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TMI Blog2013 (10) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... Whatever sale consideration was received by the assessee from its associated enterprise was duly accounted for. It is also not in dispute that the assessee has furnished all the particulars with regard to sale made to associated enterprise. The details supplied by the assessee in its return of income are not found to be incorrect or erroneous or false. Merely because some adjustment is made by applying transfer pricing provisions, it cannot be said that there was any concealment of income or furnishing of inaccurate particulars – Decided in favor of Assessee. - ITA No.736/Del/2009, ITA No.1055/Del/2013 - - - Dated:- 27-9-2013 - Shri G. D. Agrawal And Shri Chandra Mohan Garg,JJ. For the Petitioner : Shri Sanjeev Kapoor, CA. For the Respondent : Shri Sameer Sharma, Sr. DR. ORDER Per G. D. Agrawal, VP. ITA No.736/Del/2009 This appeal by the assessee is directed against the order of learned CIT(A)-XX, New Delhi dated 26th December, 2008 for the AY 2004-05. 2. Ground Nos.1 to 4 raised by the assessee read as under:- "1. The order passed by the Hnb. CIT(A) XX is bad in law and on the facts of the case. 2. The Hnb. CIT(A) XX has erred in rejecting the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verage Mean (14.83) 4. While working out the operative profit, the assessee had taken the average of the multi year data i.e. assessee has taken the data of the comparable companies for FY 2001-02 and 2002-03. The Assessing Officer rejected the multi year data taken by the assessee for TP study. He also rejected some of the comparables and included few comparables on its own and thereafter worked out the PLI at 5.99% as under:- S.No. Company Name Sales OP OP/Sales % 1. Century Laminating Col.Ltd. 112.90 6.10 5.40 2. Handicrafts Handlooms Exports Corporation of India Ltd. 1784.36 17.68 0.99 3. Living Room Lifestyle Ltd. 17.10 0.25 1.46 4. Pratik Panels Ltd. 12.37 0.62 5.01 5. Golkunda Diamonds Jewellery Ltd. 23.99 1.01 4.21 6. Kishco Cutlery Ltd. 5.94 1.11 18.68 Average 5.95% 5. On appeal, learned CIT(A) partly accepted the assessee's contention and rejected few items selected by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the case of Innovative Tech Pack Ltd., the CIT(A) has also observed that the company does not have the funds because its net worth is negative. It is stated by the learned counsel that the company had sufficient funds through debt. Therefore, merely because the company has a negative net worth, it should not be a ground for rejecting Innovative Tech Pack Ltd. as comparable. He, therefore, stated that the assessee's TP study may be accepted and the addition sustained by the CIT(A) should be deleted. 8. Learned DR, on the other hand, relied upon the order of CIT(A) and stated that CIT(A) was more than reasonable in determining the arm's length price just by applying the PLI of 1.24%. He further stated that Rule 10B(4) provides for considering the current year data only. Only proviso to the above Rule enables the applicability of multi year data provided certain conditions prescribed in the proviso are satisfied. It has nowhere been proved by the assessee that the condition prescribed in the proviso has been satisfied. Therefore, the CIT(A) rightly rejected the use of multi year data by the assessee. With regard to comparables, he referred to the order of learned CIT(A) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in relation to the transaction being compared. In this case, the assessee was unable to point out how the data of two earlier years will influence the determination of transfer prices in relation to the transaction of FY 2003-04. In support of his contention, the learned counsel for the assessee has relied upon the decision of ITAT Bangalore Bench in the case of TNT India P.Ltd. (supra), wherein the ITAT held as under:- "That the relevant financial year was 2001-02, while the assessee had used the data pertaining to the assessment years 1999-2000 and 2000-01. The assessee's argument that at the time of transfer pricing study, it did not have the data relating to relevant comparable, i.e., for the financial year 2001-02 was acceptable, but as held by the Commissioner (Appeals), the assessee had to adopt the data available for the transfer pricing study at the time of filing of the income-tax returns. It was not the case of the assessee that by the time of filing of the income-tax returns, the data relevant to the financial year 2001-02, was not available. Further, as pointed out by the Commissioner (Appeals), prior years' data was relevant only if, the assessee was able to prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one can hold that both appellant and Innovative Tech Pack Ltd. perform same functions, utilize similar assets and operate in similar risk environment. 