TMI Blog2013 (8) TMI 997X X X X Extracts X X X X X X X X Extracts X X X X ..... o merit in the levy of penalty under section 271AA of the Act - Decided in favour of assessee. - ITA No.532 /Chd/2010 - - - Dated:- 26-8-2013 - SHRI T.R. SOOD, ACCOUNTANT MEMBER AND Ms. SUSHMA CHOWLA, JUDICIAL MEMBER Appellant by : Shri N.K.Saini, DR Respondent by : Shri Tej Mohan Singh ORDER PER SUSHMA CHOWLA, J.M, : The appeal filed by the Revenue is against the order of the Commissioner of Income-tax(Appeals), Chandigarh dated 26.2.2010 relating to assessment year 2006-07 against the penalty levied under section 271AA of the Income Tax Act, 1961. 2. The Revenue has raised the following grounds of appeal : 1. On the facts and in the circumstances of the case, the ld.CIT(A) has erred in allowing appeal of the assessee without appreciating the facts of the case. 2. On the facts and in the circumstances of the case, the ld.CIT(A) has erred in deleting the penalty of ₹ 8,06,932/- in Appeal No.179/P/08-09 dated 26/02/2010, made by the A.O. for non furnishing the information as per provisions u/s 92D of I.T.Act 1961, in the prescribed u/s 10D of I.T. Rules. 3. Whether in the fact and circumstances of the case and in law the Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed that the failure to produce the said information would attract penalty u/s 271AA of the Act. None attended on behalf of the assessee on 14.11.2008. The Assessing Officer deputed the Inspector for verification of documents maintained as per Rule 10D of the Income Tax Rules. The Inspector carried out the inspection on 14.11.2008 and submitted the report in which as per the Assessing Officer he had reported that the company had not maintained any record as per clause (g), (h) and (l) of Rule 10D of the Income Tax Rules. Another opportunity was given to the assessee to produce the documents on 17.11.2008, on which date no details were filed. The Assessing Officer in view thereof held the assessee liable to penalty u/s 271AA of the Act and levied penalty @ 2% of the value of international transaction of ₹ 4.03 crores and imposed penalty of ₹ 8,06,932/-. The order levying penalty u/s 271AA of the Act was passed after approval of JCIT, Range-6, Mohali vide letter No.5390 dated 5.12.2008. The said penalty was levied vide order dated 21.11.2008/12.12.2008. 5. During the appellate proceedings before the CIT (Appeals), the assessee filed written submissions, which are inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Inspector reads as Inspected all the documents and the inspection was carried out . (v) An undated report of the Inspector seen by the Assessing Officer on 14.11.08 states that he had found that the Company did not maintain any record required as per clause (g) (h) (l) of Rule 10D of the Income Tax Rules, 1962. (vi) In the meanwhile, since assessment proceedings were going on, Sh.Sapra, C.A. and employee of the Company attended on 17.11.08 and sought adjournment till 24.11.08 which was granted. On 24.11.08, there was a discussion on the transfer pricing report submitted by the Counsel. The discussion was regarding the basis of selection of comparables and whether the companies chosen were into software testing or not and the case was adjourned to 28.11.08. (vii) The penalty order is dated 21.11.08 which has been dispatched on 12.12.08. The date clearly mentioned on the order is 21.11.08/12.12.08. (viii) It is pertinent to mention here that on 21.11.08, the officer who has signed the penalty order was not even posted there. Sh.Pathania, ACIT who has signed the order was posted as ACIT, Circle 6(1), Chandigarh on 27.11.08, meaning thereby that he imposed the penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee that first notice was issued for 7.11.2008. The learned A.R. for the assessee pointed that assessment proceedings in the case were still pending but the order levying penalty was passed before the close of the assessment proceedings. The learned A.R. for the assessee further submitted that the reply filed by the assessee on 8.12.2008 was not considered by the Assessing Officer. It was further pointed out that the report in Form No. 3CEB is dated 5.7.2006 and transactional net marginal method was followed in the report of transfer pricing. The learned A.R. for the assessee stressed that no details as per clause (g), (h) and (l) of Rule 10D of Income Tax Rules were to be kept as there were no uncontrolled transactions. An alternate plea was raised by the learned A.R. for the assessee that penalty levied in the present case was only in connection with the technicalities and no revenue loss was caused in the case. Reliance was placed on the decision of the Hon'ble Supreme Court in Hindustan Steel Ltd. Vs. State of Orissa [83 ITR 26 (SC)] for the proposition that in the absence of any revenue loss, no penalty was leviable. Further reliance was placed on undermentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transfer pricing report had