2022 (5) TMI 1279 - AT - Income Tax

Penalty u/s 271G - non furnishing of segmental transaction has hampered the TPO from benchmarking various transactions - HELD THAT - From the facts of the case, it is evident that the Assessee has furnished the necessary details for determination of the arm s length price though (ALP) was unable to provide segment-wise profit loss account of the AE segment and the non AE segment since the Assessee did not maintain separate books of account for AE non AE segments. As it is noticed that the co-ordinate bench of this Tribunal in Deputy Commissioner of Income Tax 10(1)(2), Mumbai vs Kama Schachter Jewellery (P) Ltd 2021 (2) TMI 1132 - ITAT MUMBAI has decided this issue with identical facts relating to furnishing of segmental data of Profit Loss Account of AE and non AE segment has deleted the penalty levied under section 271G. - Decided against revenue.

Summary

Issues:
- Deletion of penalty under section 271G by CIT(A) for non-furnishing of segment-wise profitability details.
- Justification of CIT(A) in deleting the penalty.
- Compliance with TPO's requirements for determining the arm's length price.
- Comparison with a similar case regarding penalty deletion.

Analysis:
1. The appeal was filed by the Revenue against the CIT(A)'s order deleting the penalty levied under section 271G of the I.T. Act for the assessment year 2012-13. The grounds of appeal raised questions regarding the compliance with the Transfer Pricing Officer's requirements and the justification for penalty deletion by the CIT(A).

2. The Assessing Officer had referred the case to the Transfer Pricing Officer to determine the arms length price for specific international transactions. The Assessee failed to furnish segmental profitability details for AE and non-AE transactions, leading to the penalty imposition under section 271G.

3. The CIT(A) held that the Assessee had substantially complied with providing necessary information to determine the arms length price, which was accepted by the TPO. The Assessee's argument of not maintaining separate books of account for AE and non-AE segments was considered, leading to the penalty deletion.

4. The Revenue argued that the Assessee, being a diamond merchant, should have maintained transaction-specific books of account, and thus, the penalty should be upheld. However, the Tribunal focused on whether the CIT(A) was justified in deleting the penalty under section 271G, considering the Assessee's compliance with the TPO's requirements.

5. The Tribunal referred to a similar case where penalty deletion was upheld due to practical difficulties in furnishing segmental details in the diamond industry. Citing the precedent, the Tribunal confirmed the CIT(A)'s decision to delete the penalty, as the Assessee's case aligned with the previous judgment.

6. Ultimately, the Tribunal dismissed the Revenue's appeal, confirming the deletion of the penalty under section 271G. The decision was based on the Assessee's substantial compliance with providing necessary information for determining the arms length price, despite the lack of segment-wise profitability details for AE and non-AE transactions.