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M/s. General Motors Overseas Corporation, C/o. C.C. Choksi & Co. Versus The Assistant Director of Income-tax, International Taxation, 3 (1) , Mumbai

Levy of penalty by the AO u/s 271(1) (c) - claim of deduction for expenditure incurred in respect of seconded employees under the Management Provision Agreement (MPA) - Held that:- We find that the assessee has filed details to the extent of 99.97 percent, which means the assessee on merits is eligible for deduction of these expenses from its income, what to talk of penalty under section 271(1)(c) of the Act. This case is not covered under any of the penalty provisions provided under section 271 .....

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iven in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing of inaccurate “particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provisions of section 271 (1) (c) of the Act, the penalty provisions cannot be invoked. The Revenue has wrongly invoked the provisions in the present case. The CIT (A) has misconstrued the facts of the case for the reason that he has not understood the American system of dates .....

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arising out of the order of the CIT (A)-10, Mumbai passed in appeal No.CIT (A)-10/ADIT (IT) 3(1)/IT-20/06- 07 dated 23-09-2010. Assessment was framed by the ADIT(IT), Circle 3 (2), Mumbai for assessment year 2001-02 vide his order dated 18-03- 2006 u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). Penalty under dispute was levied by the ADIT (IT), Circle 3 (1), Mumbai u/s 271 (1) (c) of the Act vide order dated 21-03-2006. 2. The only issue in this appeal of the asses .....

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ee Company. The assessee Company raised invoices on GMIL on case to case basis, with no mark up and as per Clause 4 of the MPA; GMIL would reimburse the cost of remuneration of the seconded employees to the assessee. In terms of the MPA, the assessee makes available to GMIL executive personnel in the areas relating to development of general management, finance and purchasing, sales, marketing and assembling/manufacturing activities etc. During the course of assessment proceedings, the assessee w .....

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unt of US $ 150619.75 as business profit and worked out the addition at ₹ 69,93,275/-. The AO initiated penalty proceedings u/s 271 (1) (c) of the Act. Against the addition, the assessee preferred appeal before CIT (A), who confirmed the action of the AO. The AO started penalty proceedings u/s 271 (1) (c) of the Act and required the assessee to explain as to why the profit added at ₹ 69,93,275/- equivalent to US $ 150690 be not treated as concealed income of the assessee for furnishi .....

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T (A) also the assessee filed details of expenses to the extent of US $ 122306, which were forwarded by him being additional evidences to the AO for his comments. The AO submitted his remand report negating the claim of the assessee. The CIT (A) confirmed the levy of penalty by observing as under:- 1.4 I have considered the facts and gone through the penalty order passed by the AO and also the submissions made by the Appellant before me. The Assessment order was passed on 18.03.2004. A perusal o .....

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nfirmed that no more bill for expenses are to be submitted. In such circumstances, the AO computed the profit attributable to activities conducted in India at USD 150619.75 being difference between invoices raised and expenditure incurred with supporting evidence (622,117.58 - 471,497.93) as per details before the AO. This clearly shows that the assessee has not declared the income to that extent of USD 150,619.75 in the return of income. The AR of the appellant clearly8 stated that there were n .....

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s not earned any profit from its Indian operations. 1.4.1 A perusal of the penalty order reveals that the AO has rejected the contentions on the basis that the assessee had admitted in the assessment proceedings that no more invoices were to be submitted. Further, CIT (A) has agreed with the AO that in absence of the documentary evidence it is difficult to accept the claim of the Appellant. The so called invoices purported to have been filed during penal proceedings before the AO were also exami .....

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third party. Similarly invoices of USD 80381 is also pertains to advance paid, therefore it could not be considered as expenditure for earning income. This view is also supported from the fact that notice issued under section 133 (6) of the Act on the address given in the invoices have returned UNserved. This also leads to infer that explanation is not bonafide and claim is not genuine. The claim of the AR that it was sent on wrong address cannot absolve the responsibility of the appellant. The .....

