SITEL INDIA LTD, MUMBAI v. DCIT RG 8(3), MUMBAI

ITA 1675/MUM/2013 | 2006-2007
Pronouncement Date: 08-11-2019 | Result: Allowed

Appeal Details

RSA Number 167519914 RSA 2013
Assessee PAN AAFCS1297M
Bench Mumbai
Appeal Number ITA 1675/MUM/2013
Duration Of Justice 6 year(s) 8 month(s) 7 day(s)
Appellant SITEL INDIA LTD, MUMBAI
Respondent DCIT RG 8(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 08-11-2019
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 08-11-2019
Last Hearing Date 13-03-2019
First Hearing Date 13-03-2019
Assessment Year 2006-2007
Appeal Filed On 01-03-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI SHAMIM YAHYA (AM) & SHRI PAWAN SINGH (J M) ITA NO. 1675/MUM/2013 (ASSESSMENT YEAR: 2006-07) SITEL INDIA LTD. 501 WING A &B BOOMERANG CHANDIVALI FARM ROAD ANDHERI (E) MUMBAI-400 072 PAN : AAFCS1297M VS DCIT RANGE-8(3) ROOM NO. 217 2 ND FLOOR AAYAKAR BHAVAN M.K. MARG MUMBAI-400020 APPELLANT RESPONDEDNT APPELLANT BY SHRI KOMAL SAWHNEY / SHRI ABHISHEK TILAK (ARS) RE SPONDENT BY SHRI AMIT PRATAP SINGH ( SR. DR) DATE OF HEARING 03-10-2019 DATE OF PRONOUNCEMENT 08-11-2019 O R D E R PER PAWAN SINGH JM : 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)-15 MUMBAI DATED 19-12-2012 FOR THE ASSESSME NT YEAR 2006- 07. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1) THE C.I.T. (A) ERRED BOTH ON FACTS AND IN LAW I N PASSING THE IMPUGNED ORDER AND IN UPHOLDING THE ORDER OF THE ASSESSING O FFICER (A.O.) CONFIRMING THE PENALTY UNDER SECTION 271 (1) (C) OF THE INCOME -TAX ACT 1961 (HEREAFTER THE SAID 'ACT 1 ) 2) THE C.I.T. (A) ERRED IN NOT APPRECIATING THAT TH E APPELLANT HAD FURNISHED ALL THE INFORMATION NECESSARY AND MADE FULL DISCLOS URE OF INTERNATIONAL TRANSACTIONS TO THE A.O. AND THE TRANSFER PRICING O FFICER ((T.P. O) FOR THE PURPOSE OF DETERMINING THE ARMS LENGTH PRICE (ALP ) OF ITS INTERNATIONAL TRANSACTIONS. 3) THE C.I.T. (A) ERRED IN NOT APPRECIATING THAT TH E BENCH MARKING OF INTERNATIONAL TRANSACTIONS BY APPLYING THE TRANSACT IONAL NET MARGIN METHOD (TNMM) WAS ACCEPTED BY THE TPO/AO AND THERE WAS NO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME ATTR ACTING PENALTY UNDER SECTION 271 (1) (C) OF THE ACT 4) THE C.I.T. (A) ERRED IN INVOKING EXPLANATION 7 T O SECTION 271 (1) (C) OF THE ACT WITHOUT APPRECIATING THAT THE APPELLANT HA D CHARGED PRICES IN 2 ITA 1675/MUM/2013 SITEL INDIA LTD INTERNATIONAL TRANSACTIONS IN ACCORDANCE WITH THE P ROVISIONS OF SECTION 92C OF THE ACT AND IN THE MANNER PRESCRIBED UNDER THE A CT IN COMPLETE GOOD FAITH AND WITH DUE DILIGENCE. THE IMPUGNED ORDER HA S BEEN PASSED ON A COMPLETE MISS-APPRECIATION OF THE FACTS OF THE CASE AND IS THEREFORE; LIABLE TO BE SET ASIDE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-C OMPANY IS ENGAGED IN THE