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TMI Blog2014 (5) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... d since it was not liable to tax it was also not required to maintain the documents required for Transfer Pricing - The submissions made by the Assessee appears to be bona-fide more so when the same has not been controverted by Revenue by bringing any contrary material on record - the Assessee was having a reasonable believe of not being liable to tax which has not been controverted by Revenue – thus, the Assessee is not liable for penalty u/s 271G of the Act – Decided in favour of Assessee. - I.T. A. Nos. 256 & 257/AHD/2010 - - - Dated:- 10-1-2014 - ANIL CHATURVEDI AND KUL BHARAT, JJ. For the Appellant : Vartik Chokshi For the Respondent : J.P. Jhangid ORDER :- PER : Anil Chaturvedi These two appeals are filed by the Assessee against the order of CIT(A), Gandhinagar dated 09.09.2009 for A.Y. 2005-06 against penalty u/s. 271G and order dated 03.09.2009 for A.Y. 2005-06 against quantum addition. We first take up ITA No. 256/AHD/2010. 2. The relevant facts as culled out from the material on record are as under. 3. At the outset, the ld. A.R. submitted that there was delay in filing of the present appeal. He submitted that against the order of CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tured in India as per requirement, exporting outside India, sales realization and the commission payments to the agents are performed by the Indian Branch only and therefore the entire activities relating to the business of the Assessee was done from the Indian Branch. The Assessee was asked to submit the Profit and Loss account and the Balance Sheet of the Assessee as a whole. Assessee however only submitted the Profit and Loss account and the Balance Sheet of Indian Branch only. On perusing the accounts, A.O noticed that Assessee had entered into international transaction of purchase of goods from Associated Enterprises and the value of the transaction was Rs. 6,61,12,504/-. A.O. accordingly made a reference under section 92CA (1) of the Act to the Transfer Pricing Officer (TPO). T.P.O. vide order dated 17.10.2008 determined the Arms Length Price of the purchases and directed the A.O. to make the adjustment of Rs. 72,09,183/- to the total income of the Assessee. Accordingly an addition of Rs. 72,09,183/-was made by the A.O. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A). CIT(A) upheld the order of A.O. Aggrieved by the order of CIT(A), the Assessee is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly. The assessee has filed reply thereto, which was not found acceptable on merit by the AO, No specific reason for not accepting the reply of the assessee has been given by the AO in the assessment order. The CIT(A) has recorded in his appellate order that in the earlier assessment years i.e. A.Y ,2002-2003 and 2003-2004, the Revenue has accepted loss'' and that the net profit of 1% in the same export business was applied in the assessment year 2001-2002. We find that these facts have been completely ignored by the AO while applying flat rate of profit, Even in a case where the net profit has to be applied, the same has to be reasonable. Considering the facts and circumstances of the case including the data gathered from Prowess database by the Revenue, and the past history of the assessee itself, wherein the loss was accepted in A.Y.2002-2003 and 2003-2004 and net profit of 1% in the same export business was applied for A.Y. 2001-2002 by the Department, we hold that it shall be reasonable to apply flat net profit rate of 1.25% on the gross receipts of the assessee as against the profit rate of 4,7% applied by the AO, and the AO is directed to determine the taxable incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Assessee was of the view that as per the provisions of Section 9(1)(i) of the Act, the income of the Assessee did not accrue or arise in India and therefore it was not liable to tax. He also placed reliance on circular issued by CBDT. He therefore submitted that Assessee was under bona fide belief that the income pertaining to operation which were confined to purchase of goods in India were not taxable in India. He further submitted that in the immediately preceding year, CIT(A) had given a finding that the profits of the Assessee attributable to procurement of goods for the purpose of exports were not chargeable to tax in India. The Assessee was therefore under bona fide belief that as the income did not accrue or arise in India, it was not required to comply with the Transfer Pricing provisions. He therefore submitted that since the failure was attributable to a reasonable cause, no penalty be levied under section 271G of the Act. 15. The ld. D.R. on the other hand pointed to the findings of A.O. and submitted that despite various opportunities granted to the Assessee, the necessary information as required by the TPO was not submitted by the Assessee. In those circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X
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