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Facts
The Revenue filed two appeals against the orders of the CIT(A) deleting penalties under Section 271G and 271AA of the Income Tax Act, 1961, for Assessment Year 2014-15. The appeals stem from the deletion of quantum additions by the ITAT in the assessee's own case for the same assessment year.
Held
The Tribunal held that the penalty orders were not sustainable. The Assessing Officer failed to specify the exact nature of the default or the specific documents that were not furnished by the assessee. Furthermore, the quantum adjustment, which formed the basis for the penalty, had already been deleted by the ITAT.
Key Issues
Whether the penalty under Section 271G and 271AA is sustainable when the Assessing Officer fails to specify the default and the quantum addition has been deleted by the ITAT.
Sections Cited
250, 271G, 92D, Rule 10D, 92CA(3), 271AA, 92D(1), 271AA(1)
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Income Tax Appellate Tribunal, PUNE BENCHES “C” :: PUNE
Assessee by Shri Darpan Kirpalani – AR Revenue by Shri Vishal Makawane – Addl.CIT(DR)-Virtual Hearing. Date of hearing 15/05/2025 Date of pronouncement 27/05/2025 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: These two appeals filed by the Revenue are against the separate orders of ld.Commissioner of Income Tax(Appeals), Pune- 13 passed under section 250 of the Income Tax Act, 1961 for A.Y.2014-15both dated 19.12.2024. We treat appeal in as the lead case. The Revenue in ITA No.407/PUN/2025 has raised the following grounds of appeal :
ITA Nos.383 & 407/PUN/2025 [R] “1) Whether on the facts and circumstances of the case the Ld. CIT(A) was right in deleting the penalty of Rs. 90,45,852/- levied under section 271G of the Income Tax Act. 1961. despite the failure of the assessee to furnish complete and relevant information as required under section 92D read with Rule 10D. 2) Whether on the facts and circumstances of the case the Ld. CIT(A) was right in holding that the penalty under section 271G is not sustainable due to the lack of specific mention of missing documents without appreciating the fact that the TPO had clearly brought on record the specifics of the missing documents/information in her order under section 92CA(3) of the Act, more specifically in paragraphs 7.3,7.5.2, 10 and 18 of the said order. 3) Whether the learned CIT(A) erred in not appreciating that the assessee's failure to provide complete documentation as per Rule 10D hindered the proper determination of the arm's length price, justifying the imposition of penalty under section 271G. 4) Whether the learned CIT(A) failed to appreciate that partial compliance with the documentation requirement under section 92D does not absolve the assessee of its statutory obligation, and the penalty is justified for non-compliance. 5) Whether the learned CIT(A) erred in deleting the penalty solely on the ground that the ITAT deleted the quantum adjustment, ignoring the fact that penalty under Section 271G is independent and can be imposed even in the absence of an adjustment to the arm's length price. 6) The appellant craves leave to add, alter, amend and modify any of the above or all grounds raised at time of proceedings before the Hon'ble Tribunal which may please be granted.” Submission of ld.AR :
2. Ld.AR for the assessee submitted that Quantum Addition has been deleted by ITAT for A.Y.2014-15 in Assessee’s own case in dated 19.08.2019. Ld.AR filed copy of order giving effect to demonstrate that entire addition has been deleted by ITAT order. Ld.AR submitted that this fact is recorded in the order of ld.CIT(A).
