Income Tax Appellate Tribunal - Chennai
Nippo Batteries Co. Ltd., Chennai vs Department Of Income Tax on 10 September, 2012
IN THE INCOME-TAX APPELLATE TRIBUNAL
'B' BENCH, CHENNAI.
Before Shri N.S. Saini, Accountant Member &
Shri S.S. Godara, Judicial Member
I.T.A. No.1137 and 1138/Mds/2010
Assessment Year : 2005-06
The Assistant Commissioner of M/s. Nippo Batteries Col. Ltd.,
Income Tax, Vs. 'Pottipatti Plaza', 4th Floor,
Company Circle IV(4) 77, Nungambakkam High Road,
Chennai 600 034. Chennai - 34.
[PAN:AAACI2291L]
(Appellant) (Respondent)
Appellant by : Dr. S. Moharana, CIT - DR
Respondent by : Shri Saroj Kumar Parida, Advocate
Date of Hearing : 10.09.2012
Date of pronouncement : 18.09.2012
ORDER
PER BENCH These two appeals of the Revenue are directed against different orders of the Commissioner of Income Tax (Appeals) V, Chennai dated 15.04.2010 in ITA No. 52/09-10 and 51/09-10; deleting penalties under section 271G and 271AA of the Income Tax Act 1961 [in short "Act"] respectively, for the assessment year 2005-06.
2. Brief facts of the case are that the assessee is a company engaged in the 'business of manufacturing/sale of dry cells' batteries having associated enterprises in Japan and Singapore. In the assessment year 2005-06, it filed its return of income on 31.10.2005 coupled with Form 3CEB explaining 2 I.T.A. Nos Nos.1137 & 1138/M/ 1138/M/10 /M/10 particulars of international transactions of the assessee. The Department made reference under section 92CA of the "Act" to the Transfer Pricing Officer (in short TPO), Chennai so as to determine the arms length price with regard to assessee's international transactions stated in Form No. 3CEB, who passed the order on 20.10.2008, holding therein that the assessee's case did not warrant any adjustment. However, it was observed that the case was covered by section 271G of the "Act" so as to initiate penalty proceedings for the reason that the assessee failed to furnish information and documents within time as per letter dated 06.09.2006.
3. In penalty proceedings, the assessee stated that non-furnishing of details within the stipulated time was due to circumstances beyond its control and it was not a case of willful default as its Company Secretary had left service suddenly due to which its relevant files could not be located. The Assessing Officer did not agree to the assessee's explanation and vide order dated 25.06.2009 passed order under section 271G of the "Act", coming to conclusion that the assessee had failed to furnish the relevant documents as stipulated under section 92D(3) of the "Act" within 30 days. Per Assessing Officer, the same lead to the contravention of the Act's provisions. Hence, deeming it as a fit case to levy penalty, the Assessing Officer imposed penalty at the rate of 2% of the value of each of assessee's international transactions i.e. totaling to `.35,77,200/-.
Aggrieved, the assessee carried the matter in appeal, wherein the 3 I.T.A. Nos Nos.1137 & 1138/M/ 1138/M/10 /M/10 Commissioner of Income Tax (Appeals) deleted the penalty by observing as under:
"4.11 I have heard the appellant's representative and have perused the records. I find that in Form 3CEB details relating to international transactions have been furnished in time. I also find that there is Joint Venture Agreement with the collaborator which is binding on the company.
4.12 Payment of Royalty is subject to prior approval and control by a separate Government Department. Royalty has been in existence since the time of inception of the company and copies of agreements were being filed with the Department whenever required in the course of assessments.
4.13 Further I find that payments that in respect of international transactions can be classified into four types as pointed out by the appellant's representative. As already observed the company has some constraints in entering into international transactions relating to purchase of raw-materials, equipments and finished goods furnished in Form 3CEB. International transactions, when viewed from this angle, one cannot say that the details furnished by the appellant are not complete.
