Section 271(1)(c) of the Income Tax Act, 1961 — Penalty — Where an issue is a debatable one, no penalty u/s 271(1)(c) can be impored.[2019] 51 ITCD 57 (DEL)
Facts: The only point of dispute was the usage of 'multiple year data' by the Assessee in determining ALP of the international transaction using TNMM whereas the Transfer Pricing Officer ('TPO') had adopted a 'single year data'. The ITAT agreed with the Assessee that this was a debatable issue. Particularly during the AY under consideration "this debate was very much alive".
Held: Delhi High Court held that the Court notes that after the words "data relating to the financial year" occurring in Rule 10 B (4) of the Rules, there is an insertion made in the Rules with effect from 19th October 2015, which reads "hereafter in this Rule and in Rule 10 (C) (a) referred to as the 'current year'. While it could be argued that this was a clarificatory amendment, the fact remains that the legislature thought it necessary to clarify that the data that was required to be used had to necessarily relate to the financial year in question and not to multiple year data. The view taken by the ITAT that during the AY in question, the issue was debatable cannot, in the circumstances, said to be an implausible view. On that ground, the penalty levied was held to be unsustainable and set aside.