2019 (6) TMI 1292 - AT - Income Tax

Penalty u/s 271G - alleged that assessee had clearly failed in maintaining the documentation as required u/s 92D(3) - assessment of the assessee was finalized u/s 92CA(3) - HELD THAT - CIT(A) has passed the order on the basis of this fact that the assessee has furnished the relevant documents u/s 92D(3) r.w.r. 10D of the Act. The penalty is not laviable specifically on the facts and circumstances when the assessee submitted all the necessary/relevant information to the TPO which was not acceptable if any by TPO. CIT(A) has also relied upon the decision in the case of Annapurna Business Solution Vs. ACIT Circle 6(1) 2011 (12) TMI 224 - ITAT HYDERABAD The facts are not distinguishable at this stage also. The basic requirement of Section 271G of the Act is that the assessee failed to submit the relevant information/document required u/s 992D(3) of the Act. But in the instant case, the necessary information was given but was not acceptable by TPO so these facts nowhere entitled the TPO to levy the penalty. No law contrary to the law relied upon the CIT(A) if any has not been produced before us. CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. - Decided against revenue.

Summary

Issues Involved:
1. Deletion of penalty under Section 271G for failure to maintain documentation as required under Section 92D(3) of the Income Tax Act.
2. Whether the CIT(A) was right in deleting the penalty imposed by the Assessing Officer (AO).

Issue-wise Detailed Analysis:

1. Deletion of penalty under Section 271G for failure to maintain documentation as required under Section 92D(3) of the Income Tax Act:

The Revenue challenged the CIT(A)'s order that deleted the penalty levied by the AO under Section 271G. The penalty was initiated because the assessee failed to submit the required documentation during the Transfer Pricing Officer (TPO) proceedings. The TPO had observed that the assessee used the entity-level Transactional Net Margin Method (TNMM) to benchmark transactions, which aggregated Associated Enterprise (AE) transactions with non-AE transactions, contrary to the requirements of Rule 10B(1)(e). The TPO required separate profitability calculations for AE and non-AE transactions, which the assessee failed to provide in an acceptable manner. Consequently, the TPO initiated the penalty under Section 271G for non-compliance.

2. Whether the CIT(A) was right in deleting the penalty imposed by the Assessing Officer (AO):

The CIT(A) deleted the penalty on the grounds that the assessee had submitted all necessary documents as per Section 92D(3) read with Rule 10D. The CIT(A) noted that the assessee had provided segmental working based on the allocation of costs between AE and non-AE transactions, though not in the audited format required by the TPO. The CIT(A) held that penalty under Section 271G is not warranted when the information submitted is not acceptable to the TPO but is otherwise furnished. The CIT(A) relied on the decision of the Hyderabad Bench of ITAT in the case of Annapurna Business Solution vs. ACIT, which supported the assessee's position.

Upon review, the Tribunal upheld the CIT(A)'s decision, noting that the assessee had indeed provided the necessary documentation, and the penalty could not be levied merely because the TPO found the information unsatisfactory. The Tribunal emphasized that the basic requirement for imposing a penalty under Section 271G is the failure to submit the required information, which was not the case here. The Tribunal found no contrary law or facts to challenge the CIT(A)'s reliance on the Annapurna Business Solution case and concluded that the CIT(A) had judiciously and correctly decided the matter.

Conclusion:

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order to delete the penalty under Section 271G, as the assessee had furnished the required documentation, and the penalty was not justified based on the TPO's dissatisfaction with the format of the provided information. The judgment was pronounced in open court on 24/06/2019.