DY CIT - 6(2)(2), MUMBAI vs. M/S. DOSHION WATER SOLUTION P. LTD., MUMBAI

Briefly stated the assessee company is a private limited company engaged in the business of manufacturing of water treatment plant and ion exchange resins and also into manufacturing of water treatment components/spares. The assessee company filed its return of income for the impugned year dated 30.10.2014 declaring total loss at Rs.3,19,82,532/-. The assessment order under section 143(3) of the Act, was passed dated 30.12.2017 determining the total income of Rs.84,53,16,335/-. The assessee’s case was referred to the TPO u/s 92CA (1) for determination of arms length price (ALP) pertaining to the transactions reported by the assessee in Form No. 3CEB. The TPO made an adjustment of Rs.62,58,64,000/- on the transactions with AE by related parties vide order 13.10.2017 passed u/s 92CA (3) of the Act. Penalty proceedings u/s 271G of the Act was also initiated for failure to furnish the required documents relating to the assessee’s transactions with AE as per Rule 10D of the Income Tax Rules 1962 read with section 92D of the Act. The Authorized Officer (AO) penalty of Rs.6,73,63,930/- which is calculated as 2% of the value of international transactions and specific domestic transactions amounting to Rs.336,81,96,490/- vide order dated 27.04.2018 on the ground of failure to furnish information or documents required u/s 92D(3).

The assessee was in appeal before the learned CIT(A) as against the order of the AO levying penalty u/s 271G of the Act. The learned CIT(A) deleted the said penalty levied by the AO on the M/s. Dashion Water Solution Pvt. Ltd. ground that there was no failure on the part of the assessee company in complying with the provisions of section 92D as the assessee has furnished the required information and documents that were maintained by the assessee pertaining to its international transaction and specified domestic transactions as per Rule 10D. The learned CIT(A) has also held that the assessee has provided the TP study report which was asked for by the TPO for determination of ALP. The learned CIT(A) has placed reliance on the decision of the Hon’ble Delhi High Court in the case of CIT Vs. Bumi Hiway (I) (P) Ltd. 2014 (51taxmann.com572) (Delhi) and CIT Vs. Leroy Somer & Controls (India) Pvt. Ltd. (2013) (37taxmann.com407) (Delhi) and had deleted the impugned penalty levied by the AO on the ground that the assessee has furnished all the required details and that the AO has failed to mention in the penalty order as to what document or information was required from the assessee to be furnished within 30 days or within the extended period.

The Revenue is in appeal before us as against the order of the learned CIT(A) in deleting the penalty order levied u/s 271G. During the appellate proceedings there was no representation for the assessee and we proceeded to hear the learned Departmental Representative (DR). The learned DR contended that, the assessee has failed to furnish the relevant documents within the stipulated time and that the assessee has been a habitual defaulter wherein, penalty has been levied on the same ground for AY 2013-14. The learned DR relied on the order of the AO.

Having heard the learned DR and perused the materials on record, it is evident that the impugned penalty was levied on the ground that the assessee has failed to furnish the required details called for by the learned TPO vide notice dated 19.09.2017 and 13.10.2017. It is observed that the TPO had issued the first notice u/s 92CA (2) dated 16.11.2016 in response to which the assessee on 10.01.2017 furnished copy of report in Form No. 3CEB along with copies of work/purchase orders and certain other documents pertaining to the ALP. This has negated the contention of the TPO that the assessee has furnished details only at the fag end of the TP proceedings due to which the TPO was compelled to determine the ALP at entity level on the basis of best judgment and had made the impugned adjustment. It is also observed that the TPO has issued another notice dated 19.09.2017 u/s 92CA (2) calling for TP study report and other specific details as per annexure attached to the notice for which the assessee had sought adjournment on 07.10.2017 and furnished detailed submissions, subsequently, on 12.10.2017. On issue of final show-cause notice dated 19.09.2017 u/s 92CA (2) of the Act asking for as to why the impugned adjustment should not be made for which the assessee was asked to make its submissions on or before 24.10.2017, the assessee filed its preliminary reply dated 26.10.2017 and subsequent reply dated 27.10.2017 along with copy of TP study report and other information/documents as required by the TPO. It is observed from the above facts that the assessee has not defaulted in furnishing