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2018 (6) TMI 1388 - AT - Income TaxLevy of penalty u/s 271(1)(c) - method of bench marking international transaction - Held that:- TPO/AO/CIT(A) have held that such action by the assessee is contrary to the provisions of the Act and tantamount to furnishing of inaccurate particulars of income. Prior to 2007, there was a legal debate as to whether multiple year data can be used or current year data has to be used. A.Y under consideration is 2005-06 which means that when the assessee completed its transfer pricing study and filed return of income, this debate was very much alive. This being a debatable issue at the point of time when the assessee filed its return of income, adoption of multiple year data for arriving at ALP is a bonafide exercise. Penalty levied on that count cannot be sustained as the law on this issue was evolving. Mere fact that the addition has been made or confirmed does not per se lead to imposition of penalty u/s 271(1)(c) for the simple reason that both the assessment and penalty proceedings are distinct from each other. If the contention of DR is accepted, then there was no need for separate penalty proceedings. Triggered the levy of penalty relates to the claim of standard deduction @ 5%. This issue is also highly debatable and many disputes arose regarding interpretation of the proviso. Whether tolerance band is standard deduction or not, different courts have interpreted it differently so much so that in the Finance Bill 2012 - even this issue was highly debatable and, therefore, no penalty can be levied on such a highly debatable issue. TPO has not rejected the methodology adopted in the TP report submitted by the assessee obtained from external expert. Difference in ALP arose only on account of difference of opinion between the assessee and the TPO with regard to the use of multiple year data and the claim of standard deduction. On both the counts, the levy of penalty is not justified. - Decided in favour of assessee.
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