee has filed the present appeal before us.
The above said issues only raised the question of validity to levy the penalty confirmed by the CIT(A) in the order under challenged. The learned representative of the assessee has argued that the assessee did not ITA No.5634/M/2015 A.Y.2008-09 conceal any particulars of his income nor furnished inaccurate particulars therefore in the said circumstances no penalty is leviable in accordance with law. It is argued that the assessee submitted all the entries in connection with the expenses but the Assessing Officer was not satisfied, therefore the Assessing Officer disallowed the 10% of the expenses on account of CSD service charges which was reduced by the CIT(A) to the extent of 2% on the basis of estimation, therefore, in the said circumstances no penalty is leviable. It is also argued that the Transfer Pricing adjustment was enhanced aggregating to Rs.1,21,597/- on account of international transactions entered by the appellant with the Associated Enterprises and the said addition was on account of difference of opinion with regard to the computation on Arm’s Length Price, therefore, no penalty is leviable in view of the law settled in judgment passed by the Apex Court in the case of Thiru Arooran Sugars Ltd. and Reliance Petroproducts Pvt. Ltd. and Hon’ble Income Tax Appellate Tribunal, Mumbai bench in for A.Y.2005-06 in case of Satyajeet Movies Pvt. Ltd. However, on the other hand the learned representative of the department has strongly relied upon the order passed by the CIT(A) in question. On appraisal of the order on record, it came into the notice that the Assessing Officer nowhere highlighted the particulars which has been concealed by the assessee and nowhere indicated about the concealment of income. The penalty was levied on account of disallowance of expenses on estimation basis to the tune of Rs.6,62,922/-. However, it is pertinent to mentioned here that the said disallowance of expenses was confirmed to the extent of 2% of the total expenditure to the tune of Rs.33,14,610/- whereas the Assessing Officer disallowed the 10% of the said expenses on account of ITA No.5634/M/2015 A.Y.2008-09 CSD service charges totally on the basis of estimation. So far as the other part is concerned, the same is in connection with the upward adjustment to the Arm’s Length Price aggregating to the tune of Rs.1,21,597/- on account of international transaction entered with the Associated Enterprises which is only on account of the difference of opinion with regard to the computation of Arm’s Length Price. In view of the said circumstances, when the expenses were disallowed on account of estimation basis and the transfer pricing adjustment to the tune of Rs.1,21,597/- was enhanced on account of difference of opinion. No penalty is leviable in accordance with law because the same cannot said as concealment of particulars of income or furnishing the inaccurate particulars. Moreover all these contents nowhere reflect in the return. In view of the said circumstances mentioned above, We are of the view that no penalty is leviable and in this regard we also find support of law settled in judgment passed by the Apex Court in the case of Thiru Arooran Sugars Ltd. and Reliance Petroproducts Pvt. Ltd. and Hon’ble Income Tax Appellate Tribunal, Mumbai bench in for A.Y.2005-06 in case of Satyajeet Movies Pvt. Ltd. Accordingly, the order passed by the CIT(A) in question is wrong against law and facts and is not liable to be sustainable in the eyes of law, therefore, we set aside the order in question and delete the penalty.
In the result, the appeal filed by the assessee is hereby ordered to be allowed.
Order pronounced in the open court on 10th February, 2017.
ITA No.5634/M/2015 A.Y.2008-09