Procter & Gamble Hygiene & Health Care Limited vs DCIT Mumbai

Details of the Case:

THE INCOME TAX APPELLATE TRIBUNAL
“C” Bench, Mumbai
Shri Shamim Yahya (AM) & Shri Amarjit Singh (JM)

I.T.A. No. 1105/Mum/2019 (Assessment Year 2012-13)
 I.T.A. No. 1106/Mum/2019 (Assessment Year 2013-14)
 I.T.A. No. 1107/Mum/2019 (Assessment Year 2014-15)

Procter & Gamble Hygiene
and Health Care Limited
P&G Plaza, Cardinal
Gracias Road
Chakala, Andheri(E)
Mumbai-400 099.
PAN : AAACP6332M

Vs.

DCIT 3(3)(1)
Mumbai.
(Appellant) (Respondent)

Assessee by Ms. Hirali Desai
Department by Shri V. Sreekar

Date of Hearing 17.08.2020
Date of Pronouncement 27.08.2020

ORDER

1. These appeals by assessee are arising out of the common order of Commissioner of Income Tax (Appeals)-17, Mumbai in Appeal No. CIT(A)-17 wherein penalties u/s. 271G were confirmed for A.Ys. 2012-13, 2013-13 & 2014-15.

2. In these cases by common order learned CIT(A) confirmed the levy of penalty by the AO under section 271G of the Act for the reason that the assessee has entered into international transactions with its AE and has failed to furnish documents or information as required under section 92D(3) of the Act. For this assessee has raised the identically worded grounds in all three years and facts and circumstances are also identical. Hence, we will take the facts from AY 2012-13 and will decide the issue. The common ground raised reads as under :-

“1. General

On the facts and circumstances of the case, and in law, the order passed by Hon’ble Commissioner of Income-tax (appeals) (CIT(A)’] is a vitiated order, as the Hon’ble CIT(A) erred both on facts and in law in confirming the penalty under section 271G levied by the Ld. Transfer Pricing Officer (“TPO”) to the appellant’s income.

2. On the facts and in the circumstances of the case and in law, the Ld. TPO/ CIT(A) erred in not appreciating that:

a) There was no failure on the part of the Appellant keep and maintain any information required by sub-section (1) of section 92D of the Act r.w. Rule 10D of the Income-tax Rules, 1962 (‘the Rules’);

b) The appellant was not required to maintain the following information/ documents called for under section 92D(3) of the Act:

-Information vis-à-vis the audited segmental account for AE and non-AEs transactions undertaken as the Appellant had select the foreign AE as the tested party in its TP study benchmarking analysis;

-Information vis-à-vis the audited segmental accounts for its manufacturing and distribution segment as it operated as an entrepreneur in the Indian market and therefore, does not have such segmental bifurcation.

c) Notice under section 92D(3) of the Act can be issued, only if after application of mind, the Ld. TPO requires more information for determination of the Arm’s Length price.

d) Notice under section 92D(3) of the Act cannot be vague or casualty issued, but must require furnishing of specific information or documents which the taxpayer failed to furnish under section 92CA(2) of the Act.

3. On the facts and circumstances of the case and in law, the Ld. TPO/ CIT(A) erred in not taking cognizance of section 92C(3), 92CA(2) and 92CA(3) of the Act, which requires:

a) the appellant to furnish evidence in support of its own determination of the arm’s length price wherein the same has been maintained by the Appellant in good faith in terms of above-mentioned section; and

b) The ld. TPO to determine arm’s length price on the basis of material available with him, if the Ld. TPO is of the opinion that the material maintained by the Appellant does not fulfil the requirement of law.

4. Without prejudice to the above, on the facts and circumstances of the case and in law, the ld. TPO erred in not taking cognizance of the fact that, in terms of section 273B of the Act, penalty under section 271G of the Act can be imposed only if default of the Appellant is held to be proved without reasonable cause.”

3. The assessee is in the business of Fast-Moving Consumer Goods in the segment of health care and feminine care and is a licensed manufacturer in the Indian market wherein it manufactures and also gets goods manufactured from its Associated Enterprises (AEs') in India. In the Transfer Pricing study report, for computing the arms' length price for the international transaction of import of raw material and finished goods, the AEs have been considered as the tested party, since they are the least complex/low risk manufacturing entities as compared to the Appellant who is performing the role of an entrepreneur for the Indian market. During the TP assessment proceedings, the Appellant submitted various documents/information to justify and support the benchmarking approach adopted in the TP study analysis.

4. However, the TPO rejected the benchmarking approach of the Appellant and determined the arms' length price by selecting the Appellant as the tested party and consequently made that T.P adjustment.

5. Separately, the TPO also initiated penalty proceedings under section 271G of the Act for non-furnishing of certain TP documentation with respect to the aforesaid international transactions of import of raw material and finished goods and export of finished goods. The Ld.CIT(A) upheld the order of the TPO on the following grounds:-

(a) Non-furnishing of AE and non-AE audited segmental accounts;
(b) Non-furnishing of manufacturing and distribution audited segmental accounts;
(c) Non-furnishing of documents regarding choice of foreign AE as tested parts and
(d) Non-furnishing of documents regarding applicability of TNMM as MAM

6. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.

7. At the Outset the learned counsel of the assessee Ms. Hirali Desai contended that the issue is squarely covered by ITAT order in the group concern case namely Procter & Gamble Home Products Private Limited in ITA No 1095 to 1097/Mum/2019, A.Y 2012-13, 2013-14 and 2014-15 order dated 09.09.2019, wherein on identical facts and similar learned CIT(appeals) order ITAT has deleted the addition levied under section 271G. She submitted that as in that case the notice with reference to which penalty has been levied was similarly worded. She submitted that the said notice was also general and casual and the assessee did maintain and supply the documents and information which it was required to maintain as per the law and rules. She referred that the documents which were noted by the tribunal to have been submitted by the assessee in that case, which were considered adequate, are also similarly maintained and submitted in this case.

8. On the other learned counsel of the Department relied upon the orders of the learned CIT(appeals).

To view the full judgment, find the enclosed file