BUSINESS OF CALL CENTRE FILED ITS RETURN OF INCOME ON 29-11-2006 DECLARING INCOME OF RS.73 81 379/-. IN THE RETURN OF INCOME THE ASSESSEE DISCLOSED INTERNATIONAL TRANSACTION WITH ITS ASSOCIATE ENTERP RISES (AES). THE ASSESSEE ALSO FURNISHED REPORT IN FORM OF 3CEB REPORTING OF INTERNATIONAL TRANSACTION. CONSEQUENT UPON THE ASSESSING OFFICER (AO) MADE A REFERENCE TO TRANSFER PRICING OFFICER (TPO) FOR COMPUTATION OF ARMS LENG TH PRICE (ALP). THE TPO WHILE COMPUTING THE ALP MADE ADJUSTMENT ON ACC OUNT OF TRANSFER PRICING UPWARD ADJUSTMENT OF RS. 4.37 CRORE AND SOF TWARE EXPENSES OF RS.47 39 071/-.ON SOFTWARE EXPENSES DISALLOWANCE T HE ASSESSEE FILED AN APPLICATION UNDER SECTION 154 FOR RECTIFICATION OF DISALLOWANCE WHICH WAS ALLOWED VIDE ORDER DATED 18.03.2011 THEREBY LEAVIN G AN ADDITION TO THE EXTENT OF RS. 5 30 786/-ONLY. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF I.T. ACT 1961. 3. ON SHOW-CAUSE NOTICE THE ASSESSEE FILED REPLY VIDE REPLY DATED 16.03.2011 WITH REGARD TO THE ISSUE OF ADJUSTMENT ON ACCOUNT O F TRANSFER PRICING THE ASSESSEE STATED THAT THEY HAD SUBMITTED THE INF ORMATION TO THE EXTENT AVAILABLE IN RESPONSE TO THE TPO'S QUERY. HOWEVER THE TPO HAD FAILED TO CONSIDER THE SUBMISSION AND DISREGARDED THE FLOO D LOSS ADJUSTMENT 3 ITA 1675/MUM/2013 SITEL INDIA LTD UNDERTAKEN BY THE COMPANY IN ITS TRANSFER PRICING S TUDY. THE ASSESSEE FURTHER STATED THAT MERELY BECAUSE OF DIFFERENCE OF OPINION ON WHETHER THE SAID ADJUSTMENT SHOULD BE MADE TO THE MARGIN OF THE COMPANY OR NOT ONE CANNOT CONCLUDE THAT THE PRICE CHARGED OR PAID IN SUCH TRANSACTION WAS NOT COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION 92C OF THE ACT. THE ASSESSEE A LSO STATED THAT THEY CARRIED OUT THE TRANSFER PRICING STUDY IN THE MANNE R PRESCRIBED UNDER THE STATUTORY PROVISION IN GOOD FAITH AND WITH DUE DILIGENCE. WITH REGARD TO THE USE OF COMPARABLE COMPANIES ARE CONCE RNED THE ASSESSEE HAS STATED THAT OUT OF THE SET OF 13 COMPARABLE COM PANIES 2 COMPANIES WERE COMMON WITH THE COMPARABLE COMPANIES SELECTED BY THE COMPANY IN ITS TRANSFER PRICING STUDY REPORT. OUT O F THE BALANCE 11 COMPANIES 5 COMPARABLES DID NOT EXIST IN THE DATAB ASE LIST GENERATED USING THE COMPREHENSIVE SEARCH PROCESS ADOPTED BY T HE ASSESSEE AT THE TIME OF UNDERTAKING THE ECONOMIC ANALYSIS. THE ASSE SSEE FURTHER STATED THAT THE COMPANIES AS SELECTED BY TPO WERE EITHER F UNCTIONALLY NOT COMPARABLE HAD CONTROLLED TRANSACTIONS OR THE FINA NCIAL DATA WAS NOT AVAILABLE IN THE PUBLIC DOMAIN AT THE TIME OF CONDU CTING THE SEARCH. THE ASSESSEE THUS CONTENDED THAT THERE WAS NO CASE FOR LEVYING THE PENALTY U/S. 271(L)(C) OF THE ACT. THE PRICE CHARGE D OR PAID IN SUCH 4 ITA 1675/MUM/2013 SITEL INDIA LTD TRANSACTION WAS COMPUTED IN ACCORDANCE WITH THE PRO VISIONS