2013 (9) TMI 761 - HC - Income Tax

Penalty under section 271G of the Income tax Act TPA - failure to furnish information and documents required by an Assessing Officer under Section 92D - Held that - Information or documentation, which is assessee specific or specific to the associated enterprises, should be readily available, whereas other documentation or information relates to data bases or transactions entered into by third parties may require collation/collection from time to time. There cannot be any end or limit to the documentation or information relating to data bases or third parties. When there is general and substantive compliance of the provisions of Rule 10D, it is sufficient. The Legislature was conscious of this fact and, therefore, had specifically stipulated in Section 92D(3) that the Assessing Officer or Commissioner (Appeals) may require a person to furnish any information or document in respect thereof and on failure of the said person to furnish the documentation within the specified time, penalty under Section 271G can be imposed - Thus, for imposing penalty the Revenue must first mention the document and information, which was required to be furnished but was not furnished by the assessee within the specified time. The documentation or information should be one specified in Rule 10D, which has been formulated in terms of Section 92D(1) of the Act Appeal of the Department is misconceived Decided against the Revenue.

Issues Involved:
1. Legality of the penalty imposed under Section 271G of the Income Tax Act, 1961.
2. Compliance with Section 92D(3) and Rule 10D of the Income Tax Rules, 1962.
3. Adequacy of the Assessing Officer's order under Section 271G.

Issue-wise Detailed Analysis:

1. Legality of the Penalty Imposed under Section 271G:
The Commissioner of Income Tax, Delhi-II challenged the tribunal's decision affirming the order of the Commissioner of Income Tax (Appeals) which deleted the penalty of Rs. 22,20,100/- imposed under Section 271G by the Assessing Officer. The tribunal dismissed the appeal of the Revenue for two main reasons. Firstly, the penalty under Section 271G can only be imposed if there is a failure to furnish information and documents required by an Assessing Officer under Section 92D(3) within the specified or extended period. In this case, the Assessing Officer did not request any specific information or document from the assessee that was not provided within the stipulated time. Secondly, the tribunal noted that the Transfer Pricing Officer (TPO) issued the first notice under Section 92CA(3) and 92D(3) seeking information by 10th January 2008, but there was no evidence of the date of service of notice or whether the time was extended. The TPO accepted the transfer pricing report on 26th February 2008 without drawing any adverse inference regarding international transactions.

2. Compliance with Section 92D(3) and Rule 10D:
The tribunal and the Commissioner of Income Tax (Appeals) observed that the Assessing Officer's order under Section 271G lacked specifics on which document or information was required by a notice under Section 92D(3) and was not furnished by the assessee within the prescribed period. Section 92D(3) mandates that the Assessing Officer or Commissioner (Appeals) may require any person who has entered into an international transaction to furnish any information or document within thirty days from the date of receipt of a notice, which can be extended. The penalty under Section 271G is discretionary and not mandatory. The tribunal concluded that the Assessing Officer failed to specify the required documents or information, thus the penalty order could not be sustained.

3. Adequacy of the Assessing Officer's Order under Section 271G:
The order under Section 271G passed by the Assessing Officer was found to be cryptic and lacking reasoning or factual narration. It merely stated that the reply of the assessee was not satisfactory without specifying which documents or information were not furnished. The tribunal emphasized that Rule 10D requires maintaining comprehensive information and documents related to international transactions, including ownership structure, business profiles, transaction details, and economic analyses. However, some clauses under Rule 10D are broad and may involve voluminous data. The tribunal reasoned that Section 271G should be interpreted reasonably, and the Revenue must specify the exact documents or information not furnished within the specified time to impose a penalty. The appeal of the Revenue was dismissed as it lacked merit.

Conclusion:
The tribunal and the Commissioner of Income Tax (Appeals) correctly concluded that the Assessing Officer's order under Section 271G was unsustainable due to the absence of specific details on the required documents or information. The broad and voluminous nature of documentation under Rule 10D necessitates a reasonable interpretation of Section 271G. Consequently, the appeal of the Revenue was dismissed for being misconceived and lacking merit.

← Previous Next →