Income Tax Appellate Tribunal - Ahmedabad
India Medtronic Pvt. Ltd.,, Baroda vs Assessee on 12 April, 2006
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "B"
(BEFORE S/SHRI T K SHARMA AND N S SAINI)
ITA No.1608/Ahd/2006
(Assessment Year:- 2003-04)
M/s India Medtronic Pvt. V/s The Assistant Commissioner
Ltd., 919/2, GIDC, of Income-tax, Circle-1(2),
Makarpura, Baroda Baroda
[Appellant] [Respondent]
Appellant by :- Shri S N Soparkar Senior Advocate with
Shri Yogesh Shah
Respondent by:- Shri B S Gahlot, CIT - DR
O R D E R
Per N S Saini (Accountant Member): This appeal has been filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals) dated 12-04-2006 for the Assessment Year 2003-04 raising the following effective grounds of appeal:
1 The Learned Commissioner of Income-tax (Appeals)-I, Baroda has erred in not holding the notice issued by the Learned Assessing Officer u/s 271G of Income-tax Act, 1961 as bad in law and hence void ab initio and consequently, the order dated 15-12-2005 passed by him also to be bad in law.
2 Without prejudice to Ground No.1 above, the Learned Commissioner of Income-tax (Appeals)-I, Baroda has erred in confirming levy of penalty of Rs.1,86,34,316/- u/s 271G of Income-
tax Act, 1961.
2 The Learned Commissioner of Income-tax (Appeals) has decided the above grounds of appeal as under:
2"3 The appellant-company is engaged in the trading of medical equipments. During the year the appellant-company entered into a number of international transactions. As per section 92E Income-tax Act, 1961 [the "Act" for short] every person who enters into international transactions shall obtain report from an Accountant and furnish the same on or before the specified date in the prescribed form duly signed by the Accountant. As per section 92D(3) in respect of any such person who has entered into international transactions, the Learned Assessing Officer may require such person to furnish any information or document as prescribed in section 92D(1) within a period of 30 days from the date of issue of the notice. In this case, the Learned Assessing Officer required the appellant to furnish report in form 3CEB vide the notice dated 19th September, 2005. The report in form 3CEB pertains to the information in respect of international transactions. Subsequently details of international transactions were also called for on 24th October, 2005 vide notice u/s 142(1). This notice was received on 26th October, 2005. At Sr. No.18 of the notice, the appellant was required to furnish details of international transactions entered into. The details called for were name and address of the parties, nature of transactions, value of transactions, arms' length price and method adopted to compute the arms' length pricing giving the basis for adopting the method and parameters taken in this respect.
4 It was the second time details of international transactions had been called for. The appellant -company requested for adjournment for a week by filing a letter and thereafter filed some papers on 22nd November, 2005. These papers contained neither the names and nor the addresses of the parties concerned. Subsequently, on 14th December, 2005 a one page detail giving name of the party, address, amount of transaction and nature of transaction was submitted. This detail also was not complete as all the items called for by notice u/s 142(1) issued on 19th September, 2005 and 24th October, 2005 had not been submitted. Section 92D(3) specifies that any details relating to international transactions can be called for and they would have to be submitted within 30 days.
5 In this regard the appellant 's representative has taken the plea that in the order the Learned Assessing Officer has levied a penalty of Rs.1,86,34,316/- on the ground that the appellant has failed to furnish information called for by notice dated 24th October, 2005. It is stated that the notice dated 24th October, 2005 which was received by the appellant on 26th October, 2005 specified that the details required were to be submitted before the AO on 8th November, 2005. The appellant further submits that vide letter dated 7th November, 2005 they have requested adjournment and adjournment was granted till 11th November, 2005.
