DCIT, CIRCLE - 8(1), KOLKATA, KOLKATA vs. M/S. EIH LTD., KOLKATA

The assessee in the present case is a Company, which is engaged in the business of running Hotels. The return of income for the year under consideration was filed by it on 28.09.2011 declaring total income of Rs. NIL. During the course of assessment proceedings, it was noticed by the Assessing Officer that the report under section 92E was not filed by the assessee-company within the due date of filing of income-tax return inspite of the fact that it had entered into international transactions with its Associated Enterprises during the year under consideration. He, therefore, required the assessee to file such report. After the initial delay, the assessee-company finally furnished the copy of Transfer Pricing Report in Form No. 3CEB as required under section 92E of the Act on 13.03.2014. The said report was stated to have been drawn up on 28.11.2011. On the basis of the information contained in the said report, the Assessing Officer held that the assessee had failed to report the international transactions with its Associated Enterprises and had also furnished incorrect information in the return of income with reference to the said transactions. He accordingly invoked the provisions of section 271AA and imposed a penalty of Rs.8,68,77,800/- being 2% of the value of international transactions of the assessee-company with its Associated Enterprises.

The penalty imposed by the Assessing Officer under section 271AA was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and after considering the submissions made on behalf of the assessee-company, the ld. CIT(Appeals) cancelled the penalty imposed by the Assessing Officer under section 271AA on the ground that the amendment made in section 271AA by the Finance Act, 2012 w.e.f. 1st July, 2012 was applicable from A.Y. 2012-13 and not to A.Y. 2011-12. Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal.

We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the penalty in this case was imposed by the Assessing Officer under section 271AA of the Act, the provisions of which as applicable to the year under consideration were as under:-

“271AA- Penalty for failure to keep and maintain information and document in respect of international transactions – Without prejudice to the provisions of section 271, if any person fails to keep and maintain any such information and document as required by sub-section (2) of section 92D, the Assessing Officer or Commissioner (Appeals) may direct that such person shall pay, by way of penalty, a sum equal to two per cent of the value of each international transaction entered into by such person”.

A perusal of the penalty order passed by the Assessing Officer in the present case shows that the penalty under section 271AA was imposed by the Assessing Officer in the case of the assessee for A.Y. 2011- 12 for the failure of the assessee to report the international transactions and also to furnish incorrect information in the return of income with reference to such international transactions. The said defaults allegedly committed by the assessee for the year under consideration, i.e. A.Y. 2011-12, however, were not covered by the provisions of section 271AA as applicable to the said year and the same were covered only by the provisions of section 271AA as amended by the Finance Act, 2012 w.e.f. 01.07.2012. Since the said provisions as amended by the Finance Act, 2012 w.e.f. 01.07.2012 were not retrospective in nature and were applicable from A.Y. 2012-13, we find ourselves in agreement with the ld. CIT(Appeals) that the penalty imposed by the Assessing Officer by relying on the amended provisions of section 271AA was not sustainable. We accordingly uphold the impugned order of the ld. CIT(Appeals) cancelling the penalty imposed by the Assessing Officer under section 271AA and dismiss this appeal of the Revenue.

In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on November 22, 2018.