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4. The assessee being aggrieved with said original assessment order dated March 23, 2006 preferred an appeal before the CIT (A). The CIT(A) vide his order dated 27.01.2009 rejected both the views i.e. PLI to be used OP/TC and application of financial results of the comparables for the immediately preceding two years. The CIT (A) reduced the adjustments made by the TPO from INR 5,77,33,054/- to INR 46,243,567. While doing so, the CIT(A) adopted TNMM as the most appropriate method but used OP/Sales (as against OP/TC adopted by the TPO and OP/CE adopted by the assessee in its TP Study) as the appropriate PLI of the same comparables selected in the TP Study, and using single year data for the FY 2002-03 to determine the arm's length margin which is the mandate of the law.

5. Aggrieved by the order of CIT(A) both the Assessee and Revenue filed appeals before the ITAT. The ITAT vide ITA No.1396/Del/2009 & ITA No. 1464(Del)/2009 vide order dated 21.10.2010 set aside the matter to the AO for fresh adjudication on additions made u/s 92CA(3) of the Act. The revenue in its appeal before Tribunal had challenged the action of the CIT(A) of adopting the PLI as the ratio operating profit to total sales (OP/Sales) which Tribunal had remanded back to TPO to decide afresh. In the fresh order passed in pursuant to the order of Tribunal, the TPO accepted OP/Sales as correct PLI for the present case to determine ALP of international transaction and not what has been contended in the original assessment and before the Tribunal by the Revenue.

The CIT(A)-XX in its order in the appeal of the appellant against the original assessment for the year in question expressly mentioned that the issue for determination in the present appeal was selection of appropriate PLI in the appellant's case. The CIT(A) in the same after the detailed discussion held that on the facts of the case, the appropriate PLI in the appellant's case should be Operating Profit by Sales (OP/Sales) and held that it would not be appropriate to use OP/CE (Assesee's PLI) and OP/TC (TPO's PLI) to compute the Arm's Length price of the International Transaction. The above view of then CIT(A) clearly shows that choice of PLI is a subjective exercise which can differ based on judicial precedents and appropriateness on the basis of the case and no fixed yardstick could be applied for selection of PLI. It is pertinent to add that the Revenue had not accepted the above finding of the then CIT(A) and challenged the same before the Hon'ble ITAT. The Hon'ble ITAT referred this issue to TPO to decide afresh. The TPO in remand proceedings accepts that Operating Profit by Sales (OP/Sales) is an appropriate PLI against its earlier stand taken in the original assessment and the ground before the Hon'ble ITAT. This also shows that issue of choice of PLI is debateable and based on subjectivity, and in no manner it could be termed as filling of inaccurate particular of income.

13. Aggrieved with such order of the CIT(A), the revenue is in appeal before the Tribunal.

14. We have considered the rival arguments made by both and perused the material available on record. We find the Assessing Officer levied penalty of Rs.48,22,410/- u/s 271 (1) (c) of the IT Act, 1961 on the addition of Rs.1,31,22,205/- finally determined on the basis direction of the Tribunal. We find the Ld. CIT (A) deleted the penalty so levied by the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraph. We find the addition finally sustained by the Assessing Officer / TPO is on account choice of PLI and use of current year data of comparables. So far as the choice of PLI is concerned we find the assessee had applied OP/CE as the appropriate profit level indicator as against OP/TC adopted by the TPO in the first round of litigation. We find the CIT(A) directed for adoption OP/ Sales as PLI which was set aside by the Tribunal to the TPO for adjudication of the issue afresh. We find the TPO in the remand proceedings adopted the OP/ Sales as the PLI. Thus, the issue in our opinion is a debatable one and the conduct of the assessee in preparing the TP study report on the basis of OP/CE cannot be termed as bonafide. We, therefore, agree with the findings of Ld. CIT(A) that the choice of the PLI in the present case is a contentions and debatable issue and therefore penalty u/s 271 (1) (c ) of the IT Act cannot be levied.