TaxTMI 
TaxTMI 
2021 (8) TMI 964
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....sessee is that the ld. CIT(A) erred in confirming the penalty of Rs. 90,27,690/- u/s 271(1)(c) of the Income tax Act, 1961 [hereinafter referred to as 'The Act' for short]. 3. Representatives of both the sides were heard at length. Case records carefully perused. 4. The roots for levy of penalty lie in the assessment order dated 31.03.2016 framed u/s 143(3) r.w.s 144C of the Act. Pursuant to the order of the TPO dated 20.01.2016 framed u/s 92CA(3) of the Act, the Assessing Officer enhanced the income of the assessee by Rs. 2,78,24,585/-. While proposing enhancement, the TPO observed "The Assessing Officer may examine the feasibility of initiation of penalty u/s 271(1)(c) of the Act in accordance with Explanation 7 of the same.....
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.... in person or through authorised representative you may show cause in writing on or before the said date which will be considered before any such order is made under section 271. Place New Delhi Date 31.03.2016 Assessing Officer [D.S. Rathi] Dy. Commissioner of Income tax, Circle 10(1), C.R. Building, New Delhi Delete inappropriate paragraphs and words." 6. On 05.09.2016, the Assessing Officer once again issued noticed as under: 7. It can be seen from the above that the notice issued on 05.09.2016 is, in fact, not a notice but in continuation of earlier notice dated 31.03.2016 asking the assessee to furnish reply to the notice dated 31.03.2016. 8. A simple perusal of the notice dated 31,03.....
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.... aforesaid decision of Division Bench and, therefore, there was no substantial question of law arising for determination - Whether since there was no merit in SLP filed by revenue, same was liable to be dismissed - Held, yes [Para 2] [In favour of assessee. 11. Hon'ble Delhi High Court in case of Pr. CIT vs. Sahara India Life Insurance Company Ltd. (supra) while deciding the identical issue held as under: "21. The Respondent had challenged the upholding of the penalty imposed under Sec. 271(1)(c) of the Act, which was accepted by the IT AT. It followed the decision of the Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar) and observed that the notice issued by the AO would be bad in law if it di....
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.... by the AO and confirmed by the Id. CIT (A) is not sustainable and as such, the appeal filed by the assessee is allowed. 14. Considering the totality of the facts in light of the judicial decisions [supra] we direct the Assessing Officer to delete the penalty u/s 271(1)(c) of the Act amounting to Rs. 90,27,690/-. 15. We will not rest our findings at this stage, but would like to proceed on merits of the case. 16. Facts on record show that the assessee has taken his foreign Associated Enterprise as tested party, which bench marking was rejected by the TPO. Observations of the TPO are as under: "12. The assessee has also stated that it has not tested overall margin of the AE but the margin earned from this particular transac....
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....ngth on account of these services. That will be the actual separate benchmarking of this transaction. The Hon'ble ITAT Delhi has held in Global Vantedge Pvt. Ltd. vs DCIT Cir-12(l), New Delhi. (ITA Nos 14328s2321/Del/2009) that the use of foreign comparables and foreign tested party was incorrect. 15. Under these circumstances, it cannot be said that by following this course of action, the assessee has 'separately benchmarked' this transaction. This benchmarking approach of the assessee is therefore, rejected. Accordingly, the assessee shall be chosen as the tested party and we shall arrive at the aim's length price that would have been paid in uncontrolled circumstances for the receipt of such services." 17. In our ....
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....es. The appeal is accordingly dismissed along with the pending application." 19. Considering the facts of the case in light of the decision of the Hon'ble Jurisdictional High Court of Delhi [supra] we do not find any merit in levy of penalty u/s 271(1)(c) of the Act. 20. In the result, the appeal filed by the assessee in ITA No. 2779/DEL/2018 is allowed. The order is pronounced in the open court on 23.08.2021 in the presence of both the rival representatives. ============= Document 1 सतà¥à¤¯à¤®à¥‡ OFFICE OF THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-10(1), ROOM NO. 238A,C.R. BUILDING, I. P. ESTATE, NEW DELHI NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(c) OF THE INCOME TAX ACT,....