2023 (6) TMI 205 - AT - Income Tax

Penalty u/s 271(1)(c) - TP adjustment for US and non US transactions - HELD THAT - As rightly observed by Commissioner (Appeals), the entire TP adjustment was due to change in filter and comparables by the TPO. There cannot be any doubt that application of filters and selection of comparables are highly debatable issues. Therefore, in respect of additions made on such issues, the assessee cannot be accused of furnishing inaccurate particulars of income or concealing income. Therefore,Commissioner (Appeals) was justified in deleting the penalty imposed in respect of addition made on account of TP adjustment. Disallowance of provision of doubtful debts - On perusing the computation of income filed by the assessee along with return of income, prima facie, we are convinced that the assessee has itself disallowed the amount in dispute while computing its income. In any case of the matter, after the order of the Tribunal, the addition as on date, doesn t survive. Thus, in our view, learned Commissioner (Appeals) was justified in deleting the penalty imposed under Section 271(1)(c) of the Act. Assessee appeal allowed.

Summary

Issues:
- Penalty imposed under Section 271(1)(c) for assessment year 2006-07.
- Penalty imposed under Section 271(1)(c) for assessment year 2007-08.

Assessment Year 2006-07:
The appeals were filed by the Revenue challenging the deletion of penalties under Section 271(1)(c) for assessment years 2006-07 and 2007-08. The Assessing Officer imposed a penalty of Rs.8,26,06,560 for inaccurate income particulars and concealment. The Commissioner (Appeals) deleted the penalties based on the transfer pricing adjustment and the disallowance of provision for doubtful debts. The Tribunal upheld the decision, stating that the transfer pricing adjustment was due to changes in filters and comparables, not intentional misreporting. The Tribunal also noted that the provision for doubtful debts was already shown in the original return, aligning with a Supreme Court decision. The Tribunal found the penalties unjustified and deleted them.

Assessment Year 2007-08:
For this assessment year, the Assessing Officer imposed a penalty of Rs.7,82,43,260 based on two additions: transfer pricing adjustment and denial of deduction under Section 10A. The Commissioner (Appeals) deleted the penalties as the DRP had already removed the denial under Section 10A, and the transfer pricing adjustment was also due to changes in filters and comparables. The Tribunal agreed with the Commissioner's decision, noting that the adjustments were either resolved under MAP or no longer applicable after Tribunal directions. The Tribunal found the penalties unwarranted and upheld the deletion by the Commissioner (Appeals).

In both cases, the Tribunal dismissed the Revenue's appeals and upheld the decisions to delete the penalties imposed under Section 271(1)(c) for the respective assessment years. The Tribunal emphasized that the adjustments made were not due to intentional misreporting but rather changes in filters, comparables, or factual errors that were rectified through appropriate procedures. The penalties were deemed unjustified and were therefore deleted.