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TMI Blog2025 (1) TMI 1062X X X X Extracts X X X X X X X X Extracts X X X X ..... any particular clause itself. No merit in levying penalty u/s. 271AA of the Act, holding that the assessee have not maintained proper documents. Even otherwise, international transaction entered upon by the assessee with its AE had been held to be at arm s length by the Ld TPO. Thus, penalty order is not sustainable in law. Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty (in Rs.) Nature of Addition 2012-13 23-09-2022 5,36,25,808/- A sum of 2% of the value of each International Transaction or and specified domestic transaction 2013-14 23-09-2022 4,49,91,630/- -do- 2014-15 23-09-2022 3,94,83,384/- -do- 2015-16 23-09-2022 5,93,72,149/- -do- 2016-17 23-09-2022 88,17,323/- -do- 2017-18 23-09-2022 4,25,16,156/- -do- 2018-19 23-09-2022 5,76,17,811/- -do- 2019-20 23-09-2022 90,91,650/- -do- 4. Aggrieved against penalty orders the assessee filed appeals before Ld CIT[A] who deleted the penalties by passing detailed order after considering decisions of various Benches of the Tribunal as follows: "… 5.2. It is observed that the AO has levied penalty under Section 271AA of the Act for Rs. 5,36,25,808/- being 2% of international transactions made by appellant. On perusal of such TP order, it is observed that appellant had carried out vessel purchase transactions with Best Oasis Limited, AE of appellant (which is reported in Form 3CEB) for Rs. 268,12,90,414/- and AO has levied penalty under Section 271AA of the Act for Rs. 5,36,25,808/- on these purchase transactions on the ground that appellant has failed to main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustify purchase value, the TPO ought to have made certain TP adjustments which in present case has not been made. On perusal of Section 271AA of the Act, it is apparent that such penalty can be levied, if Assessee fails to keep and maintain documents/information as required in Section 92D but before levying such penalty, AO is duty bound to provide reasoning for levy of such penalty which is 2% of international transaction and AO ought to have brought on record details as to which document/information were not supplied by appellant which can justify levy of penalty in absence of such cogent reasoning, penalty under Section 271AA cannot be levied. 5.7 On perusal of assessment order passed under section 143(3) rw.s. 144C of the Act, it is apparent that except initiating penalty under section 271AA in the last line of assessment order, there is no discussion as to why such penalty has been initiated by the AO or which were the documents/information as required in Section 92D which was not furnished by appellant during transfer pricing proceedings. In the present case, the TPO has not initiated any such penalty but the Assessing Officer has initiated the penalty as well as levied the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, Ld.AO accepted and took on record prescribed documents, that are submitted by assessee which forms part of paper book filed before us, more particularly placed at page 2- 152. Further, having regard to these documents Ld.AO, accepted international transaction entered into assessee with its AE to be at arm's length price, and no adjustment whatsoever has been made. Ld.AO has not expressed any difficulty in examining correctness of price adopted by assessee in respect of international transaction with AE Thus in our considered opinion there is no justification for imposition of penalty under section 271 AA of the Act We, therefore do not find any infirmity in the order of Ld. CIT(A) and the same is upheld" …………………. 5.8.2. The decision of the Hon'ble ITAT Chennai in the case Income-Tax Officer (OSD), Company Circle V (2), Chennai V. Generating Co. (P.) Ltd. 2011 (10) TMI 482-ITAT Chennai IT Appeal No. 774 (Mds.) of 2007:- "Penalty u/s 271AA Transfer Pricing" no adjustment to ALP - penalty initiated on ground that that assessee had not maintained documents as required under Rule 10D of Income-tax Rules, 1962 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 271AA were substituted by Finance Act 2012 w.e.f 1st April 2012 wherein Clause (ii) & (in) were inserted and as per earlier provisions, penalty u/s 271AA could be levied only on the issue of failure to keep and maintain any such information/ document in support of international transactions and that there was no condition to impose penalty of failure of reporting international transaction in the return of income and/ or furnishing of incorrect information. He therefore, submitted that the condition of failure to report the transaction was inserted w.e.f 1st April 2012 and accordingly it cannot be imposed for A.Y. 2011-12. In support of the aforesaid contention, he relied on the decision of Kolkata Bench of Tribunal in the case of JCIT (OSD), Circle-8 (1), Kolkata Vs. M/S. Kunjal Synergies Pvt. Ltd. AND (Vice Versa)- 2019 (2) TMI 55 - ITAT Kolkata. He further submitted that Form 3CEB was furnished by the assessee during the course of assessment proceedings and TPO after due consideration of the documents information furnished by the assessee determined the adjustment which was subsequently deleted by the ITAT. He further pointing to the notice issued u/s 271AA dated 21.10.2014 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e specific information or documents which assessee failed to furnish under section 92CA(2) but which according to TPO are necessary for determination of ALP of international transactions Held, yes During course of assessment proceedings, Assessing Officer noticed that assessee had entered into international transactions with its AE- Since value of such transactions exceeded Rs 15 crores Assessing Officer made a reference to transfer pricing officer (TPO) for determining arm's length price (ALP) of international transactions Though TPO did not suggest any adjustment in his order, he suggested initiation of penalty proceedings under sections 271AA, 271G and 271BA on ground that assessee had not maintained prescribed TP documentation and did not furnish information requisitioned by TPO On basis of recommendation of TPO, Assessing Officer imposed penalty under sections 271AA and 271G upon assessee On appeal, Commissioner (Appeals) deleted penalty observing that documents maintained by assessee- company were furnished to