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2024 (6) TMI 795 - AT - Income TaxLevy of penalty u/s 271G - TP Adjustment - HELD THAT - We observe from the record that the assessee has not filed the segment wise results of purchase and sales of polished and unpolished diamonds relating to international transactions. However, on the query raised by the TPO assessee has made an attempt to segregate the figures of sales and purchases segment-wise and submitted the same before TPO. Transfer Pricing Officer has considered the same or atleast not discussed anything in his order. However, proceeded to levy the penalty u/s 271G of the Act and at the same time has not proposed any Arm s Length Price adjustment. In the similar facts on record, there are several decisions where various Coordinate Bench of this Tribunal has deleted the penalties. We observe that Ld. CIT(A) has relied on the decision of Annapurna Business Solutions 2011 (12) TMI 224 - ITAT HYDERABAD and Magick Woods Exports 2012 (10) TMI 205 - ITAT CHENNAI in which the relevant Coordinate Bench has deleted the penalty u/s 271G. Even in this case CIT(A) has deleted penalty u/s 271G of the Act with the observation that levy of penalty u/s 271G of the Act is neither fair nor reasonable and it is not justified in the present facts of the case viz., the nature of diamond trade, substantial compliance made by the assessee and the reasonable cause submitted before TPO and above all when there is no adjustment made in the Arm s Length Price, the levy of penalty u/s 271G is hereby deleted. Ground raised by the revenue is dismissed.
Issues: Transfer Pricing Adjustment, Penalty under section 271G
Transfer Pricing Adjustment: The appeal was filed by the revenue against the order of the Learned Commissioner of Income-Tax (Appeals) regarding international transactions for the assessment year 2011-12. The assessee had entered into international transactions and benchmarked them using the TNMM Method. During the assessment proceedings, the Transfer Pricing Officer requested the assessee to provide separate profit level indicators in AE and Non-AE segments to demonstrate that the transactions were at Arm's Length Price. The assessee submitted segment-wise data on AE and Non-AE sales and worked out the OP/Sales Margins. Despite the complexities in the diamond industry, the Transfer Pricing Officer accepted the ALP without proposing any adjustment but proceeded to levy a penalty under section 271G for failure to furnish required information. Penalty under section 271G: In the absence of representation from the assessee, the case was heard with the assistance of the Ld. DR. The Ld. DR supported the order of the Transfer Pricing Officer in imposing the penalty. The ITAT observed that the assessee had not submitted segment-wise results of purchase and sales of polished and unpolished diamonds related to international transactions. However, the assessee had attempted to segregate the data as requested. The ITAT noted that the Transfer Pricing Officer did not discuss this submission but still imposed the penalty under section 271G. Referring to previous decisions, the ITAT found that penalties had been deleted in similar cases by other Coordinate Benches of the Tribunal. The ITAT agreed with the Ld. CIT(A) who had relied on precedent cases and deleted the penalty under section 271G, citing the nature of the diamond trade, substantial compliance by the assessee, and the absence of any Arm's Length Price adjustment as justifications. The ITAT dismissed the revenue's appeal, upholding the decision of the Ld. CIT(A). In conclusion, the ITAT dismissed the revenue's appeal, affirming the deletion of the penalty under section 271G by the Ld. CIT(A) due to the reasons mentioned above.
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