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TMI Blog2024 (6) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... ishing of factually incorrect details and information about income. As considered the provisions of Explanation-7 to section 271(1)(c) of the Act, as the Revenue authorities contend that it is a deeming provision and the assessee is deemed to have concealed income or income of which inaccurate particulars have been furnished and the onus is on the assessee to establish bona fide and due diligence, then, what is required is that the notice should be specific and there should not be any ambiguity of any sort, rather, the notice should specifically provide that the penalty is being invoked in the light of the Explanation-7 of section 271(1)(c) of the Act, as the presumption of the deeming provision is called to be rebutted by the assessee. Thus on ground of ambiguity in the notice too the penalty order cannot be sustained. Decided in favour of assessee. - Shri G.S. Pannu, Hon ble Vice President And Shri Anubhav Sharma, Judicial Member For the Assessee : Shri Vishal Kalra, Advocate And Shri S.S. Tomar, Advocate For the Revenue : Shri Amit Katoch, Sr. DR ORDER PER ANUBHAV SHARMA, JM: This appeal is preferred by the assessee against the order dated 29.08.2019 of the Commissioner of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% of the tax sought to be evaded on the above income and passed the order. 2.2 On behalf of the assessee, a specific plea was raised that Explanation-7 to section 271(1)(c) of the Act was not invoked appropriately and the assessee should have been given benefit of the fact that arm s length price of international transactions were calculated with bona fides, in good faith and with due diligence. However, the CIT(A) was not satisfied and sustained the addition with the following findings:- 5. I have considered the facts of the case, basis of imposition of penalty and' submissions given by appellant. As can be seen from the submissions that appellant has raised the several issues on legal grounds as well as on merits. However, it can be seen from the provisions of section 271(1)(c) of IT Act, the specific provisions have been brought in statute to deal with the cases related to additions or disallowances made u/s 92C of the Act. Under Explanation-7 to section 271(1)(c) of the Income-tax Act, 1961, an addition or disallowance made while computing the income under section 92C of the Act is deemed to be concealed income or income for which inaccurate particulars have been furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in law, the penalty order passed by the AO deserves to be quashed as the same has been passed without recording adequate satisfaction and the CIT(A) has erred in upholding the same. 3. That on the facts and circumstances of the case and in law, the AO has erred in invoking the Explanation (1) to section 271(1)(c) of the Act, without appreciating that for levying penalty in relation to transfer pricing adjustments, Explanation 7 to section 271(1)(c) of the Act should be invoked. Therefore, the penalty order is bad in law and liable to be quashed and the CIT(A) erred in upholding the same. 4. That on the facts and circumstances of the case and in law, the CIT(A) erred in upholding the action of the AO levying penalty under section 271(1)(c) of the Act, in relation to computation of transfer pricing adjustment for the provisions of business support and research development services, without appreciating that the Appellant has acted in good faith and with due diligence , therefore the Assessee could not have been malafide in computing incorrect transfer pricing, 5. That on the facts and circumstances of the case and in law, the CIT(A) erred in upholding the action of the AO levying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y categorical in the use of data to be used for analysis to the data relating to financial year in which transaction was taken place. Thus, it can be seen that last two years data can be used on addition to the current year s data that too only if the effect of earlier data can be shown on the current year's data. It can be seen that in the transfer pricing analysis, the assessee has not used the current year data at all. By not using the current year data at all, the transfer pricing document is against the provisions of Rule 10B(4) of the Income Tax Rules. 8. The same became the foundation for levying the penalty by the AO and sustaining the same by the CIT(A). In this context, we are of the considered view that Rule 10B(4) which has laid down categorically for use of data relating to financial year in which transaction has taken place was inserted w.e.f. 19.10.2015 while the case of the assessee pertains to AY 2013-14. The TP order is dated 26.10.2016. Therefore, the TPO has heavily relied Rule 10B(4) alleging that there was deliberate act to not take current year data. In Verizon Communication India (P) Ltd. vs. PCIT (supra), the coordinate Bench has dealt with similar issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngth Pricing (ALP) and made adjustments in the final return. The Assessing Officer (AO), while accepting TPO s determination, was of the opinion that as per Explanation 7 to Section 271(1)(c), the addition was to be deemed to represent income and was, therefore, liable, and consequently penalty was leviable. The AO s order was set-aside by the ITAT. We have considered the circumstances. The assessee in this case could not, in the opinion of this Court, visualize that out of the twelve comparables furnished, nine would be rejected and the matrix of calculations, as it worked, would radically undergo change. Pertinently, for the previous year 2006-07, the assessee s comparables including some of those which were rejected in the present order, were in fact accepted when the matter reached finality. In these circumstances, the interpretation adopted by the AO was plainly erroneous. The Court is also of the opinion that in the absence of any overt act, which disclosed conscious and material suppression, invocation of Explanation 7 in a blanket manner could not only be injurious to the assessee but ultimately would be contrary to the purpose for which it was engrafted in the statute. It ..... X X X X Extracts X X X X X X X X Extracts X X X X
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