The DCIT(OSD)-1, Circle-4,, Ahmedabad v. Mastek Ltd.,, Ahmedabad

ITA 2785/AHD/2013 | 2003-2004
Pronouncement Date: 17-10-2016 | Result: Dismissed

Appeal Details

RSA Number 278520514 RSA 2013
Assessee PAN AAACM9908Q
Bench Ahmedabad
Appeal Number ITA 2785/AHD/2013
Duration Of Justice 2 year(s) 10 month(s) 19 day(s)
Appellant The DCIT(OSD)-1, Circle-4,, Ahmedabad
Respondent Mastek Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 17-10-2016
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 17-10-2016
Date Of Final Hearing 31-08-2016
Next Hearing Date 31-08-2016
Assessment Year 2003-2004
Appeal Filed On 28-11-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI PRAMOD KUMAR ACCOUNTANT MEMBER AND SHRI S. S. GODARA JUDICIAL MEMBER. ITA NOS.2785 & 2786 /AHD/2013 (ASSESSMENT YEARS:2003-04 & 2004-05) THE DCIT (OSD)-I CIRCLE-4 NAVJIVAN TRUST BLDG. OFF. ASHRAM ROAD AHMEDABAD APPELLANT VS. MASTEK LTD. PRESIDENT HOUSE OPP. C. N. VIDYALAYA AMBAWADI AHMEDABAD RESPONDENT PAN: AAACM9908Q /BY REVENUE : MRS. VIBHA BHALLA CIT D.R. / BY ASSESSEE : SHRI S. N. SOPARKAR WITH SHRI PARIN SHAH A.R. /DATE OF HEARING : 31.08.2016 /DATE OF PRONOUNCEMENT : 17.10.2016 ORDER PER S. S. GODARA JUDICIAL MEMBER THESE TWO REVENUES APPEALS FOR ASSESSMENT YEARS 20 03-04 AND 2004- 05 ARISE FROM A COMMON ORDER OF THE CIT(A)-VIII AH MEDABAD DATED ITA NOS.2785 & 2786/AHD/2013 (DCIT VS. MASTEK LTD.) A.Y. 2003-04 & 2004-05 - 2 - 05.08.2013 IN CASES NO. CIT(A)-VIII/DCIT/CIR.4/82 & 83/12-13 & CIT(A)- VIII/DCIT/CIR.4/82 & 83/12-13 RESPECTIVELY DELETIN G PENALTIES OF RS.50 20 863/- AND RS.62 97 810/- IMPOSED BY THE A SSESSING OFFICER VIDE SEPARATE ORDERS DATED 30.01.2013 IN BOTH ASSESSMENT YEARS IN PROCEEDINGS U/S.271(1)(C) OF THE INCOME TAX ACT 1961 IN SHORT THE ACT . 2. WE COME TO RELEVANT FACTS FIRST. THIS ASSESSEE IS A COMPANY PROVIDING SOFTWARE SERVICES AND OTHER RELATED BUSINESS(ES). IT FILED RETURNS ON 27.11.2003 AND 01.11.2004 STATING INCOMES OF RS.13 03 30 257/- AND RS.NIL RESPECTIVELY. THE ASSESSING OFFICER FRAMED REGULAR ASSESSMENT ON 15.12.2005 AND 27.12.2006 DISALLOWING /ADDING TWO C LAIMS OF TRAVELLING EXPENSES AMOUNTING TO RS.1 26 88 612/- AND RS.1 67 98 984/- FOLLOWED BY THE OTHER HEAD OF UPWARD ADJUSTMENTS OF INTEREST ON ADVANCES NOT CHARGED TO THE TUNE OF RS.9 77 598/- AND RS.7 55 888/-; RESPEC TIVELY. HE FURTHER INITIATED THE IMPUGNED SECTION 271(1)(C) PENALTY PROCEEDINGS ALLEGING CONCEALMENT AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. 3. THE ASSESSEE PREFERRED SEPARATE APPEALS. THE CI T(A)S RESPECTIVE ORDERS PASSED ON 24.08.2006 AND 28.03.2007 UPHELD F ORMER DISALLOWANCE OF TRAVELLING EXPENSES AND DELETED THE LATTER ONE PERT AINING TO INTEREST ADVANCES. BOTHE PARTIES FILED THEIR RESPECTIVE APPEALS BEFORE THE TRIBUNAL. A COORDINATE BENCH VIDE ORDER DATED 11.05.2012 IN QUANTUM PROCEE DINGS UPHELD ASSESSING OFFICERS FINDINGS ON THE FORMER ISSUE OF TRAVELLIN G EXPENSES DISALLOWANCE AND RESTORED ASSESSING AUTHORITIES OPINION QUA THE LETTER ISSUE OF INTEREST ON LOANS AND ADVANCES. QUANTUM PROCEEDINGS APPEAR TO HAVE ATTAINED FINALITY AT THIS STAGE. 