M/S. TRANSOCEANIC FINANCIAL ENGINEERING PVT LTD ,MUMBAI vs. ITO WARD 13(3)(1), MUMBAI

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ITA 6948/MUM/2025Status: DisposedITAT Mumbai01 October 2026AY 2011-126 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty order under appeal could not be sustained. The reasoning was that the transfer-pricing adjustment, which formed the basis of the penalty, had been set aside by the Tribunal in its earlier order dated January 28, 2019, and the matter was restored for fresh adjudication. The Tribunal clarified that its earlier order had not expressed any opinion on the merits of the transfer-pricing issues, and the adjustment did not remain a concluded determination. Since the original adjustment was not a concluded determination and was subject to reconsideration in remanded proceedings, a penalty founded upon it could not stand. The Tribunal noted that in the second round, the Assessing Officer had passed a fresh assessment order and initiated fresh penalty proceedings. Therefore, the penalty order presently under appeal, based on the earlier set-aside adjustment, was quashed. The Tribunal explicitly stated that it had expressed no opinion on the merits of the fresh assessment or the validity of the fresh penalty proceedings, which were to be dealt with independently. The appeal filed by the assessee was allowed.

What were the facts?

The assessee, M/s. Transoceanic Financial Engineering Pvt. Ltd., filed an appeal against a penalty order dated October 15, 2025, passed by the National Faceless Appeal Centre, Delhi. The penalty, amounting to ₹18,17,200, was levied under section 271(1)(c) of the Income-tax Act, 1961, for assessment year 2011-12. This penalty was based on a transfer-pricing adjustment of ₹9,08,60,000 made in respect of international transactions with an associated enterprise. The adjustment comprised ₹5,60,00,000 for software and assets purchased and ₹3,48,60,000 for operating licenses. The assessee contended that the original transfer-pricing adjustment, which formed the basis of the penalty, had been set aside by the Tribunal in a prior order dated January 28, 2019, and the matter was restored for fresh adjudication. The assessee further stated that in the second round, a fresh assessment order was passed, and fresh penalty proceedings were initiated.

What were the issues?

1. Whether the penalty levied under section 271(1)(c) of the Income-tax Act, 1961, for assessment year 2011-12 can be sustained when the underlying transfer-pricing adjustment has been set aside by the Tribunal for fresh adjudication. Assessee's Contentions: - The transfer-pricing adjustment, which is the foundation for the impugned penalty, was set aside by the Tribunal in ITA No. 675/Mum/2016 vide order dated January 28, 2019. - The Tribunal had directed that the assessee's submissions and supporting evidence be considered in accordance with law. - In the second round of proceedings, the Assessing Officer passed a fresh assessment order and initiated fresh penalty proceedings. - Consequently, the penalty under appeal, arising from the earlier, now set-aside, transfer-pricing adjustment, cannot be sustained. Revenue's Contentions: - The judgment records no specific contentions from the revenue regarding the sustainability of the penalty in light of the set-aside transfer-pricing adjustment.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘H’ BENCH

Before: SHRI AMIT SHUKLA & SHRI G.M. DOSS

For Appellant: Shri Prayag Jha, Advocate
For Respondent: Shri Pravin Salunkhe, SR DR
Hearing: 01/10/2026Pronounced: 01/10/2026

आदेश / O R D E R PER AMIT SHUKLA (J.M): This appeal by the assessee is directed against the order dated 15 October 2025 passed by the National Faceless Appeal Centre, Delhi, in relation to the penalty levied under section 271(1)(c) of the Income-tax Act, 1961, for the assessment year 2011–12. 2. The penalty of ₹18,17,200 was levied with reference to the transfer-pricing adjustment of ₹9,08,60,000 made in respect of the assessee’s international transactions with its associated enterprise. The adjustment comprised the following:

Sl. No. Narration ALP determined by TPO 1 Software and Rs.5,60,00,000 assets purchased 2 Operating licences Rs.3,48,60,000 Arm’s Length Price (ALP) of Rs.9,08,60,000 assessee’s transaction with AE

3.

The learned counsel submitted that the transfer-pricing adjustment forming the basis of the impugned penalty had

3 ITA No.6948/Mum/2025 Transoceanic Financial Engineering Pvt. Ltd., been set aside by the Tribunal, vide order dated 28 January 2019 in ITA No. 675/Mum/2016, and the matter restored for fresh adjudication. It was submitted that the Tribunal had directed that the assessee’s submissions and supporting evidence be considered in accordance with law. The learned counsel further submitted that, in the second round, the Assessing Officer had passed a fresh assessment order and initiated fresh penalty proceedings. In these circumstances, according to the learned counsel, the penalty presently under appeal, which arose from the earlier transfer-pricing adjustment, could not be sustained.

4.

We have considered the rival submissions and perused the material on record. The transfer-pricing adjustment underlying the impugned penalty was the subject matter of the Tribunal’s order dated 28 January 2019 in ITA No. 675/Mum/2016. The relevant observations and findings of the Tribunal, which bear upon the issue before us, are reproduced below:

5.

We have considered rival submissions and perused material on record. The argument of the learned Authorised Representative before us is twofold. Firstly, there is no international transaction of revenue nature between the assessee and the AE in the relevant financial year. Secondly, the submissions made by the assessee and evidences filed to justify its claim that there is no international transaction of revenue nature and also objecting to the transfer pricing adjustment made by the Transfer Pricing Officer were not

4 ITA No.6948/Mum/2025 Transoceanic Financial Engineering Pvt. Ltd., considered by the DRP. In our considered opinion, if for justifying its claim that no transfer pricing adjustment was required to be made in the given facts and circumstances of the case, the assessee makes certain submissions and furnishes evidences to support such claim, the Departmental authorities are duty bound to not only consider the submissions of the assessee but examine the evidences submitted. Non–consideration of the submissions and evidences furnished by the assessee amounts to violation of rules of natural justice. Therefore, we are inclined to restore all the issues raised in the present appeal to the DRP for de novo adjudication after due opportunity of being heard to the assessee. Grounds raised are allowed for statistical purposes. 2. Before parting, we must make it clear that we have not expressed any opinion on the merits of the issues raised by the assessee in the present appeal.

5.

It is evident from the aforesaid findings that the transfer- pricing issues giving rise to the impugned penalty were restored for fresh adjudication, without any expression of opinion on their merits. The adjustment on which the penalty under appeal was founded, therefore, did not remain a concluded determination and was required to be reconsidered in the remanded proceedings. The learned counsel has also placed before us that, in the second round, the Assessing Officer has passed a fresh assessment order and initiated fresh penalty proceedings.

6.

In these circumstances, the penalty order presently under appeal, having been founded upon the earlier transfer-pricing adjustment which was set aside for fresh adjudication, cannot

5 ITA No.6948/Mum/2025 Transoceanic Financial Engineering Pvt. Ltd., be sustained. We accordingly set aside and quash the impugned penalty order. We make it clear that we have expressed no opinion on the merits of the fresh assessment or on the validity of the fresh penalty proceedings stated to have been initiated by the Assessing Officer. Those proceedings shall be dealt with independently, in accordance with law and subject to the outcome of the fresh determination of the transfer-pricing issue.

7.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 1st October 2026.

Sd/- Sd/- (G.M. DOSS) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 01/10/2026 KARUNA, sr.ps

6 ITA No.6948/Mum/2025 Transoceanic Financial Engineering Pvt. Ltd., Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// BY ORDER,

(Asstt. Registrar) ITAT, Mumbai

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