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TMI Blog2018 (6) TMI 1388X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty u/s 271(1)(c) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] amounting to Rs. 1.24 crores. 3. The root cause for levy of penalty lie in the assessment order dated 15.12.2018 framed u/s 143(3) of the Act. 4. Briefly stated, the facts of the case are that the assessee is a direct subsidiary of Giesecke & Devrient GmbH. During the year under consideration, the assessee was engaged in the business of wholesale trading of currency verification and processing systems and their maintenance and providing SIM Card systems to telecommunication operators. Return was filed on 31.10.2005 declaring a loss of 93.35 lakhs. Return was selected for scrutiny assessment and a reference was made u/s 92CA(1) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the correct Explanation is Explanation 7 to section 271(1)(c) of the Act and not Explanation 1 invoked by the AO. The CIT(A) was of the opinion that this is only a technical mistake which can be set right u/s 292B of the Act. The CIT(A) was convinced that the assessee has not valued its international transaction by Rs. 3,41,12,260/- and, therefore, penalty levied by the AO is justified. 7. Before us, the ld. AR vehemently stated that there is no dispute between the assessee and the TPO as far as method of bench marking the international transaction is concerned and TNMM has been accepted as such. It is the say of the ld. Counsel that the only point of dispute is the usage of multiple year data by the assessee whereas the TPO has adopte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee did not file any appeal and therefore, has accepted the addition without challenging it before the appellate forums, in our considered opinion, the mere fact that the addition has been made or confirmed does not per se lead to imposition of penalty u/s 271(1)(c) of the Act for the simple reason that both the assessment and penalty proceedings are distinct from each other. If the contention of the ld. DR is accepted, then there was no need for separate penalty proceedings. 11. The next issue which 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, diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic mean. The amendment clarified the ambiguity about applicability of 5% tolerance band, not being a standard deduction. However, the position prior to amendment by Finance (No.2) Act, 2009 still remained ambiguous with varying judicial decisions. Some favouring departmental stand and others the stand of taxpayer. There is, therefore, a need to bring certainty to the issue by clarifying the legislative intent in respect of first proviso to sub-section (2) which was inserted by the Finance Act, 2002. It is, therefore, proposed to amend the Income Tax Act to provide clarity with retrospective effect in respect of first proviso to section 92C(2) as it stood before its substitution by Finance (No.2) Act, 2009 so that the tolerance band of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, that even this issue was highly debatable and, therefore, no penalty can be levied on such a highly debatable issue. 13. Considering the facts of the case in totality, we are of the considered opinion that the TPO has not rejected the methodology adopted in the TP report submitted by the assessee obtained from external expert. The 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. We, accordingly, set aside the findings of the ld. CIT(A) and direct the Assessing Officer to delete the penalty of Rs. 1,24,81,676/-. 14. In the result, the appeal of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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