TMI Blog2018 (8) TMI 1137X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding Counsel for Income Tax Department. Respondent Through: None. SANJIV KHANNA, J. (ORAL) Present appeal by the Revenue under Section 260A of the Income Tax Act, 1961(the Act, for short) in the case of M/s Sinosteel India Limited (respondent-assessee, for short) impugns the order dated 29th January, 2018 passed by the Income Tax Appellate Tribunal (Tribunal) deleting penalty for concealment of income under Section 271(1)(c) of the Act. The appeal relates to Assessment Year 2006-07. 2. Penalty for concealment was imposed for failure to correctly compute arm s length price of international transactions between the respondent-assessee and its holding company M/s Sino Steel Corporation, China and associated enterprises by excluding internal comparable while applying the Comparable Uncontrolled Price (CUP) method. 3. Respondent-assessee was providing support and assistance to its holding company and associated enterprises in procuring and supplying metallurgical materials and related activities, for which the respondent-assessee was paid commission in related international transactions @ US$ 0.15 per DMT and US$ 0.33 per WMT. 4. During the year in question, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 961, this amount of ₹ 2,87,72,311/- shall also be deemed to represent the income in respect of which particulars have been concealed/inaccurate particulars have been furnished. The assessee has failed to establish that the price charged or paid in such transaction was computed in accordance with the provisions contained in section 92C of the IT Act 1961 and lathe manner prescribed under that section in good faith and with due diligence. In view of the above, I am of the considered opinion that the assessee has concealed particulars of its income and is liable to penalty u/s 271(1)(c) of the I.T. Act 1961. The Assessing Officer, in our view, had failed to appreciate that imposition of penalty was not automatic in the sense that it was mandatory as addition had been made in the quantum proceedings. 11. The Commissioner of Income Tax (Appeals) vide order dated 6th October, 2015 upheld the penalty order observing that the respondent-assessee merely stated that the lower rate of commission was on account of higher volume. The transfer pricing report had not mentioned that the lower rate of commission was at arm's length when compared to internal comparable. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 14A of the Act was a debatable issue. We may also note that against the quantum assessment where under deduction under section 14A of the Act was prescribed to the assessee, the assessee has preferred an appeal in this Court under Section 260A of the Act which has also been admitted and substantial question of law framed. This itself shows that the issue is debatable. For these reasons, we are of the opinion that no question of law arises in the present case. 3.3. Thus, it is the nature of addition/disallowance, which is material to determine whether the issue involved in the addition is a debatable issue and, therefore, the claim of the assessee is a bona fide claim, though not acceptable. Even otherwise legislature has made it clear by inserting Explanation 7 to section 271(1)(c) that any addition in the computation of the total income is made as per the provisions of section 92C. The amounts so added or disallowed shall for the purpose of Clause(c) of section 271(1) would be deemed to represent the income, in respect of which the particulars have been concealed or inaccurate particulars have been furnished unless, the assessee proves to the satisfaction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal transactions regarding purchase of raw material, the most appropriate method for determining the ALP would be Comparable Uncontrolled Transactions (CUP). However, the selection of the method is further subjected to various factors and one of the factors is the availability, coverage and reliability of data necessary for application of the method. In the facts of the present case entire adjustment has been made due to the lack of reliable data. We find that the decision of the Hon ble Delhi High Court in Liquid Investments Trading Co. (supra) clinches the issue in favour of the assessee. In this case it was held by the Hon'ble High Court that where the assessee has preferred an appeal u/s 260A of the Act which has also been admitted a substantial question of law framed; this itself shows that the issue is debatable. In our considered view no penalty u/s 271(1)(c) of the Act could be imposed on a debatable issue. In this view of the order we hold that the case of the assessee is not a fit case for levy of penalty u/s 271(1)(c) of the Act and accordingly the grounds of the appeal by the assessee stand allowed. 13. Quantum appeal on the question of internal comparable h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same, but appreciation and consideration is from a different point of view, i.e. bona fides and due diligence. 17. Respondent-assessee had applied CUP method to compute the arms length price of the international transactions with the associated enterprises. Revenue has not disputed that the CUP method was the preferred or appropriate method to be applied. Revenue no doubt states that there was lack of reliable data for application of the CUP method, but the method adopted and applied by the respondent- assessee was not rejected. 18. As noticed above, the respondent-assessee had justified and explained why the independent transaction was disregarded as an internal comparable, for two reasons. Firstly, the transaction was of low value in comparison with transactions with associated entities. Secondly, it was a single transaction, whereas transactions with associated enterprises were continuous and based upon long-term business relationship. This factual position and distinction is undisputed. In view of the factual matrix, the explanation of the respondent/assessee was accepted as bona fide and that the assessee had exercised due diligence in selection of the method and compara ..... X X X X Extracts X X X X X X X X Extracts X X X X
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