9911796707
TMI Blog2021 (5) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... are applicable to even administrative order and they are applicable to both the parties in a dispute. On this plank itself the order of learned CIT(A) is not sustainable. Moreover the issue of case laws will arise after learned CIT(A) duly deals with facts and issues, which he has failed to do. In this connection we refer to the decision of Hon ble Supreme Court in the case of Kapurchand Shrimal [ 1981 (8) TMI 2 - SUPREME COURT] wherein held that it is the duty of the appellate authority to correct the error in the order of the authorities below and remit the matter with or without direction unless probable by law. Hence in the interest of justice, we vacate the order of learned CIT(A) and set aside the issue to the learned CIT(A). CIT(A) shall pass a proper and speaking order after giving the assessee proper opportunity of being heard. Assessee is at liberty to canvas the issue at it deems fit - Appeal by the Revenue stand allowed for statistical purpose. X X X X Extracts X X X X X X X X Extracts X X X X ..... t it is seen from the following are the total purchases and sales effected by the assessee with AE during A.Y. 2013-14 :- Total Sale of Cut & Polished Diamonds = ₹ 718,74 crores Sale of Cut & Polished Diamonds (AE) = ₹ 331.33 crores Purchase of Cut & Polished Diamonds = ₹ 690.71 crores Purchase of Cut & Polished Diamonds(AE) = ₹ 0.58 crores That the sale of assessee to AE is about 46% of turnover and purchase of assessee from AE is about 0.08% of total purchase. The assessee m its transfer pricing study report has followed TNNM method for the purpose of benchmarking. Operating profit/Total Cost has been used as Profit Level Indicator (PM). For the purpose of comparison the assessee has compared its entity level margins (4.86%) with that of comparable companies margin (3.69%) arid claimed chat the transactions are at arm's length. That the entity level margins of assesses included its combined profit in transactions with Associate Enterprises (AE) and non Associate Enterprises (non-AEs). 4. The Assessing Officer referred to provisions of concerned section as under : "Section 92C(1) of income Tax Act, 1961 prescribes the methods of benchmarking the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he net profit margin thus established is then taken into account to arrive 3t an arm's length price in relation to the international transaction 55c[ or the specified domestic Transaction]; 5. The Assessing Officer was of the opinion that as per above rule, the net profit margin realized by the assessee from international transactions has to be ascertained in relation to cost incurred or sale or any other relevant base. That this net profit margin can be compared with the net profit margin realized by the assessee itself in its transaction with unrelated parties or with the transactions entered into by the unrelated parties in comparable uncontrolled transactions. That so the first step is that, the assessee's net profit margin needs to be calculated with respect to international transactions entered into by it. 6. The Assessing Officer held that the order to find out whether the transactions entered in to by the assessee with its AE are at arms length with that entered in to by the third party in comparable situation with independent parties, the separate segmental results in assessee's transactions with AE and non-AE are a must. Because in combined entity level mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etails of such comparable transactions even during subsequent Hearings. Therefore, during the course of TP proceedings the TPO had required the assessee's aurthorised representative to furnish per carat purchase price and sale price separately for AE and non-AE segments alongwith complete tabulation of purchases and sales made with AEs and non-AEs with carats and volume and also invoice copies for purchases arid sales made with non-AEs. Besides, the assessee was also required to provide separate segmental profit for AE and non-AE segments. In response, the authorized representative of the assessee furnished a written submission giving separate AE and non-AE segmental profits which was filed on 30.06.2016, and also furnished only the average per carat purchase and sale price for AE and non-AE transactions. The Assessing Officer found that the segmental accounts of AE, filed are on the basis of sales ratio applied to allocated expenses. He referred to Hon'ble Delhi high court decision that such allocation is not proper in the case of Pr.CIT v/s Saxo India P. Ltd. in ITA No. 682/2016 date 28-9-2016. He further noted that the assessee had further stated that it was not practical to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transfer pricing order passed u/s 92CA(3) dated 3l-10-2016. 