Income-tax penalty deleted due to procedural violation, substantial compliance, and accepted arm's length price

The ITAT upheld the CIT(A)'s decision to delete the penalty under Section 271G of the Income-tax Act, 1961. It was found that the assessee had substantially complied by providing most of the required information within the deadline, and the failure to fully comply was due to a procedural violation rather than intentional non-compliance. The accepted arm's length price further supported the conclusion that the penalty was unwarranted, leading to the dismissal of the Revenue's appeal.

---

---

Issues:
- Penalty under Section 271G of Income-tax Act, 1961 for failure to comply with Transfer Pricing Officer's request for information within the prescribed time limit.

Analysis:
1. The appeal filed by the Revenue challenged the deletion of penalty under Section 271G of the Income-tax Act, 1961 by the Commissioner of Income Tax (Appeals) for the impugned assessment year. The assessee had failed to comply with the Transfer Pricing Officer's request for information regarding international transactions within the specified time frame.

2. The facts revealed that the Transfer Pricing Officer issued a letter on 25.11.2008 to the assessee, requiring the submission of information under Sections 92D and 92E of the Act by 24.12.2008. The TPO observed that the assessee did not fully comply with the request within the stipulated time. The Assessing Officer then imposed a penalty under Section 271G, which the assessee contested by claiming substantial compliance and lack of experience in transfer pricing regulations.

3. In the appeal before the CIT(A), the assessee argued that the TPO's letter was not issued under Section 92D(3) of the Act but under Section 92CA(3). The CIT(A) agreed with the assessee's contentions, noting that the TPO's order indicated that the letter was not a notice under Section 92D(3). Consequently, the penalty under Section 271G was deleted by the CIT(A).

4. During the appeal before the ITAT, the Revenue contended that the penalty was justified as the assessee had failed to furnish the required information within the specified period under Section 92D(3). However, the ITAT examined the facts and submissions, concluding that the letter from the TPO did not constitute a notice under Section 92D(3) and that the assessee had substantially complied by providing information on 12 out of 16 items by the deadline. Moreover, the accepted arm's length price indicated a procedural violation rather than intentional non-compliance, justifying the deletion of the penalty by the CIT(A).

5. The ITAT upheld the decision of the CIT(A) and dismissed the Revenue's appeal, emphasizing that there was no failure on the part of the assessee warranting a penalty under Section 271G of the Income-tax Act, 1961. The lack of specific evidence of non-compliance and the acceptance of the arm's length price supported the conclusion that the penalty was not justified in this case.

---