9911796707
TMI Blog2025 (1) TMI 1062X X X X Extracts X X X X X X X X Extracts X X X X ..... . For the Asst. Year 2019-20, the assessee filed its original Return of Income on 25.12.2020 declaring total income of Rs. 4,99,08,500/-. The same was processed u/s. 143[1] of the Act accepting the returned income. 2.1. It is thereafter a search action u/s. 132 of the Act was conducted in Priya Blue Group of Companies on 19.11.2019, in which the business premises of the assessee was also covered. Consequently, in response to 153A notice, the assessee filed its Return of Income as admitted in the original return. Since there were Transfer Pricing issues in respect of International Transactions or Specified Domestic Transaction or both, the case was referred to Transfer Pricing Officer [hereinafter referred as TPO] u/s. 92CA(1) of the Act. The Ld TPO after making detailed enquiry u/s. 92CA(2) of the Act, passed the Transfer Pricing Order u/s. 92CA(3) of the Act making an upward adjustment of Rs. 1,54,77,374/- namely [a] on benchmarking of provision of services rendered to Associate Enterprise of Rs. 67,96,987/- and [b] Corporate Guarantee given to AE of Rs. 86,80,387/-. 2.2. As the assessee has not chosen to challenge the TPO's order before Dispute Resolution Panel, therefore t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has raised similar line of arguments which are dealt with in subsequent paras. ... ... ... ... 5.4 It is observed that the TPO has passed order under Section 92CA of the Act wherein he has made two TP adjustments as referred supra which are unconnected with purchase transactions of vessel made with AE. The 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 observed that such transactions are also mentioned in Form 3CEB filed prior to date of search. It is further observed that in present Assessment Year order under Section 143(3) of the Act was also passed on 05/03/2015 wherein also the AO has not doubted such purchase value. It is relevant to refer to decision of Hon'ble Chandigarh ITAT in the case of DCIT vs Bebo Technologies Pvt. Pvt. Limited, 40 Taxman 160 wherein it is held as under: ... .... 5.5 On perusal of the Transfer Pricing Order, it is apparent that - (i) the TPO has not made any adjustments relating to vessel purchase transaction with AE (ii) there is no whisper in entire transfer pricing order that appellant has f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf has mentioned that appellant has reported purchase transactions with AE in Form 3CEB, such details were also furnished in response to notice under Section 142(1) of the Act. However, on perusal of such penalty order, there is complete lack of satisfaction on part of Assessing Officer to record which were material documents/information which were not provided to the TPO for such purchase transactions. The AO has merely mentioned that appellant has failed to maintain documents specified in Section 92D rwr 10D but is completely silent on material aspects as to what were such documents which appellant has not furnished. In present case, the AO has levied penalty under Section 271AA of the Act on international transaction reported in Form 3CEB which were never subject to any upward/downward adjustment in TP Order hence such penalty cannot be sustained in view of judicial pronouncements discussed in subsequent paras. 5.8 It is relevant to refer to decision of the Hon'ble Delhi ITAT in the case of ACIT vs BSC C & C JN in ITA No. 1401/Del/2016, dated 14/02/2019 wherein it has been held as under.- "... In this particular case, the A.O after taking into account the evidences and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to point it out specifically before levying of penalty. By forming a general opinion that the assessee had not maintained required documents as required under Rule 10D, penalty could not have been levied. Assessee had furnished ---required documents and information inadequacy of any document for meeting requirement of Rule 100 has not been pointed out by any of the authorities below. Further, based on such documentation, the TPO had himself come to a conclusion Inal there was no requirement of any revision of value of the international transactions CIT(A) rightly deleted the penalty Decided in favor of assessee. 5.8.3. The decision of the Hon'ble ITAT Delhi Bench 'E' in the case of ACIT vs. M/s. Micromax Informatics Ltd, ITA No. 4632/Del/2016 for A.Y.2011-12, wherein it was held as under: 5. Before us. Learned DR look us the findings and observation of The AO and supported the order of AO Reliance was also placed on the decision of Hon'ble Apex Court in the case of Mak Data Pvt. Ltd reported in (2013)258 ITR 593 The Learned AR on the other hand submitted that penalty u/s 271AA was initiated and levied on the total international transactions of Rs 26,41,92,634/-, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h he placed reliance on the decision of Hon'ble Apex Court in the case of CIT v. SSA's Emerald Meadows He therefore, submitted that CIT(A) has rightly deleted the penalty 6. We have heard both the parties and perused all the relevant materials available on record. The issue in the present ground is with respect to levy of penalty u/s 271AA of the Act. We find that CIT(A) while deleting the penalty has given a finding that assessee has kept and maintained the information about the international transactions, the discussion of which is also in the Transfer Pricing Report which was submitted to the TPO during the assessment proceedings. CIT(A) thus concluded that the assessee was maintaining the information and documents as prescribed under the law regarding international transactions and that assessee has not failed in reporting any international transactions. Before us, Revenue has not pointed to any fallacy in the findings of CIT(A). We further find that the ratio of the decision of Hon'ble Apex Court relied before us by Revenue is not applicable to the facts of the present case. Considering the totality of the aforesaid facts and the submissions made by Learned AR, we fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Assessing Officer - Held, yes [in