Transfer pricing documentation penalty fails where the pre-amendment authority lacked jurisdiction and no real prejudice was shown.

Penalty for non-compliance with transfer pricing document-production requirements must be imposed by the authority empowered on the date of the default; where the omission occurred before the 01.10.2014 amendment, the Transfer Pricing Officer had no jurisdiction to levy penalty under section 271G. The text also notes that subsequent furnishing of the documents, absence of prejudice to the Revenue, and lack of mala fides make the breach merely technical, so penalty is not justified on merits. The resulting position is that the penalty could not be sustained on either jurisdictional or substantive grounds.

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Issues: (i) Whether the Transfer Pricing Officer had jurisdiction to impose penalty under section 271G of the Income-tax Act, 1961 for non-compliance with document-production requirements before the amendment effective from 01.10.2014; (ii) Whether the penalty was sustainable on merits in view of the assessee's subsequent furnishing of documents and the absence of prejudice to the Revenue.

Issue (i): Whether the Transfer Pricing Officer had jurisdiction to impose penalty under section 271G of the Income-tax Act, 1961 for non-compliance with document-production requirements before the amendment effective from 01.10.2014.

Analysis: The applicable principle is that a penalty must be governed by the law in force on the date when the wrongful omission or commission occurs. The amendment expanding the power to levy penalty under section 271G took effect only from 01.10.2014. The default in furnishing the required transfer pricing documents had occurred earlier, when the power to levy such penalty vested only in the Assessing Officer and not in the Transfer Pricing Officer. The penalty proceedings initiated and concluded by the Transfer Pricing Officer for an earlier default were therefore contrary to the jurisdictional position then prevailing.

Conclusion: The penalty order was without jurisdiction and could not be sustained.

Issue (ii): Whether the penalty was sustainable on merits in view of the assessee's subsequent furnishing of documents and the absence of prejudice to the Revenue.

Analysis: The documents were ultimately furnished and formed the basis of the transfer pricing adjustment itself. No mala fides or deliberate contumacy were shown, and the breach was at best technical or venial. In such circumstances, penalty is not justified where the default causes no real prejudice and the conduct does not disclose any culpable intent.

Conclusion: The penalty was also unsustainable on merits.

Final Conclusion: The penalty under section 271G could not be upheld, and the assessee succeeded on both jurisdictional and substantive grounds.

Ratio Decidendi: Penalty for non-compliance with transfer pricing documentation requirements must be levied by the authority empowered on the date of the default, and a technical breach causing no prejudice does not warrant penalty.

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