Income Tax Appellate Tribunal - Jaipur
Integrated Decisions & Systems (India) ... vs Department Of Income Tax on 24 February, 2016
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM
vk;dj vihy la-@ITA No. 127/JP/2013
fu/kZkj.k o"kZ@Assessment Year : 2006-07.
Assistant Commissioner of cuke M/s Integrated Decisions &
Income Tax, Vs. Systems (India) Pvt. Ltd.,
Circle-6, Jaipur. E-16, Gokhle Marg, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AAACI 7132 C
vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by : Shri B.K. Gupta (CIT)
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Rajendra Agarwal (C.A.)
lquokbZ dh rkjh[k@ Date of Hearing : 21/01/2016.
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 24/02/2016.
vkns'k@ ORDER
PER T.R. MEENA, A.M.
This is an appeal filed by the revenue against the order dated 07/11/2012 of the learned C.I.T.(A)-II Jaipur, for A.Y. 2006-07. The sole effective ground of appeal is as under:-
"On the facts and in the circumstances of the case, the ld CIT(A) has erred in deleting the penalty of Rs. 15,51,675/- imposed by U/s 271AA of the I.T. Act, 1961 without appreciating the fact that the assessee 2 ITA No. 127/JP/2013 ACIT Vs M/s Integrated Decisions & Systems (I) P Ltd.
failed to maintain the record as required U/s 92D of the I.T. Act read with rule 10D of the I.T. Rules."
2. The sole ground of the revenue's appeal is against deleting the penalty of Rs. 15,51,675/- imposed U/s 271AA of the Income Tax Act, 1961 (in short the Act). The assessee is engaged in the development and online support of software. The assessee filed its return for A.Y. 2006-07 on 17/10/2006 declaring total income of Rs. 5,56,720/-. The case was scrutinized U/s 143(3) of the Act. During the course of assessment proceedings, the ld Assessing Officer has held that the assessee had not used recent contemporary data for the purpose of benchmarking international transaction of the year in which the transaction took place, the comparables identified by the assessee were not considered valid. Accordingly, penalty U/s 271AA was initiated for default of the provisions/requirements prescribed by Rule 10D(1) of the Income Tax Rules, 1962 (in short the Rules) read with Section 92D of the Act. 2.1 Before imposing penalty U/s 271AA, the ld Assessing Officer gave reasonable opportunity of being heard. It was submitted by the assessee that penalty proceeding may be kept in abeyance as the assessee was going to file appeal against the assessment order before the Hon'ble ITAT. Again show cause notice was issued by the Assessing Officer on 3 ITA No. 127/JP/2013 ACIT Vs M/s Integrated Decisions & Systems (I) P Ltd.
13/5/2011 to impose the penalty under this Section and case was fixed for 20/5/2011. It was submitted by the assessee that it had filed appeal before the Hon'ble ITAT and requested to keep the penalty proceeding in abeyance. After considering the assessee's reply, the ld Assessing Officer held that the facts of maintenance of records as per provisions of Rule 10D of the Rules will remain unchanged from the status as observed during assessment proceedings. The appellate authority may decide the relevancy of kind of information but observation that the records relating to international transaction were not maintained as required under Rule 10D of the Rules will remain same. Therefore, penalty proceeding cannot be kept in abeyance till disposal of appeal by the Hon'ble ITAT. In order U/s 92CA(3) of the Act, The Transfer Pricing Officer (TPO) in para 4 has observed that the records of analysis performed to evaluate the comparability of uncontrolled transaction with the relevant international transactions was not filed. Further it has been observed that as per Annexure-5 of the T.P. study report, relating to the record of the analysis performed to evaluate comparability, the search process had been undertaking for the preceding year i.e. F.Y. 2004-05. Eighty companies had been selected as comparables by the assessee for F.Y. 2002-03, 2003-04 and 2004-05, which had been analysed. No fresh search for 4 ITA No. 127/JP/2013 ACIT Vs M/s Integrated Decisions & Systems (I) P Ltd.
comparables or analysis using contemporaneous data had been made by the assessee. Thus the assessee had not complied with the provisions of
(f),(g) and (h) of Rule 10D of the Rules, which has been reproduced by the Assessing Officer in penalty order. Besides this Sub-Rule (4) of Rule 10D required that the information and document specified under Sub- Rule (1)&(2) should as far as possible be contemporaneous and should exist latest by specified date referred to Clause (iv) of Section 29F of the Act. He further observed that the word "shall" in the main provisions of the Rule, makes it clear in certain terms that the use of the current F.Y. data i.e. the F.Y. in which international transaction was actually entered into is a mandatory requirement of the law in the comparability analysis under the transfer pricing regulations. The assessee failed to maintain records relating to international transactions as required under Rule 10D of the Rules is liable to impose penalty U/s 271AA of the Act. Thus, he imposed 2% penalty under this Section on value of each international transaction determined by the TPO at Rs. 15,51,675/-.
3. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had deleted the penalty by observing that the ld TPO required the appellant to undertake 5 ITA No. 127/JP/2013 ACIT Vs M/s Integrated Decisions & Systems (I) P Ltd.
search for comparables relevant for F.Y. 2005-06, which it did, using darabases updated as on 25th August, 2006. Out of 12 companies chosen by the TPO as comparable companies, 5 companies were from the set of nine comparable companies with database updated as on 11/1/2006 and 25/8/2006 identified by the appellant. The comparable companies has been narrated by the ld CIT(A) at page 10 of his order. The ld TPO did not find the necessary documents in support of the Arms Length Price (ALP) shown by the appellant. He directed the appellant to conduct search for comparables relevant to F.Y. 2005-06. The appellant did during TPO proceedings and provided nine company cases as comparables. However, these nine companies were the same companies which the appellant had used for FY 2004-05. For providing the information required by the TPO the appellant updated margins for the same companies, stating that the updates were dated 25/8/2006. The ld TPO used five companies out of nine provided by the appellant during TPO proceedings for determining the ALP. The TPO's objection was that the appellant utilized the results of the same process as had been undertaken by it in the FY 2004-05 and provided the updated margins for the same comparables and therefore he recommended penalty proceeding U/s 271AA. The ld Assessing Officer imposed penalty U/s 6 ITA No. 127/JP/2013 ACIT Vs M/s Integrated Decisions & Systems (I) P Ltd.
271AA on the ALP determined by the TPO and taken in the assessment order i.e. on Rs. 7,75,83,771/- but this ALP has not been upheld by the Hon'ble ITAT vide order dated 31/10/2011 in the case of appellant on the ground that the difference in the ALP declared by the appellant and that determined by the department was less than 5% so no upward adjustment was warranted. The appellant had furnished required documents/information as per Rule 10D(4), as far as possible, be contemporaneous and should exist latest by the specified date referred to in clause (iv) of Section 92F. It is undisputed that the comparables were updated as on 25/8/2006, which is before the due date of filing of return i.e. 31/10/2006. As per Section 92D(3), the ld Assessing Officer may in the course of proceedings direct such person who has entered into an international transaction to furnish any information and document in respect thereof, as may be prescribed under sub-section (1) within a period of 30 days from the date of receipt of a notice issued in this regard. The ld TPO asked the appellant to undertake search for comparables relevant for F.Y. 2005-06, which the appellant did. The TPO used the comparables provided by the appellant. The argument of the appellant is also not disputed by the Assessing Officer that similar service 7 ITA No. 127/JP/2013 ACIT Vs M/s Integrated Decisions & Systems (I) P Ltd.
rendered to the AE during the year under consideration, which has been rendered in F.Y. 2004-05. Accordingly she deleted the penalty.
4. Now the revenue is in appeal before us. The ld DR has vehemently supported the order of the Assessing Officer. At the outset, the ld AR of the assessee has reiterated the arguments made before the ld CIT(A) and further argued that the service rendered to the AE by the assessee was same as provided in A.Y. 2004-05. The comparables were updated before due date of filing of return. The assessee had submitted nine comparables before the ld TPO out of which he used five comparables for deciding ALP of international transactions. He further relied on the decision in the case of DCIT Vs M/s Bebo Technologies Pvt. Ltd. ITA No. 532/Chd/2010 dated 26/08/2013 wherein it has been held by the Hon'ble Tribunal that the international transaction disclosed by the assessee has not found to be ALP and no adjustment is required to be made as held by the Tribunal. Thus, there is no merit in the levy of penalty U/s 271AA of the Act. He further relied on the following case laws:-
(i) ACIT Vs. M/s Smith and Nephew Healthcare (P) Ltd. ITA No. 5779/Mum/2007 dated 09th November, 2011.
(ii) ITO(OSD) Vs. M/s PPN Power Generating Company Pvt. Ltd.ITA No. 774/Mds/2007 dated 21st October, 2011. 8 ITA No. 127/JP/2013
ACIT Vs M/s Integrated Decisions & Systems (I) P Ltd.
(iii) ACIT Vs. M/s Global One India Pvt. Ltd. ITA Nos. 5164 & 5165/Del/2011 dated 17th February, 2012.
(iv) Tussor Machine Tools India (P) Ltd. Vs. ACIT ITA No. 1270/Mds/2012 dated 14th February, 2013.
(v) Cargill India (P) Ltd. Vs. DCIT ITA No. 1844/Del/2007 order dated 15th February, 2008.
He further argued that perusal of Rule 10D of the Rules are voluminous and various clauses are prescribed under Sub-Rule(1), therefore, and all such clauses are not applicable on the given case. Therefore, he prayed to uphold the order of the ld CIT(A).
5. We have heard the rival contentions of both the parties and perused the material available on the record. The assessee disclosed international transaction made with AE. The Tribunal had decided that no upward adjustment is required in the ALP disclosed by the assessee. Whatever information asked to supply by the TPO had been furnished before him i.e. nine comparable companies data were furnished out of which the ld TPO had selected five companies. The ld DR had not controverted that the assessee had not provided similar services during the year under consideration as provided in F.Y 2004-05, therefore, comparable companies applied for F.Y. 2004-05 are relevant to the 9 ITA No. 127/JP/2013 ACIT Vs M/s Integrated Decisions & Systems (I) P Ltd.
transactions made during the F.Y. 2005-06, which was also updated by the appellant. Accordingly, we uphold the order of the ld CIT(A).
6. In the result, the revenue's appeal is dismissed.
Order pronounced in the open court on 24/02/2016.
Sd/- Sd/-
¼yfyr dqekj½ ¼Vh-vkj-ehuk½
(Laliet Kumar) (T.R. Meena)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur
fnukad@Dated:- 24th February,2016
Ranjan*
vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- The ACIT, Circle-6, Jaipur.
2. izR;FkhZ@ The Respondent- M/s Integrated Decisions & Systems (India)Pvt. Ltd., Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No.127/JP/2013) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar