ASST. CIT CIRCLE-9 (3)(1), MUMBAI vs. M/S FINE JEWELLERY MANUFACTURING LTD., MUMBAI

Aforesaid appeal by Revenue for Assessment Year (AY) 2012-13 arises out of the order of Ld. Commissioner of Income Tax (Appeals)-56 Mumbai [CIT(A)] dated 23/07/2019 which has deleted penalty of Rs.111.82 Lacs as levied by learned Assessing Officer (AO) u/s. 271G vide order dated 29/07/2016.

The Ld. Sr. DR, drawing attention to the factual matrix, justified the penalty levied by Ld. AO whereas the Ld. AR submitted that keeping in view the nature of business, the details as sought by lower authorities could not be furnished and therefore, the penalty has rightly been deleted in the impugned order. The Ld. AR relied on various favorable decision of Tribunal rendered on similar facts and circumstances, the copies of which have been placed on record. 3. We have carefully heard the rival submissions and deliberated upon the case laws placed before us. Our adjudication to the subject matter of appeal would be as given in succeeding paragraphs. 4. Facts leading to imposition of penalty are that assessee being resident corporate assessee is stated to be engaged in manufacturing and marketing of cut and polished diamonds / jewellery. Since the assessee carried out certain international transactions of sale and purchase with its Associated Enterprises (AE) during the year, the same were referred to Ld. Transfer Pricing Officer-2(1)(2), Mumbai (TPO) for determination of Arm’s Length Price (ALP). The assessee had benchmarked the transactions using entity level TNMM method and claimed the transactions to be at Arm’s Length. However, Ld. TPO sought segmental profitability of AE and non-AE segment. The assessee submitted that it was not practical to identify and bifurcate the stock, cost and revenue under two segments. Though Ld. TPO accepted the transactions to be at Arm’s Length but he initiated penalty u/s 271G for aforesaid failure on the part of the assessee. Finally, the assessee was saddled with impugned penalty u/s 271G vide order dated 29/07/2016. 5. The Ld. CIT(A), relying upon the order of Tribunal in for AY 2011-12 in the case of Interjewel Pvt. Ltd., deleted the penalty. Aggrieved, the revenue is in further appeal before us.