$~11.
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ INCOME TAX APPEAL NO. 757/2014
Date of decision: 23rd December, 2014
THE COMMISSIONER OF INCOME TAX-II ..... Appellant
Through Mr. Rohit Madan & Mr. Ruchir Bhatia,
Advocates.
versus
M/S JOHNSON MATTHEY INDIA P. LTD. ..... Respondent
Through Mr. Vikas Srivastava & Ms. Varsha
Bhattacharya, Advocates.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE V. KAMESWAR RAO
SANJIV KHANNA, J. (ORAL):
CM No. 20423/2014
Learned counsel appearing for the respondent-assessee on advance
notice states that he has no objection in case delay in re-filing of 395 days
is condoned. The application is allowed in view of the said statement.
INCOME TAX APPEAL NO. 757/2014
This appeal under Section 260A of the Income Tax Act, 1961 (Act,
for short) impugns order dated 31st August, 2012 passed by the Income Tax
Appellate Tribunal (Tribunal, for short) affirming the finding of the
Commissioner of Income Tax (Appeals) that the Assessing Officer was not
justified in imposing penalty of Rs.1,31,82,960/- under Section 271G of the
ITA No. 757/2014 Page 1 of 5
Act.
2. The finding of the two appellate forums is that the assessee had filed
the relevant documents within two months from the date of issue of notice
by the Transfer Pricing Officer. The said notice issued by the Transfer
Pricing Officer is dated 19th March, 2007. The respondent-assessee
thereafter had filed an application seeking adjournment on 11th April, 2007
and the proceedings were adjourned for 8th May, 2007 and then to 18th
May, 2007. The Tribunal has accepted the finding of the Commissioner of
Income Tax (Appeals) that the assessee had filed transfer pricing report
along with Form No.3CEB on 16th May, 2007. Thus, the relevant
documents and papers as per the mandate of Section 92D(3) of the Act
were complied and filed within two months from the date of issue of
notice. The Tribunal has also referred to Section 92D of the Act, which
requires the assessee to furnish documents maintained under Section
92D(1) of the Act within a period of 30 days of service of notice, but the
Assessing Officer had power to extend the said period by another 30 days.
In this connection, request for adjournment made and allowed have been
referred to. The documents have to be filed within a period of 60 days
from the service of notice. Thus, the appellate forums have held that the
statutory compliance was duly made.
3. The Assessing Officer in his order under Section 271G of the Act
was unsure and uncertain about the relevant facts. The Assessing Officer
ITA No. 757/2014 Page 2 of 5
in the penalty order had accepted the factual position that the assessee had
sought adjournment and the case was adjourned first to 8 th May, 2007 and
then to 18th May, 2007. The assessee in response to the show cause notice
had asserted due compliance with the requirements by filing requisite Rule
10D documentations within a period of 60 days, as per extension of time
allowed by the Transfer Pricing Officer. The Assessing Officer in view of
the said reply had raised a query to the office of the Transfer Pricing
Officer and the penalty order records and accepts that adjournment was
allowed and granted upto 18th May, 2007. The Assessing Officer referring
to the Transfer Pricing Officer's response, observed that the Transfer
Pricing Officer had not mentioned whether the assessee had filed Rule 10D
documentation within the stipulated time. The Assessing Officer
nevertheless and still observed that the assessee's letter dated 16th May,
2007 addressed to the Transfer Pricing Officer, which was filed before
him, had not been corroborated by the Transfer Pricing Officer. Silence on
the part of the Transfer Pricing Officer was read in negative and against the
assessee. The assumption drawn is not justified and a mere surmise. The
exact reasoning given by the Assessing Officer to impose penalty is
reproduced below:-
"Assessee's reply has been considered but found not
convincing. On enquiry from the office of TPO, it is
gathered that the assessee was allowed adjournment
upto 18.5.2007 and on 18.5.200 a letter has been filed
enclosing therewith return of income with audited
ITA No. 757/2014 Page 3 of 5
balance sheet & P&L account. Further perusal of
TPO's reply revealed that there was no mention of
assessee's filing of Rule 10D documentation within the
stipulated time rather whether the assessee in fact filed
the 10D documentation or not has not been mentioned
in his letter. Assessee's letter dated 16.5.07 addressed
to Addl.CIT, TPO, copy of which has been filed along
with its reply has not been corrobated [sic,
corroborated] by the TPO in his reply dated 26.6.2009.
Under these circumstances, it is not clearly established
that the assessee has filed 10D documentation within
the prescribed time limit, therefore, it is liable for
imposition of penalty u/s 271G of 1T Act, as
recommended by the TPO. In view of the
circumstances, the reply of the assessee is not found
acceptable and as such the default u/s 271G established
beyond doubt. It is also pertinent to mention here that it
was on the TPO's recommendation only that penalty
proceedings u/s 271G were initiated as it was noticed
by him that the Rule 10D documentation were not filed
within the stipulated time."
(emphasis supplied)
4. It is interesting to note that the Transfer Pricing Officer did not
interfere and make adjustment to the international transactions. The total
value of the international transactions was Rs.65,91,48,060/-. This figure
was not disturbed. It can be inferred that as per documentation filed, no
addition was required. In spite of the Assessing Officer not being factually
sure and certain, whether or not there was violation of Section 92D of the
Act read with Rule 10D of the Rules, penalty @ 2% of the value of
international transactions of Rs.1,31,82,960/- was imposed. Penalty cannot
be imposed unless and until the Assessing Officer is sure and certain that
there was a violation. Ambiguity or doubt in the mind of the Assessing Officer
ITA No. 757/2014 Page 4 of 5
does not justify imposition of penalty, when the actus reas itself is not
proved and established. The penalty order is self contradictory.
5. It was in these circumstances that the Commissioner of Income Tax
(Appeals) deleted the penalty, which order has been affirmed by the
Tribunal. The Commissioner of Income Tax (Appeals) specifically
recorded a finding that the documentation was filed by the assessee within
the extended period of 30 days, i.e., within 60 days, and hence, no penalty
was leviable.
6. In the grounds of appeal, Revenue has taken a different stand, which
was possibly not taken before the Tribunal. It is stated that the
documentation filed with the letter dated 16th May, 2007 did not enclose
documentations to be maintained under Rule 10D of the Rules. It is clear
that this was not the stand taken by the Revenue before the Tribunal and it
was not the stand or ground taken by the Assessing Officer while imposing
penalty.
7. In view of the aforesaid position and the findings of the
Commissioner of Income Tax (Appeals) and the Tribunal, we do not find
any merit in the present appeal and the same is dismissed.
SANJIV KHANNA, J.
V. KAMESWAR RAO, J.
DECEMBER 23, 2014
VKR
ITA No. 757/2014 Page 5 of 5
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