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TMI Blog2022 (7) TMI 947X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction was computed in accordance with provisions contained in section 92C and such price was computed as per the manner prescribed under that section in good faith and with due diligence. The term good faith and due diligence in Explanation 7 to section 271(1)(c) of the Act were analysed by the Co ordinate Bench of Tribunal in DCIT v/s RBS Equities India Ltd. [ 2011 (8) TMI 459 - ITAT MUMBAI] Section 92C of the Act deals with computation of ALP and enlists the methods to be followed for same. In the present case, assessee applied TNMM as the most appropriate method, which is also prescribed u/s 92C - as there is no dispute regarding the selection of most appropriate method in the present case. In the present case, the assessee has conducted and maintained contemporaneous transfer pricing documentation as per the provisions of section 92D of the Act read with Rule 10D of the Income Tax Rules. The assessee, in its transfer pricing report had conducted a detailed function, assets and risk analysis of its international transaction. It is also not the case, wherein, the transfer pricing documentations filed by the assessee were rejected by the TPO. Thus, applying th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings, the transactions entered into by the assessee with its AEs were still found to be not at arm's length which by itself tantamounts to furnishing of inaccurate particulars of income by the assessee thereby leading to concealment further confirmed by the fact that assessee had not preferred any further appeal against these findings of the CIT(A). 5. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in not appreciating that the price charged by the assessee in respect of the international transactions entered into with the associate concerns was neither computed in accordance in the manner prescribed under section 92C, nor in 'good faith and with 'due diligence'. Hence, penalty u/s. 271(1)(c) read with Explanation (7) is clearly leviable on this issue. 6. The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the A.O. be restored. 2. The only grievance of the Revenue in the present appeal is against deletion of penalty of Rs. 57,37,070 levied under section 271(1)(c) of the Act. 3. The brief facts of the case pertaining to this issue, as emanating from the record, are: The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 8,54,35,703 in respect of international transaction of Provision of Contact Centre Services . 5. Pursuant to the order passed by the TPO, Assessing Officer vide order dated 24/12/2008 passed under section 143(3) of the Act, inter-alia, computed the total income of the assessee at Rs. 6,42,38,970. Simultaneously, notice under section 274 read with section 271(1)(c) of the Act was issued to the assessee. In quantum appeal, against the order passed under section 143 (3) of the Act, the learned CIT(A) restricted the transfer pricing adjustment to Rs. 1,56,78,265. Accordingly, vide order dated 30/03/2012, passed under section 271(1)(c) of the Act, the Assessing Officer levied penalty of Rs 57,37,070. 6. In appeal, learned CIT(A) vide impugned order dated 21/01/2014 allowed the appeal filed by the assessee and directed deletion of penalty levied by the Assessing Officer under section 271(1)(c) of the Act, on account of transfer pricing adjustment made by the TPO, by observing as under: 9. As correctly pointed out by the assessee company, Explanation 7 to section 271(1)(c) is the specific clause relevant to the application of concealment penalty provisions relatable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iting before the AO that it did not wish to pursue the matter in further appellate proceedings considering the quantum of the addition retained, even though it did not agree with the decision rendered by the CIT(A). 13. On the above facts, the assessee having carried out its transfer pricing study in accordance with section 92C of the Act and that no specific defect with such TP study having been pointed out by any of the Departmental authorities it cannot be said that such TP study was not prepared in good faith or that the TP study had not been carried out by the assessee and its auditors with due diligence. In terms of Explanation 7 to section 271(1)(c) of the Act no penalty would be leviable on the facts of the present case. Penalty levied by the AO in this case is hereby directed to be deleted. Being aggrieved, the Revenue is in appeal before us. 7. During the course of hearing, learned Departmental Representative vehemently relied upon the order passed by the Assessing Officer levying penalty in the present case. On the other hand, learned Authorised Representative placed reliance upon the order passed by the learned CIT(A). 8. We have considered the rival sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which states that a thing shall be deemed to be done in 'good faith' where it is in fact done honesty, whether it is done negligently or not. A thing done in good faith is a thing done honestly, and, therefore, it is not even necessary whether in doing that thing the assessee has been negligent or not. There is no way that an assessee can prove his honesty, because honesty, in practical terms, only implies lack of dishonesty, and proving not being dishonest is essentially proving a negative, which, as Hon'ble Supreme Court has observed in the case of KP Varghese v. ITO 119811 131 ITR 597/7 Taxman 13, is almost impossible. However, as the expression good faith is used alongwith 'due diligence, which refers to 'proper care, it is also essential that not only the action of the assessee should be in good faith, e, honestly, but also with proper care. An act done with due diligence, in our humble understanding, would mean an act done with as much as care as a prudent person would take in such circumstances. In view of these discussions, in our considered view, as long as no dishonesty is found in the conduct of the assessee and as long as he has done what a reasonab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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