CONTAINED IN SECTION 92C OF THE ACT AND IN THE MANNER PRESCRI BED UNDER THAT SECTION IN GOOD FAITH AND WITH DUE DILIGENCE. THE ASSESSEE STATED THAT SINCE THE TPO HAD ACCEPTED THE DOCUMENTATION MAINT AINED BY THE ASSESSEE AND ALSO ACCEPTED THE TNMM USED FOR THE BE NCHMARKING THE INTERNATIONAL TRANSACTION IT CANNOT BE CONSTRUED THAT THE COMPANY HAS SUBMITTED INACCURATE PARTICULARS OR HAD TRIED TO CO NCEAL INCOME. WITH REGARD TO THE ISSUE OF DISALLOWANCE OF SOFTWARE EXP ENSES THE ASSESSEE STATED THAT THE ISSUE WHETHER SOFTWARE EXPENSES ARE CAPITAL OR REVENUE IN NATURE WAS CLEARLY A DEBATABLE ISSUE AND THAT PE NALTY U/S. 271(L)(C) OF THE ACT CANNOT BE LEVIED ON DEBATABLE ISSUES. THE A SSESSEE IN ITS REPLY CONCLUDED THAT IT HAS NEITHER CONCEALED ANY INCOME NOR FURNISHED ANY INACCURATE PARTICULARS OF INCOME IN RESPECT OF ALL THE ABOVE GROUNDS ON WHICH PENALTY U/S.271(L)(C) HAD BEEN INITIATED. 4. THE REPLY OF ASSESSEE WAS NOT ACCEPTED BY THE AO. THE AO LEVIED PENALTY @100% ON TAX SOUGHT TO BE EVADED. ON APPEA L BEFORE CIT(A) THE ACTION OF AO IN LEVYING PENALTY WAS UPHELD. FU RTHER AGGRIEVED THE ASSESSEE HAS FILED THIS APPEAL BEFORE THIS TRIB UNAL. 5. WE HAVE HEARD THE SUBMISSIONS OF THE LD. AUTHORIZED REPRESENTATIVE (AR) FOR THE ASSESSEE AND THE SUBMISSIONS OF THE LD . DEPARTMENTAL 5 ITA 1675/MUM/2013 SITEL INDIA LTD REPRESENTATIVE (DR) FOR REVENUE AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT T HE COMPARABLE COMPANIES SELECTED BY TPO WERE EITHER FUNCTIONALLY NOT COMPARABLE HAD CONTROLLED TRANSACTIONS OR THE FINANCIAL DATA W ERE NOT AVAILABLE IN THE PUBLIC DOMAIN AT THE TIME OF CONDUCTING THE SEA RCH. THE LD. AR OF THE ASSESSEE THUS SUBMITTED THAT THERE WAS NO CASE OF PENALTY U/S.271(L)(C) OF THE ACT SINCE PRICE CHARGED OR PA ID IN SUCH TRANSACTION WAS COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONT AINED IN SECTION 92C OF THE ACT AND IN THE MANNER PRESCRIBED UNDER T HAT SECTION IN GOOD FAITH AND WITH DUE DILIGENCE. THE LD.AR FOR T HE ASSESSEE ALSO SUBMITTED THAT THE TPO HAD ACCEPTED THE DOCUMENTATI ON MAINTAINED BY THE ASSESSEE AND ALSO ACCEPTED THE TRANSACTION NET MARGIN METHOD (TNMM) AS MOST APPROPRIATE METHOD USED FOR THE BENC HMARKING THE INTERNATIONAL TRANSACTION IT CANNOT BE CONSTRUED THAT THE COMPANY HAS SUBMITTED INACCURATE PARTICULARS OR HAD TRIED TO CO NCEAL INCOME. THE LD. AR FOR THE ASSESSEE ALSO SUBMITTED THAT AS REGA RDS THE ISSUE OF SOFTWARE EXPENSES WAS CONCERNED THE ASSESSEE IN I TS WRITTEN SUBMISSIONS HAD STATED THAT THE ISSUE WHETHER SOFTW ARE EXPENSES ARE CAPITAL OR REVENUE IN NATURE WAS CLEARLY A DEBATABL E ISSUE AND THAT PENALTY U/S.271(L)(C) OF THE ACT CANNOT BE LEVIED O N DEBATABLE ISSUES. 