2017 (4) TMI 1454 - HC - Income Tax

High Court upholds ITAT decision on penalty & transfer pricing adjustment for Assessee.

The Pr. Commissioner Of Income Tax-4 Versus M/s Gap International Sourcing India Ltd.  

The High Court dismissed the appeal filed by the Revenue against the ITAT's decision to delete the penalty imposed on the Assessee for the Assessment Year ... Penalty u/s 271(1)(c) - inaccurate particulars of income with respect to the transfer pricing (TP) adjustment - HELD THAT:- ITAT [2016 (8) TMI 1143 - ITAT DELHI] has deleted the penalty imposed by the Assessing Officer as affirmed by the Commissioner of Income Tax (Appeals) - XX, New Delhi by its order dated 12th November, 2013. Every step the assessee has been able to demonstrate that the notwithstanding the addition accepted by way of an estimate the claim that the arms length price has been computed in accordance with the provisions of section 92C of the Act stands unrebutted on record. The mere fact that addition has been partially sustained by itself in the facts and circumstances of the present case does not warrant the penal action. - Decided in favour of assessee TP adjustment - 32% of the operational cost for the purpose of as the cost plus mark-up of the international transactions entered into by the Assessee with its Associated Enterprise - HELD THAT:- This was a derived mark-up on the operating cost earned by Li & Fung (India) Private Limited with respect to its global profits. The entire proceedings, therefore, show that there was no deliberate attempt by the Assessee to conceal any income or to underpay tax. ITAT, in the circumstances, was justified in reversing the order of the CIT (Appeals), New Delhi. Appeal under Section 260A of the Income Tax Act, 1961 by the Revenue against the ITAT order for AY 2006-07, challenging deletion of penalty imposed by the Assessing Officer and affirmed by the CIT(A). In the quantum proceedings the assessee accepted a derived mark-up of 32% of operational cost as the cost-plus mark-up for transfer pricing adjustments concerning international transactions with its Associated Enterprise; this mark-up reflected operating cost allocation tied to global profits of Li & Fung (India) Private Limited. The factual matrix demonstrated that there was 'no deliberate attempt by the Assessee to conceal any income or to underpay tax.' On that basis the ITAT justifiably reversed the CIT(A)'s confirmation of penalty. Court found that 'no substantial question of law arises' and dismissed the Revenue's appeal.