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TMI Blog2018 (6) TMI 1388X X X X Extracts X X X X X X X X Extracts X X X X ..... debate was very much alive. This being a debatable issue at the point of time when the assessee filed its return of income, adoption of multiple year data for arriving at ALP is a bonafide exercise. Penalty levied on that count cannot be sustained as the law on this issue was evolving. Mere fact that the addition has been made or confirmed does not per se lead to imposition of penalty u/s 271(1)(c) for the simple reason that both the assessment and penalty proceedings are distinct from each other. If the contention of DR is accepted, then there was no need for separate penalty proceedings. Triggered the levy of penalty relates to the claim of standard deduction @ 5%. This issue is also highly debatable and many disputes arose regarding inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee is a direct subsidiary of Giesecke & Devrient GmbH. During the year under consideration, the assessee was engaged in the business of wholesale trading of currency verification and processing systems and their maintenance and providing SIM Card systems to telecommunication operators. Return was filed on 31.10.2005 declaring a loss of 93.35 lakhs. Return was selected for scrutiny assessment and a reference was made u/s 92CA(1) of the Act. The Transfer Pricing Officer [TPO] did not appreciate the Arm's Length Price of the assessee and made upward adjustments and penalty proceedings u/s 271(1)(c) of the Act were separately initiated. 5. During the course of penalty proceedings, the assessee strongly agitated that it has not fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... international transaction by ₹ 3,41,12,260/- and, therefore, penalty levied by the AO is justified. 7. Before us, the ld. AR vehemently stated that there is no dispute between the assessee and the TPO as far as method of bench marking the international transaction is concerned and TNMM has been accepted as such. It is the say of the ld. Counsel that the only point of dispute is the usage of multiple year data by the assessee whereas the TPO has adopted single year data. The ld. AR further stated that the claim of standard deduction of 5% was as per provisions of the Act which was a highly debatable issue, and therefore, it cannot be said that the assessee has computed the international transaction not in good faith and not with due d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he simple reason that both the assessment and penalty proceedings are distinct from each other. If the contention of the ld. DR is accepted, then there was no need for separate penalty proceedings. 11. The next issue which triggered the levy of penalty relates to the claim of standard deduction @ 5%. This issue is also highly debatable and many disputes arose regarding interpretation of the proviso. Whether tolerance band is standard deduction or not, different courts have interpreted it differently so much so that in the Finance Bill 2012, the following clarification was made: "Section 92C of the Act provides for computation of arms lengths price. Sub-section (1) of this section provides the set of methods for determination of arms leng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... others the stand of taxpayer. There is, therefore, a need to bring certainty to the issue by clarifying the legislative intent in respect of first proviso to sub-section (2) which was inserted by the Finance Act, 2002. It is, therefore, proposed to amend the Income Tax Act to provide clarity with retrospective effect in respect of first proviso to section 92C(2) as it stood before its substitution by Finance (No.2) Act, 2009 so that the tolerance band of 5% is not taken to be a standard deduction while computing Arm's Length Price and to ensure that due to such retrospective amendment already completed assessments or proceedings are not reopened only on this ground. The amendments proposed above shall be effective retrospectively ..... X X X X Extracts X X X X X X X X Extracts X X X X
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