6 ITA 1675/MUM/2013 SITEL INDIA LTD THE ASSESSEE COMPANY IN ITS WRITTEN SUBMISSIONS H AS ALSO RELIED UPON VARIOUS OTHER DECISIONS OF TRIBUNALS AND HIGH COURT S WHICH WERE HOWEVER FOUND TO BE NOT RELEVANT TO THE PRESENT CA SE BY THE AO INASMUCH AS THE FACTS AND CIRCUMSTANCES OF THOSE CA SES ARE DISTINCT FROM THAT OF THE INSTANT CASE. THE LD.AR OF THE AS SESSEE THEREFORE PRAYED THAT THE PENALTY LEVIED BY THE AO AND CONFIR MED BY THE CIT(A) IS LIABLE TO BE DELETED. 6. ON THE OTHER HAND THE LD. DR FOR THE REVENUE SUBMI TS THAT THE ASSESSEE FAILED TO PROVE TO THE SATISFACTION OF THE LOWER AU THORITIES THAT THE PRICE CHARGED OR PAID IN INTERNATIONAL TRANSACTIONS WAS C OMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION 92C OF THE ACT. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES PERUSED THE ORDERS OF AUTHORITIES BELOW. THE ASSESSING OFFICER LEVIED THE PENALTY ON UPWARD ADJUSTMENT SUGGESTED BY TPO OF RS. 4.37 C RORE AND THE SOFTWARE EXPENSES DISALLOWANCES. THE SOFTWARE EXPEN SES WAS ULTIMATELY RESTRICTED TO RS.5 30 786/-. THE ASSESSI NG OFFICER WHILE LEVYING THE PENALTY TOOK HIS VIEW THAT THE ASSESSEE SUPPRESSED THE REAL INCOME BY RS. 4.42 CRORE ( 4.37 + .53) AND LEVIED P ENALTY @ 100% OF TAX SOUGHT TO BE EVADED. ON APPEAL BEFORE LD COMMI SSIONER (APPEALS) 7 ITA 1675/MUM/2013 SITEL INDIA LTD THE PENALTY ON THE ADJUSTMENT ON ACCOUNT OF ALP WAS UPHELD HOWEVER IT WAS DELETED ON SOFTWARE EXPENSES DISALLOWANCE. 8. WE ARE CONSCIOUS OF THE FACT THAT THE EXPLANATION 7 TO SECTION 271(1)(C) OF THE ACT MAKES IT CLEAR THAT THE ONUS ON THE ASSE SSEE TO SHOW THAT THE ALP WAS COMPUTED BY THE ASSESSEE IN ACCORDANCE WITH THE SCHEME OF SECTION 92C OF THE ACT IN GOOD FAITH AND DUE DILIGE NCE. WE HAVE NOTED THAT IT IS NOT IN DISPUTE HERE THAT THE ALP WAS COM PUTED IN ACCORDANCE WITH THE SCHEME OF SECTION 92C INASMUCH AS TNMM MET HOD WAS USED FOR BENCH MARKING. THE MOST APPROPRIATE METHOD ADOP TED BY ASSESSEE WAS NOT DISPUTED BY ASSESSING OFFICER. THE UPWARD A DJUSTMENT WAS SUGGESTED BY TPO BY INCLUDING NEW COMPARABLE IN THE FINAL SET OF COMPARABLES. WE HAVE SEEN THAT THE ASSESSEE IN ITS REPLY BEFORE THE ASSESSING OFFICER HAS SPECIFICALLY STATED THAT THE MARGIN COMPUTED IN TP STUDY ARE IN ACCORDANCE WITH THE PROVISIONS OF SECT ION 92C IN GOOD FAITH AND WITH DUE DILIGENCE. THE ASSESSING OFFICE R WHILE PASSING THE PENALTY ORDER HAS NO WHERE MENTIONED THAT THE TRANS FER STUDY CARRIED OUT BY THE ASSESSEE WAS NOT IN ACCORDANCE WITH THE STATUTORY PROVISION OR NOT IN GOOD FAITH OR WITH DUE DILIGENCE. 9. WE ARE ALSO OF THE VIEW THAT IN THE ABSENCE OF ANY OVERT ACT WHICH DISCLOSED CONSCIOUS AND MATERIAL SUPPRESSION INVOC ATION OF EXPLANATION 8 ITA 1675/MUM/2013 SITEL INDIA LTD 7 IN A BLANKET MANNER COULD NOT ONLY BE INJURIOUS T O THE ASSESSEE BUT ULTIMATELY WOULD BE CONTRARY TO THE PURPOSE FOR WHI CH IT WAS ENGRAFTED IN THE STATUTE. IT MIGHT LEAD TO A RATHER PECULIAR SIT UATION WHERE THE ASSESSEE WHO MIGHT OTHERWISE ACCEPT SUCH DETERMINATION MAY B E FORCED TO LITIGATE FURTHER TO ESCAPE THE CLUTCHES OF EXPLANATION 7. 