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ved that the appellant does not have any income in India. The appellant has shown NIL income in India on the ground that expenditure incurred is cost to cost basis. However, such claim cannot be accepted in absence of any transfer pricing study report. No Transfer Pricing Report been brought to my furnished to support the claim. It is further seen from the past history that the appellant has never been able to furnish documentary evidence in supports of expenditure incurred therefore such disall .....

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d against the action of CIT(A), for confirming levy of penalty, the assessee came in second appeal before the Tribunal. 5. We have heard the rival contentions and gone through the facts and circumstances of the case. Before us, the learned Counsel Ms Priyanka Gada for the assessee stated the facts of the case that the assessee almost all invoices (99.5%) raised to GMIL, being reimbursement cost incurred by the assessee were filed either during penalty proceedings or before CIT (A) during appella .....

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e documentary evidences in respect of invoices raised and details of expenses incurred was not produced. Thus, income was assessed including this as business profit at ₹ 69,93,275/- and the CIT (A) also confirmed the action of the AO. During the penalty proceedings, according to the learned Counsel for the assessee, the assessee further submitted the details of invoices of expenditure incurred to the extent of US $ 26500 vide submissions dated 14-03-2004. But the AO refused to entertain th .....

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er book at page 53, reads as under:- 6. The appellant has also submitted that it filed supporting evidences for expenses to the extent of US $ 26500 before the A. O. during the penalty proceedings. This fact is also mentioned on Page No.2 of the penalty order. The appellant has furnished supporting evidences before me to the extent of US $122306. Subsequent to the assessment proceedings, the appellant has filed supporting documents to the extent of US $ 148806 against the disallowance of US $ 15 .....

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the documents and it has submitted during the penalty proceedings. I also feel that since it is a penalty proceedings which is of penal in nature, the appellant s additional evidences should be examined in the interest of justice. 7. In view of the above, I request you to kindly go through the evidences filed and examine about the genuinenity of the evidences filed and to report whether the appellant could substantiate the expenses to the extent of US $ 148806. You may also make necessary enqui .....

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page 54-55 of the paper book filed by the assessee,:- Please find enclosed herewith, a letter No.DDIT (IT)- 3(1)/Remand Report/2010-11 dated 30.04.2010 which was addressed to your office. As per the letter, a notice u/s 133(6) was issued to the concerned party and the reply was yet to be received, hence the remand report could not be submitted. It may be submitted that, a notice u/s 133 (6) was issued to The Principal Officer, North American Operations, General Motors Corporation Disbursement (2 .....

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f the above mentioned facts, conscious efforts have been made to verify the genuineness of the claim of the assessee, but the same is not available for the aforementioned reasons. Thus, it is clear that additional evidences filed by the assessee cannot be relied upon to allow the said claim of the assessee and needs to be rejected . 7. In view of the above learned Counsel for the assessee explained that in the remand report, the AO took a plea for rejecting the evidences that notice issued u/s 1 .....

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to rebut this notice, returned un-served, has been given to the assessee. She also assails the order of CIT (A) and the reasoning given therein that CIT (A) confirmed levy of penalty only on the ground that the invoice raised are dated 03.09.2001, whereas accounting period of the assessee closes on 31-03- 2001. She explained that CIT (A) failed to appreciate that the invoice was in American Format i.e. MM/DD/YY. According to her, the invoice was raised on 9th March 2001 and not on 03rd September .....

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lso referred to the details of payment and tax paid by the concerned employees in US, as given at page 3 of the assessee s paper book wherein paid amount in the last column of the Table is shown as $26,500.00. 8. In view of the above facts, the learned Counsel for the assessee stated that the entire episode happened because the assessee could not lay its hands on the evidences at the right time, while the entire evidences were available with the assessee for claim of deduction of expenses. Accor .....

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stances of the case. We find that the learned Counsel for the assessee has explained the case with facts and figures as narrated above and in such circumstances; it is not at all a case for levy of penalty for furnishing of inaccurate particulars of income for the reason that the assessee has filed all the details before the CIT(A) and before the Assessing Officer during the course of penalty proceedings or during the course of appellate proceedings. We find that the assessee has filed details t .....

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