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TMI Blog2011 (11) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... epted to be one confirming to the Arm's Length Price. - there is no justification for imposition of penalty. - Decided in favor of assessee. - ITA No. 5779 (Mum.) of 2007 - - - Dated:- 9-11-2011 - Shri R.S. Syal,and Shri N.V. Vasudevan, JJ. Represented By: Shri Jitendra Yadav for the Appellant. Shri Arvind Sonde and Niraj Sheth for the Respondent. N.V. Vasudevan, This is an appeal by the Revenue against the order dated 12.06.2007 of CIT(A)-XXIX, Mumbai, relating to AY 03-04. The Ground of appeal of the revenue reads as follows: "On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the penalty of Rs. 13,57,720/- levied u/s. 271AA for non-compliance of provision of sec. 92D without appreciating the provisions of sec. 92D/92D(3)" 2. In this appeal the Revenue has challenged the action of the CIT(A) in canceling the penalty imposed on the Assessee u/s.271AA of the Income Tax Act, 1961 (Act). Sec.271AA of the Act provides as follows: 271AA. Penalty for failure to keep and maintain information and document in respect of international transaction. Without prejudice to the provisions of section 271, if any person fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee and by the associated enterprises involved in the international transaction ; (f) a record of the economic and market analyses, forecasts, budgets or any other financial estimates prepared by the assessee for the business as a whole and for each division or product separately, which may have a bearing on the international transactions entered into by the assessee ; (g) a record of uncontrolled transactions taken into account for analysing their comparability with the international transactions entered into, including a record of the nature, terms and conditions relating to any uncontrolled transaction with third parties which may be of relevance to the pricing of the international transactions ; (h) a record of the analysis performed to evaluate comparability of uncontrolled transactions with the relevant international transaction ; (i) a description of the methods considered for determining the arm's length price in relation to each international transaction or class of transaction, the method selected as the most appropriate method along with explanations as to why such method was so selected, and how such method was applied in each case ; (j) a record o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing practices followed. (4) The information and documents specified under sub-rules (1) and (2), should, as far as possible, be contemporaneous and should exist latest by the specified date referred to in clause (iv) of section 92F : Provided that where an international transaction continues to have effect over more than one previous year, fresh documentation need not be maintained separately in respect of each previous year, unless there is any significant change in the nature or terms of the international transaction, in the assumptions made, or in any other factor which could influence the transfer price, and in the case of such significant change, fresh documentation as may be necessary under sub-rules (1) and (2) shall be maintained bringing out the impact of the change on the pricing of the international transaction. (5) The information and documents specified in sub-rules (1) and (2) shall be kept and maintained for a period of eight years from the end of the relevant assessment year." Rule 10-D of the IT Rules, 1962 were introduced by Income Tax (21st Amend.) Rules, 2001, wef. 21-8-2001. 3. The Assessee is a company engaged in the business of manufacturing and dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vijay Eashwaran, CA attended and filed the details of International transaction, and asked to produce the vouchers showing the product and sale price. Case is fixed for 27/01/2006 at 11.00 AM 30/01/2006 Order u/s. 143(3) passed 4. In the order of assessment, the AO accepted the International Transaction with AE as at Arm's Length Price and no adjustment whatsoever was made. The relevant observations of the AO in the order of assessment is as follows: "11. Non maintenance of information and document in respect of international transactions. During the course of assessment proceedings, it is observed that assessee has total international transaction at Rs.6,78,86,119/-, but the assessee company is not maintain information and documents in respect of these transactions as required by Sub-Clause(1) and Sub-Clause(2) of Sec.92D of IT Act, 1961. Since the assessee failed to maintain the books of accounts for international transactions, penalty u/s.271AA is initiated separately." 5. In response to the show cause notice before imposing penalty u/s.271AA of the Act, the Assessee submitted that it had maintained all such information and documentation as pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessee. 7. The CIT(A) was of the view that the relevant provisions of law casts an obligation on an Assessee who has entered into International Transaction with an AE shall "Keep and Maintain" information and documents. Thus these documents need only to be produced as and when demanded by the AO. He held that the Assessee has produced before the AO all information and documents demanded by the AO. He also found that the AO has accepted that the price adopted in respect of the international transaction with the AE was at Arm's Length and no addition was made. He held that there is no material on record brought out either in the order of assessment or in the order imposing penalty as to what information or documents the Assessee did not maintain. The CIT(A)was therefore of the view that the penalty imposed by the AO was without any basis and cancelled imposition of penalty. Aggrieved by the order of the CIT(A), the revenue has filed the present appeal before the Tribunal. 8. Before us the learned D.R. relied on the order of the AO. The learned Counsel for the Assessee relied on the order of the CIT(A). 9. We have considered the rival contentions and are of the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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