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2018 (10) TMI 298 - HC - Income TaxPenalty imposed u/s 271G - default of the notice requiring the petitioner/assessee to produce the relevant documents under Section 92D(3) - TPO did not possess the requisite jurisdiction to initiate penalty proceedings and its imposition subsequently on 16.01.2015, was not justified - Held that - In Varkey Chacko 1993 (8) TMI 1 - SUPREME COURT , the Supreme Court considered the formulation of law in Brij Mohan 1993 (8) TMI 1 - SUPREME COURT and reiterated it. The assessee s contention was that the concealment exercise being penal in nature, committed when the return was filed and cognizance taken by the authority, by virtue of the subsequent amendment, was not legal. It was in these circumstances that the Court held that the penalty for concealment of particulars of income for furnishing inaccurate particulars would be upon the assessing authority for satisfaction in that regard. In the opinion of this Court, that judgment does not help the revenue s answer on the charge of lack of jurisdiction and the law as enunciated in Brij Mohan and Varkey Chacko (supra) i.e. that the event of default defines the jurisdiction of the concerned authority, who may proceed to initiate the penalty proceedings. In the present case, since event of default occurred in March, 2014 i.e. well prior to the date of coming into force the amendment (i.e. 01.10.2014), the impugned order was wholly without jurisdiction. - Decided in favour of assessee.
Issues:
1. Jurisdiction of Transfer Pricing Officer (TPO) under Section 271G of the Income Tax Act, 1961. 2. Compliance with notice requirements under Section 92D(3) of the Act. 3. Imposition of penalty under Section 271G by TPO. 4. Interpretation of the event of default for determining jurisdiction. 5. Impact of amendment expanding TPO's jurisdiction on penalty proceedings. Analysis: Issue 1: Jurisdiction of TPO under Section 271G The petitioner challenged the penalty imposed under Section 271G, arguing that the TPO lacked jurisdiction when issuing the first show-cause notice. The TPO's authority to impose penalties under Section 271G was expanded by the Finance Act 2014, allowing the TPO to initiate penalty proceedings for non-compliance with notice requirements. The TPO issued a fresh notice after the amendment, leading to the imposition of a substantial penalty. The petitioner contended that the event of default occurred before the amendment, rendering the penalty order without jurisdiction. Issue 2: Compliance with Notice Requirements The petitioner failed to comply with the notice issued by the TPO under Section 92D(3) of the Act, which required the production of relevant documents. The TPO issued subsequent notices alleging default and proposing penalties under Section 271G. The petitioner's non-compliance with the initial notice formed the basis for the penalty proceedings initiated by the TPO. Issue 3: Imposition of Penalty by TPO The TPO imposed a significant penalty on the assessee for non-compliance with notice requirements and failure to furnish requisite documents. The penalty amount was substantial, highlighting the seriousness of the non-compliance with the statutory provisions. Issue 4: Interpretation of Event of Default The Court analyzed the event of default to determine the jurisdiction of the TPO in initiating penalty proceedings. The petitioner argued that the event of default occurred before the amendment expanding the TPO's jurisdiction, rendering the penalty order unjustified. The Court referred to legal precedents to establish that the event of default defines the jurisdiction of the authority imposing penalties. Issue 5: Impact of Amendment on Penalty Proceedings The amendment to the Act expanded the TPO's jurisdiction to impose penalties for non-compliance with notice requirements. The revenue contended that the subsequent notice issued by the TPO after the amendment empowered the TPO to impose penalties. However, the Court held that the event of default occurring before the amendment rendered the penalty order void for lack of jurisdiction. In conclusion, the Court quashed the impugned order and allowed the writ petition, holding that the penalty imposed by the TPO was without jurisdiction due to the event of default predating the amendment. The judgment emphasizes the significance of the event of default in determining the authority's jurisdiction to initiate penalty proceedings under the Income Tax Act.
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