2016 (12) TMI 1008 - AT - Income Tax

Appeal allowed for assessee on compliance with record maintenance; no penalty recommended by TPO

Cadbury Schweppes Overseas Ltd. C/o Cadbury House Versus Assistant Director of Income Tax, (International Taxation) -1 (2), Mumbai

The ITAT allowed the appeal of the assessee, emphasizing compliance with record maintenance requirements under section 92D and Rule 10D. The ITAT noted no ... Penalty under section 271AA - assessee failure to furnish the information or documents under section 92D - Held that:- We have seen the order of TPO u/s 92CA(3) dated 28/10/2011 which does not mention that there was any failure on the part of assessee to maintain documents as required under Rule 10D. Though, the order contain the reference that assessee failed to submit the document and Transfer Pricing Report. In part-5 of its report ld. TPO referred that “in view of the fact that these replica transactions of Cadbury India Ltd., where ALP is determined of these very transaction. As such the ALP determined by assessee is not being disturbed”. Further, we have seen that assessee filed Form 3CEB, Royalty Agreements entered into with AE and (copy of which are available at page no.19 to 53 of PB). These documents were furnished by assessee along with assessee’s letter dated 16.11.2011 which was duly acknowledged. The report is duly certified by C.A. that all the documents in respect of International Transaction have been maintained by assessee. Thus as assessee made the sufficient compliance for maintaining the record as required u/s 92D r.w. Rule 10D. We also find from the order of ld. TPO that there was no recommendation for initiating any penalty proceeding u/s 271AA of the Act nor any finding that assessee failed to maintain the record prescribed under Rule 8D. - Decided in favour of assessee Issues:Appeal against penalty under section 271AA of the Income Tax Act for Assessment Year 2008-09.Detailed Analysis:1. Issue: Appeal against penalty under section 271AA.- The appeal was directed by the assessee challenging the order of the CIT (A) confirming the penalty under section 271AA of the Act amounting to Rs. 48,70,467.- The AO initiated penalty proceedings as the assessee failed to furnish information under section 92D, despite the TPO accepting the Arm's Length Price (ALP) in respect of international transactions.2. Facts of the Case:- The assessee, a foreign company, provides services for manufacturing and selling FMCO products.- The AO initiated penalty proceedings under section 271AA after the TPO accepted the ALP but reported that the assessee failed to furnish information under section 92D.- The appeal was made before the ITAT against the order of the CIT (A) upholding the penalty.3. Arguments:- The assessee argued that there was no failure in maintaining the required records under Rule 10D and that the TPO accepted the ALP without any further additions.- The assessee contended that all necessary documents were submitted, and the TPO's order was made after considering the information provided.- The Revenue argued that the penalty was justified as the assessee failed to comply with Rule 10D requirements.4. Analysis and Precedents:- The ITAT noted that the TPO did not make any adjustments in the international transactions, indicating no failure on the part of the assessee.- Precedents were cited where sufficient compliance with maintaining records under Rule 10D was considered satisfactory, leading to the dismissal of penalties.- The ITAT observed that no penalty recommendation was made by the TPO, and the assessee had complied with the record maintenance requirements.5. Decision:- The ITAT allowed the appeal of the assessee, stating that the compliance with record maintenance under section 92D and Rule 10D was sufficient.- It was emphasized that there was no recommendation for penalty initiation by the TPO, and the appeal was allowed with no cost imposed.6. Conclusion:- The ITAT's decision favored the assessee, emphasizing the importance of compliance with record maintenance requirements under the Income Tax Act.- The appeal against the penalty under section 271AA for the Assessment Year 2008-09 was allowed by the ITAT.This detailed analysis highlights the key aspects of the legal judgment regarding the appeal against the penalty under section 271AA of the Income Tax Act.