ITA Nos.383 & 407/PUN/2025 [R] 2.1 Ld.AR filed written submission as under : “Documents submitted at the time of TP proceedings (mentioned in the TP Order): 1) Transfer pricing study (duly including all requisite information as mandated under Rule 10D of the Income Tax Rules, 1962). 2) Submission wrt application of Cost Plus Method. 3) Margin calculation of Elica India. 4) Financials of the Assessee. 5) CA Certificate of AE and Non- AE segmental data. 6) Sample invoices. 7) Model wise contribution sheet for FY 2013-14. 8) Various judicial precedents in support of the Assessees MAM selection. 9) Secondary submission by Assessee for selection of internal TNMM. The Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)] has granted full relief to the appellant in respect of the penalties imposed by the Assessing Officer (AO) under Sections 271G and 271AA of the Income-tax Act, 1961. This relief was accorded on the basis of the following two substantive grounds: 1) Lack of Specificity in the Penalty Order: The Ld. CIT(A) noted that the penalty order issued by the AO failed to specify the exact nature of the default allegedly committed by the appellant. Specifically, the AO did not identify which of the mandatory information or documents, as prescribed under Rule 10D of the Income- tax Rules, 1962, were either not maintained or not furnished by the assessee. In the absence of such specific. CIT Vs. M/s.Leroy Somer & Controls (I)ndia) Pvt. In Income Tax Appeal No.410/2012 dated 30.08.2013. K.C.Builders and ANR Vs. ACIT dated 28.01.2004. & 407/PUN/2025 [R] DCIT Vs. Priya Blue Industries Pvt. Ltd., in ITA Nos.317 to 324/Ahd/2024 dated 21.01.2025. ACIT Vs. Undercarriage and Tractor Parts in ITA No.839/PUN/2024 dated 07.01.2025.” Submission of ld.DR : 3. The ld.DR for the Revenue relied on the order of the Assessing Officer. We specifically asked ld.DR to explain the documents which have not been filed by the Assessee for which penalty has been imposed. However, ld.DR for the Revenue could not explain about the same. ITA No.407/PUN/2025 – 271G Findings & Analysis : 4. We have heard both the parties and perused the records. These two appeals are against penalty order. On perusal of the ld.CIT(A)’s order, it is noted that ITAT in ITA No.1697/PUN/2018 has decided the issue of Quantum Addition in favour of Assessee. Hence, ld.CIT(A) directed to delete the penalty. Relevant paragraph of ld.CIT(A)’s order is as under : “On the other hand, the Appellant has made a forceful and logical argument based on the ratio of several decisions of the superior judicial authorities quoted by it, wherein it has been held that- a. penalty cannot stand if the assessment (quantum) itself is set aside or deleted. b. penalty cannot be imposed in absence of the default of the assessee information called for by the AO/TPO. & 407/PUN/2025 [R] I find considerable force in the arguments of the Appellant especially where he points out no specific defect was pointed out by the AO/TPO in the documentation of the Assessee or a particular failure to furnish a specified information. I light of the above, I am not convinced with the arguments of the AO, and on the strength of the arguments put forth by the Appellant, I order that penalty u/s 271G be deleted. Accordingly, these grounds of appeal are allowed.” 4.1 In this case, we have perused the penalty order u/s.271G of the Act, dated 29.03.2019 for A.Y.2014-15. Nowhere in the penalty order, the Assessing Officer has specified the documents which have not been filed by the Assessee. The Assessing Officer has merely reproduced Rule 10D and Section 92D of the Act. However, ld.AR for the Assessee has submitted a list of documents which were filed before the Transfer Pricing Officer(TPO), this fact has not been rebutted by the ld.DR for the Revenue.
4.2 The Hon’ble Delhi High Court in the case of CIT Vs. M/s.Leroy Somer & Controls (India) Pvt., Vide order dated 30.08.2013 has held as under : “When there is general and substantive compliance of the provisions of Rule 10D, it is sufficient. The Legislature was conscious of this fact and, therefore, had specifically stipulated in Section 92D(3) that the Assessing Officer or Commissioner (Appeals) may require a person to furnish any information or document in respect thereof and on failure of the said person to furnish the documentation within the specified time. Penalty under Section 271G can be imposed. Thus, for imposing ITA Nos.383 & 407/PUN/2025 [R] penalty the Revenue must first mention the document and information, which was required to be furnished but was not furnished by the assessee within the specified time. The documentation of information should be one specified in Rule 10D, which has been formulated in terms of Section 92D(1) OF THE Act. Looking from any quarter and angle, the appeal of the Revenue is misconceived, totally lacking in merits and is, therefore, dismissed.”
