2024 (5) TMI 1496 - AT - Income Tax

Levy of penalty u/s. 271G - 2% earned on total value of Specified Domestic Transaction - details were not filed within 30 days - HELD THAT - If the details for computation of ALP of SDT has been accepted by the ld. TPO and ALP computed by the assessee has been accepted, we find no reason for levy of penalty u/s. 271G. CIT (A) has simply confirmed the penalty on the ground that there was no explanation filed by the assessee and there is no reasonable cause for such failure. If the ld. TPO had duly considered the explanation and the details submitted as noted above in the TPO s order, then penalty cannot be levied u/s. 271G. Accordingly, the same is deleted. Appeal of assessee allowed.

Summary

Issues:
Levy of penalty under section 271G for specified domestic transaction for A.Y. 2015-16.

Analysis:
The appeal was filed against the penalty order u/s. 271G for the A.Y. 2015-16. The penalty of Rs. 40,47,075 was imposed on the assessee, being 2% earned on the total value of the specified domestic transaction of Rs. 20,23,52,771. The grounds of appeal argued that all details were submitted, arm's length price (ALP) was accepted, and the delay in submission was due to a reasonable cause. The Assessing Officer (AO) had issued notices to submit details/explanations related to arm's length price, but it was not mentioned that the assessee had failed to furnish the required details during the transfer pricing proceedings. The Transfer Pricing Officer (TPO) noted in an order that all required details were submitted by the assessee and the value of the specified domestic transaction with the associated enterprise in regard to ALP was not disturbed.

The penalty was imposed solely on the grounds that the details were not filed within 30 days. However, since the TPO had accepted the explanation and details submitted by the assessee, and the ALP computed by the assessee was accepted, there was no valid reason for the penalty under section 271G. The Commissioner of Income Tax (Appeals) confirmed the penalty based on the absence of an explanation filed by the assessee without considering the details submitted and accepted by the TPO. Therefore, the penalty was unjustified, and the Tribunal allowed the appeal of the assessee, leading to the deletion of the penalty.

In conclusion, the Tribunal found that if the TPO had duly considered the explanation and details submitted by the assessee, as noted in the TPO's order, then the penalty under section 271G could not be levied. As a result, the penalty was deleted, and the appeal of the assessee was allowed.