10. THE COORDINATE BENCH OF DELHI TRIBUNAL IN HALSCROW CONSULTING INDIA PVT LTD VS DCIT (2017) 87 TAXMANN.COM 331 (DELHI TR I) WHILE CONSIDERING THE SIMILAR GROUNDS OF APPEAL ON SIMILA R SET OF FACTS HELD AS UNDER; 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. AS FAR AS THE PENALTY LEVIED ON TRANSFER PRICING ADJUSTMENT IS CONCERNED IT IS SEEN THAT DURING THE YEAR UNDER CO NSIDERATION THE ASSESSEE HAD ENTERED INTO FOLLOWING INTERNATIONAL TRANSACTIO NS: P ROVISIONS OF TECHNICAL SERVICES (RECEIVABLES FROM A SSOCIATED ENTERPRISES ) AVAILING OF TECHNICAL SERVICES (PAYABLE TO ASSOCIAT ED ENTERPRISES) THE ASSESSEE SELECTED COST PLUS METHOD FOR BOTH THE SE TRANSACTIONS. FURTHER THERE WAS ALSO APPORTIONMENT OF EXPENSES T OWARDS BUSINESS SUPPORT SERVICES PAYABLE TO THE ASSOCIATED ENTERPRI SES (AE) FOREIGN CURRENCY COMPONENT OF SALARY OF EXPATRIATE EMPLOYEE S PAYABLE TO THE FOREIGN AE AND REIMBURSEMENT OF VARIOUS EXPENSES RE CEIVABLE FROM THE AE. ALL THESE THREE WERE AT COST. IT WAS THE ASSESS EE'S VIEW THAT NO BENCHMARKING WAS REQUIRED IN RESPECT IF THESE THREE TRANSACTIONS. HOWEVER DURING THE TRANSFER PRICING PROCEEDINGS T HE TPO WAS OF THE VIEW THAT WHILE COMPUTING PROFIT LEVEL INDICATOR (P LI) USING COST PLUS METHOD THE ASSESSEE HAD CLAIMED IDLE CAPACITY ADJU STMENT OF RS. 2 46 46 065/- WHICH WAS REDUCED FROM THE DIRECT COS T WAS NOT TO BE INCLUDED AND ACCORDINGLY THE TPO EXCLUDED THE SAM E. THE TPO ALSO REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY COST PLUS METHOD SHOULD 9 ITA 1675/MUM/2013 SITEL INDIA LTD NOT BE REJECTED AND TNMM SHOULD NOT BE APPLIED AS T HE MOST APPROPRIATE METHOD. THE TPO ALSO ASKED THE ASSESSEE TO SHOW CAU SE AS TO WHY THE INTRA GROUP SERVICES PAYABLE TO THE ASSESSEE SHOULD NOT BE TREATED AS NIL BY APPLYING CUP METHOD. THEREAFTER THE TPO PROCEEDED TO MAKE ADJUSTMENT WITH RESPECT TO IDLE CAPACITY AMOUNTING TO RS. 2 46 46 065/- AND OF RS. 1 56 32 267/- WITH RESPECT TO INTRA GROU P SERVICES BY TAKING THE ALP OF INTRA GROUP SERVICES AT NIL. 5.1 IT IS SEEN THAT THE ASSESSING OFFICER WHILE IMPOS ING THE PENALTY SIMPLY RELIED ON THE ADDITION/ADJUSTMENT MADE BY TH E TPO AND DID NOT EXAMINE IN DETAIL AS TO WHETHER PENALTY WAS IMPOSAB LE ON SUCH ADJUSTMENTS OR NOT. ON APPEAL THE LD. CIT (A) ALSO NOTED THAT THE ASSESSEE HAD NOT ACTED IN GOOD FAITH WHILE COMPUTIN G THE ALP. THE LD. CIT (A) ALSO TOOK NOTE OF THE FACT THAT THE ASSESSE E HAD NOT PREFERRED ANY APPEAL AGAINST THE ALP ADJUSTMENT AND THEREFORE T HE ASSESSEE HAD ACCEPTED THAT THE ALP HAD NOT BEEN COMPUTED CORRECT LY BY HIM AND AS SUCH THE PENALTY WAS IMPOSABLE. 