9911796707
TMI Blog2018 (6) TMI 1098X X X X Extracts X X X X X X X X Extracts X X X X ..... any reason to interfere with the orders of the lower authorities. - Decided against assessee - I.T.A. Nos.2207 & 2208/CHNY/2017 - - - Dated:- 18-6-2018 - SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER Appellant by : Shri. R. Vijayaraghavan, Adv. Respondent by : Shri. Sanath Kumar Raha, JCIT ORDER PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER These are appeals filed by the assessee, which are directed against an order dated 23.06.2017 of the ld. Commissioner of Income Tax (Appeals)-6, Chennai, confirming penalty levied under Sections 271AA and 271G of the Income Tax Act, 1961 (in short the Act ). 2. Facts apropos are that assessee; engaged in a business of manufacturing pistons and piston assemblies had filed its return of income for the impugned assessment year on 29.10.2004 declaring income of G Nil under normal provision and G7,03,68,754/- under Section 115JB of the Act. Since assessee had international transactions with its Associated Enterprise abroad, ld. Assessing Officer made a reference to the ld. Transfer Pricing Officer during the course of assessment proceedings. Ld. TPO on taking up the transfer pricing analy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Rules, and failed to furnish the information and records provided under the said Rule. Penalty of G1,84,808/- each was levied u/s.271AA and u/s.271G of the Act. 3. Aggrieved, assessee moved in appeal before the ld. Commissioner of Income Tax (Appeals). Argument of the assessee was that it had maintained all required documentation under Rule 10D of the Rules and furnished such documentations to the ld. TPO. As per the assessee, it had followed cost plus method for its Arms Length pricing study and it was therefore not necessary to maintain records relating to transactions of uncontrolled comparables. Further, as per the assessee, ld. TPO had followed Transactional Net Margin Method (hereinafter referred to as TNMM ) for which information was gathered through Prowess database. According to the assessee, there was no failure of the nature alleged by the ld. Assessing Officer. Reliance was placed on the decision of Co-ordinate Bench in the case of DCIT vs. Magick Woods Exports Pvt. Ltd (2012) 53 SOT 293. 4. However, ld. Commissioner of Income Tax (Appeals) was not impressed by the above arguments. According to him, defense taken by the assessee were primarily on two ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties except for three supplies where the company has adopted lower rates due to the reasons stated below:- 1) Sales to third parties are occasional/ one time supply and the price charged includes element of risk which is not so in case of sale to associates. 2) The variation is also attributable to different currency and exchange rate. In the absence of competitive international rates, we are unable to comment . A reading of the above clearly indicate that assessee had adopted CUP method and comparison was attempted with sale of similar products to third parties. Associated Enterprises of the assessee, as it appear at page 2 of ld. TPO order were M/s. Federal Mogul Corporation, M/s. Federal Mogul Bursucheid GMBH, M/s. T N Piston Product Group and M/s. Wallace Cartright Co Ltd. Annexure A to the Audit report in form 3CEB gives the details of transactions with M/s. Federal Mogul Corporation and Wallace Cartwright Company both of which were Associated Enterprises of the assessee. No data whatsoever regarding the internal comparables considered by the assessee are available in such report. There is nothing on record to show the prices at which assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and the industry in which the assessee operates, and of the business of the associated enterprises with whom the assessee has transacted ; (d) the nature and terms (including prices) of international transactions or specified domestic transactions entered into with each associated enterprise, details of property transferred or services provided and the quantum and the value of each such transaction or class of such transaction ; (e) a description of the functions performed, risks assumed and assets employed or to be employed by the assessee and by the associated enterprises involved in the international transaction or the specified domestic 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 or the specified domestic transactions entered into by the assessee ; (g) a record of uncontrolled transactions taken into account for analysing their comparability with the international transactions or the specified domestic transactions enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... published accounts and financial statements relating to the business affairs of the associated enterprises ; (e) agreements and contracts entered into with associated enterprises or with unrelated enterprises in respect of transactions similar to the international transactions or the specified domestic transactions, as the case may be; (f) letters and other correspondence documenting any terms negotiated between the assessee and the associated enterprise ; (g) documents normally issued in connection with various transactions under the accounting 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 or a specified domestic 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 or the specified domestic transaction, in the assumptions ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 271G of the Act:- If any person who has entered into an international transaction or specified domestic transaction fails to furnish any such information or document as required by sub-section (3) of section 92D, the Assessing Officer or the Transfer Pricing Officer as referred to in section 92CA or the Commissioner (Appeals) may direct that such person shall pay, by way of penalty, a sum equal to two per cent. of the value of the international transaction or specified domestic transaction for each such failure These sections were enacted only for the purpose of penalizing the defaults of the nature committed by the assessee. No doubt Section 273B mandates that penalty under Sections 271AA and 271G of the Act are not imposable if the assessee proves that there was a reasonable cause for failure. However, assessee before us in our opinion has not been able to show any reasonable cause for not complying with Rules nor for its failure to produce information called for by the ld. TPO. In the circumstances, we are of the opinion that levy of penalty under Sections 271AA as well as 271G of the Act were justified. We do not find any reason to interfere with the orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
