In this Question arose for consideration was whether penalty under section 271(1)(c) of Income Tax Act, 1961 could be levied in respect of an addition not having been made in quantum/assessment proceedings and it was held that Imposition of penalty proceedings under section 271(1)(c) is strictly circumscribed to addition which has been made/confirmed in the assessment/quantum proceedings. Hence, addition not having been made in the assessment or in quantum proceedings by any appellate authority, could not be roped in penalty proceedings either by AO or CIT(A) in terms of power enshrined under section 251.
ORDER
Amit Shukla, J.M.
The aforesaid appeal has been filed by the assessee against impugned order dated 18-3-2014, passed by the learned Commissioner (Appeals), Noida, in relation to penalty proceedings under section 271(1)(c). In the grounds of appeal assessee has raised following grounds :–
‘1. That having regard to the facts and circumstances of the case, learned Commissioner (Appeals) has erred in law and on facts in confirming the action of learned assessing officer in levying penalty of Rs. 23,20,000 under section 271(l)(c) being illegal and void-ab-initio.
2. That in any case and in any view of the matter, action of learned Commissioner (Appeals) in confirming the action of learned assessing officer in levying the penalty of Rs. 23,20,000 under section 271(l)(c) is bad in law and against the facts and circumstances of the case.
3. That having regard to the facts and circumstances of the case, learned Commissioner (Appeals) has erred in law and on facts in confirming the action of learned assessing officer in levying penalty under section 271(l)(c) on the following additions made in assessment order and more so when framing the such assessment order under section 143(3)/144C dated 28-2-2011 is also contrary to law and facts.
On account of expenses of capital nature–Rs. 5,00,000
On account of transfer price adjustment–Rs. 63,85,158
4. That having regard to the facts and circumstances of the case, learned Commissioner (Appeals) has erred in law and on facts in confirming the action of learned assessing officer in levying penalty under section 271(l)(c) which is bad in law being beyond jurisdiction and barred by limitation and contrary to the principles of natural justice and has been passed by recording incorrect facts and findings and without giving adequate opportunity to the assessee and the same is not sustainable on various legal and factual grounds.
5. That having regard to the facts and circumstances of the case, learned Commissioner (Appeals) has erred in law and on facts in confirming the action of learned assessing officer in imposing a penalty of Rs. 20,79,453 that too without recording mandatory “satisfaction” as per law.
6. That having regard to the facts and circumstances of the case, learned Commissioner (Appeals) has erred in law and on facts in directing the assessing officer to revise/enhancing the quantum of penalty with respect to TP adjustment of Rs. 60,23,024 on account of raw material import and that too by recording incorrect facts and finding and by disregarding the principles of natural justice and without bringing anything contrary on record.
7. That the assessee craves the leave to add, alter or amend the grounds of appeal at any stage and all the grounds are without prejudice to each other.’
2. Here in this case, the assessing officer had levied penalty of Rs. 23,20,000 on an addition aggregating to Rs. 68,85,158, which was made on account of:-firstly, transfer pricing adjustment of Rs. 63,85,158 in respect of purchase/import of capital goods from AE; and secondly, disallowance of Rs. 5,00,000 paid as ROC fees for increase in authorized capital which has been treated as capital expenditure by the assessing officer. However, the learned Commissioner (Appeals) has enhanced the penalty on further addition of Rs. 60,23,024 which was on account of transfer pricing adjustment in respect of purchase/import of raw materials from AE, though proposed by TPO, but not made by the assessing officer.
3. The brief facts of the case qua the issue involved are that, the assessee company was engaged in the business of manufacturing of auto parts especially for interiors. It is subsidiary of M/s. Summit Auto Seats Industry Company Ltd. (SAS) Thailand, which held 82.50% of its share capital. In the quantum proceedings, the learned TPO to whom the matter was referred by the assessing officer to determine the arm’s length of the international transactions entered with the assessee with SAS during the relevant assessment year had proposed certain adjustments to be made in arm’s length price of the transactions. During the year under consideration as stated by the assessee in its T.P. study report, it has undertaken following international transactions :–
