ACIT Vs Kapu Gems E-Tower Centre (ITAT Mumbai)
The Assessing Officer concluded that the TPO has called for specific details pertaining to segmental profitability between AE and non-AE segments within the meaning of section 92D(3) of the income tax Act, 1961. The details were called for during transfer pricing proceedings and assessee was given opportunity to submit the same but the same was not furnished within 30 days or even till passing of transfer pricing order or at any time subsequently. The details were essential for benchmarking the transaction of the assessee with AE. The assessee could also not provide any alternate method of benchmarking the transaction based on material available on record. In the absence of material the TPO was forced accept the transactions to be at arm’s length after initiating penalty proceedings under section 271G of the Income Tax Act, 1961. Accordingly the Assessing Officer levied the penalty of Rs. 6,63,87,700/- under section 271G.
Against the above order, assessee appealed before learned CIT(A). Learned CIT(A) referred the provisions of section 271G and 273B of the Act. Thereafter without discussing the fact of the case, the Assessing Officer’s finding, leave alone dealing with then, he laconically deleted the penalty.
Learned Departmental Representative submitted that learned CIT(A) has passed a totally non-speaking order and laconic order which is not at all sustainable.
Upon careful consideration, we find that learned CIT(A) has failed to discharge the duty cast upon him. He is passing a quasi judicial order. It was incumbent upon him to pass a proper speaking order while deleting a huge penalty of Rs. 6.63 crores levied by the Assessing Officer which is a detailed order and also relies upon Hon’ble Bombay High Court decision. It is settled law that rules of natural justice are applicable to even administrative order and they are applicable to both the parties in a dispute. On this plank itself the order of learned CIT(A) is not sustainable. Moreover the issue of case laws will arise after learned CIT(A) duly deals with facts and issues, which he has failed to do.
In this connection we refer to the decision of Hon’ble Supreme Court in the case of Kapurchand Shrimal (131 ITR 451), where Hon’ble Supreme Court held that it is the duty of the appellate authority to correct the error in the order of the authorities below and remit the matter with or without direction unless probable by law. Hence in the interest of justice, we vacate the order of learned CIT(A) and set aside the issue to the learned CIT(A). The learned CIT(A) shall pass a proper and speaking order after giving the assessee proper opportunity of being heard. Assessee is at liberty to canvas the issue at it deems fit.
FULL TEXT OF THE ITAT JUDGEMENT
This is an appeal by the Revenue against the order of learned Commissioner of Income Tax (Appeals) [in short learned CIT(A)] dated 7.3.2019 and pertains to A.Y. 2013-14..
2. The grounds of appeal read as under :
(i) “Whether the Ld. CIT(A) was correct in deleting the penalty levied u/s. 271G of the Act, by holding that the assessee had made substantial compliance, failing to note that under TNMM adopted by the assessee, the profit of the international transaction has to be furnished, whereas the assessee has only furnished the entity level margins which consists of overall profits on AE and significant non non-AE transactions.
(ii) Whether the decision of the Ld. CIT(A) is not vitiated for the reason that the Ld. CIT(A) has not given any finding on how the assessee has compiled with clause (d), (g), (h) and (m) of Rule 10D(1), that have been specifically invoked by the TPO.
(iii) The Ld. CIT(A) erred in holding that there was reasonable cause for non-compliance of Section 92D read with Rule 10D(1) without specifying the cause of such non-compliance or demonstrating how the same was reasonable.
(iv) Whether the Ld. CIT(A) was correct in ignoring the ratio laid down in the decision of the Hon’ble High Court in the case of M/s. Shatrunjay Diamonds (261 ITR 258) holding that the initial burden was cast upon the assessee?
(v) The Ld. 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) of the Act, the assessee effectively prevented the TPO to make any determination as recorded by the TPO in the order u/s. 92CA (3) of the Act.
(vi) The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the AO be restored.”
3. Brief facts of the case are that :-
The assessee is engaged in the business of import of rough diamonds, manufacturing the same into polished diamonds, and finally export the said polished diamonds. During the FY 2012-13 relevant to AY 2013-14 the assesses has had the following international transactions with its AEs :-