4.14 The submission of the appellant's representative that no loss has been caused to the Revenue, and that there is no willful delay, is not without force. I find that the appellant has furnished basic details in time in Form 3CEB. Failure, if any, to file additional details was due to circumstances beyond appellant's control. Further transactions relating to purchase of Raw-materials and Finished Goods pertaining to international transactions are not appreciable as compared to the total operations of the appellant company.
4.15 The appellant had also explained that the secretary of the company had left and the new secretary who joined in October 2006 took considerable time to adapt to the new environment. The sudden leaving of the erstwhile secretary put unnecessary pressure on the company and it took considerable and long time to locate the system related files due to circumstances and reasons beyond control. In fact in the subsequent year's work also affected. That no adjustment has been found necessary to the value accounted for would confirm the fact that the authority had considered all the materials furnished on behalf 4 I.T.A. Nos Nos.1137 & 1138/M/ 1138/M/10 /M/10 of the appellant company which is a significant aspect for purposes of considering levy of penalty.
4.16 I find that the values of the international transactions having been accepted are genuine and the appellant company has explained reasonable cause vide Para 4.6 above that the Company Secretary who was handling the matter left services in 2006. Hence, I am of the view that the appellant has reasonable cause for not furnishing details in time as per Section 273 B of the Income Tax Act, 1961. Further more, filing of late details will no way lead to revenue loss. Hence, the Assessing Officer is directed to delete the penalty of `.35,77,200/- levied u/s 271G relating to the assessment year 2005-06." I.T.A. No. 1138/Mds/2010
4. Similarly, in I.T.A. No. 1138/Mds/2010 for the same assessment year i.e. 2005-06, the relevant facts of the case are that after agreeing to the arm's length price stated by assessee (supra), the TPO observed that there was failure on assessee's part in maintaining information and documents as required under section 92D of the "Act". Therefore, penalty proceeding stood initiated against the assessee under section 271AA of the "Act" read with Rule 10D of the Income Tax Rules, 1962. In penalty proceedings, the assessee's justification was same as in 271G penalty (supra). However, the Assessing Officer imposed same penalty under section 271AA as imposed under section 271G of the "Act".
5. The assessee carried the matter in appeal, wherein also, the Commissioner of Income Tax (Appeals) deleted the penalty by holding as under:
"5. I have heard the appellant's representative and have perused the records. It is a fact that international transactions fall in to four types as 5 I.T.A. Nos Nos.1137 & 1138/M/ 1138/M/10 /M/10 mentioned above. It is equally a fact that in Form 3CEB, details relating to the four types aforesaid have been furnished. I agree with the appellant's representative that no specific instance has been pointed out to show that there is difficulty in computing the arms length price in respect of uncontrolled transactions.
5.1 As submitted by the appellant's representative, payment of Royalty is subject to prior approval by the Central Government. Similarly imports of capital goods and raw-materials and outright purchase of finished goods as well as import of machinery are also subject to Government regulations. Further, the fact remains that import of all other items including machinery and equipments will have to be on the advice and at the instance of the foreign collaborators. Similar is the position with regard to import of raw- materials. Thus there is considerable constraint faced by the appellant company in the international transactions. In this background maintenance of records and information will have to be considered. Information relating to Royalty had been furnished. Similarly details of import of raw-materials and machinery have been filed in time. I find from the report in Form 3CEB and annexure that it confirms the maintenance of record and information as per the Act.
5.2 The appellant submits that no detriment has been caused to the revenue as even the TPO has held that no adjustment was found necessary to the value of international transactions as disclosed by the appellant company. The value of international transactions excluding Royalty of `.5.73 crores is not appreciable compared to the appellant company's total purchases of raw-materials and components of `.137 crores.
5.3 Taking into account Form 3CEB and other facts and circumstances, I hold that that the appellant company is maintaining records and information as required under 92D rw Rule 10D of the I.T. Rules. I hold the view that the appellant company is maintaining records and information as required under law and by which the appellant company prepared Form No.3CEB report. Having regard to the fact that no further adjustment was required to the value of international transactions and considering appellant's submissions that Form 3CEB had been filed in time.
