2016 (4) TMI 947 - AT - Income Tax

Penalty U/s 271AA - assessee failed to maintain the record as required U/s 92D of the I.T. Act read with rule 10D of the I.T. Rules - CIT(A) deleted the penalty - Held that - The assessee disclosed international transaction made with AE. The Tribunal had decided that no upward adjustment is required in the ALP disclosed by the assessee. Whatever information asked to supply by the TPO had been furnished before him i.e. nine comparable companies data were furnished out of which the ld TPO had selected five companies. The ld DR had not controverted that the assessee had not provided similar services during the year under consideration as provided in F.Y 2004-05, therefore, comparable companies applied for F.Y. 2004-05 are relevant to the transactions made during the F.Y. 2005-06, which was also updated by the appellant. Accordingly, we uphold the order of the ld CIT(A). - Decided in favour of assessee

Summary

Issues:
Appeal against deletion of penalty under Section 271AA for failure to maintain records as required under Rule 10D of the Income Tax Rules.

Detailed Analysis:

1. Issue of Penalty Imposition:
The case involved an appeal by the revenue against the deletion of a penalty of Rs. 15,51,675 imposed under Section 271AA of the Income Tax Act, 1961. The penalty was initiated due to the assessee's failure to maintain records as required under Rule 10D of the Income Tax Rules. The Assessing Officer found that the assessee did not use recent data for benchmarking international transactions, and the comparables identified were not considered valid.

2. Assessing Officer's Actions:
Before imposing the penalty, the Assessing Officer provided a reasonable opportunity for the assessee to be heard. Despite the assessee's request to keep the penalty proceedings in abeyance due to an appeal filed before the ITAT, the Assessing Officer proceeded with the penalty. It was observed that the assessee failed to comply with Rule 10D requirements, specifically related to contemporaneous data and maintaining records of international transactions.

3. CIT(A)'s Decision:
The CIT(A) deleted the penalty, noting that the assessee had updated comparables before the due date of filing the return. The CIT(A) found that the comparables used were relevant to the transactions, and the information required by the TPO was furnished within the prescribed timeline. The CIT(A) concluded that the penalty was unjustified based on the circumstances of the case.

4. Appellate Tribunal's Decision:
The Tribunal upheld the CIT(A)'s decision, emphasizing that no upward adjustment was required in the ALP disclosed by the assessee. It was noted that the assessee had provided similar services during the relevant years, and the comparables applied for the transactions were relevant and updated. The Tribunal found merit in the arguments presented by the assessee and dismissed the revenue's appeal.

5. Arguments and Precedents:
During the appeal, the revenue vehemently supported the Assessing Officer's order, while the assessee relied on various case laws to support their position. The Tribunal considered the arguments of both parties, reviewed the material on record, and concluded that the penalty deletion was justified based on the facts and legal provisions presented.

In conclusion, the Tribunal dismissed the revenue's appeal, affirming the deletion of the penalty imposed under Section 271AA, as the assessee had complied with the relevant requirements and provided necessary information within the prescribed timelines.