12. Thereafter Assessing Officer referred to section 92D & 92(3) and Rule 10D. Section 92D of Income Tax Act, 1961 deals with maintenance, keeping of information and document by persons entering into an international transaction. Section 92D(1) of Income Tax Act, 1961 prescribes that: "Even person who has entered into an international transaction [or specified domestic transaction] shall keep and maintain such information and document in respect thereof, as may be prescribed. 13. The details of documents in this regard are prescribed in rule 10D of income Tax rules. Section 92C(3) deals with powers of officer to call for details in respect of international transaction and other relevant details. Rule 10D of the Income Tax Rules reads as under :- "10D.(1) Every person who has entered into an international transaction for a specified domestic transaction] shall keep and maintain the following information and documents, namely: (a..)......... (b)............ (c) ......... (d) the nature and terms (including prices) of international transactions or specified domestic transactions] entered into with eac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per Sub-Rule l(d), it is required to maintain data or document, including information or data relating to the associated enterprise, which may be relevant for determination of the arm's length price. That accordingly, the TPO had with notice u/s 92CA(2) dated 24-12-2015, required the assessee to submit the following information/documents: 2(i) "Under Rule 10D(1) of the I.T. Rules, you are required to (maintain the information /documents listed as items (a) to (in) in Rule 10D(1). Please furnish copy of information/documents maintained by you for each of these items (a) to (m). If for any item, no information/documents have beer, maintained, this may be so indicated along with reasons for non-maintenance. 2(ii) Under Rule 10D(3) of the I T. Rules, required to Support the information maintained under Rule 10D(1) by authentic documents listed as items (a) to (g) in Rule 10D(3). Please furnish copy of all such authentic documents railing under each of these items (a) to (g). If there is no such authentic documents for any of these items (a) to (g), the same may De so indicated." 15. The Assessing Officer noted that in this context, under clause (g) of Rule 10D(l), t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) Prima facie no transaction of purchase of sale or diamonds can be compared with another Transaction. (ii) It is not possible and practicable to find out the exact cost of transaction and hence resultant markup or net profit margin of particular transaction. ' c) Also diamond business world over is being done in the form of partnership firm, proprietary concern or private limited companies There are way few public listed companies in India and abroad so it is not difficult but rather impossible to have reliable, comparable and publically available database." 19. That by giving the above reasoning, the assessee had failed to comply with the clause (h) of Rule 100(1) that mandatorily requires assessee to maintain a record of the analysis performed to evaluate comparability of uncontrolled transaction with the relevant international transaction. 20. Hence the Assessing Officer held that in this case the assessee has failed to maintain the full record in respect of transactions entered in to with the Associated enterprises (AEs) i.e. controlled transactions and chose entered into with non-Associated Enterprises (non-AEs) i.e. uncontrolled transaction. That eventuall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,87,700/- under section 271G. 24. Against the above order, assessee appealed before learned CIT(A). Learned CIT(A) referred the provisions of section 271G and 273B of the Act. Thereafter without discussing the fact of the case, the Assessing Officer's finding, leave alone dealing with then, he laconically deleted the penalty by holing as under:- "The appellant also cited orders of Hon. IT AT and to make a case against the imposition of penalty. They include (a) AQT-5(1)(2), Mumbai vs. M/s. D Navinchandra Exports Pvt. Ltd. (ITA No. 6303 and 6304/Mum/2016) dated 25.10.2017, DC1T-5(2)(1) vs. Inter Jewel Pvt. Ltd. (ITA No. 5628/Mum/2016) dated 01.11.2018 and DCIT-5(2)( 2) vs. Laxmi Diamond Ltd. (ITA No. 2643/Mum/2017) dated 27.12.2018. Following the above, as facts and circumstances are identical, I cancel the penalty imposed under section 271G of Income Tax Act 1961." 25. Against the above order assessee is in appeal before us. 26. We have heard both the counsel and perused the records. Learned Counsel of the assessee made elaborate submission. He relied upon ITAT decisions wherein such penalty has been deleted. He also submitted the Hon'ble Bombay High Court decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
