2012 (4) TMI 173 - AT - Income Tax

Arm s Length Price - found some international transactions exceeding the limit prescribed in the assessee s return and a reference to TPO for determination of arms length price - TPO issued a letter to assessee to furnish required information as per s. 92D and 92E of the Act - assessee filed documents after the statutory time limit of 30 days - A.O. levied a penalty under Section 271G of the Act - as per the assessee, it was the initial year of its operations and it had no experience regarding transfer pricing regulations - A.O. was of the opinion that ignorance of law was not an excuse - argument of the assessee that he had substantially complied with the said letter of TPO since 12 out of 16 items were filed - the allegation of TPO that it had failed to comply with the notice was incorrect Held that - If the Revenue alleges that there has been failure of the assessee with regard to production of any of the record, it was required to point out which record it had failed to produce and whether such record was one which was prescribed under Section 92D(1) to be maintained by an assessee in respect of the international transactions entered into by it - was not a fit case for levy of penalty under Section 271G of the Act. Ld. CIT(Appeals) was justified in deleting such penalty. No interference is required

Summary

Issues:
- Penalty under Section 271G of Income-tax Act, 1961 for failure to comply with Transfer Pricing Officer's request for information within the prescribed time limit.

Analysis:
1. The appeal filed by the Revenue challenged the deletion of penalty under Section 271G of the Income-tax Act, 1961 by the Commissioner of Income Tax (Appeals) for the impugned assessment year. The assessee had failed to comply with the Transfer Pricing Officer's request for information regarding international transactions within the specified time frame.

2. The facts revealed that the Transfer Pricing Officer issued a letter on 25.11.2008 to the assessee, requiring the submission of information under Sections 92D and 92E of the Act by 24.12.2008. The TPO observed that the assessee did not fully comply with the request within the stipulated time. The Assessing Officer then imposed a penalty under Section 271G, which the assessee contested by claiming substantial compliance and lack of experience in transfer pricing regulations.

3. In the appeal before the CIT(A), the assessee argued that the TPO's letter was not issued under Section 92D(3) of the Act but under Section 92CA(3). The CIT(A) agreed with the assessee's contentions, noting that the TPO's order indicated that the letter was not a notice under Section 92D(3). Consequently, the penalty under Section 271G was deleted by the CIT(A).

4. During the appeal before the ITAT, the Revenue contended that the penalty was justified as the assessee had failed to furnish the required information within the specified period under Section 92D(3). However, the ITAT examined the facts and submissions, concluding that the letter from the TPO did not constitute a notice under Section 92D(3) and that the assessee had substantially complied by providing information on 12 out of 16 items by the deadline. Moreover, the accepted arm's length price indicated a procedural violation rather than intentional non-compliance, justifying the deletion of the penalty by the CIT(A).

5. The ITAT upheld the decision of the CIT(A) and dismissed the Revenue's appeal, emphasizing that there was no failure on the part of the assessee warranting a penalty under Section 271G of the Income-tax Act, 1961. The lack of specific evidence of non-compliance and the acceptance of the arm's length price supported the conclusion that the penalty was not justified in this case.