favour of assessee]" 5.8.5. The decision of the Hon'ble ITAT MUMBAI BENCH 'L' in the case of Assistant Commissioner of Income-tax. Range 8(3), Mumbal v. Smith & Newphew Healthcare (P.) Ltd. (2011] 16 taxmann.com 5 (Mumbai):- "Section 92D, read with section 271A of the Income-tax Act. 1961- Transfer pricing Maintenance and keeping of information and document-Assessment year 2003-04-Assessee was a company engaged in business of manufacturing and distributing non- pharmaceutical healthcare products It had entered into an international transactions with its associated enterprises (AE) - During course of assessment proceedings, it was observed that assessee had total international transaction at Rs 6,78,86.119, but it did not maintain information and documents in respect of these transactions as required under sub-section (1) and subsection (2) of section 920 Since assessee failed to maintain books of account for international transactions, penalty under section 271AA was levied by Assessing Officer-It was found from records that assessment order and order imposing penalty under section 271AA, did not specify what was failure on part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Ltd was passed on 30.10 2011 As per our considered opinion, the order u/s 92CA(3) was made by TPO after due consideration of the documents, information furnished by the assessee. The Co-ordinate Bench of this Tribunal in ACIT vs. Smith & Nephew Healthcare Pvt. Ltd. (2016) 16 taxmann.com 5 (Mumbai) on almost similar facts held as under: "the Assessee has to "keep and maintain" information and documents in respect of international transaction entered into with AE. Rule 10D(4) of the Rules envisages that 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, which is due date for filing return of income u/s 139(1) of the Act. The Assessment order and the order imposing penalty u/s 271AA of the Act, does not specify what was the failure on the part of the Assessee under Sec 92D read with Rule 100 of the Rules The Assessee has in the course of assessment proceedings furnished all details required by the AO and the international transaction with the AE has been accepted to be one confirming to the Arm's Length Price No addition w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the penalty u/s. 271AA of Rs. 90,91,650/- levied for non-maintaining documents as specified in section 92D r.w.r. 10D, without discussing the case on merits. 6. Ld Senior DR Shri Rignesh Das appearing for the Revenue supported the penalty orders passed by the Assessing Officer and requested to uphold the same. However he could not contravent the findings arrived by the Ld CI T[A], with relevant materials and provisions of law and rules. 7. Per contra Ld Senior Counsel Mr. Thushar Himani appearing for the assessee submitted that the Ld TPO has not made any TP adjustment with respect to underlying transactions which implies that he has accepted that the international transactions were executed at as per Arms Length Price. Further Ld TPO has observed that in response to notices issued u/s. 92CA(2) and 92D(3), the assessee had filed requisite details (Para 2 of TPO's order, Pg.55 of P/B). Thus there is no whisper in TPO's order that there is any failure on the part of the assessee as to maintaining documents specified u/s 92D r.w.r. 10D of the I.T. Rules. After considering entire material available on record, the Ld TPO did not recommend initiation of penalty proceedings u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty under Section 271AA of the Act, it is relevant to refer to provisions of the Act which reads as follows: 271AA (1) Without prejudice to the provisions of section 270A or section 271 or section 271BA if any person in respect of an international transaction or specified domestic transaction, - (i) fails to keep and maintain any such information and document as required by sub-section (1) or sub-section (2) of section 920, (ii) fails to report such transaction which he is required to do so, or (iii) maintains or furnishes an incorrect information or document. the Assessing Officer or Commissioner (Appeals) may direct that such person shall pay, by way of penalty, a sum equal to two per cent of the value of each international transaction or specified domestic transaction entered into by such person. (2) If any person fails to furnish the information and the document as required under sub-section (4) of section 92D, the prescribed income-tax authority referred to in the said sub-section may direct that such person shall pay, by way of penalty, a sum of five hundred thousand rupees. 8.1. On perusal of relevant facts, it is observed that Ld AO levied penalty under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment 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 by Assessing Officer, there was nothing to suggest as to which particular information or document was not submitted by assessee nor exact nature of default had been brought out. Commissioner (Appeals) was justified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is misconceived, totally lacking in merits and is, therefore, dismissed." 8.5. Other decisions relied by the assessee which are passed by different Co-ordinate Benches of the Tribunal are in the same line that penalty u/s. 271AA cannot be levied without specifying the required documents failed to be maintained/furnished by the assessee. Thus the issue is no more res-integra. 9. Further it is noticed that penalty order was passed in perfunctory manner without giving requisite show-cause notice and without affording proper opportunity of hearing to the assessee. Moreover, the Assessing Officer had merely show caused the assessee to file details/documents maintained as per rule 10D of Income-tax Rules, without specifying any particular clause itself. Thus there is 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. In the above circumstances, penalty order is not sustainable in law. Thus we do not find any infirmity in the common order passed by the Ld CIT[A] deleting the penalty lev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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