6 Referring to the impugned order the appellant 's representative seeks to point out the penalty of Rs.1.86 crores has been levied on the ground that there was a failure to furnish information requested by item No.18 of notice u/s 142(1) dated 24th October, 2005 3 without any reasonable cause. The appellant 's representative has also pointed out that the operative phrase in section 92D(3) is within a period of 30 days from the date of receipt of a notice. A comparison has been carried out with notice u/s 148 wherein the operative words are "within such period (**) as may be specified in the notice". The words in the brackets were "not being less than 30 days" which have been omitted by the Finance (2) Act, 1996 with retrospective effect from 1-4-1989. By carrying out this comparison it is the contention of the appellant 's representative that the notice is bad in law hence void ab initio, in vie of the fact that the Learned Assessing Officer has to give time of 30 days whereas only 14 day's time was granted by him. It is further submitted that the phrase "within such period as may be specified in the notice"
appearing in section 148 allows the Learned Assessing Officer flexibility in respect of giving time to the appellant to furnish his return of income. In other words he can given day's times or month's time. The appellant 's representative further contends that in context of section 92D(3), the Act does not grant such flexibility to the Learned Assessing Officer and he should have asked for the details to be provided within a period of 30 days from the date of receipt of the notice. It is contended that he cannot allow less than thirty days in the notice. Reliance has been placed on the decision in the case of CIT vs. Ekbal & Co. 13 ITR 154 (Bom) wherein it was held that section 22(2) of the Indian Income-tax Act which provides that a notice may be served on an appellant requiring him to furnish a return of his income "within such period, not being less than thirty days" gives the appellant an interval of thirty clear days from the date of the receipt of the notice to the date on which return is to be furnished. Under section 22(2) of the I.T. Act, 1922 a notice requiring an appellant to furnish a return of his income "within thirty days" of the receipt thereof is not a valid notice within the meaning of the section 22(2). Further comment in the judgment from Stone C.J. - was that whereas "within thirty days" is within two points of time, one at which the period begins and the other at which it expires, "not less than thirty days" is outside these two points of time. It is, therefore, pointed out that the court has held in no uncertain terms that the expression "within thirty days" and "not less than thirty days" are two different things. It is further submitted that Bombay High Court in the aforesaid case held to the effect that when the Act envisaged giving notice of not less than thirty days and if notice is given to furnish the return within thirty days, the same is not a valid notice. Applying the same rationale to this case the appellant submits that when section 92D of the Act prescribes that the details of international transactions are to be provided "within a period of thirty days" and when the Learned Assessing Officer asks to provide the same in fourteen days, the notice calling for the information would certainly not meet with the requirement of the section and thereby rendering the notice to be not a valid one. Reliance has also been placed on Gujarat High Court decision in the case of CIT vs. Nanalal Tribhovandas (1975) 100 ITR 734 wherein it has been held that "under section 34 read with the proviso to section 22(2) the notice in connection with the reassessment proceedings must call upon the person concerned to 4 file a return within such period not being less than thirty days. Therefore, the notices which were received by the appellant on April 1, 1954, calling upon the appellant to file the returns on or before April 15, 1954, were not in accordance with law. The validity of the notices under section 34 goes to the very basis of the jurisdiction of the Income-tax Officer to entertain reassessment proceedings under section 34, and in the absence of such notices, the Income-tax Officer has no jurisdiction to initiate reassessment proceedings. If in fact the Income-tax Officer had no jurisdiction to initiate reassessment proceedings or to pass any order in reassessment proceedings, then the fact that this particular contention was not urged at an earlier stage was beside the point. A direction cannot be given by the Appellate Assistant Commissioner under section 31 which will go to the extent of conferring jurisdiction on the Income-tax Officer where he is not lawfully seized of jurisdiction. Therefore, the Appellate Assistant Commissioner was competent to entertain the appellant 's objection in regard to the validity of the notices under section 34. The assessments under section 34 were bad in law."
