2024 (12) TMI 456 - AT - Income Tax

Penalty levied u/s. 271G - breach of section 92D - asseesee has only furnished the entity level margins in spite of having been given the opportunity to furnish segment account HELD THAT - There is no breach of section 92D in conjunction with Rule 10(B)(1) of the Rules. The ld. TPO did not make any adjustments during the Transfer Pricing Study. We have relied respectfully on the case of the assessee in 2018 (12) TMI 1589 - ITAT MUMBAI . Hence, there is no violation of Section 92D of the Act, and consequently, the penalty has been waived. We do not find it necessary to intervene in the decision of the appeal. Decided against revenue.

Issues:
- Appeal against penalty under section 271G for Assessment Year 2012-13.
- Compliance with provisions of section 92D(3) and Rule 10D(1)(g) in relation to international transactions.
- Justification for deletion of penalty by the CIT(A).
- Interpretation of penalty provisions under section 271G.
- Impact of lack of adjustment in Arm's Length Price on penalty imposition.
- Consideration of judicial precedents in similar cases.

Analysis:

1. Appeal against Penalty under Section 271G:
The appeal was filed by the revenue challenging the deletion of penalty under section 271G for Assessment Year 2012-13 by the Learned Commissioner of Income-tax(A)-57, Mumbai. The penalty was initially imposed by the Deputy Commissioner of Income-tax (Transfer Pricing)-3(1)(1) for failure to furnish required information and documents in relation to international transactions.

2. Compliance with Section 92D(3) and Rule 10D(1)(g):
The assessee, engaged in diamond business, failed to submit necessary documents as per section 92D(3) and Rule 10D(1)(g) during proceedings before the Transfer Pricing Officer (TPO). The penalty was levied based on this non-compliance, amounting to 2% of the total value of relevant international transactions.

3. Justification for Deletion of Penalty:
The Learned CIT(A) deleted the penalty after considering the submissions of the assessee, who argued that no adjustment was made by the TPO in the Transfer Pricing study, and the penalty was imposed only under domestic tax provisions. The CIT(A) found merit in the assessee's argument and ruled in favor of deleting the penalty.

4. Interpretation of Penalty Provisions under Section 271G:
The grounds of appeal raised various legal questions regarding the justification for penalty deletion, compliance with specific clauses of Rule 10D(1), and the relevance of judicial precedents. The revenue contended that the penalty should not have been deleted based on the failure to furnish required information under section 92D(3).

5. Impact of Lack of Adjustment in Arm's Length Price:
The absence of any adjustment in the Arm's Length Price by the TPO was a crucial factor in the decision to delete the penalty. The CIT(A) and the appellate authorities relied on this aspect to support the deletion of the penalty under section 271G.

6. Consideration of Judicial Precedents:
The decision to delete the penalty was supported by citing judicial precedents, including a specific case related to the nature of the diamond business and compliance with documentation requirements for determining the Arm's Length Price. These precedents were crucial in establishing the justification for penalty deletion in the present case.

In conclusion, the Appellate Tribunal upheld the decision of the CIT(A) to delete the penalty under section 271G for Assessment Year 2012-13, emphasizing the lack of adjustment in the Arm's Length Price and compliance with documentation requirements as per section 92D(3) and Rule 10D(1)(g). The appeal filed by the revenue was dismissed based on these grounds and the relevant legal interpretations and precedents cited during the proceedings.

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