2011 (12) TMI 224 - AT - Income Tax

Penalty u/s 271G - business of software development and export alleged failure to furnish information/document u/s 92D for determining ALP assessee inability to furnish invoices, price quotation, ownership etc., of other companies as such information was not in public domain Held that - When the Assessee had furnished all the particulars on the basis of which the AO could come to the conclusion regarding the ALP in the case of the international transaction and hence the additional particulars required which were not available with the Assessee for the reason that such information was not in public domain were not really necessary and further the Assessee cause for not filing the requisite particulars within the time permitted. Sec 273B provides that no penalty can be levied u/s 271G if there was a reasonable cause for the failure. Penalty levied is deleted - Decided in favor of assessee.

Summary

Issues:
Levy of penalty under section 271G of the Income Tax Act for failure to furnish information related to international transactions with an associated enterprise.

Analysis:
1. The appellant, engaged in software development and export, claimed exemption under section 10A for the income from its business. The Assessing Officer called for information under section 92D regarding international transactions with an associated enterprise. Despite multiple opportunities, the appellant failed to provide the required information on comparable transactions to justify the adoption of the Comparable Uncontrolled Price (CUP) method as mentioned in the audit report.

2. The Assessing Officer issued a penalty notice under section 271G as the appellant did not furnish the information called for, leading to the levy of a penalty amounting to 2% of the international transactions. The appellant contended that it charged $25 per hour for services, a rate prevalent in the industry, and could not provide invoices or price quotations of other companies as such information was not within its control.

3. The CIT(A) held that section 92D mandates the maintenance of information and documents for international transactions, with penalties applicable for non-compliance. Despite opportunities, the appellant failed to provide the necessary information within the specified time frame, justifying the penalty imposed by the Assessing Officer. The CIT(A) dismissed the appeal, upholding the penalty levy.

4. The appellant argued that it had already submitted details on the CUP method and the prevailing industry rates, justifying its pricing strategy. The appellant maintained that certain information requested, such as invoices and price quotations of other companies, was beyond its control and not necessary for determining the arm's length price.

5. The Tribunal observed that the appellant had provided sufficient information for the authorities to determine that its transactions were at arm's length, as evidenced by no adjustments made. The Tribunal held that the additional particulars requested were not essential, and the appellant had a reasonable cause for not furnishing certain information within the stipulated time frame.

6. Consequently, the Tribunal allowed the appeal, deleting the penalty imposed under section 271G of the Income Tax Act. The decision was based on the appellant's provision of relevant particulars and the absence of a requirement for additional information not in the appellant's possession due to being unavailable in the public domain.