4. THE ASSESSING OFFICER RESUMED WITH THE IMPUGNED PENALTY PROCEEDINGS. HE TOOK A SERIOUS NOTE OF ABOVE QUANT UM DEVELOPMENTS IN HIS PENALTY ORDERS DATED 30.01.2013 WHILE REJECTING ASS ESSEES PLEA OF NOT HAVING ITA NOS.2785 & 2786/AHD/2013 (DCIT VS. MASTEK LTD.) A.Y. 2003-04 & 2004-05 - 3 - FURNISHED INACCURATE PARTICULARS OF INCOME IN VIEW OF BONAFIDE BELIEF IN SUPPORT OF ITS TWO CLAIMS OF TRAVELLING EXPENSES AN D INTEREST NOT CHARGED ON ADVANCES. HE CONCLUDED THAT ASSESSEES ACT AND CON DUCT IN BOTH THE IMPUGNED ASSESSMENT YEARS WAS THAT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME FOLLOWED BY CONCEALMENT THEREOF. 5. THE CIT(A) ALLOWS ASSESSEES APPEAL CHALLENGING PENALTIES ON BOTH THE ABOVE STATED ISSUES. HE OBSERVES THAT THIS TRIBUNA L IN ASSESSEES OWN CASE FOR A.Y.2002-03 ITA NO.2050/AHD/2008 DECIDED ON 19.10.2 012 HAS ALREADY DELETED SECTION 271(1)(C) PENALTY ARISING FROM IDEN TICAL TRAVELLING EXPENSES DISALLOWANCE. THE SAME FACTUAL POSITION CONTINUES BEFORE THIS TRIBUNAL AS WELL IN THE IMPUGNED ASSESSMENT YEAR. THE REVENUE NEITHER POINTS OUT ANY EXCEPTION ON FACTS NOR LAW SO FAR AS THE RELEVANT F ACTS ON THE ISSUE OF TRAVELLING EXPENSES CLAIM IN THESE TWO ASSESSMENT O RDERS ARE CONCERNED. WE ADOPT JUDICIAL CONSISTENCY IN THIS FACTUAL BACKDROP AND FIND NO REASON TO INTERFERE IN THE CIT(A)S ORDER DELETING PENALTY O N THE FIRST ISSUE OF TRAVELLING EXPENSES DISALLOWANCES IN THE TWO ASSESSMENT YEARS BEFORE US. THE REVENUES FIRST IDENTICAL SUBSTANTIVE GROUND IN THE SE TWO APPEALS FAILS ACCORDINGLY. 6. WE NOW ADVERT TO THE LATTER ISSUE OF SECTION 271 (1)(C) PENALTY ARISING FROM INTEREST DISALLOWANCE ISSUE. THE CIT(A)S FIN DINGS UNDER CHALLENGE READ AS FOLLOWS: II) INTEREST ON SETTLEMENT ADVANCE:- THE SECOND ISSUE ON WHICH THE PENALTY HAS BEEN IMP OSED IS REGARDING THE UPWARD ADJUSTMENT OF INTEREST ON SETTLEMENT OF ADVANCES. THE APPELLANT PROVIDED SETTLEMENT ADVANCE TO EMPLOYEES WHO HAVE B EEN SENT TO THE AE IN ORDER TO MEET THEIR BASIC REQUIREMENT OF LODGING B OARDING AND FOOD FOR THE FIRST FEW DAYS UNTIL THEY RECEIVE PAY FROM THE AES IN THE FOREIGN COUNTRY. THE ADVANCE IS RECOVERED BY THE AES AS DEDUCTION FROM T HE MONTHLY SALARY PAYABLE TO THE RESPECTIVE EMPLOYEES. THE AMOUNT SO RECOVERE D BY THE AES IS TRANSFERRED ITA NOS.2785 & 2786/AHD/2013 (DCIT VS. MASTEK LTD.) A.Y. 2003-04 & 2004-05 - 4 - TO THE APPELLANT. THE AO/TPO HELD THAT SINCE THE AD VANCE IS BEING PAID FOR THE BENEFIT OF AES THEREFORE INTEREST FOR THE PERIOD WHEN THE AMOUNT ADVANCED TO THE EMPLOYEES WAS RECOVERED BY THEM SHOULD BE CHARG ED. THE HONOURABLE ITAT UPHELD THE ADJUSTMENT MADE BY THE A.O AND THE A.O I MPOSED A PENALTY ON THE ISSUE. AFTER CAREFULLY CONSIDERING THE FACTS OF THE ISSUE AND THE WRITTEN SUBMISSION MADE BY THE APPELLANT AND THE