"7 I have considered the submissions made in respect of this ground and also heard the AO on the subject and considered the rival submissions. The phrase applied in the section 22(2) of the Indian Income-tax Act, 1922 specifies furnishing of return "within such period not being less than thirty days". The phrase in section 148 of the Income-tax Act, 1961 specifies that the return of income is to be filed "within such period as may be specified in the notice". In this section the earlier compulsion placed upon the AO by the words "not being less than thirty days" has been removed w.e.f. 1-4- 1989. Lastly the phrase applied in section 92D is "within a period of 30 days from the date of receipt of notice". As such there is a clear indication that the AO is to call for information u/s 92D(3) allowing a period of less than thirty days as has been indicated by the Hon'ble Bombay High Court in the case of CIT vs. Ekbal & Co. (supra). The phrase within a period of thirty days indicates a point of time within the two points of time whereas the phrase not being less than thirty days indicates of point of time outside the two points of time. The intention of the legislature is clear that the information called for is to be furnished within a short period of time. Further the proviso to section 92D(3) strengthened this view that the legislative intent was that the AO should obtain the information in the shortest possible time. The proviso says that the AO may on an application made by the appellant , extent the period of thirty days by a further period not exceeding 30 days. The whole tone and tenor of the section is to obtain information within the shortest possible time. Thereby even the AO is not empowered to give the appellant unlimited or long period of adjournments for furnishing the details of the international transactions. Further it is seen that the wording of section 22(2) of the Income-tax Act, 1922 was "within the such period, not being less than thirty days". Here, there was no flexibility with the AO to specify any time limit less than thirty days whereas in section 92D(3) the words used are "within a period of thirty days from date of receipt of the notice". It is, therefore, clear that the AO is 5 empowered to specify any time span within thirty days. There is a clear omission of the phrase "not being less than thirty days". In view of the above, it is held that the reliance placed on the case law does not help the appellant . Since the AO has specified a period within a period of thirty days, the notice is held to be valid."
8 Even if for a moment the appellant's contention is accepted that the period mentioned in the notice is not exactly as per the provisions of section 92D(3), it is clearly a case that falls under the ambit of section 292B. No notice can be held to be invalid if such notice is in substance and effect in conformity with or according to the intent and purpose of this Act. The intention of inserting this section by Taxation Laws (Amendment) Act, 1975 w.e.f. 1-10-1975 was to provide against purely technical objection without substance coming in the way of the validity of the assessment proceedings etc. (Circular No.179 dated 30th September, 1975). This "defect", if at all it is to be held as such, is totally falling with the scope of section 292B. It was held in the case of CIT vs. K Saraswathi Ammal (1984) 146 ITR 486 (Mad) that a composite notice asking the appellant to pay the outstanding advance tax and stating that on failure to pay, the appellant has to show cause why penalty under section 221(1) should not be imposed. It was held that having regard to the purport of the notice and keeping in view the provisions of section 292B, the composite notice was a valid one.
9 Further as mentioned above the proviso to section 92D(3) clearly indicates the legislative intent is to provide as short a time as possible thereby restricting the AO from giving more than thirty days extra time even on an application by the appellant , whatever be the circumstances. Since the notice issued by AO is in substance and effect in conformity with the intent and purpose of the Act it is held to be valid."
10 The second ground taken by the appellant is without prejudice to the first is that, the Learned Assessing Officer has levied a penalty of Rs.1,86,34,316/- by not considering the details submitted. It is submitted that notwithstanding the issuance of notice allowing lesser period than what is granted under the Act, the Learned Assessing Officer ought to have appreciated that the details of international transactions have been submitted to him within a period of thirty days allowed by the statute. Further it is submitted that the Learned Assessing Officer ought to have considered the request to grant time as requested in the letter of 18th November, 2005 referred to by the Learned Assessing Officer in his order, whereby a request to grant a week's time was made on account of the fact that the person responsible for collating the information regarding international transactions had resumed the work after Diwali vacations on Monday i.e. 14th November, 2005. It is also submitted that this being the festive season many employees tend to go on leave and, therefore, the appellant was prevented by reasonable cause in not being able to furnish the information called for within the stipulated time. It is further stated that 6 the information was furnished on 22nd November, 2005. The appellant 's representative has also placed reliance in the case of Hindustan Steel Ltd. v. State of Orissa, 83 ITR 26 wherein it is held that the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.