4.3 It is also a fact that the entire adjustment proposed by Transfer Pricing Officer has been deleted after the ITAT Order dated 19.08.2019 as per the Order u/s.154, dated 02.08.2020 giving effect to the order of the ITAT.
4.4 Since the Assessing Officer failed to establish in the impugned penalty order that Assessee had failed to furnish documents required, we agree with ld.CIT(A) that penalty needs to be deleted. Accordingly, grounds of appeal raised by the Revenue are dismissed.
In the result, appeal of the Revenue is dismissed.
271AA of the I.T.Act: 6. We have studied the order u/s.271AA of the I.T.Act, dated 29.03.2019. On perusal of the order, it is noted that ld.Assessing Officer has not specified the documents which were required to be & 407/PUN/2025 [R] filed by assessee, but not filed.The relevant paragraph of the penalty order u/s.271AA of the Act, are reproduced here as under : “5. A combined reading of all the above provisions makes it clear that the assessee was required not only to keep and maintain such information and documents but also to furnish correct information before the AO/TPO in order to enable them to compute the Arm's Length Price of the international transactions with the AE On going through the order of the TPO u/s 92CA(3) of the IT Act, it is seen that the TPO had issued the notice and questionnaire on various dates asking the assessee to furnish the information and documents as detailed in para-7. The chronology of events as mentioned in para-7 of the order shows that the assessee has filed TP study report on 07.03.2017 and furnished partial details on 09.02.2017. 15.06.2017 and 03.10.2017, The assessee has not furnished all the information as asked for by the TPO. That was why the TPO has specifically mentioned in her order for initiation of penalty proceedings. Even, during the course of penalty proceedings, the assessee furnished only those information and documents which were already furnished before the TPO. Making part compliance of a statutory requirement cannot be construed as full compliance and penalty is still leviable for part non-compliance.
In the submission made by the assessee, it has been contended that the assessee had maintained the information / documents as per section 92D and had furnished all the data required with the TPO. In support of the claim, the assessee enclosed the letters through which the information was furnished before the TPO. I have gone through the compliance letters and information furnished before the TPO. In the order, the TPO has categorically stated that the assessee failed to comply with even a single condition of application of CPM as the most appropriate method, hence the TP Study report and the benchmarking analysis carried out by the assessee has been rejected. It goes to prove & 407/PUN/2025 [R] that the assessee has kept and maintained incorrect information and documents leading to an adjustment of Rs. 6,35,19,586/- to the ALP in respect of international transactions with its AE. The assessee has committed default under section 271AA(1) which is a violation of requirement of section 92D(1). Hence, as per the provisions of clause (i) & (iii) of sub-section (1) of section 271AA. the assessee is liable for penalty.
7 In the light of above discussion and considering the facts of the case and submission of the assessee, I am fully satisfied that this is a fit case for levy of penalty u/s 271AA of the Income Tax Act, 1961. 1, therefore, direct the assessee to pay by way of penalty a sum of Rs. 90,45,852/-/- (which is two percent of the value of the international transaction of Rs.45,22,92,578/-).
6.1 Thus, it can be observed that Assessing Officer has not specified the documents in the penalty order. The penalty order is vague.
We have perused the submission of the assessee and it is observed that the assessee had filed Transfer Pricing Study Report and other documents. It is also observed that the ITAT in Assessee’s case i.e.ITA No.1697/PUN/2018 vide order dated 19.08.2019 has decided the issue of Transfer Pricing Adjustments. The Assessing Officer passed an order u/s.154 of the Act, on 03.08.2020 to give effect to the order of the ITAT in ITA & 407/PUN/2025 [R] No.1697/PUN/2018, deleting the entire adjustment proposed by the Transfer Pricing Officer.
7.1 The Assessing Officer has failed to establish the specific defects of the Assessee. Therefore, we agree with ld.CIT(A) that penalty us/.271AA is not sustainable. Accordingly, grounds of appeal raised by the Revenue are dismissed.
In the result, appeal of the Revenue in is dismissed.