PENALTY ORDER IT IS NOTED THAT INITIALLY THE UPWARD ADJUSTMENTS WERE MADE BY THE A.O IN BOTH THE YEARS. HOWEVER THE ADDITIONS WERE DELETED BY THE CIT(A) SUBSEQUENTLY THE ITAT UPHELD THE ADJUSTMENT BUT THE QUANTUM WAS REDUCED CONSIDERABLY . FURTHER IT IS NOTED THAT THE APPELLANT HAS INDICATED THESE TRANSACTIONS IN T HE TRANSFER PRICING REPORT SUBMITTED TO THE AO/TPO DURING THE COURSE OF ASSESS MENT PROCEEDINGS. IT IS NOTED THAT IN THE FORM 3CEB THE SETTLEMENT ADVANCES WERE DISCLOSED AS AN INTERNATIONAL TRANSACTION UNDER THE HEAD REIMBURSEM ENTS AT ACTUALS. IT IS FURTHER NOTED THAT THE APPELLANT HAD PROVIDED ALL D ETAILS PERTAINING TO THE ADVANCE AND THERE IS NO CONCEALMENT OF FACTS OR FIG URES ON BEHALF OF THE APPELLANT. IT WAS A MERE CLAIM WHICH WAS NOT ACCEP TED BY THE AO/TPO AND UPWARD ADJUSTMENT BY TREATING THE INTEREST AS THE A DDITION WAS MADE. THEREFORE THERE IS NO FURNISHING OF INACCURATE PAR TICULARS ON THE PART OF THE APPELLANT AND IN THESE CIRCUMSTANCES THE DECI SION OF HONOURABLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. L TD REPORTED IN 322 ITR 158 IS CLEARLY APPLICABLE. ACCORDING TO THE DECISION W HERE THERE IS NO FINDING THAT ANY DETAILS WERE SUPPLIED BY THE ASSESSEE IN ITS RE TURN OF INCOME FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE WAS NO QUESTI ON OF INVOKING THE PENALTY UNDER SECTION 271(1) (C). THE APPELLANT AT ALL TIMES HAD CO-OPERATED FULLY BY FURNISHING DETAILS OF THE BASIS OF CALCULATION GIVEN IN THE TRANSFER PRIC ING REPORT. NONE OF THE DETAILS SUBMITTED BY THE APPELLANT HAVE BEEN FOUND TO BE FALSE OR THERE WAS NO CASE OF MISREPRESENTATION ON BEHALF OF THE APPELLAN T. THE APPELLANT IN ANNEXURE- E (FOR A.Y. 2003-04) AND ANNEXURE-D (FOR A.Y 2004 - 05) OF THE TRANSFER PRICING REPORTS HAS GIVEN DETAILS ABOUT TH ESE TRANSACTIONS. THE QUANTUM OF THE REIMBURSEMENTS RECEIVED FROM VARIOUS AES HAS ALSO BEEN DISCLOSED. IT HAS BEEN NOTED IN THE REPORT THAT NO ADJUSTMENT WAS BEING MADE AS IT WAS REIMBURSEMENTS WERE AT ACTUALS. THE VIEW OF THE APPELLANT WAS THAT SINCE IT WAS THE REIMBURSEMENT OF THE ADVANCES GIVEN TO T HE EMPLOYEES SENT FOR FOREIGN DUTY NO INTEREST SHOULD BE CHARGED HOWEVER THE AO/TPO DID NOT ACCEPT THE VIEW OF THE APPELLANT AND HELD THAT SOME INTERE ST SHOULD HAVE BEEN CHARGED BY THE APPELLANT FROM THE AES. THEREFORE THIS WAS A MERE CLAIM AND THE VIEWS OF THE APPELLANT AND THE AO DID NOT MATCH. THE AO D ID NOT ACCEPT THE CLAIM OF THE APPELLANT BY TREATING THE ADVANCES TO THE EMPLO YEES AND SUBSEQUENT REIMBURSEMENT BY THE AES AS INTEREST-FREE. IT IS NO T A CASE WHERE THE APPELLANT DID NOT DISCLOSE THE INTERNATIONAL TRANSACTIONS TH E QUANTUM AND THE BASIS OF NOT MAKING ANY UPWARD ADJUSTMENT IN THE TRANSFER PRICIN G REPORT AND THE AO SUBSEQUENTLY DISCOVERED THAT THESE TRANSACTIONS WER E NOT DISCLOSED AND SOME ADDITION WAS MADE ON THAT BASIS. THE APPELLANT DEMO NSTRATED THAT THE TRANSACTIONS WERE DEALT WITH FOR THE TRANSFER PRICI