Sale of assets after valuation and the adjustment by the TPO by resorting to CUP method cannot be a ground for levy of penalty u/ s 271(1)(c).

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Sale of assets after valuation and the adjustment by the TPO by resorting to CUP method cannot be a ground for levy of penalty u/ s 271(1)(c).

 

ASSISTANT  COMMISSIONER OF  INCOME TAX vs. IKEA TRADING (INAI) PVT. LTD.

(2021) 61 CCH 0221 DelTrib

Short Overview:

Penalty under section 271(1)(c)

Adjustment on account of ALP of fixed assets

Assessee, a Merchant Exporter, granted a ‘Four Star’ export house status by Government of India, is engaged in trading of home furnishing products

Assessee purchases different home furnishing products from various supporting manufacturers in India and exports same outside India

Assessment in this case was made at a loss

Additions were made on account of transfer pricing adjustment in respect of sale of fixed assets and disallowance on account of expenses

Penalty proceedings were initiated during course of assessment and penalty was imposed on issue of adjustment on account of ALP of fixed assets and on issue of disallowance of expenses

Held, Assessee has sold assets at WDV of assets as per company law whereas TPO held that assessee ought to have sold assets at value of WDV of block of assets as per Income Tax Act

WDV as per Income Tax Act may not be / cannot be fair market value of assets

Assets were transferred at book value as per audited accounts of assessee which is a recognized method of providing depreciation—Such sale of assets after valuation and adjustment by TPO by resorting to CUP method cannot be a ground for levy of penalty u/ s 271(1)(c)

Case of concealment or furnishing of inaccurate of particulars of income cannot attract provisions of penalty u/ s 271 (1)(c)

Hence, penalty levied on this ground has been rightly deleted by ld. CIT (A)

Assessee’s ground allowed.

 

 

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