5.4 Hence, I am of the view that the appellant had reasonable cause for not furnishing details in time as per Section 273 B of the Income Tax Act, 1961. Further more, filing of late, details will no way lead to revenue loss. I am of the opinion that the company has maintained information and documents as required under section 92 D of the Act r.w. Rule 10D of the 6 I.T.A. Nos Nos.1137 & 1138/M/ 1138/M/10 /M/10 Rules and therefore I hold the view that the appellant had reasonable cause under section 273 B of the Act. Hence, the Assessing Officer is directed to delete the penalty of `.35,77,200/- levied u/s 271 AA of the Act."
6. It is, in this background of these facts with both appeals have been preferred by the Revenue challenging the deletion of penalty by the Commissioner of Income Tax (Appeals) i.e. under section 271G and 271AA of the "Act".
7. Before us, the Revenue has reiterated various pleas raised in the grounds of both the appeals and prayed for restoring the order of the Assessing Officer.
8. On behalf of the assessee, the AR has strongly supported CIT(A)'s order in both cases and also cited order of the ITAT Chennai Bench pertaining to the assessment year 2006-07 in I.T.A. Nos. 1180 and 1181/Mds/2011 dated 09.03.2012 passed in assessee's own case involving the very same issues. In the light thereof, the AR of the assessee has prayed for confirmation of the order of the Commissioner of Income Tax (Appeals).
9. We have duly considered the arguments raised by both the parties at length and also perused relevant findings in both the cases. Admittedly, in assessment proceedings, there is no adjustment in the international transactions of the assessee. The only issue is that there has been failure alleged on the part of the assessee in not furnishing and maintaining the 7 I.T.A. Nos Nos.1137 & 1138/M/ 1138/M/10 /M/10 complete documents of the case. The assessee's stand is that in both cases, the circumstances were beyond its control as its Company Secretary had suddenly left the job. We notice from the Coordinate Bench order (supra), wherein one of us [N.S. Saini, A.M. was a Member of the Bench] had duly accepted the assessee's plea by upholding the order of the Commissioner of Income Tax (Appeals) as under:
"6. We have considered the rival submissions. A perusal of the order of the TPO in the present case passed u/s 92 of the Act dated 20.09.2009 clearly shows that no adjustments have been made. A perusal of the show cause notices levied u/s 271AA and 271G shows that there is no specific indication as to the documents which were not furnished. In fact, the order of the TPO shows that the details were called for and the assessee had submitted the details. Further perusal of the order of the TPO shows that the assessee had been asked to provide the details in 30 days. However, the details had been produced with delay of six months. A perusal of the order of the ld. CIT(A) clearly shows that the reason for delay in producing the documents was the resignation of the secretary and this claim of the assessee has not been found to be false. The assessee admittedly is a corporate entity. The assessee can function only through its employees. If an employee leaves the services of the assessee company getting another employee to take over the job and get acclimatized and familiar to the functions originally done by the earlier employee would take time. This would be a reasonable cause. It is noticed that the ld. CIT(A) has also accepted this as reasonable cause. The claim of the assessee has also not been found to be false. In these circumstances, we are of the view that the ld. CIT(A) was right in deleting both the penalties u/s 271AA and 271G of the Act. Our view is also supported by the decision of the co-ordinate Bench of the Tribunal in the case of SSLTTK Ltd referred to supra. In the circumstances, both the appeals of the Revenue are dismissed."
Having perused the order of Coordinate Bench, it comes out that the issue in hand is no more res integra as the same reason was tendered by the assessee in that case as well. Therefore, we conclude that the 8 I.T.A. Nos Nos.1137 & 1138/M/ 1138/M/10 /M/10 Commissioner of Income Tax (Appeals) has rightly deleted the penalty after keeping in mind the circumstances of both cases. Therefore, we see no reason to interfere and revive the penalties on the assessee imposed by the assessment authority.
10. In the result both the appeals of the Revenue are dismissed.
Order pronounced on Tuesday , the 18th of September, 2012 at Chennai.
Sd/- Sd/- (N.S. SAINI) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, the 18.09.2012 Vm/- To: The assessee//A.O./CIT(A)/CIT/D.R.