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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 ..... that the assessment of the assessee was finalized on 15.01.2016 u/s 92CA(3). The TPO had initiated the penalty u/s 271G of the Act, 1961 against the assessee for non-submission of details called for during the course of TPO proceeding. The relevant details for initiation of penalty proceeding in the order u/s 92CA(3) dated 15.01.2016 is hereby reproduced as under for ready reference.:- "3. Taxpayer's profile: Dauji & Co. is a partnership firm that is engaged in the business of trading in diamonds exclusively. The firm purchases locally diamond and the same are either exported or sold locally. In respect of exports, the same are either exported to the Ae's viz M/s. Dow Gems Inc. and M/s. Kuber Mfg. Inc. or to several non-AE's. Details of International Transaction: Sr. No Nature of Transaction Amount (Rs.) 1 Export of cut and polished diamonds 21,19,74,097 5. 1 The Assessee has submitted that it is engaged in the business of manufacture and sale of studded jewelery. The assesses total sale is Rs. 31,69,34,162/- and out of it Sales to AE is Rs. 21,19,74,097/- which comes to 67%. The assessee has used entity level TNMM method to benchmark these transactions. The calc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the specified domestic transaction. (Unquote) 5.3 The above indicates that for the purpose of application of TNMM, profit from the International Transactions alone has to be considered. The law does not permit the aggregation of International Transactions with other uncontrolled transactions for the purpose of determining ALP under TNMM. In this connection reliance is placed upon the decision of TEAT in the case of UCB India Pvt. Ltd. vs. ITAT (1TA No. 428 & 429 of 2007) which has been consistently followed by the ITAT on this issue. 5.4 The term transaction has been defined in Rule 10A to include a number of closely linked transactions. Two or more International Transactions can be aggregated only when they are established to be closely linked. Therefore, when the law is so clear so as to permit aggregation of International Transactions only when they are closely linked, there is no mandate under law to aggregate AE and non Al? transactions. Even from common sense perspective, when the Al? transaction constitutes around 67% of the total transaction, the operating profit margin at entity level does not reflect the impact of Al? transaction but in fact is a reflection of Non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has failed to maintain separate records of different quality. Similarly, for the application of TNMM, separate profitability on transaction is required. But the assessee has failed to furnish the details. 5.8 For the application of PSM, the profit earned by the AE and assessee is required which is also not furnished by the assessee. Thus assessee has prevented the revenue for making any determination of ALP by not furnishing the required documents. Though the law requires the TPO to determine the ALP based on information available on the records, however, due to the failure of assessee to maintain and furnish the basic information pertaining to the AE and non AE transactions, the TPO has been prevented from making any determination. In view of the same, for want of even the basic information, no adjustment is made to the value of International Transactions, though, from the material on record it cannot be concluded whether the IT are at ALP or not. 5.9 Under these circumstances, penalty u/ s 271G is initiated separately for failure of assessee to furnish the required documentation." 4. Thereafter, an opportunity of being heard was given to the assessee to levy the penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basic information pertaining to the AE and non AE transactions, the TPO has been prevented from making any determination and so no adjustment have been made to the value of international transaction and hence penalty His 271G was initiated and imposed for failure to furnish the required documentation. During the course of appellate proceedings, the AR of the appellant submitted following: 1. Form NO. 3CEB under rule 10E was furnished which contained details of information and documents kept and maintained by the appellant u/s 92D read with section 10D (1)(a) to (m). 2. TPO has asked during the course of proceedings u/s 92CA audited segmental accounts. The appellant had submitted before the TPO that it is dealing only in one business segments and therefore as per Accounting Standards 17 which governs the method by which the financial statements are prepared and audited, it is not required to exhibit separate segments in the financial statements. 3. The TPO did not agree with the working of the appellant, and though did not made any adjustment, imposed a penalty u/s 271G for not maintaining separate accounts for transactions with AE and non AE. 4. The appellant further ..... X X X X Extracts X X X X X X X X Extracts X X X X
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