5.2 THE MAIN ARGUMENT OF THE LD. AR AGAINST THE LEVY O F PENALTY ON THE DIFFERENCE IN DETERMINATION OF ALP IS THAT IT IS A DEBATABLE ISSUE AND THEREFORE THE PENALTY CANNOT BE SUSTAINED. THE SCH EME OF EXPLANATION 7 TO SECTION 271(1)( C) OF THE ACT MAKES IT CLEAR THA T THE ONUS ON THE ASSESSEE IS ONLY TO SHOW THAT THE ALP WAS COMPUTED BY THE AS SESSEE IN ACCORDANCE WITH THE SCHEME OF SECTION 92 C OF THE ACT IN GOOD FAITH AND DUE DILIGENCE. IT IS NOT IN DISPUTE HERE THAT THE ALP W AS COMPUTED IN ACCORDANCE WITH THE SCHEME OF SECTION 92C INASMUCH AS COST PLUS METHOD WAS USED. THE TPO ONLY SUBSTITUTED COST PLUS METHOD WITH TNMM AND ALSO COMPUTED THE ALP OF INTRA GROUP SERVI CES BY TAKING THE ALP AS NIL BY APPLYING THE CUP METHOD. WHATEVER MAY BE THE MERITS IN THE ACTION OF THE TPO CHANGING THE METHOD OF COMPUT ATION OF ALP THE SAME CANNOT BE A FIT CASE FOR IMPOSITION OF PENALTY INASMUCH AS IT CANNOT BE SAID THAT THE ALP HAD NOT BEEN COMPUTED BY THE A SSESSEE UNDER THE SCHEME OF SECTION 92C. THE SCOPE OF CONNOTATIONS OF EXPRESSED 'IN GOOD FAITH' AND APPEARING IN EXPLANATION 7 CAN BE FOUND FROM SECTION 3(22) OF THE GENERAL CLAUSES ACT WHICH STATES THAT 'A THING SHALL BE DEEMED TO BE DONE IN 'GOOD FAITH' WHERE IT IS IN FACT DONE HONES TLY. THEREFORE IT IS NOT EVEN NECESSARY WHETHER IN DOING THAT THING THE ASSE SSEE HAS BEEN NEGLIGENT OR NOT. THUS THERE IS NO WAY THAT THE ASSESSEE CAN PROVE HIS HONESTY BECAUSE HONESTY IN PRACTICAL TERMS ONLY IMPLIES L ACK OF DISHONESTY AND PROVING NOT BEING DISHONEST IS ESSENTIALLY PROVING A NEGATIVE WHICH AS THE HON'BLE SUPREME COURT HAS OBSERVED IN THE CASE OF K.P. VERGHESE V. ITO [1981] 131 ITR 597/7 TAXMAN 13 IS ALMOST IMPOSSIBLE. HOWEVER AS THE EXPRESSION 'GOOD FAITH' IS USED ALONG WITH 'DUE DIL IGENCE' WHICH REFERS TO 10 ITA 1675/MUM/2013 SITEL INDIA LTD 'PROPER CARE'. IT IS ALSO ESSENTIAL THAT NOT ONLY T HE ACTION OF THE ASSESSEE SHOULD BE IN GOOD FAITH BUT ALSO WITH PROPER CARE. AN ACT DONE WITH DUE DILIGENCE WOULD MEAN THE ACT DONE WITH AS MUCH AS C ARE AS A PRUDENT PERSON WOULD TAKE IN SUCH CIRCUMSTANCES. THUS AS L ONG AS NO DISHONESTY IS FOUND IN THE CONDUCT OF THE ASSESSEE AS LONG AS HE HAS DONE WHAT A REASONABLE MAN WOULD HAVE DONE IN HIS CIRCUMSTANCES TO ENSURE THAT THE ALP WAS DETERMINED IN ACCORDANCE WITH THE SCHEME OF SECTION 92C DEEMING FICTION UNDER EXPLANATION 7 TO SECTION 271(1)(C) CANNOT BE INVOKED. 