NG STUDY IN ACCORDANCE WITH ITA NOS.2785 & 2786/AHD/2013 (DCIT VS. MASTEK LTD.) A.Y. 2003-04 & 2004-05 - 5 - THE PROVISIONS CONTAINED IN SECTION 92C AND THE SAM E WERE IN GOOD FAITH AND THE BASIS OF COMPUTATION WAS ON THE BASIS OF DUE DI LIGENCE. THE APPELLANT HAS THEREFORE EXPLAINED THE BONAFIDES AND ACCORDINGLY HAS DEMONSTRATED THE REASONABLE CAUSE FOR NOT MAKING ANY UPWARD ADJUST MENT RELATED TO THAT TRANSACTION. THE EXPLANATION 7 TO SEC. 271(1)(C) IS THEREFORE NOT APPLICABLE IN THE PRESENT CASE. THE RELIANCE PLACED BY THE AO ON THE JUDGEMENTS MEN TIONED BY HIM IN THE PENALTY ORDER IS OUT OF PLACE AS THE FACTS OF A LL THE CASES ARE DIFFERENT. THE CASES REPORTED IN 169 ITR 782 AND 127 ITR 837 ARE N OT APPLICABLE AS THE APPELLANT HAS DULY DISCHARGED THE BURDEN OF PROVING THE BASIS OF CALCULATION. FURTHER THE DECISION OF HONOURABLE DELHI HIGH COUR T IN THE CASE OF MOTOR GENERAL FINANCE LTD 254 ITR 449 IS ALSO NOT APPLICA BLE AS THE APPELLANT HAD FURNISHED ALL THE DOCUMENTARY EVIDENCE RELATED TO T HE TRANSFER PRICING PROVISIONS. IN VIEW OF THE ABOVE-MENTIONED DISCUSSION FACTS AN D CIRCUMSTANCES I AM OF THE CONSIDERED OPINION THAT NO PENALTY UNDER SEC TION 271(1)(C) IS EXIGIBLE ON THE APPELLANT FOR BOTH THE YEARS ON THE BASIS OF UP WARD ADJUSTMENT RELATED TO THE INTEREST ON SETTLEMENT ADVANCES AS WELL. THE PE NALTIES IMPOSED BY THE A.O FOR BOTH THE YEARS ARE THEREFORE DIRECTED TO BE DE LETED. THE GROUNDS NO. 2 & 3 ARE THEREFORE ALLOWED. 7. HEARD BOTH PARTIES. THERE IS HARDLY ANY DISPUT E BY NOW THAT THE ASSESSEE HAD DULY PLACED ON RECORD ALL FACTUAL PART ICULARS IN THE COURSE OF QUANTUM ASSESSMENT IN ITS TRANSFER PRICING REPORT I .E. FORM 3 CEB. THE REVENUE FURTHER FAILS TO REBUT THE FACT THAT ITS A TRANSFER PRICING ADJUSTMENT AND NOT A CASE OF FURNISHING OF INACCURATE PARTICUL ARS SINCE THE TRANSFER PRICING AUTHORITY HAD TO COMPUTE ARMS LENGTH PRICE OF THE I MPUGNED LOAN TRANSACTIONS. WE OBSERVE IN THESE PECULIAR FACTS T HAT ONCE THE ASSESSEE HAS INCLUDED ALL THE RELEVANT PARTICULARS THE MERE FAC T THAT IT DID NOT BENCHMARK ITS LOAN TRANSACTIONS AT ARMS LENGTH RESULTING IN THE IMPUGNED UPWARD ADJUSTMENT WOULD NOT FORM THE SOLE GROUND TO INVOKE THE IMPUGNED PENALTY PROVISION IN ABSENCE OF ANY EXERCISE BY THE LOWER A UTHORITIES IN QUANTUM PROCEEDINGS FINDING THE SAME TO BE INACCURATE. WE THUS FIND NO REASON TO INTERFERE IN THE CIT(A)S FINDING UNDER CHALLENGE A S EXTRACTED IN PRECEDING ITA NOS.2785 & 2786/AHD/2013 (DCIT VS. MASTEK LTD.) A.Y. 2003-04 & 2004-05 - 6 - PARAGRAPHS. THIS LATTER SUBSTANTIVE GROUND IN BOTH APPEALS IS ALSO DECLINED ACCORDINGLY. 8. THESE TWO REVENUES APPEALS ARE DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 17 TH DAY OF OCTOBER 2016.] SD/- SD/- (PRAMOD KUMAR) (S. S . GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 17/10/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ()*+ --. ./0 / DR ITAT AHMEDABAD 1+2345 / GUARD FILE. BY ORDER / . // ./0