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2017 (9) TMI 1339 - AT - Income TaxLevy of penalty u/s 271BA - assessee did not furnish report in form No. 3CEB as required u/s 92E r/w rule 10E - assessee has pleaded that the non-submission was not intentional but bonafide belief and ignorance of Finance Manager in complying the provision u/s 92E - Held that - Mere ignorance and bonafide belief that will not be considered as reasonable cause to delete the penalty. It is clearly the obligation on the part of the assessee to comply with the provisions of section 92E. Hence, the action initiated by the AO in levying penalty u/s 271BA is proper in these cases. Accordingly, we uphold the order of the CIT(A) in confirming the penalty levied by the AO. - Decided against assessee. Levy of penalty u/s 271G - non comply with the requirements laid down under Rule 10D - Held that - The assessee has filed the relevant information during assessment proceedings and accordingly, AO completed the assessment. On careful reading of section 271G & 92D(3), penalty can be levied only when AO issues notice u/s 92D(3) and assessee fails to furnish information for completing the assessment. Further, on application by the assessee, the AO can extend the period for submission by further period of 30 days. In the given case, AO has not issued any notice, however, AO opined that it is not necessary to issue notice but order sheet notice/entry also amounts to notice issued u/s 92D(3). We find that the assessee has in fact filed the relevant information as soon as it is brought to the notice and AO has completed the assessment without making any adjustment. It shows that the assessee has complied with the provisions of section 92D(3). Considering the facts on record and other judicial pronouncements relied on by the assessee, we are inclined to accept the contention of ld. AR and in our opinion, penalty u/s 271G is uncalled for and accordingly, it is deleted. - Decided in favour of assessee.
Issues Involved:
1. Levy of penalty under Section 271BA of the Income Tax Act. 2. Levy of penalty under Section 271G of the Income Tax Act. Issue-wise Detailed Analysis: 1. Levy of Penalty under Section 271BA: The appeals ITA Nos. 737 & 740/Hyd/2016 pertain to the levy of penalty under Section 271BA for the assessment years (AYs) 2010-11 and 2011-12. The assessee failed to furnish the report in Form No. 3CEB as required under Section 92E read with Rule 10E. The Assessing Officer (AO) initiated penalty proceedings and observed that the obligation to furnish the report is compulsory and ignorance of law is no excuse. The AO noted that obtaining permission for payment of royalty from RBI or other authorities does not exempt the assessee from filing Form 3CEB. The AO also rejected the argument that previous officers accepted the non-filing of the report, stating that successors can implement the law correctly. The AO concluded that the failure to file the report was a deliberate default, and the penalty of ?1,00,000/- was levied. The assessee contended before the Commissioner of Income-tax (Appeals) [CIT(A)] that it was under a bona fide belief that the report was not required due to RBI approval and that the non-filing was not intentional. However, the CIT(A) upheld the AO's decision, noting that the assessee did not provide any material to contradict the AO's conclusions. The assessee appealed to the Tribunal, reiterating the arguments made before the CIT(A). The Tribunal found that mere ignorance and bona fide belief are not reasonable causes to delete the penalty. The Tribunal upheld the CIT(A)'s order, confirming the penalty levied by the AO for AYs 2010-11 and 2011-12, and dismissed the appeals. 2. Levy of Penalty under Section 271G: The appeals ITA Nos. 738 & 739/Hyd/2016 pertain to the levy of penalty under Section 271G for AYs 2010-11 and 2011-12. During scrutiny proceedings, the AO required the assessee to file the Transfer Pricing (TP) study maintained under Section 92D(3) read with Rule 10D. The assessee filed the report, but the AO found it non-compliant with Rule 10D requirements and initiated penalty proceedings. The AO observed that no specific notice format is prescribed under Section 92D(3) and that an order sheet noting is sufficient. The AO also noted that the method adopted for the TP study was incorrect and that the assessee did not provide comparables for the "CUP" method. The AO concluded that the assessee's failure to file a proper TP study deprived the Department of necessary information, and a penalty of ?4,23,634/- was levied. The CIT(A) confirmed the penalty, noting that the assessee did not provide any material to contradict the AO's conclusions. The assessee appealed to the Tribunal, arguing that no specific notice was served and that the information was furnished during assessment proceedings. The Tribunal found that the AO did not issue a notice under Section 92D(3) and that the assessee complied with the provisions by filing the required information. The Tribunal noted that the AO completed the assessment without making any adjustments, indicating compliance by the assessee. The Tribunal, considering the facts and judicial pronouncements, deleted the penalty under Section 271G for AYs 2010-11 and 2011-12, and allowed the appeals. Conclusion: - Appeals in ITA Nos. 737 & 740/Hyd/2016 (Section 271BA) are dismissed. - Appeals in ITA Nos. 738 & 739/Hyd/2016 (Section 271G) are allowed. Pronounced in the open court on 7th July, 2017.
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