2017 (4) TMI 1454 - HC - Income Tax

Penalty u/s 271(1)(c) - inaccurate particulars of income with respect to the transfer pricing (TP) adjustment - HELD THAT - ITAT 2016 (8) TMI 1143 - ITAT DELHI has deleted the penalty imposed by the Assessing Officer as affirmed by the Commissioner of Income Tax (Appeals) - XX, New Delhi by its order dated 12th November, 2013. Every step the assessee has been able to demonstrate that the notwithstanding the addition accepted by way of an estimate the claim that the arms length price has been computed in accordance with the provisions of section 92C of the Act stands unrebutted on record. The mere fact that addition has been partially sustained by itself in the facts and circumstances of the present case does not warrant the penal action. - Decided in favour of assessee TP adjustment - 32% of the operational cost for the purpose of as the cost plus mark-up of the international transactions entered into by the Assessee with its Associated Enterprise - HELD THAT - This was a derived mark-up on the operating cost earned by Li Fung (India) Private Limited with respect to its global profits. The entire proceedings, therefore, show that there was no deliberate attempt by the Assessee to conceal any income or to underpay tax. ITAT, in the circumstances, was justified in reversing the order of the CIT (Appeals), New Delhi.

Summary

Issues:
1. Appeal against penalty deletion by ITAT
2. Transfer Pricing Adjustment
3. Justification for reversing CIT(A) order
4. Absence of deliberate attempt to conceal income

Analysis:
1. The High Court heard an appeal under Section 260A of the Income Tax Act, 1961, filed by the Revenue against the order of the Income Tax Appellate Tribunal (ITAT) dated 10th August, 2016, pertaining to the Assessment Year 2006-07. The ITAT had deleted the penalty imposed by the Assessing Officer, which was upheld by the Commissioner of Income Tax (Appeals) - XX, New Delhi, as per the impugned order dated 12th November, 2013.

2. The issue of Transfer Pricing Adjustment was highlighted during the proceedings. It was noted that the Assessee had agreed to a mark-up of 32% of the operational cost for Transfer Pricing Adjustment concerning international transactions with its Associated Enterprise. This mark-up was derived from the operating cost earned by Li & Fung (India) Private Limited in relation to its global profits.

3. The Court observed that the Assessee did not engage in any deliberate attempt to hide income or evade tax. The ITAT's decision to overturn the Commissioner of Income Tax (Appeals) order was considered justified in light of the facts presented during the proceedings. The Court found no substantial question of law that warranted further consideration.

4. Consequently, the Court dismissed the appeal, affirming the ITAT's decision to delete the penalty imposed on the Assessee. The judgment emphasized the lack of evidence supporting any intentional wrongdoing on the part of the Assessee, leading to the rejection of the Revenue's appeal.