11 Further reliance has also been placed on Gujarat High Court in the case of CIT vs. Harsiddh Construction Pvt. Ltd. 244 ITR 417 wherein it has been held that penalty will not be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed the authority competent to impose the penalty will be justified in refusing to impose penalty when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.
"12 I have gone through the rival submissions made, the Assessing Officer has specifically stated that the appellant failed to furnish the information required in respect of international transactions within the specified date. A perusal of the records reveals that the Assessing Officer had first called for the details regarding international transactions when he issued a notice u/s 142(1) dated 19th September, 2005 to furnish the Accountant's report which is prepared in Form No.3CEB. There was, however, no compliance for which no doubt the appellant has been separately penalized. However, it is as early as 19th September, 2005 that the details relating to international transactions were called for. Subsequently, a notice u/s 142(1) dated 24th October, 2005 also called for the details regarding international transactions. According to the appellant , compliance to this notice was made on 22nd November, 2005. On perusal of the records it is seen that the information supplied on 22nd November, 2005 is neither complete as per the requirement specified by the Assessing Officer nor is it in a readable form. Even the name and address of the parties concerned (which is the basic and primary information required) have not been given. Subsequently, on 14th December, 2005, name & address of the parties and amount of transaction has been given but again the information is incomplete in so far as it is totally silent on the point of arm's length price and basis of adopting the same. Therefore, the information called for on 19th September, 2005 and subsequently called for on 24th October, 2005 has not been fully submitted even on 14th December, 2005. The period ranges over almost three months, the appellant has not been able to show reasonable cause even before me as to why the information could not be supplied when the period afforded under the section is within thirty days. Further, it is seen that the Assessing Officer has levied the penalty much beyond the period of thirty days and the excuse 7 put forth by the appellant's representative that the staff is away on holiday due to Diwali festival cannot be accepted as a reasonable cause preventing it from fulfilling the statutory obligations even as late as 14-12-2005, i.e. a month and a half after Diwali.
13 It has been held in the decision of Azadi Bachao Andolan v. Union of India, 252 ITR 471 that the word 'reasonable' has in law the prima facie meaning of reasonable with regard to those circumstances of which the actor, called on to act reasonably, knows or ought to know. Reasonable cause can be reasonably said to be a cause which prevents a man of ordinary prudence and average intelligence, acting under normal circumstances, without negligence or inaction or want of bona fides. Subsequently by another decision of the Hon'ble Delhi High Court in Woodward Governors India (P) Ltd., reported in 253 ITR 745 the definition of "reasonable cause" has been given as below:
"'Reasonable cause' as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. It can be described as probable cause. It means an honest belief founded upon reasonable grounds, of the existence of a state of circumstances, which assuming them to be true, would reasonably lead any ordinary prudent and cautious man, placed in the position of the person concerned, to come to the conclusion that the same was the right thing to do. The cause shown has to be considered and only if it is found to be frivolous, without substance or foundation, the prescribed consequences follows."
14 If the tests inherent in these judgments regarding "reasonable cause" were to be applied the appellant would be found to be wanting to the extent that the excuse of the festival was not a valid one beyond the 5th November, 2005. The notice had been received by 26th October, 2005. It is obvious that it was not taken seriously, there appears to have been no action in this regard till the 14th November, 2005. Some uncoordinated incomplete information is filed on 22nd November, 2005, further information is filed on 14th December, 2005, which again is incomplete. The inordinately long time taken in filing incomplete details has to be further seen in light of the fact that the assessment would become barred by limitation on 31st March, 2005 of which the appellant was well aware. The details which are claimed to have been submitted on 22nd November, 2005 simply consists of the down load of the entire international transactions carried out. The details have not been submitted in a readable or analyzable form apart from the fact that they are incomplete. It is, therefore, held that there was inaction and negligence on the part of the appellant in complying with the notices of the Assessing Officer. Therefore, penalty has been correctly imposed and is upheld. Before me the grounds are also taken that the penalty is excessive considering the default.
