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2008 (2) TMI 453 - AT - Income TaxTransfer Pricing - Validity of notices issued u/s 92D(3) - levy of penalty u/s 271G - No satisfaction in this case was recorded by the Assessing Officer - failure to furnish information/documents required by Sub-section (3) of Section 92D - Applicability of Section 273B - HELD THAT - We have discussed relating to requirement of valid notice Under Section 92D(3) of the Act, mentioned notices cannot be treated as valid and legal to justify application of provision Under Section 271G of the act and levy of penalty of more than Rs 40 crores. These are omnibus notices issued without application of mind and without considering documents already placed by the taxpayer on record and without consideration as to which of the specific clauses of Sub-rule (1) or other Sub-rules was attracted or which relevant information was needed in this case. Under Section 92D(3), A.O. or CIT (Appeals) is authorized to require prescribed information but here both prescribed and un-prescribed information like balance sheet, profit and loss account, computation of income etc was also required to be furnished from the taxpayer before the taxpayer could file evidence under Section 92CA(2). Not only primary documents necessary to support the computation of ALP of taxpayer, but also supporting documents detailed in Sub-rule (3) of Rule 10D were required to be furnished without considering which supporting documents out of several mentioned in various clauses of the said sub-rule were available with the taxpayer. The burden of selection/relevancy of clauses applicable was shifted to the taxpayer. The notice only increased burden of the taxpayer and confused the notice. Above notices issued without application of mind and without considering relevancy and requirement of all the prescribed information and documents under Rule 10D vitiated the legality of the notices. Above notices could not be treated as proper and legal notices in terms of Section 92D(3) of the act. The failure, therefore, of the taxpayer to comply such notices in time can not justify levy of penalty of Rs 40,46,41,376/-. The notice being illegal question of levy of penalty did not arise. Thus, we hold that three notices referred to above issued by the TPO could not be treated as valid notices issued in terms of Section 92D(3) of the Act and, therefore, did not attract penalty provisions of Section 271G of the Income-tax Act. The penalty Under Section 271G can be imposed only if the default is held to be proved to be without reasonable cause. Once a reasonable cause for delay is pleaded then it has to be examined in accordance with law. In the present case, no attempt has been made by the Revenue to look into, examine or refute the claim of reasonable cause put forth by the taxpayer. The case, therefore, cannot be taken to have been rejected. The penalty has been imposed without considering application of Section 273B of the Income-tax Act which as noted earlier overrides provisions of Section 271G of the Income-tax Act. We are of the view that the present case is covered Under Section 273B. The delay, if any, in the submission of information or documents within the prescribed time is held to be due to a reasonable cause. Therefore, the penalty is not sustainable on account of this ground also. Besides we are of view that penalty of Rs 40,46,41,376/- for mere delay of about a month or so in the submission of information and documents assuming entire case of revenue is established, is to be held to be imposed on mere technical grounds. Having regard to the settled law that no penalty for technical or venial default is imposable, we find force in this alternative argument of Shri Agarwal. In our view, provisions of Section 271G are quite different from provisions of Section 271(1) of the Act. Therefore, CIT (Appeals) was quite justified in holding that no satisfaction need be recorded before initiating proceedings Under Section 271G of the Income-tax Act. Apart from above, in the present case, the TPO has specifically recorded details of the alleged default committed by the assessee in not furnishing information/documents which the TPO thought he was competent to require Under Section 92D of the Act Therefore, there is no merit in the contention that satisfaction was not recorded in this case, although we are cancelling penalty on some other ground and this finding does not materially affect the ultimate result of the appeal. There are several other grounds/arguments raised by the parties, but in the light of our decision recorded above, no useful purpose would be served in dealing with each of those grounds. Therefore, on facts of the case, we hold that the penalty imposed is not exigible and the same is hereby cancelled. In the result, assessee's appeal is allowed.
Issues Involved:
1. Validity of the notices issued under section 92D(3). 2. Justification of the penalty imposed under section 271G. 3. Examination of reasonable cause for delay in furnishing documents. 4. Requirement of recording satisfaction during assessment proceedings. Summary: 1. Validity of the Notices Issued Under Section 92D(3): The Tribunal examined the notices issued by the TPO on September 22, 2005, October 13, 2005, and November 8, 2005, and found them to be omnibus and lacking specificity. The notices required the taxpayer to furnish a vast amount of information without specifying which particular documents were necessary. The Tribunal held that such notices, issued without application of mind and without considering the documents already placed on record, were invalid under section 92D(3). Consequently, the failure to comply with these notices could not justify the imposition of a penalty under section 271G. 2. Justification of the Penalty Imposed Under Section 271G: The Tribunal noted that the penalty under section 271G can be imposed for failing to furnish information or documents as required under section 92D(3). However, the notices issued by the TPO were found to be invalid. Additionally, the Tribunal observed that the taxpayer had furnished all required documents by the end of December 2005, thus there was no default in submitting documents within the prescribed time. Therefore, the penalty of Rs. 40,46,41,376 was not justified. 3. Examination of Reasonable Cause for Delay in Furnishing Documents: The taxpayer argued that the delay in furnishing documents was due to the absence of the Country Finance Controller and the unfamiliarity of the new Controller with the assessment proceedings. The Tribunal found that the taxpayer had provided a reasonable cause for the delay, which was not refuted by the Assessing Officer or the CIT (Appeals). As per section 273B, no penalty shall be imposable if the failure is due to a reasonable cause. The Tribunal held that the delay was due to a reasonable cause and thus, the penalty was not sustainable. 4. Requirement of Recording Satisfaction During Assessment Proceedings: The Tribunal rejected the taxpayer's contention that no satisfaction was recorded by the Assessing Officer during the course of assessment proceedings. It was held that provisions of section 271G are different from section 271(1), and thus, no satisfaction need be recorded before initiating proceedings under section 271G. However, this finding did not materially affect the ultimate result of the appeal as the penalty was cancelled on other grounds. Conclusion: The Tribunal allowed the taxpayer's appeal, cancelling the penalty imposed under section 271G, on the grounds of invalid notices, reasonable cause for delay, and the technical nature of the default.
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