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TMI Blog2019 (6) TMI 1292X X X X Extracts X X X X X X X X Extracts X X X X ..... uced before us. CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. - Decided against revenue. - I.T.A. No.2713/Mum/2018 - - - Dated:- 24-6-2019 - Shri Shamim Yahya, AM And Shri Amarjit Singh, J For the Assessee : None For the Revenue : Shri R. Sindhu (Sr. AR) ORDER PER AMARJIT SINGH, JM: The revenue has filed the present appeal against the order dated 04.01.2018 passed by the Commissioner of Income Tax (Appeals) -55, Mumbai [hereinafter referred to as the CIT(A) ] relevant to the A.Y.2012-13 in which the penalty levied by AO has been ordered to be deleted. 2. The revenue has raised the following grounds: - 1. Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) was right in deleting the penalty u/s 271G in the assessee s case when he assessee had clearly failed in maintaining the documentation as required u/s 92D(3) of the I.T. Act. 2. The appellant prays that the order of the Ld. CIT(A) on the above grounds b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total revenue. it is observed that international Transactions constitutes less than 67% of the assessee total transaction and the remaining 33 % are third party transactions. This type of aggregation of AE transaction with Non AEs transaction is not permissible law under the TNMM Method. in this connection reference is made to rule I O(B)(l)(e). Transactional net margin method, by which, - i) the net profit margin realized by the enterprise from an international transaction 55c[or a specified domestic transaction] entered into with an associated enterprise is computed in relation to costs incurred or sales effected or assets employed or to be employed by the enterprise or having regard to any other relevant base; 'ii) the net profit margin realized by the enterprise or by an unrelated enterprise from a comparable uncontrolled transaction or a number of such transactions is computed having regard to the same base; iii) the net profit margin referred to in sub-clause (ii) arising in comparable uncontrolled transactions is adjusted to take into account the differences, if any, between the international ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al working which is based on allocation of all costs in the ratio of sale to AE? and non AE. All costs have been allocated to the Al? and non Al? segment. This kind of margin working which does not reflect the real profitability for the purpose of benchmarking of International Transactions cannot be accepted. If the contention of the assessee is to be accepted, then the whole scheme of Transfer Pricing provision will be defeated as TNIV1M at the entity level will be applied in the every case in disregard the of criteria mentioned in Rule 100 for the selection of the WM. Therefore, the TNMM is not the MAM in this case. 5.6 Further under rule 10D(1) - clauses (g) (h), the Assessee is required to maintain the price and profits earned in Al? Non Al? Transactions separately. But the Assessee has neither maintained the price details of different qualities of diamond sold nor the profits earned on controlled and uncontrolled transaction separately. Hence the assessee has failed to maintain documentation as required under Rule 10D because of which the ALP of the international transactions could not be properly verified as per the methods prescribed u/ s. 92C(1). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the revenue has argued that the Ld. CIT(A) has wrongly deleted the penalty, therefore, the finding of the CIT(A) is not justifiable, hence, is liable to be set aside. However, on the other hand, the Ld. Representative of the assessee has strongly relied upon the order passed by the CIT(A) in question. Before going further, we deem it necessary to advert the finding of the CIT(A) on record.:- The appeal is filed against the Penalty Levied u/s 271 G of the IT Act 1961. The facts of the case is that the appellant is a partnership firm that is engaged in the business of trading in diamonds exclusively. The firm purchases diamonds locally and sells it locally or export it to its AE's - M/s Dow Gems Inc and M/s Kuber MIS. Inc. During the course of transfer Pricing proceedings, the TPO observed that the assessee has used entity level TNMM to benchmark the transaction. The TPO held that this type of aggregation of AE transaction with non AE transaction is not permissible law under the TNMM method and as per Rule 10(8)(1)(e) for the purpose of application of TNMM, profit from the international transaction alone has to be considered. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. it was further submitted that even Rule 100 (g) and (h) does not stipulate that the said data as requested by the TPO be maintained in an audited basis and even when it is contrary to the requirement of the Accounting Standards. 6. Reliance has been placed on following decisions: (a) Decision of Hyderabad Bench of ITAT in the case of Annapurna Business Solution VS ACIT Circle 6(1) reported in 17 Taxman.com 125 in this regard. After analyzing the contention of the TPO and of submissions of the appellant and relying on above case laws I am of the considered opinion that penalty u/s 271G is not warranted in the above case and I find that appellant cannot be held responsible for failure to furnish information or documents u/s 93D(3). And so I find that appellant has furnished all information and documents which it was required to produce as per Accounting Standards. 6. On appraisal of the above mentioned finding, we noticed that the CIT(A) has passed the order on the basis of this fact that the assessee has furnished the relevant documents u/s 92D(3) r.w.r. 10D of the Act. The penalty is not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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