been prepared by the C.A. and had been prepared recently and was handed over to him today only. He was enquired as to when this report was made. The Assessing Officer observed that the report was submitted in the last week after the query on transfer pricing was raised. He was also asked to give the basis of selection of companies in the line of business in which comparable companies were working. He was specifically asked whether the companies which have been chosen as comparables were into software testing or not. The hearing was adjourned to 28.11.2008. k) On 28.11.2008 none appeared on behalf of the assessee and notice u/s 143(2) was issued for 8.12.2008. l) On 8.12.2008 the counsel for the assessee appeared and filed written reply and the case was partly examined and discussed. The hearing was adjourned for 12.12.2008. m) On 12.12.2008 the learned counsel appeared and case was partly discussed. Further the Assessing Officer asked the assessee to show cause as to why provisions u/s 10B(7) should not be applied and the case was adjourned for 19.12.2008. n) On 19.12.2008 the learned counsel appeared and the case was partly discussed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computed in accordance with section 92 of the Act. The information and documents are to be kept and maintained for a period of 8 years from the end of the relevant assessment year. Any person who enters into international transaction is to obtain a report from the Accountant and furnish the said report before the specified date in the prescribed form and verified in the prescribed manner by such Accountant. Under Rule 10E of the Income Tax Rules it is provided that the report of the Accountant is required to be furnished under section 92E of the Act in Form No. 3CEB. Where the assessee has failed to keep and maintain the information and documents as required u/s 92D(1) or (2) of the Act, the Assessing Officer or the CIT (Appeals) may direct levy of penalty u/s 271AA of the Act being equal to 2% of the value on each international transaction entered into by such persons. Section 271AA of the Act reads s under: 271AA. Without prejudice to the provisions of section 271, if any person fails to keep and maintain any such information and document as required by sub- section (1) or sub-section (2) of section 92D, the Assessing Officer or Commissioner (Appeals) may direct that such pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by order sheet entry dated 10.10.2008. The order levying penalty under section 271AA of the Act is dated 21.11.2008/12.12.2008. If the period prescribed under the Act for replying to the show cause notice was to be considered i.e. 30 days extendable to 60 days, the order proposed by the Assessing Officer on 21.11.2008 is passed in a hurry and is bad in law. Further the Assessing Officer had made enquiries through the Inspector, who vide Report dated 14.11.2008, admitted that the assessee was maintaining records, which were inspected by him at the premises of the assessee. The Assessing Officer refers to another report of Inspector, which is contrary to the first report, but the same cannot be relied upon, as it was not confronted to the assessee during the assessment proceedings or thereafter. Another plea raised by the learned A.R. for the assessee was that it was not the case of the Assessing Officer that the assessee had not kept the records. Only objection was that the assessee had not maintained particulars as per clauses (g),(h) (l) of Rule 10D of Income Tax Rules, which as per the learned A.R. for the assessee, were not prescribed documents vis- - vis the assessee, as ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant in cases of transactions, say for example relating to intangibles . Application of one or more clauses of sub-rule (3) would depend upon facts involved in the international transactions. Further, if official publications are needed in the case, other documents like report, studies, and data from the Government agencies mentioned in the same clause might not be required. Information even in the same clause may be alternative in some cases. It is evident from the information/documents prescribed in sub-rules of rule 10D that the assessee and the tax authorities are to see what information and documents and from which particular clause is relevant and, therefore, needed for determining ALP. The consideration of this aspect is material before issuing notice under section 92D(3), if it is to serve its purpose. 17. The perusal of the information and documents required to be kept and maintained under section 92D of the Act as per Rule 10D of Income Tax Rules reflects voluminous documents and information are prescribed thereunder and only in rare cases all the clauses of Sub-Rule to Rule 10D would be applicable. The facts and circumstances of each case would determine the requ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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