2021 (6) TMI 447 - AT - Income Tax

Penalty levied u/s. 271G - assessee ignoring the provisions of Section 92D of the Act as well as Rule 10D of the Income Tax Rules - As assessee had entered into international transactions and in respect thereof, he failed to furnish certain documents specified u/s. 92D of the Act r.w.r. 10D - HELD THAT - When we peruse the notice for penalty proceedings, there also, there is no mention of any specific documents that are required to be filed by the assessee before the Assessing Office - Taking the guidance from M/S LEROY SOMER CONTROLS (INDIA) PVT. LTD. 2013 (9) TMI 761 - DELHI HIGH COURT without naming those documents there cannot be any imposition of penalty u/s. 271G of the Act. In our opinion, the principles of natural justice demands in respect of the right of defense for the assessee whatever proceedings are to be done by any Quasi-Judicial Authority, the first step is the issuance of notice to the assessee and in that said notice all the relevant details should be there so that the assessee gets an opportunity to prepare his defense and unfortunately in this case, it was not done. For this reason also penalty u/s. 271G of the Act is not imposable. Section 273B of the Act provides for reasonable cause and if that is justified, penalty/s. 271G of the Act may not be imposed and when this opportunity is given to the assessee by the statutes itself and the assessee has explained the reasonable causes which was accepted by the Ld. CIT(Appeal) and after perusing such reasons, we are in conformity with the findings of the Ld. CIT(Appeals). DR could not bring out any evidences or place on record any material suggesting no reasonable cause in respect of the assessee. In view thereof, we don't find any reason to interfere with the findings of the Ld. CIT(Appeal) and the same is upheld. The relief provided to the assessee is hereby sustained. Appeal of the Revenue is dismissed.

Summary

Issues:
1. Appeal against order of Ld. CIT(Appeals) for assessment year 2012-13.
2. Deletion of penalty u/s. 271G of the IT Act.
3. Compliance with provisions of Section 92D of the Act and Rule 10D of the Income Tax Rules.
4. Adherence to principles of natural justice in penalty proceedings.

Analysis:
1. The appeal was filed by the Revenue against the order of the Ld. CIT(Appeals) for the assessment year 2012-13. The issue revolved around the penalty levied under section 271G of the IT Act. The Assessing Officer had issued a notice to show cause why the penalty should not be imposed as the assessee failed to furnish documents specified under Section 92D of the Act. The assessee did not attend the penalty proceedings or provide any explanation to the Assessing Officer.

2. Before the Ld. CIT(Appeals), the assessee explained that the non-filing of documents was due to reasonable causes. The assessee had submitted the required documents to the Transfer Pricing Officer (TPO) who accepted the Arm's Length Price (ALP) of the international transactions without any changes. The Ld. CIT(Appeals) noted that the purpose of filing documents under Section 92D was to justify the ALP, which was already accepted by the TPO. The absence of documents before the Assessing Officer was considered a technical issue with no prejudice to the Revenue.

3. The assessee argued that the penalty notice lacked specificity regarding the documents required to be filed. Citing the decision of the Delhi High Court, it was emphasized that the notice should specify the information or documents needed from the assessee. The Ld. CIT(Appeals) agreed that without essential details, the penalty under Section 271G could not be sustained. The Tribunal concurred, highlighting the importance of providing all relevant details to the assessee for a fair defense.

4. The Tribunal examined all relevant documents, including the penalty notice, submissions of the assessee, and judicial decisions. It was established that the TPO had already reviewed the documents, and the non-filing before the Assessing Officer did not prejudice the Revenue. Emphasizing the principles of natural justice and reasonable cause under Section 273B of the Act, the Tribunal upheld the Ld. CIT(Appeals) decision to delete the penalty under Section 271G. The absence of evidence to refute the reasonable causes cited by the assessee led to the dismissal of the Revenue's appeal.

In conclusion, the Tribunal dismissed the appeal of the Revenue, upholding the decision to delete the penalty under Section 271G of the IT Act for the assessment year 2012-13, based on the principles of natural justice and lack of prejudice to the Revenue due to non-filing of documents before the Assessing Officer.