DCIT, CHENNAI vs. DISHNET WIRELESS LTD., CHENNAI

आदेश /O R D E R

PER S. JAYARAMAN, ACCOUNTANT MEMBER:

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21.03.2006 and the details required by the TPO could not be furnished since those details were not furnished by the erstwhile

:-3-: I.T.A. N0. 1278/Mds/2016 management & (b) the information required by the TPO was not publicly available and the same was not also furnished to the company by the erstwhile management. After hearing the appellant, the AO passed penalty order u/s. 271G dated 30.06.2009 levying a penalty of Rs. 1,47,13,125/-. Aggrieved, the assessee filed an appeal before the CIT(A). The CIT (A) held that the default was not patent, hence the penalty u/s. 271G was sustainable in law and directed the AO to delete the penalty. Aggrieved against that order, the Revenue filed this appeal, inter alia, with the following grounds:

“2.1 The learned CIT(A) erred in deleting the penalty levied u/s. 271G of the IT Act to the tune of Rs. 1,47,13,125/- 2.2 The learned CIT(A) erred in deleting the penalty by stating that the assessee has reasonable cause to furnish the information/document u/s. 92D of the IT Act. 2.3 The learned CIT(A) erred in accepting the reason adduced by the appellant that there was change in the management of the assessee company due to which the assessee was incapacitated from furnishing the information required u/s. 92D of the IT Act. 2.4 The learned CIT(A) erred in not appreciating the fact that the information and documents in relation to the international transactions reported in Form 3CEB constitutes contemporaneous documentation which required to be kept and maintained by the assessee mandatorily. 2.5 The learned CIT(A) failed to appreciate that keeping and maintain the documentation u/s. 92D has got nothing to do with the change in the ownership/management of the assessee company.

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2.6 The learned CIT(A) failed to appreciate that the assessee entity continues to be in existence as a going concern irrespective of the change in the management of the company. Therefore the relief granted to the assessee is not in accordance with the provisions of law.”

:-5-: I.T.A. N0. 1278/Mds/2016 7, 2008 and July 3, 2008 had called for some documents/information to substantiate its claim before the TPO that SLB and DWML are not its Associated Enterprises (‘AEs’). In the absence of details/documents, the TPO wanted to conclude that the TP provisions are applicable. Thereupon, the TPO had discussions with the Authorised Representative of the assessee to determine the Arm’s Length Price (‘ALP’) of the international transaction and after discussions and consideration of documents furnished before her, she has concluded that the international transactions are at Arm’s Length. Though the information as per Rule 10D were furnished to the satisfaction of the TPO, She had considered them and concluded that the transactions are at Arm’s Length, still the TPO considered that the provisions of section 271G are applicable and initiated penalty proceedings. Although the assessee had pleaded before the Assessing Officer that there had been a change in the management of the Appellant Company due to which it did not have exhaustive documentation to support its contention etc, the AO disregarded them and levied penalty. In support, the AR invited our attention to its letter dated 16.05.2007 to Shri D. Rama Prasad, Group CFO, Siva Ventures Limited, on the subject of information for transfer price assessment for the assessment year 2005-06-Dishnet Wireless Limited, Chennai . Further, the AR relied on the order of :-6-: I.T.A. N0. 1278/Mds/2016 the CIT (A) and submitted that on proper appreciation of the facts and circumstances of its case and after considering the reasonable causes, the appellate authority allowed its appeal and then invited our attention to the relevant portions of the CIT(A) order.

“15. I have carefully considered the facts, order of the AO, submissions made by the appellant and material on record. As in evident from the above the proceedings u/s 271 G were initiated and penalty levied for failure to furnish information called for by the TPO. It necessitates the presence of the ingredients viz., (i) that the person ought to have entered into a international transaction with an AE which mandates reference to the TPO u/s 92CA (ii) that on being called for to produce information or document the same remain uncomplied with. The provisions of s.271 G are to be read along with s.273B which require penalty not to be imposed in case the appellant proves that he was precluded from complying with the requirements of production of documents or information called for by the TPO by reasonable cause.

:-7-: I.T.A. N0. 1278/Mds/2016 (iii) that the information called for by the TPO was not in public domain and the same were also not furnished by the erstwhile management. (iv) that SIVA Ltd., Bermuda (SLB) and Dishnet Wireless (Mauritus) Ltd (DWML) are not AEs of the appellant and hence the provisions of transfer pricing including the obligation of complying with the same would not apply. This fact was submitted by the appellant before the TPO vide its submission dt. 14.3.2007 that SLB and DWML were not associated enterprises in terms of provisions of s. 92A and hence transfer pricing provisions were not applicable to the appellant. (v) that the appellant had stated before the TPO that the management had changed after being taken over by the Maxis Group effective from 21.03.2006. (vi) that there was a finding by the TPO while finalizing the order u/s 92CA that " The case was discussed with the assessee's representative. After examining international transactions, no adjustment is considered necessary to the value of the international transactions entered into by the assessee. As the assessee failed to furnish the details called for vide this office notings dated 14.3.2007 and 7.5.2008 and letter dated 3.7.2008, the provisions of section 271G is attracted for each failure of the assessee." (extracted by the appellant from the order of TPO and made part of the submission. (vii) that the submissions made by the appellant dated 20.1.2009 before the AO needed to be considered.

the appellant was precluded from complying with the requirements with regard to information and documents requisitioned by the TPO by reasonable cause. Accordingly, I am of the considered view that the default was not patent and hence the penalty u/s 271 G was not sustainable in law. The AO is directed to delete the penalty. This ground of appeal is allowed.”

4.1 From the above it is clear, that the assessee has established that SIVA Ltd., Bermuda and Dishnet Wireless (Mauritius) Ltd are not its AEs and hence the provisions of transfer pricing including the obligation of complying with the same would not apply. Certain information called for by the TPO could not be furnished by the asseesee on account of change of ownership of the appellant company w.e.f. 21.3.2006 consequent to which there was a change in erstwhile management. The information called for by the TPO was not in public domain and the same were also not furnished by the erstwhile management. Thereafter, the TPO based on the elaborate details furnished by the assessee had finalized the order u/s 92CA without making any adjustment to the value of international transactions and accepted the declared transactions to be at arm’s length. When we consider the above facts and circumstances and the reasons given by the CIT(A) , as extracted supra, it is clear that the assessee has established reasonable causes for the impugned non-compliance and hence there is no ground for the levy of :-9-: I.T.A. N0. 1278/Mds/2016 penalty. The order passed by the CIT (A) does not require any interference and hence the Revenue’s grounds of appeal fail.

Order pronounced on Wednesday, the 6th day of September, 2017 at Chennai.