IN INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA Nos.2785 & 2786 /Ahd/2013 (Assessment Years:2003-04 & 2004-05) DCIT (OSD)-I, Circle-4, Navjivan Trust Bldg., Off. Ashram Road, Ahmedabad Appellant Vs. Mastek Ltd. President House, Opp. C. N. Vidyalaya, Ambawadi, Ahmedabad Respondent PAN: AAACM9908Q By Revenue : Mrs. Vibha Bhalla, CIT D.R. By Assessee : Shri S. N. Soparkar with Shri Parin Shah, A.R. Date of Hearing : 31.08.2016 Date of Pronouncement : 17.10.2016 ORDER PER S. S. GODARA, JUDICIAL MEMBER These two Revenue s appeals for assessment years 2003-04 and 2004- 05 arise from common order of CIT(A)-VIII, Ahmedabad, dated ITA Nos.2785 & 2786/Ahd/2013 (DCIT vs. Mastek Ltd.) A.Y. 2003-04 & 2004-05 -2- 05.08.2013, in cases no. CIT(A)-VIII/DCIT/Cir.4/82 & 83/12-13 & CIT(A)- VIII/DCIT/Cir.4/82 & 83/12-13 respectively, deleting penalties of Rs.50,20,863/- and Rs.62,97,810/-, imposed by Assessing Officer vide separate orders dated 30.01.2013 in both assessment years, in proceedings u/s.271(1)(c) of Income Tax Act, 1961, in short Act . 2. We come to relevant facts first. This assessee is company providing software services and other related business(es). It filed returns on 27.11.2003 and 01.11.2004 stating incomes of Rs.13,03,30,257/- and Rs.Nil respectively. Assessing Officer framed regular assessment on 15.12.2005 and 27.12.2006 disallowing /adding two claims of travelling expenses amounting to Rs.1,26,88,612/- and Rs.1,67,98,984/- followed by other head of upward adjustments of interest on advances not charged to tune of Rs.9,77,598/- and Rs.7,55,888/-; respectively. He further initiated impugned Section 271(1)(c) penalty proceedings alleging concealment and furnishing of inaccurate particulars of income. 3. assessee preferred separate appeals. CIT(A) s respective orders passed on 24.08.2006 and 28.03.2007 upheld former disallowance of travelling expenses and deleted latter one pertaining to interest advances. Bothe parties filed their respective appeals before tribunal. coordinate bench vide order dated 11.05.2012 in quantum proceedings upheld Assessing Officer s findings on former issue of travelling expenses disallowance and restored assessing authorities opinion qua letter issue of interest on loans and advances. Quantum proceedings appear to have attained finality at this stage. 4. Assessing Officer resumed with impugned penalty proceedings. He took serious note of above quantum developments in his penalty orders dated 30.01.2013 while rejecting assessee s plea of not having ITA Nos.2785 & 2786/Ahd/2013 (DCIT vs. Mastek Ltd.) A.Y. 2003-04 & 2004-05 -3- furnished inaccurate particulars of income in view of bonafide belief in support of its two claims of travelling expenses and interest not charged on advances. He concluded that assessee s act and conduct in both impugned assessment years was that of furnishing of inaccurate particulars of income followed by concealment thereof. 5. CIT(A) allows assessee s appeal challenging penalties on both above stated issues. He observes that this tribunal in assessee s own case for A.Y.2002-03 ITA No.2050/Ahd/2008 decided on 19.10.2012 has already deleted Section 271(1)(c) penalty arising from identical travelling expenses disallowance. same factual position continues before this tribunal as well in impugned assessment year. Revenue neither points out any exception on facts nor law so far as relevant facts on issue of travelling expenses claim in these two assessment orders are concerned. We adopt judicial consistency in this factual backdrop and find no reason to interfere in CIT(A) s order deleting penalty on first issue of travelling expenses disallowances in two assessment years before us. Revenue s first identical substantive ground in these two appeals fails accordingly. 6. We now advert to latter issue of Section 271(1)(c) penalty arising from interest disallowance issue. CIT(A) s findings under challenge read as follows: II) Interest on Settlement advance:- second issue on which penalty has been imposed is regarding upward adjustment of interest on settlement of advances. appellant provided settlement advance to employees who have been sent to AE in order to meet their basic requirement of lodging, boarding and food for first few days until they receive pay from AEs in foreign country. advance is recovered by AEs as deduction from monthly salary payable to respective employees. amount so recovered by AEs is transferred ITA Nos.2785 & 2786/Ahd/2013 (DCIT vs. Mastek Ltd.) A.Y. 2003-04 & 2004-05 -4- to appellant. AO/TPO held that since advance is being paid for benefit of AEs, therefore, interest for period when amount advanced to employees was recovered by them should be charged. honourable ITAT upheld adjustment made by A.O and A.O imposed penalty on issue. After carefully considering facts of issue and written submission made by appellant and penalty order, it is noted that initially upward adjustments were made by A.O in both years. However, additions were deleted by CIT(A), subsequently ITAT upheld adjustment but quantum was reduced considerably. Further it is noted that appellant has indicated