Case Law Details
M/s Hal crow Consulting India Pvt. Ltd. Vs. DCIT (ITAT Delhi)
It is seen that the grounds on which the ALP determined by the assessee has been rejected are reasonably debatable. The assessee had obtained a transfer pricing study from an outside expert and the objectivity of the same was not called into question. Therefore, lack of due diligence in determining the ALP is neither indicated nor can be inferred. In such a situation, it cannot be said that the assessee had not determined the ALP in accordance with the scheme of section 92C in good faith and with due diligence and accordingly, the conditions precedent for invoking Explanation 7 to section 271(1) (c) did not exist on the facts of the instant case. We also find that the assessee’s case is covered by the order of the ITAT Mumbai Bench in the case of DCIT vs RBS Equities India Ltd. in ITA No. 2570/MUM/2010 in which the penalty u/s 271(1)(c) had been deleted in a somewhat similar circumstance. If we accept the contentions of the department that addition on account of transfer pricing adjustment invariably means absence of good faith and due diligence, then each and every case involving transfer pricing adjustment would call for imposition of penalty us/ 271(1)(c) of the Act. ITAT Delhi had also taken a similar view on identical facts in case of Mitsui Prime Advanced Composites India Pvt. Ltd. in ITA No. 550/Del/2016 and had deleted the penalty imposed u/s 271(1)(c) of the Act. The Honorable High Court of Delhi has also upheld this order of the ITAT on the appeal of the department in ITA No. 913/2016 vide order dated 17.01.2017. Further, the Honorable High Court of Delhi has held in the case of Principal Commissioner of Income Tax vs Verizon India Ltd. in ITA No. 4602/20 16 that in absence of any overt act, which indicates conscious and material suppression, invocation of Explanation 7 in a blanket manner could not only be injurious to the assessee but ultimately would be contrary to the purpose for which it was en grafted in the statute. The Honorable Delhi High Court further observed that it might lead to a rather peculiar situation where the assessee who might otherwise accept such determination may be forced to litigate further to escape the clutches of Explanation 7. Therefore, in view of the factual circumstances and respectfully following the ratio of the decisions of the various judicial authorities, we are of the opinion that the assessee cannot be visited with penalty u/s 271(1) (c) of the Act on this issue and accordingly, the impugned order is set aside and penalty is deleted.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
This appeal has been filed by the assessee against the order of the Ld. CIT(A)-44, New Delhi wherein vide order dated 20.01.2016, the Ld. CIT(A) has upheld the penalty of Rs. 1,14,76,281/- imposed u/s 271(1)( c) of the Income Tax Act, 1961 pertaining to assessment year 2010-11.
2. Brief facts of the case are that the assessee company is engaged in providing planning, design and management services in the area of infrastructure consultancy. The return of income was filed declaring loss of Rs. 1,53,16,395/-. The case was selected for scrutiny and reference was made to the transfer Pricing Officer (TPO). The TPO proposed a dis allowance of Rs. 3,31,83,409/- in respect of international transactions undertaken by the assessee with respect of arm’s length price of business support services. The dis allowances were also made in respect of balances written off, advances written off and miscellaneous expenses. Subsequently, penalty proceedings u/s 271(1)(c) of the Act were also initiated and penalty was imposed for furnishing inaccurate particulars leading to concealment of income. On the assessee approaching the Ld. CIT (A), no relief was allowed to the assessee and the assessee’s appeal was dismissed. Now, the assessee has approached the ITAT challenging the confirmation of imposition of penalty and has raised the following grounds of appeal:-
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