8However, in that regard the statute does not allow any discretion to the Assessing Officer regarding the percentage. It is clearly mentioned that 2% of the transaction is the amount of penalty to be levied."
3 The Learned Authorised Representative of the assessee during the course of hearing has filed the following submissions:
No Jurisdiction to AO after reference to TPO:
- Reference to TPO made on 20-10-05 - Notice requiring information issued on 24-10-05 - AO has no jurisdiction to call for information in relation to
international transactions when matter is alread y referred to TPO - section 92CA.
No Notice u/s 92D(3):
- 271G provides "... fails to furnish any such information or document as required by sub-section (3) of section 92D, the AO ..."
- No notice has been issued u/s 92D(3) - Information was called for in notice u/s 142(1) - Penalty u/s 271G levied for so called 'non compliance' of
notice u/s 142(1) [Refer last para levying penalty in Penalt y Order]
- Penalty, if any, for non-compliance with notice u/s 142(1) can at most be u/s 271(1)(b) Invalid Notice (for want of giving 30 days time):
- 92D(3) requires submission of details within a period of thirty days
- Notice required details within 13 days (i.e. 26-10-05 to 08-11-
05) CIT vs. Ekbal & Co. 13 ITR 154 (Bom) CIT vs. Nanalal Tribhovandas 100 ITR 734 (Guj)
- The penalty notice did not mention specific details required 9 Cargil India (P) Ltd. vs. DCIT 110 ITD 616 (Del) Complete details were submitted within 30 days:
- Complete details were submitted on 22-11-05 i.e. within 30 days
- Penalty order was issued on 15-12-06, however, the AO did not even mention that the details have been furnished on 22- 11-05
- It was only before CIT(A), AO broadly stated that information was not relevant
- Nothing on record to show that the information was 'irrelevant'
- No finding in the Assessment Order that in view of non-
availability of certain information, he had difficulty in carrying out assessment
- Not resorting to section 144 means he is satisfied with whatever has been furnished to the AO
- Especially when total international transactions were almost 70% of total turnover of the appellant
- TPO has specifically made comment that he is satisfied with the documents
- If it does not have any bearing on the assessment especiall y dealing with new law, no penalt y can be levied.
Reasonable cause- section 273B:
- Bonafide reasons for delay in submitting the details - no harsh penalty be levied for technical default particularly when TPO is satisfied with the details and passed the order. CIT vs. Harsiddh Construction (P) Ltd. 244 ITR 417 (Guj) Woodward Governors (I) P. Ltd. vs. CIT 253 ITR 745 (Del)
4 The Learned Departmental Representative Shri B S Gahlot, CIT - DR submitted that vide letter dated 24-10-2005 bearing No. BRD/Cir..1(2)/142(1)/IMPL/2005-06 vide item No.18 10 the assessee was required to furnish the details of international transactions (as per provisions of the Income-tax Act) entered into viz. name and address of the parties, nature of transactions, value of transactions, arms' length price and method adopted to compute the arms' length price giving the basis for adopting the method and parameters taken in this respect. He submitted that the compliance to the notice was made on 22 n d November, 2005 when also the information supplied was neither complete as per the requirements specified by the Learned Assessing Officer nor it was in a readable form. He further submitted that subsequently on 14 t h December, 2005 name and addresses of the parties and amount of transaction has been given but the information was incomplete in so far as it was totall y silent on the point of arms' length price and basis of adopting the same. While referring to the order of penalt y u/s 271G dated 15- 12-2005 the Learned Departmental Representative submitted that the assessee had requested for adjournment on 07-11-2005 and the hearing was adjourned to 11-11-2005. Even on that date the assessee failed to compl y with the requirements of information vide item No.18 of notice u/s 142(1) dated 24-10-2005 in respect of international transactions and also failed to submit the report in Form No.3CEB u/s 92D of the Act.
