TRANSOCEANIC FINANCIAL ENGINEERING P. LTD,MUMBAI vs. ITO 13(3)(4), MUMBAI

Brief facts are, the assessee is a resident company and is engaged in the business of providing consultancy/advisory services on financial matters. For the assessment year under dispute, the assessee filed its return of income on 31st March 2013, declaring loss of ` 13,745. In course of assessment proceedings, the Assessing Officer observed that the assessee in the relevant previous year had entered into international transactions with its Associated Enterprises (AE) aggregating to ` 18,70,20,000. However, the assessee has not submitted the statutory audit report concerning such international transaction along with the return of income. Therefore, for the purpose of determining the alleged arm's length price of the international transaction, the Assessing Officer made a reference to the Transfer Pricing Officer. The Transfer Pricing Officer vide order dated 29th January 2015, proposed adjustment of ` 9,08,60,000. In the draft assessment order passed in pursuance to the order passed by the Transfer Pricing Officer, the Assessing Officer added back the transfer pricing adjustment proposed by Transfer Pricing Officer. Against the draft assessment order, the assessee raised objections before the Dispute Resolution Panel (DRP). When the matter stood thus, the Assessing Officer initiated proceedings for imposition of penalty under section 271AA and 271BA on the allegation that the assessee had 3 Transoceanic Financial Engineering Pvt. Ltd. failed to keep and maintain information and documents as required under section 92D of the Act and has further failed to furnish the report from an accountant as required under section 92E of the Act. Though, the assessee filed his submissions objecting to the penalty proceedings initiated under section 271AA and 271BA of the Act, however, the Assessing Officer rejecting the submissions/explanation of the assessee proceeded to pass orders imposing penalty of ` 18,17,200, under section 271AA and ` 1,00,000 under section 271BA of the Act. Though the assessee contested the levy of penalty under the aforesaid provisions by filing appeals before learned Commissioner (Appeals), however, it was unsuccessful.

The learned Authorised Representative submitted, the assessee from the very beginning has taken a stand before the Departmental Authorities that during the year under consideration, it has not entered into any international transaction with the AE. Therefore, the transfer pricing provisions would not be applicable. He submitted, while considering the issue in the quantum proceedings, the Tribunal vide order dated 28th January 2019, in ITA no.675/Mum./2016, has restored back the issue to the DRP for fresh adjudication. Thus, he submitted, in view of the decision of the Tribunal, the issues relating to imposition of penalty should also be restored back to the Assessing Officer.

The learned Departmental Representative, though, relied upon the observations of learned Commissioner (Appeals), however, he submitted that the issues raised in the present appeal can be restored back to the Assessing Officer.

We have considered rival submissions and perused the material on record. As could be seen from the facts on record, the genesis of imposition of penalty under section 271AA and 271BA of the Act is on an assumption by the Assessing Officer and the Transfer Pricing Officer that in the relevant previous year the assessee had entered into international transaction with its AE. Therefore, while proposing adjustment to the arm's length price of the international transaction, the Transfer Pricing Officer has observed that the assessee has not complied with the provisions of section 92D and 92E of the Act. On the basis of the aforesaid, the Assessing Officer has initiated proceedings for imposition of penalty under section 271AA and 271BA of the Act and has ultimately imposed penalty under the aforesaid provisions. However, it is seen from record, from the very beginning in course of proceedings before the Assessing Officer and the Transfer Pricing Officer, the assessee had taken a categorical stand that during the year under consideration it has not entered into any international transaction with the AE. Therefore, the transfer pricing provisions

In the result, appeals are allowed for statistical purposes. Order pronounced in the open court on 04.12.2020