2021 (12) TMI 653 - HC - Income Tax

Penalty u/s 271(1)(c) - Issue of use of single-year data - whether multiple-year data can be used or only current-year data ? - ITAT in its impugned order has recorded that prior to 2007, there was a legal debate as to whether multiple-year data can be used or only current-year data is to be used under Rule 10B(4) of the Rules - ITAT further records that the other reason for making the adjustments in the relevant AY was the denial of the capacity utilization claimed by the respondent and difference in the level of capacity utilization is an accepted principle, though denied in the relevant AY to the respondent and same cannot tantamount to filing without good faith and due diligence - HELD THAT - We do not find any infirmity in the above observation of the learned ITAT. As held by the Supreme Court in Commissioner of Income Tax, Ahmedabad vs. Reliance Petroproducts Pvt. Ltd., 2010 (3) TMI 80 - SUPREME COURT for the purpose of invoking Section 271(1)(c) of the Act, there has to be a concealment of particulars in the income of the assessee and the assessee must have furnished inaccurate particulars of his income. Making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars under Section 271(1)(c) of the Act. Mere making of a claim which is not sustainable in law, by itself, will not tantamount to furnishing inaccurate particulars regarding income of the assessee. Merely because, the assessee had claimed an expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not attract the penalty under Section 271(1)(c) of the Act.

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal setting aside penalty levy by Assessing Officer.

Analysis:
The appellant challenged the order of the Income Tax Appellate Tribunal (ITAT) dated 28.01.2019, which set aside the penalty levy by the Assessing Officer. The appellant contended that the respondent, a subsidiary of Giesecke & Devrient Gmbh, was engaged in various business activities including wholesale trading, software development, and smartcard applications. The Assessing Officer made adjustments to the returned income for the Assessment Year 2007-08 based on Transfer Pricing Officer's order. The ITAT partly allowed the respondent's appeal, upholding certain adjustments. Subsequently, a penalty was levied on the respondent, which was challenged in appeals before the CIT(A) and ITAT.

The appellant argued that the respondent lacked bona fide in its actions, citing Rule 10B(4) of the Income Tax Rules, 1962, regarding the use of single-year data. The appellant claimed that the respondent's TP documentation for software development and raw material purchase segments was faulty and misleading, indicating a lack of good faith. However, the Court found no merit in these arguments.

The ITAT's order highlighted a legal debate on the use of multiple-year data under Rule 10B(4) before 2007. The Court's judgment in a previous case involving the respondent upheld the ITAT's view that only current-year data should be used. The ITAT also noted the denial of capacity utilization claimed by the respondent, stating that such differences do not imply lack of good faith or diligence.

The Court referred to the Supreme Court's decision in Commissioner of Income Tax vs. Reliance Petroproducts Pvt. Ltd., emphasizing that incorrect legal claims do not amount to furnishing inaccurate income particulars under Section 271(1)(c) of the Income Tax Act. Mere disagreement on a claim does not warrant a penalty. Therefore, the Court upheld the ITAT's decision, dismissing the appeal as no substantial question of law arose for consideration.