TMI Blog2016 (4) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... te the assessment on the basis of draft order. However, in case, the assessee raises objection against the draft assessment order, as per sub–section (13) of section 144C, the Assessing Officer shall pass the final assessment order in conformity with the direction of the DRP without providing any further opportunity of being heard to the assessee. Thus, the final assessment order as contemplated under section 144C(13) is only to implement the directions of the DRP. Therefore, in our view, if the Assessing Officer has not initiated penalty proceedings under section 271(1)(c) in respect of a particular item of addition in the draft assessment order, he cannot do so in the final assessment order. Thus, in such a situation, if at the stage of final assessment, the Assessing Officer initiates penalty proceedings under section 271(1)(c) against additions not objected / contested before DRP, assessee would be put to a very precarious position, because in terms of section 144C(13), final assessment order has to be passed without affording any further opportunity of being heard to assessee. Therefore, on a harmonious construction of relevant statutory provisions, we are of the view, if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proposed adjustment, however, Transfer Pricing Officer passed an order by applying the margin of 29.50% as a result of which there was an upward transfer pricing adjustment of Rs. 2,54,27,043 on the arm's length price. On the basis of the order passed by the Transfer Pricing Officer, Assessing Officer passed a draft assessment order incorporating the transfer pricing adjustment recommended by the Transfer Pricing Officer. Further, Assessing Officer also disallowed the amount of Rs. 21,47,595 under section 40(a)(ia) of the Act. Against the draft assessment order, the assessee raised objections before the DRP. As it appears, assessee did not contest the disallowance under section 40(a)(ia). The DRP having confirmed transfer pricing adjustment, the Assessing Officer passed the final assessment order. Though, assessee preferred appeal before the Tribunal against the final assessment order, however, as it appears, as far as the transfer pricing adjustment is concerned, the Tribunal confirmed the addition. On the basis of aforesaid two additions sustained in appeal, the Assessing Officer initiated proceedings under section 271(1)(c) by issuing a show cause notice to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... selected by the assessee and all other facts except the margin computed on the basis of multiple year data, it cannot be said that the assessee has not carried out the exercise of determining arm's length price in good faith or due diligence. Accordingly, he held that in terms of Explanation 7 to section 271(1)(c), no penalty is imposable. As far as, imposition of penalty on the disallowance made under section 40(a)(ia), learned Commissioner (Appeals) held as the Assessing Officer in the draft assessment order has not initiated proceedings for imposition of penalty under section 271(1)(c) in respect of the disallowance made under section 40(a)(ia), he cannot impose penalty on such addition after directions of the DRP on the draft assessment order. 4. Learned Departmental Representative submitted, the very fact that the assessee itself made transfer pricing adjustment of Rs. 92 lakh to the arm's length price proves that the price charged was not at arm s length. Referring to Explanation 7 to section 271(1)(c), learned Departmental Representative submitted, burden is on the assessee to prove that the price charged or paid in respect of an international transaction was com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of imposition of penalty on the disallowance made under section 40(a)(ia), learned Authorised Representative submitted, since the Assessing Officer did not initiate penalty proceeding under section 271(1)(c) in the draft assessment order, he cannot do so in the final assessment order as the final assessment order is to be passed in conformity with the directions of the DRP. He submitted, as the issue of imposition of penalty under section 271(1)(c) was not in the draft assessment order, the same cannot be considered to be a part of directions of DRP for initiating the proceeding in the final assessment order. Finally, the learned Authorised Representative submitted, issue relating to transfer pricing adjustment is now subject matter of adjudication before the High Court as in the appeal preferred by the assessee the Hon'ble High Court has admitted the substantial question of law framed on the issue. He, therefore submitted, as substantial question of law arising out of the transfer pricing adjustment has been admitted by Hon ble High Court, no penalty under section 271(1)(c) can be imposed. For such proposition, he relied upon the following decisions: i. DCIT v/s M/s. Cri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the data available in public domain, whether current year or multiple year, computed the margin of comparables. Nothing has been brought on record by the Department to establish that current year data in respect of all the comparables were available in public domain on the due date of filing of return of income. Therefore, it cannot be said that the determination of the international transaction by the assessee is not in accordance with the provisions of section 92C r/w rule 10B(4) or not in good faith or without due diligence as proviso to rule 10B(4) provides under certain contingencies use of previous years data is permissible. 8. Moreover, it is a fact on record, assessee has furnished all relevant information in respect of international transaction with A.E. in the audit report as well as transfer pricing study. In fact, the Transfer Pricing Officer himself admits that the assessee furnished the updated margins of the comparables. The Transfer Pricing Officer has not found any of the information submitted by the assessee misleading or unreliable. Therefore, in our view, a case of furnishing of inaccurate particulars of income has not been made out to justify imposition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. Vyas, in Tax Appeal no.606/2010, wherein a contrary view has been expressed, but, we are persuaded to follow the decision of the Hon'ble Jurisdictional High Court in Nayan Builders and Developers P. Ltd. (supra), which is binding on us. Therefore, looked at from any angle, imposition of penalty under section 271(1)(c) in the present case is not justified. The bonafide of the assessee is further proved from the fact that voluntarily it has made adjustment of Rs. 92 lakh to the price charged. In the circumstances, in our considered opinion, learned Commissioner (Appeals) was justified in deleting the penalty under section 271(1)(c). 9. As far as the issue relating to penalty on the addition made under section 40(a)(ia), admittedly, in the draft assessment order, the Assessing Officer has not initiated proceeding for imposition of penalty. It is only in the final assessment order the Assessing Officer initiated proceeding for imposition of penalty in respect of disallowance made under section 40(a)(ia). On a perusal of the provisions contained under section 144C, it is to be noted that the as per sub section 3, if the assessee intimates the Assessing Officer the acceptance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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