Case Law Details
It is observed that when the appeals of the assessee challenging the imposition of penalty were pending before the ld. CIT(A) and the prayer of the assessee for stay of outstanding demand on account of the said penalty was rejected by the revenue authorities, the assessee had moved writ petitions before the Hon’ble Bombay High Court and vide two separate orders passed on 13th January 2013, their lordships granted the stay of outstanding demand subject to the payment of Rs. 50,00,000/- for each of the two years after considering all the submissions made on behalf of the assessee which have now been reiterated before us in support of the present stay applications. The said stay was granted by the Hon’ble Bombay High Court till the disposal of the penalty appeals by ld. CIT(A) and since the ld. CIT(A) has already disposed of the said appeals, the balance outstanding demand is being sought to be stayed by the assessee by the present stay applications. Although the ld. Counsel for the assessee has submitted that a sum of Rs. 50,00,000/- has already been paid by the assessee against the penalty imposed for each of the two years under consideration, it is pertinent to note that the same has been paid as per directions of the Hon’ble Bombay High Court and not voluntarily by the assessee. The ld. Counsel for the assessee no doubt has made an attempt to show that the assessee has a good prima-facie case to succeed on merit in its appeal filed before the Tribunal. However this matter can be decided finally only after hearing both the sides while disposing of the appeals of the assessee by the Tribunal. Moreover, the financial position of the assessee is very sound as agreed even by its ld. Counsel and any further recovery of the outstanding demand on account of penalty is not going to cause any genuine hardship to the assessee. At the same time, government also needs liquid funds to manage its day to day affairs. Having regard to all these facts & circumstances, we are of the view that the stay of outstanding demand for both the years can justifiably be granted subject to a further payment of Rs. 50,00,000/-by the assessee against the penalty imposed for each of the two years under consideration. Accordingly, we direct the assessee to deposit a further sum of Rs. 50,00,000/- against the outstanding demand for each of the two years by 10/02/2014. Subject to the said payment, the balance outstanding demand for both the years under consideration is stayed for a period of six months or till the disposal of the assessee’s appeals by the Tribunal, whichever is earlier. The registry is directed to fix the said appeals of the assessee for hearing of out of turn on 13.02.2014 as announced in the open court and taken note by the learned Representatives of both the sides.
INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI
BEFORE SHRI P.M. JAGTAP, AM AND SHRI VIVEK VARMA, JM
S.A. No.332 /Mum/2013 – (Arising out of ITA No. 7650/Mum/2013)
Assessment Year 2004-05
S.A. No.333 /Mum/2013 – (Arising out of ITA No. 7651/Mum/2013)
Assessment Year 2005-06
M/s Deloitte Consulting India Private Limited
Vs.
The Assistant Commissioner of Income-tax
Date of Pronouncement :03/01/2014
O R D E R
PER P.M. JAGTAP, A.M.
By these stay applications, the assessee is seeking stay of outstanding demand of Rs.1,55,26,718/- and Rs. 1,81,18,488/- for A.Y. 2004-05 and 2005-06 respectively on account of penalty imposed u/s 271(1)(c).
2. The assessee in the present case is a joint venture between Mastek Ltd. and Deloittee Consulting LLP, USA. It is registered under the ‘Software Technology Parks of India’ Scheme and is engaged in the business of export of computer software and also in providing Information Technology Enables Services. Along with its return of income for both the years under consideration, the assessee had filed an Accountant’s Report in prescribed form reporting inter-alia the particulars of its international transactions which included payments made by the assessee to Deloitte for rendering of marketing-services amounting to Rs. 5.86 crores and 6.60 crores for A>Y. 2004-05 and 2005-06 respectively. These payments were claimed to be made by the assessee to Deloitte in connection with the reimbursement of salary and other direct costs without their being any mark-up charged by Delloitte. Given that there was a dispute on the determination of the arm’s length price of these transactions, the assessee, with a view to avoid litigation, filed revised return suo¬moto disallowing the amount paid towards reimbursement of salary and other directs costs. The assessee however claimed deduction u/s 10A of the Act on the amounts so disallowed on the ground that the corresponding TP adjustment having not been made by the AO/TPO, the proviso to section 92C(4) of the Act was not applicable. This claim of the assessee for deduction u/s 10A was not allowed by the AO, the ld. CIT(A) as well as the Tribunal in the quantum proceedings and the assessee therefore preferred appeals before the Hon’ble Bombay High Court which are pending for disposal. Meanwhile, the AO imposed penalty of Rs. 2,05,26,718/- and Rs. 2,31,18,488/- u/s 271(1)(c) for A.Y. 2004-05 and 2005-06 respectively in respect of the addition made to the total income of the assessee on account of dis allowance of deduction u/s 10A and on confirmation of the same by the ld. CIT(A), the assessee has preferred its appeals before the Tribunal which are pending. This imposition of penalty has given rise to the impugned outstanding demand which is being sought to be stayed by the assessee in the present applications.