5.3 IT IS SEEN THAT THE GROUNDS ON WHICH THE ALP DETER MINED BY THE ASSESSEE HAS BEEN REJECTED ARE REASONABLY DEBATABLE . THE ASSESSEE HAD OBTAINED A TRANSFER PRICING STUDY FROM AN OUTSIDE E XPERT AND THE OBJECTIVITY OF THE SAME WAS NOT CALLED INTO QUESTIO N. THEREFORE LACK OF DUE DILIGENCE IN DETERMINING THE ALP IS NEITHER IND ICATED NOR CAN BE INFERRED. IN SUCH A SITUATION IT CANNOT BE SAID TH AT 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 TH E ASSESSEE'S CASE IS COVERED BY THE ORDER OF THE ITAT MUMBAI BENCH IN TH E CASE OF RBS EQUITIES INDIA LTD. ( SUPRA ) IN WHICH THE PENALTY U/S 271(1)(C) HAD BEEN DELETED IN A SOMEWHAT SIMILAR CIRCUMSTANCE. IF WE A CCEPT THE CONTENTIONS OF THE DEPARTMENT THAT ADDITION ON ACCOUNT OF TRANS FER PRICING ADJUSTMENT INVARIABLY MEANS ABSENCE OF GOOD FAITH AND DUE DILI GENCE THEN EACH AND EVERY CASE INVOLVING TRANSFER PRICING ADJUSTMENT WO ULD 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 (P.) LTD. ( SUPRA ) AND HAD DELETED THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT. THE HON'BLE HIGH COURT OF DELHI HAS ALS O 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 HON'BLE HIGH COURT O F DELHI HAS HELD IN THE CASE OF VERIZON INDIA (P.) LTD. ( SUPRA ) 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 PU RPOSE FOR WHICH IT WAS ENGRAFTED IN THE STATUTE. THE HON'BLE DELHI HIGH CO URT FURTHER OBSERVED THAT IT MIGHT LEAD TO A RATHER PECULIAR SITUATION W HERE THE ASSESSEE WHO MIGHT OTHERWISE ACCEPT SUCH DETERMINATION MAY BE FO RCED TO LITIGATE FURTHER TO ESCAPE THE CLUTCHES OF EXPLANATION 7. THEREFORE IN VIEW OF THE FACTUAL CIRCUMSTANCES AND RESPECTFULLY FOLLOWING TH E RATIO OF THE DECISIONS OF THE VARIOUS JUDICIAL AUTHORITIES WE ARE OF THE OPINION THAT THE ASSESSEE 11 ITA 1675/MUM/2013 SITEL INDIA LTD 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 PE NALTY IS DELETED. 5.4 AS FAR AS THE SECOND WHICH ON WHICH THE PENALTY HA S BEEN IMPOSED IT IS SEEN THAT PENALTY HAS BEEN IMPOSED ON DISALLOWAN CE OF ADVANCES/BALANCES WRITTEN OFF AND DISALLOWANCE OUT OF MISCELLANEOUS EXPENSES. THE LD. CIT (A) HAS CONFIRMED THE PENALTY ON THESE ADDITIONS ON THE GROUND THAT THE ASSESSEE HAD ACCEPTED THESE ADDITIONS AND THAT THE ASSESSEE DID NOT FURNISH ANY EVIDENCE IN SUPPORT OF THE WRITE OFF OF ADVANCES. THE PENALTY ON MISCELLANEOUS EXPENSES HAS BEEN CONFIRMED ON THE GROUND THAT SOME PERSONAL ELEMENT IN THE EXPEND ITURE COULD NOT BE RULED OUT. HOWEVER IT IS CLEAR THAT IN THE INSTANT CASE IT CANNOT BE SAID THAT THE ASSESSEE HAD WITHHELD ANY RELEVANT INFORMATION REGARDING MISCELLANEOUS EXPENSES OR ADVANCES/BALANCES WRITTEN OFF. THE ASSESSEE HAS DULY DISCLOSED THESE AMOUNTS IN ITS PROFIT/LOSS ACCOUNT AND HAS ALSO SUBMITTED DETAILS THEREOF DURING THE ASSESSMENT PRO CEEDINGS. THE ONLY REASON THE PENALTY WAS IMPOSED WAS THAT THE LOWER A UTHORITIES DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND IMPOSED PENALTY FOR CONCEALMENT OF INCOME. THUS THE BONA FIDES OF THE ASSESSEE CANNOT BE DOUBTED IN SUCH CIRCUMSTANCES. WITH REGARD TO THE P ROVISIONS OF SECTION 271(1)(C ) OF THE ACT PERTAINING TO PENALTY THE