7.1.7 Further it is not out of place to mention here that Innovative Tech Pack Ltd. is a continuous loss making entity and has a negative net worth. As per "Prowess" database the profit and Net worth of Innovative Tech Pack for the last 4 years are as under: Year ending Profit before Taxes (Rs. In crore) Net Worth (Rs. in crore) 31.03.2001 -6.13 -0.04 31.03.2002 -3.47 -3.51 31.03.2003 -2.61 -6.13 31.03.2004 -0.68 6.81 The appellant claims that Innovative Tech Pack must be taken as comparable, as it is dealing in the Home Product, this claim of the appellant is not correct at all. As mentioned above appellant himself has stated that he deals in handicrafts not meant for daily use and it involves lot of styling and artistic imagination." 13. From the above, it is evident that in the case of Hitkari China Ltd., the data of the relevant financial year is not available in public domain. The assessee itself has used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. 14. Ground No.5 of the assessee's appeal reads as under:- "The employees contribution to Provident Fund for the assessment year 2004-05 has been incorrectly disallowed on the grounds that the same were deposited by the assessee beyond the stipulated time period read with the Provident Fund Act and section 2(24)(X) of the Income Tax Act 1961. This is despite the fact that a decision contrary to the same has been upheld by the Honourable Mumbai Bench of Tribunal in the case of Fluid Air (India) Ltd. Vs. DCIT 63 ITD 182." 15. At the time of hearing before us, it is stated by the learned counsel that the payment of PF etc. was deposited during the financial year itself and, therefore, disallowance of Rs. 1,12,064/- was not justified. In support of this contention, he relied upon the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Dharmendra Sharma - [2008] 297 ITR 320 (Delhi), of Hon'ble Supreme Court in the case of CIT Vs. Vinay Cement Ltd. - [2007] 213 CTR (SC) 268 and of ITAT, Mumbai Bench in the case of Fluid Air (India) Ltd. Vs. DCIT - [1997] 63 ITD 182. 16. Learned DR, on the other hand, relied upon the orders of authorities below. 17. We have h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue. 21. We have heard both the sides and perused the material placed before us. In this case, the Assessing Officer has made the addition of Rs. 1,16,20,046/- as per arm's length price determined by the TPO. However, after the order of the CIT(A), the addition is reduced to Rs. 85,83,266/-. The facts of the case have already been discussed in detail while deciding the assessee's appeal in quantum i.e. ITA No.736/Del/2009 wherein we have mentioned that the assessee company is manufacturing home decorative in India and selling to its associated enterprise viz., Michael Aram Inc., USA. As per TP study by the assessee, the sale price was at arm's length which was not accepted by the TPO and which is partly sustained by the CIT(A). However, there is no dispute that whatever sale consideration was received by the assessee from its associated enterprise has duly been accounted for. There is no concealment of any fact or furnishing of any incorrect facts. Merely because some addition has been made on account of determination of arm's length price by the TPO, it cannot be said that the assessee either furnished inaccurate particulars of its income or concealed its income. On thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot overlook the fact that only a small percentage of the income-tax returns are picked up for scrutiny. If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be bona fide, it would be difficult to say that he would still not be liable to penalty under section 271(1)(c) of the Act. If we take the view that a claim which is wholly untenable in law and has absolutely no foundation on which it could be made, the assessee would not be liable to imposition of penalty, even if he was not acting bona fide while making a claim of this nature, that would give a licence to unscrupulous assessees to make wholly untenable and unsustainable claims without there being any basis for making them, in the hope that their return would not be picked up for scrutiny and they would be assessed on the basis of self-assessment under section 143(1) of the Act and even if their case is selected for scrutiny, they can get away merely by paying the tax, which in any case, was payable by them. The consequence would be that the persons who make claims of this nature, actuated by a mala fid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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