Transfer pricing documentation penalty cannot stand without proof of a concrete failure to maintain prescribed records.

Penalty under section 271AA was held unsustainable where the assessee had maintained and produced transfer pricing documentation, including functional and economic analysis, and the TPO drew no adverse inference from it. The assessment order did not identify any specific information or document required under section 92D read with Rule 10D that was missing. Prior Revenue rulings were treated as factually distinguishable because the present year did not rest on the same disallowance basis. The deletion of penalty was upheld because the Revenue failed to establish a concrete statutory default.

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Issues: Whether penalty under section 271AA of the Income-tax Act, 1961 was leviable for alleged failure to keep and maintain information and documents required under section 92D of the Income-tax Act, 1961 read with Rule 10D of the Income-tax Rules, 1962.

Analysis: The assessee had maintained and produced transfer pricing documentation, including the functional and economic analysis, and the TPO recorded that no adverse inference was drawn from the documentation furnished. The assessment order did not identify any specific document or information that was required under section 92D(1) or 92D(2) and was not maintained. The earlier orders relied upon by the Revenue were found distinguishable on facts, as the present year did not involve the same basis of disallowance.

Conclusion: The penalty was not sustainable and was rightly deleted.

Final Conclusion: The Revenue failed to establish a statutory default warranting penalty, and the deletion of penalty was upheld, resulting in dismissal of the appeal.

Ratio Decidendi: Penalty under section 271AA cannot be sustained unless the Revenue shows a concrete failure to maintain the prescribed transfer pricing documents or information required by section 92D and Rule 10D.

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