HO N'BLE APEX COURT HAS AUTHORITATIVELY LAID DOWN THAT MAKING OF A CLAIM BY THE ASSESSEE WHICH IS NOT SUSTAINABLE WILL NOT TANTAMOUNT TO FURNISHING I NACCURATE PARTICULARS. IN CIT V. RELIANCE PETROPRODUCTS (P.) LTD. [2010] 322 ITR 158/189 TAXMAN 322 (SC) THE HON'BLE APEX COURT HAS HELD AS FOLLOWS: 'A GLANCE AT THIS PROVISION WOULD SUGGEST THAT IN O RDER TO BE COVERED THERE HAS TO BE CONCEALMENT OF PARTICULARS OF THE I NCOME OF THE ASSESSEE. SECONDLY THE ASSESSEE MUST HAVE FURNISHE D INACCURATE PARTICULARS OF HIS INCOME. THE PRESENT IS NOT A CAS E OF CONCEALMENT OF INCOME. THAT IS NOT THE CASE OF THE REVENUE EITH ER. HOWEVER THE LD. COUNSEL FOR THE REVENUE SUGGESTED THAT BY MAKIN G INCORRECT CLAIM FOR THE EXPENDITURE ON INTEREST THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. AS PER LAW LEXICO N THE MEANING OF THE WORD 'PARTICULAR' IS A DETAIL OR DETAILS (IN PLURAL SENSE); THE DETAILS OF A CLAIM OR THE SEPARATE ITEMS OF AN ACC OUNT. THEREFORE THE WORD 'PARTICULARS' USED IN THE SECTION 271 (1) (C) WOULD EMBRACE THE MEANING OF THE DETAILS OF THE CLAIM MADE. IT IS AN ADMITTED POSITION IN THE PRESENT CASE THAT NO INFORMATION GIVEN IN TH E RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. IT IS NOT AS IF ANY STATEMENT MADE OR ANY DETAIL SUPPLIED WAS FOUND TO BE FACTUALLY INCOR RECT. HENCE AT LEAST PRIMA FACIE THE ASSESSEE CANNOT BE HELD GUI LTY OF FURNISHING INACCURATE PARTICULARS. THE LEARNED COUNSEL ARGUED THAT 'SUBMITTING 12 ITA 1675/MUM/2013 SITEL INDIA LTD AN INCORRECT CLAIM IN LAW FOR THE EXPENDITURE ON IN TEREST WOULD AMOUNT TO GIVING INACCURATE PARTICULARS OF SUCH INC OME.' WE DO NOT THINK THAT SUCH CAN BE THE INTERPRETATION OF THE CO NCERNED WORDS. THE WORDS ARE PLAIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION THE PENALTY PROVISION CANNOT BE INVOKED. BY ANY STRETCH OF IMAGINATION MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS.' 5.5 ALTHOUGH BOTH THE LOWER AUTHORITIES HAVE HELD THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME ON A CONSIDERATION ON THE FACTS SUCH A VIEW IS NOT TENABLE IS THE PRESENT APPEAL. THEREFOR E RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS (P.) LTD. ( SUPRA ) WE SET ASIDE THE ORDER OF THE LD. CIT (APPEALS) AND DIRECT THE AO TO DELETE THE PENALTY. 11. IN VIEW OF THE AFORESAID DISCUSSIONS WE ARE OF THE VIEW THAT THE ACTION OF ASSESSING OFFICER IS NOT JUSTIFIED IN LEVYING TH E PENALTY UNDER SECTION 271(1)(C) OF THE ACT. HENCE WE ACCEPT THE APPEAL O F THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY. 12. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08-11-2019. SD/- SD/- SHAMIM YAHYA (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI DT : 8 TH NOVEMBER 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR ITAT MUMBAI