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2024 (9) TMI 1628 - AT - Income TaxLevy of penalty u/s. 271G - assessee failing to furnish documents and information u/s. 92CA/92D - HELD THAT - There is no finding by the TPO / AO in the transfer pricing orders stating that the information / explanations provided by the assessee during the transfer pricing assessment proceedings were inaccurate or that there was any insufficient information / explanation preventing the TPO from determining the arm s length price. On the contrary the Transfer Pricing Officer has acknowledged that the assessee has furnished the details and information. There is no finding recorded by the TPO that the conduct of the assessee lacks bonafides or there any indifference on the part of the assessee in not producing the records called for by the TPO leading to inability on the part of the TPO to determine the arm s length price. The most important factor is that whatever TP adjustment has been done by the TPO has been deleted by the DRP and the Revenue has accepted the order of the DRP. On similar facts in the case of Ankit Gems (P) Ltd. 2019 (7) TMI 13 - ITAT MUMBAI has held that where TPO had accepted benchmarking done by assessee under TNMM and no variation / adjustment was made by him to ALP imposition of penalty u/s. 271G would be unsustainable. Appeals by the assessee are allowed.
Issues:
Levy of penalty u/s. 271G of the Act for non-furnishing of documents and information u/s. 92CA/92D. Detailed Analysis: The appeals involved two separate assessees appealing against orders of CIT(A)-58, Mumbai regarding the levy of penalty u/s. 271G of the Act for not providing required documents. The assessees were non-resident companies incorporated in the USA engaged in distributing motion pictures. They received license fees from their associated enterprises (AE) for exhibiting motion pictures on television in various territories, including India. The assessees did not have a place of business or a permanent establishment in India as per the India US DTAA. They filed their income tax returns offering the license fees received from India on a gross basis. The transfer pricing assessments were completed by the Transfer Pricing Officer (TPO), and penalties were imposed for non-furnishing of documents and information under Sections 92CA/92D. The Counsel for the assessees argued that they were not required to maintain information under Rule 10D of the Rules, and therefore, penalty u/s. 271G should not apply. They contended that they had complied with the TPO's requests for information. The TPO did not find any inaccuracies in the information provided by the assessees during the transfer pricing assessment proceedings. Additionally, there was no finding that the assessees' conduct lacked bonafides or that they were indifferent in producing records. The TPO's adjustments were deleted by the Dispute Resolution Panel (DRP), and the Revenue accepted the DRP's order. Citing a similar case precedent, the Tribunal held that where the TPO accepted the benchmarking done by the assessee and made no adjustments, the penalty under Section 271G would be unsustainable. The Tribunal referred to a High Court case where it was held that the explanation offered by the assessee, though not entirely acceptable, did not amount to unreasonable conduct. The Tribunal found that the assessees had complied with most of the TPO's requests, and there was no evidence of lack of bonafides or indifference. Based on the judicial decisions and the specific facts of the case, the Tribunal concluded that there was no merit in levying the penalty under Section 271G. Therefore, the penalties were directed to be deleted, and both appeals by the assessees were allowed. In conclusion, the Tribunal found that the penalties imposed under Section 271G for non-furnishing of documents and information were unwarranted in the absence of any evidence of inaccurate information, lack of bonafides, or unreasonable conduct on the part of the assessees. The Tribunal's decision was based on the specific facts of the case and relevant legal precedents, leading to the deletion of the penalties.
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