these transactions in Transfer Pricing Report submitted to AO/TPO during course of assessment proceedings. It is noted that in Form 3CEB settlement advances were disclosed as international transaction under head reimbursements at actuals. It is further noted that appellant had provided all details pertaining to advance and there is no concealment of facts or figures on behalf of appellant. It was mere claim which was not accepted by AO/TPO and upward adjustment by treating interest as addition was made. Therefore, there is no furnishing of inaccurate particulars on part of appellant and in these circumstances decision of Honourable Supreme Court in case of Reliance Petro products Pvt. Ltd reported in 322 ITR 158 is clearly applicable. According to decision, where there is no finding that any details were supplied by assessee in its return of income found to be incorrect or erroneous or false there was no question of invoking penalty under section 271(1) (c). appellant, at all times, had co-operated fully by furnishing details of basis of calculation given In Transfer Pricing Report. None of details submitted by appellant have been found to be false or there was no case of misrepresentation on behalf of appellant. appellant in Annexure- E (for A.Y. 2003-04) and Annexure-D (for A.Y 2004 - 05) of Transfer Pricing Reports has given details about these transactions. quantum of reimbursements received from various AEs has also been disclosed. It has been noted in report that no adjustment was being made as it was reimbursements were at actuals. view of appellant was that since it was reimbursement of advances given to employees sent for foreign duty, no interest should be charged however AO/TPO did not accept view of appellant and held that some interest should have been charged by appellant from AEs. Therefore, this was mere claim and views of appellant and AO did not match. AO did not accept claim of appellant by treating advances to employees and subsequent reimbursement by AEs as interest-free. It is not case where appellant did not disclose international transactions, quantum and basis of not making any upward adjustment in Transfer Pricing Report and AO subsequently discovered that these transactions were not disclosed and some addition was made on that basis. appellant demonstrated that transactions were dealt with for Transfer Pricing study in accordance with ITA Nos.2785 & 2786/Ahd/2013 (DCIT vs. Mastek Ltd.) A.Y. 2003-04 & 2004-05 -5- provisions contained in section 92C and same were in good faith and basis of computation was on basis of due diligence. appellant has therefore, explained bonafides and accordingly, has demonstrated reasonable cause for not making any upward adjustment related to that transaction. explanation 7 to sec. 271(1)(c) is, therefore, not applicable in present case. reliance placed by AO on judgements mentioned by him in penalty order is out of place as facts of all cases are different. cases reported in 169 ITR 782 and 127 ITR 837 are not applicable, as appellant has duly discharged burden of proving basis of calculation. Further, decision of Honourable Delhi High Court in case of Motor General Finance Ltd 254 ITR 449 is also not applicable as appellant had furnished all documentary evidence related to Transfer Pricing provisions. In view of above-mentioned discussion, facts and circumstances I am of considered opinion that no penalty under section 271(1)(c) is exigible on appellant for both years on basis of upward adjustment related to interest on settlement advances as well. penalties imposed by A.O for both years are therefore, directed to be deleted. grounds No. 2 & 3 are, therefore, allowed. 7. Heard both parties. There is hardly any dispute by now that assessee had duly placed on record all factual particulars in course of quantum assessment in its transfer pricing report i.e. Form 3 CEB. Revenue further fails to rebut fact that it s transfer pricing adjustment and not case of furnishing of inaccurate particulars since transfer pricing authority had to compute arms length price of impugned loan transactions. We observe in these peculiar facts that once assessee has included all relevant particulars, mere fact that it did not benchmark its loan transactions at arm s length resulting in impugned upward adjustment would not form sole ground to invoke impugned penalty provision in absence of any exercise by lower authorities in quantum proceedings finding same to be inaccurate. We thus find no reason to interfere in CIT(A) s finding under challenge as extracted in preceding ITA Nos.2785 & 2786/Ahd/2013 (DCIT vs. Mastek Ltd.) A.Y. 2003-04 & 2004-05 -6- paragraphs. This latter substantive ground in both appeals is also declined accordingly. 8. These two Revenue s appeals are dismissed. Pronounced in open Court on this 17th day of October, 2016. Sd/- Sd/- (PRAMOD KUMAR) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 17/10/2016 True Copy S.K.SINHA Copy of Order Forwarded to:- 1. Revenue 2. Assessee 3. Concerned CIT 4. - CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order DCIT (OSD)-I, Circle-4 v. Mastek Ltd