3. The ld. Counsel for the assessee vehemently supported these stay applications filed by the assessee. He put-forth following propositions in support of the assessee’s case that the penalty imposed by the AO and confirmed by the ld. CIT(A) for both the years under consideration is not sustainable.
a. Complete disclosure made by the Applicant vis-à-vis the issue in dispute and hence there can be no question of any furnishing of inaccurate particulars and or concealment of income;
b. The denial of deduction u/s 1OA to the Applicant itself is wrong and hence there can be no question of penalty;
c. Issue in dispute is a legal issue on which there can be no levy of penalty;
d. No penalty levied on a similar issue in the earlier years thereby clearly demonstrating that the Department too accepts that this is neither a case of concealment of income nor furnishing of inaccurate particulars and hence there can be no levy of penalty for the year under consideration.
e. No finding of the Assessing Officer as to whether the penalty is levied for concealment of income or furnishing of inaccurate particulars and hence there can be no levy of penalty;
4. On the basis of above propositions, the ld. Counsel for the assessee submitted that the assessee has a good prima-facie case to succeed on merit in its appeals filed before the Tribunal and urged that keeping in view the same as well as the fact that the assessee has already paid a sum of Rs.50,00,000/- each against penalty imposed for both the years under consideration, the balance outstanding demand on account of penalty may be stayed.
5. The ld. DR on the other hand strongly opposed these stay applications filed by the assessee. He submitted that the penalty imposed by the AO u/s 271 (1)(c) for both the years under consideration has been confirmed by the ld. CIT(A) after considering all the submissions made on behalf of the assessee and it therefore cannot be said that the assessee has a good prima-facie case to succeed on merit in the appeals filed before the Tribunal. He submitted that keeping in view this position as well as the fact that the financial position of the assessee is very sound, it is not a fit case to grant the stay of outstanding demand as sought by the assessee in the present stay applications.
6. We have considered the rival submissions and perused the relevant record. It is observed that when the appeals of the assessee challenging the imposition of penalty were pending before the ld. CIT(A) and the prayer of the assessee for stay of outstanding demand on account of the said penalty was rejected by the revenue authorities, the assessee had moved writ petitions before the Hon’ble Bombay High Court and vide two separate orders passed on 13th January 2013, their lordships granted the stay of outstanding demand subject to the payment of Rs.50,00,000/- for each of the two years after considering all the submissions made on behalf of the assessee which have now been reiterated before us in support of the present stay applications. The said stay was granted by the Hon’ble Bombay High Court till the disposal of the penalty appeals by ld. CIT(A) and since the ld. CIT(A) has already disposed of the said appeals, the balance outstanding demand is being sought to be stayed by the assessee by the present stay applications. Although the ld. Counsel for the assessee has submitted that a sum of Rs.50,00,000/- has already been paid by the assessee against the penalty imposed for each of the two years under consideration, it is pertinent to note that the same has been paid as per directions of the Hon’ble Bombay High Court and not voluntarily by the assessee. The ld. Counsel for the assessee no doubt has made an attempt to show that the assessee has a good prima-facie case to succeed on merit in its appeal filed before the Tribunal. However this matter can be decided finally only after hearing both the sides while disposing of the appeals of the assessee by the Tribunal. Moreover, the financial position of the assessee is very sound as agreed even by its ld. Counsel and any further recovery of the outstanding demand on account of penalty is not going to cause any genuine hardship to the assessee. At the same time, government also needs liquid funds to manage its day to day affairs. Having regard to all these facts & circumstances, we are of the view that the stay of outstanding demand for both the years can justifiably be granted subject to a further payment of Rs. 50,00,000/-by the assessee against the penalty imposed for each of the two years under consideration. Accordingly, we direct the assessee to deposit a further sum of Rs. 50,00,000/- against the outstanding demand for each of the two years by 10/02/2014. Subject to the said payment, the balance outstanding demand for both the years under consideration is stayed for a period of six months or till the disposal of the assessee’s appeals by the Tribunal, whichever is earlier. The registry is directed to fix the said appeals of the assessee for hearing of out of turn on 13.02.2014 as announced in the open court and taken note by the learned Representatives of both the sides.
7. In the result, stay applications of the assessee are allowed in terms indicated above.
Order pronounced in the open court on 03/01/2014.
View HC Judgment in above case – Financial hardship not necessary for grant of stay – HC