5 The Learned Departmental Representative further referred to pages 8 and 9 of the paper book where letter of the assessee dated 22-11-2005 is filed. He pointed out that at point 13 of the letter the assessee has stated that the details of international transactions (as per provisions of the Income-tax Act), are enclosed herewith marked as Annexure-H. He submitted that even this information which was supplied was not complete as per the requirements of letter dated 24-10-2005 issued u/s 142(1) of the Act by the Learned Assessing Officer.
116 The Learned Departmental Representative then referred to section 92C(3) of the Act and pointed out that the same provided that where during the course of any proceeding of assessment of Income-tax, Assessing Officer is, on the basis of material or information or document in his possession, of the opinion that -
(a). The price charged or paid in an international transaction has not been determined in accordance with sub-sections (1) and or
(b). any information and document relating to an international transaction have not been kept and maintained by the appellant in accordance with the provisions contained in sub-section (1) of section 92D and the rules made in this behalf; or
(c). the information or data used in computation of the arms' length price is not reliable or correct; or
(d). the appellant has failed to furnish, within the specified time, any information or document which he was required to furnish by a notice issued under sub-section (3) of section 92D the AO can proceed to determine the arms' length price in relation to the said international transaction in accordance with sub-section (1) and (2) on the basis of such material or information or document available with him.
Provided that an opportunity shall be given b y the AO by serving a notice calling upon the appellant to show cause, on the date and time to be specified in the notice, why the arms' length price should not be so determined on the basis of material or information or document in the possession of the AO.
Further sub-section (4) of section 92C provides that where an arms' length price is determined by the AO under sub-section (3) the AO may compute the total income of the appellant having regard to the arms' length price so determined.
127 Further, he referred to section 92CA and submitted that the said section provides for reference to the Transfer Pricing Officer for the purpose of determination of arms' length price of the international transactions undertaken by the appellant .
8 Further, he referred to section 92D sub-section (1) and submitted that the said sub-section provides for maintenance of information and documents as may be prescribed. He submitted that Rule 10D of the Income-tax Rules, 1962 provides for the information and documents to be kept and maintained u/s 92D of the Act.
9 Further, the Learned Departmental Representative referred to section 92E of the Act and submitted that the said section provides for submitting report of an Accountant by the assessee entering into international transactions.
10 Further, the Learned Departmental Representative referred to section 92F and submitted that the said section provides for the definitions of certain terms relevant to the computation of arms' length price etc. 11 It was further submitted by the Learned Departmental Representative that the corresponding section to section 92D for levy of penalty is section 271G.
12 He also submitted that the word "document" in section 92D(3) also includes the report of the Accountant u/s 92E of the Act.
13 Further, relying on the order of the Learned Commissioner of Income-tax (Appeals) at page-7 para-7 he argued and submitted that the phrase "within a period of 30 days"
mentioned in section 92D(3) indicates a point of time within the two points of time whereas the phrase "not being less than 30 days"
indicates of point of time outside the two points of time. The 13 intention of the legislature is clear that the information called for is to be furnished within a short period of time. Further proviso to section 92D(3) strengthened this view that the legislative intention was that the AO should obtain the information in the shortest possible time. The proviso says that the AO may on an application made by the assessee, extend the period of 30 days by a further period not exceeding 30 days. The whole tone and tenure of the section is to obtain information within the shortest possible time. Thereby even the AO is not empowered to give the assessee unlimited or long period of adjournments for furnishing the details of the international transactions. It was therefore his submission that the notice issued by the AO on 24-10-2005 which was served on the appellant on 26-10-2005 requiring to file the information on 08-11- 2005 i.e. within 15 days of the receipt of notice was a valid notice and the contention of the appellant that the notice was invalid as section 92D(3) requires granting of 30 days' time to the appellant for furnishing the required information is not correct.