TPO and even TPO was satisfied with documentation and that was why no adjustment was made to ALP of international transaction Whether since in penalty orders passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s AE this fact itself shows that the Ld. PTO and no further addition was proposed We have seen the order of TPO u/s 92CA(3) dated 28/10/2011 which does not mention that there was any failure on the part of assessee to maintain documents as required under Rule 10D. Though, the order contain the reference that assessee failed to submit the document and Transfer Pricing Report. In part-5 of its report Id. TPO referred that "in view of the fact that these replica transactions of Cadbury India Ltd., where ALP is determined of these very transaction. As such the ALP determined by assessee is not being disturbed. Further, we have seen that assessee filed Form 3CEB, Royally Agreements entered into with AE and (copy of which are available at page no 19 to 53 of PB). These documents were furnished by assessee along with assessee's letter dated 16.11.2011 which was duly acknowledged. Further, the assessee furnished the agreement of assessee with its AE with regard to provisions for brand license and technical assistance and no-how vide assessee's application dated 23.12.2011 The report under Form No. 3CEB is available al page no 6 to 12 of PB which was furnished to DDIT with lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for initiating any penalty proceeding u/s 271AA of the Act nor any finding that assessee failed to maintain the record prescribed under Rule 8D. With these observations, the appeal of the assessee is allowed. No order as to cost. 5.10 In view of above discussion, it is observed that AO has levied penalty under Section 271AA of the Act for Rs. 5,36,25,808/- without bringing on record details of documents as required under Section 92D of the Act which were not submitted before TPO and on transactions which were considered to be at arms- length by TPO. On perusal of TP Order, it is observed that appellant has made sufficient compliance for maintaining the records as required under Section 92D of the Act In fact, the TPO at para 2 of his order has mentioned that all the requisite details regarding vessels purchases were called for and appellant had submitted all such details 5.11 In view of above factual and legal matrix, there is no justification for levy of penalty under Section 271AA of the Act and consequently penalty levied by AO is deleted. Thus, the grounds of appeal no. 3 to 6 are allowed." 5. Aggrieved against the appellate orders cancelling the penalty u/s. 271AA of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at "since, assessee has failed to maintain the requisite documents as specified in sec. 92D r.w.r. 10D, issue penalty notice w/s 271AA of the Act for non-complinace of sec. 92D r.w.r. 10D" (Pgs.103-108 @ 106 of Paper Book). Under such circumstances, penalty u/s 271AA of the Act cannot be levied. Reliance is placed on following decisions: • DCIT v. Convergys Customer Management Group Inc. (2022) 143 taxmann.com 43 (Delhi); • DCIT v. Bebo Technologies Pvt. Ltd. (2014) 40 taxmann.com 168 (Chandigarh); • ITO v. PPN Power Generating Co. P. Ltd. (2012) 18 taxmann.com 127 (Chennai); • ACIT v. Global One India P. Ltd. (2012) 19 taxmann.com 249 (Delhi Trib.); • CIT v. Leroy Somer & Controls (India) Pvt. Ltd. (2013) 360 ITR 532 (Delhi); • Tapi JWil JV v. ITO (2024) 158 taxmann.com 433 (Delhi Trib.); • Apace Realty v. ITO (2022) 140 taxmann.com 257 (Mum): • DCIT v. Francois Compressors India P. Ltd. (2021) 129 taxmann.com 260 (Pune): 7.2. Thus Ld Senior Counsel Mr. Thushar Himani appearing for the assessee submitted that in view of the above, no case is made out by the Ld AO for levy of penalty u/s 271AA of the Act. Under such circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of vessels made with AE. Thus the Ld TPO has not doubted such purchase price nor made any upward adjustments relating to purchase transactions with AE, which means that such transactions are recorded at arms-length price. It is further seen that such transactions are also mentioned in Form 3CEB filed prior to date of search. It is further seen that in the Final assessment order dated 05-03-2015 was passed u/s. 143(3) of the Act, wherein also the AO has not doubted such purchase value. 8.3. On identical facts Chandigarh Bench of ITAT in the case of DCIT vs Bebo Technologies Pvt. Pvt. Ltd, 40 Taxman 160 wherein deleted the levy of penalty u/s. 271AA of the Act as follows:- "Section 92D, read with sections 271AA and 271G, of the Income- tax Act, 1961 Transfer Pricing Maintenance & keeping of information and document of persons entering into an international transaction - Assessment year 2005-06 Whether only in event of failure of assessee to support its ALP by filing necessary evidence, question of requiring assessee to furnish prescribed information would arise - Held, yes - Whether there is no rationality in requiring information or documents from assessee first under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transient and changeable. Constant assimilation may be required. Besides, data information can also vary. The tribunal has rightly concluded that with such a broad rule, which requires documentation and information voluminous and virtually unlimited, Section 271G has to be interpreted reasonably and in a rational manner. Information or documentation, which is assessee specific or specific to the associated enterprises, should be readily available, whereas other documentation or information relates to data bases or transactions entered into by third parties may require collation/collection from time to time. There cannot be any end or limit to the do or information relating to data bases or third parties. When there is general and substantive compliance of the provisions of Rule 10D, it is sufficient The Legislature was conscious of this fact and, therefore, had specifically stipulated in Section 92D(3) that the Assessing Officer or Commissioner (Appeals) may require a person to furnish any information or document in respect thereof and on failure of the said person to furnish the documentation within the specified time, penalty under Section 271G can be imposed. Thus, for imposing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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