14 Further, it was the argument of the Learned Departmental Representative that the AO was not bound to accept the arms' length price as determined by the Transfer Pricing Officer and could make variation in the price as determined by the TPO. Therefore, the argument of the assessee that since the matter was referred to the TPO for his determination of arms' length price of the international transaction entered into by the assessee on 20-10-2005, therefore, the issue of notice u/s 142(1) on 24-10-2005 by the AO requiring the assessee to furnish the details with regard to the international transaction of the assessee was without jurisdiction, is not correct.
15 Hence it was his prayer that the order of the Learned Commissioner of Income-tax (Appeals) should be confirmed and the appeal of the assessee should be dismissed.
1416 We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. In the instant case the Learned Assessing Officer levied the penalt y of Rs.186,34,316/- u/s 271G of the Act for default in compliance with the provisions of section 92D(3) of the Act. The operative portion of the order of the Learned Assessing Officer reads as under:-
"In view of above facts it is clear that the assessee failed to furnish the information required by item No.18 of the Notice u/s 142(1) dated 24-10-2005 in respect of international transaction, within the specified date, as required by sub- section (3) of section 92D of the Act, without any reasonable cause. I therefore consider it a fit case for levy of penalty u/s 271G of the I.T. Act. A penalt y of Rs.1,86,34,316/- is therefore levied u/s 271G of the Act (i.e. 2% of the value of the international transaction amounting to Rs.93,17,15,842/- as per submission dated 14-12-2005).
17 On appeal, the Learned Commissioner of Income-tax (Appeals) confirmed the above lev y of penalty.
18 The main argument of the Learned Authorised Representative of the assessee were as under:-
No Jurisdiction to AO after reference to TPO:
- Reference to TPO made on 20-10-05 - Notice requiring information issued on 24-10-05 - AO has no jurisdiction to call for information in relation to
international transactions when matter is alread y referred to TPO - section 92CA.
No Notice u/s 92D(3):
- 271G provides "... fails to furnish any such information or document as required by sub-section (3) of section 92D, the AO ..."
- No notice has been issued u/s 92D(3)
15
- Information was called for in notice u/s 142(1)
- Penalty u/s 271G levied for so called 'non compliance' of
notice u/s 142(1) [Refer last para levying penalty in Penalt y Order]
- Penalty, if any, for non-compliance with notice u/s 142(1) can at most be u/s 271(1)(b) Invalid Notice (for want of giving 30 days time):
- 92D(3) requires submission of details within a period of thirty days
- Notice required details within 13 days (i.e. 26-10-05 to 08-11-
05) CIT vs. Ekbal & Co. 13 ITR 154 (Bom) CIT vs. Nanalal Tribhovandas 100 ITR 734 (Guj)
- The penalty notice did not mention specific details required Cargil India (P) Ltd. vs. DCIT 110 ITD 616 (Del) Complete details were submitted within 30 days:
- Complete details were submitted on 22-11-05 i.e. within 30 days
- Penalty order was issued on 15-12-06, however, the AO did not even mention that the details have been furnished on 22- 11-05
- It was only before CIT(A), AO broadly stated that information was not relevant
- Nothing on record to show that the information was 'irrelevant'
- No finding in the Assessment Order that in view of non-
availability of certain information, he had difficulty in carrying out assessment
- Not resorting to section 144 means he is satisfied with whatever has been furnished to the AO 16
- Especially when total international transactions were almost 70% of total turnover of the appellant
- TPO has specifically made comment that he is satisfied with the documents
- If it does not have any bearing on the assessment especiall y dealing with new law, no penalt y can be levied.
Reasonable cause- section 273B:
- Bonafide reasons for delay in submitting the details - no harsh penalty be levied for technical default particularly when TPO is satisfied with the details and passed the order. CIT vs. Harsiddh Construction (P) Ltd. 244 ITR 417 (Guj) Woodward Governors (I) P. Ltd. vs. CIT 253 ITR 745 (Del)
19 The Learned Departmental Representative vehemently supported the orders of the lower authorities.
20 We find that in the instant case the TPO has determined arms' length price u/s 92CA(3) of the Act vide order dated 28-02- 2006. A perusal of the said order shows that the reference u/s 92CA(1) was made to him by the Learned Assessing Officer on 20- 10-2005. The assessee's contention that after such reference on 20- 10-2005 in the assessee's case arms' length price was to be determined by the TPO, and not by the Learned Assessing Officer. Thus, powers under the provisions of section 92D(3) after 20-10- 2005 was exerciseable by the TPO and not b y the Learned Assessing Officer. Thus, the notice issued u/s 142(1) on 24-10-2005 cannot be considered as a notice issued under section 92D(3) of the Act and for any default in compliance with such notice issued u/s 142(1), penalt y u/s 271G is not legally exigible. We find that the Learned Departmental Representative could not controvert the above submissions of the assessee. In our considered opinion, law always denounces multiplicity of proceedings. It cannot be assumed that law permits to parallel proceedings simultaneously in respect of same cause of action i.e. the determination of arms' length price for the 17 purpose of making of assessment under the Act. Further, it is observed that section 92D(3) reads as follows:
"(3) The AO or the Commissioner (Appeals) may, in the course of any proceeding under this Act, require any person who has entered into an international transaction to furnish any information or document in respect thereof, as may be prescribed under sub-section (1), within a period of thirty days from the date of receipt of a notice issued in this regard.
Provided that the AO or the Commissioner (Appeals) may, on an application made by such person, extend the period of thirty days by a further period not exceeding thirty days.
21 Thus, a perusal of the above provisions shows that the notice which is issued u/s 92D(3) should require to furnish the information or document within a period of thirty days from the date of receipt of such notice. Thus, it is crystal clear from the reading of proviso to that sub-section which provides that on an application made by the appellant period of thirty days can be extended by a further period not exceeding thirty days. In view of the above also, we find force in the contention of the Learned Authorised Representative of the assessee that the notice dated 24-10-2005 issued by the Learned Assessing Officer u/s 142(1) requiring compliance on 08-11-2005 cannot be treated as a notice referred under section 92D(3) of the Act. It is further observed in the instant case it is not in dispute that the appellant has furnished all the information or document as desired by the TPO and the TPO has in fact calculated the arms' length price of the international transactions entered into by the assessee. Therefore, default, if any, was on the part of the assessee in respect of furnishing of information in respect of international transaction, the same was only a technical default. The Learned Departmental Representative contended before us that the assessee has made default in compliance with the notices which were also issued by the Learned Assessing Officer prior to notice issued on 24-10-2005 and therefore the levy 18 of penalty u/s 271G was justified. We find that the penalty u/s 271G of the Act was levied by the Learned Assessing Officer for default in compliance with the notice dated 24-10-2005 and not in respect of default, if any, in compliance with notices issued prior to that date. Thus, we find that the Learned Departmental Representative is trying to expend the scope of the subject matter of appeal which is legally not permissible and the Learned Departmental Representative is not allowed to improve upon the order of the Learned Assessing Officer. In view of the facts of the case, in our considered opinion, levy of penalty u/s 271G of the Act for default in compliance with notice dated 24-10-2005 issued u/s 142(1) is not exigible. We, therefore, delete the levy of penalty u/s 271G of the Act of Rs.1,86,34,316/-. Thus, the grounds of appeal of the assessee are allowed.
22 In the result, the appeal filed by the assessee is allowed Order pronounced in the open court today on 13-01-2010 Sd/- Sd/-
(T K SHARMA) (N S SAINI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date : 13-01-2010
Copy of the order forwarded to :
1. M/s India Medtronic Pvt. Ltd., 919/2, GIDC, Makarpura, Baroda
2. The ACIT, Circle-1(2), Baroda
3. CIT concerned
4. CIT(A)-I, Baroda
5. The DR, ITAT, Ahmedabad
6. Guard File BY ORDER Deput y Registrar Assistant Registrar ITAT, AHMEDABA