Bona fide failure to furnish accountant's report did not justify penalty where the report was filed during assessment.

Penalty under section 271BA was held unsustainable where the assessee acted under a bona fide belief that its India-sourced royalty income had already suffered tax deduction at source, filed the return in response to notice under section 148, and furnished the accountant's report under section 92E during assessment proceedings. As the assessment was completed at the returned income under section 143(3) read with section 147 and no transfer pricing adjustment was made, the non-furnishing of the report at the initial stage was not treated as a fit case for penalty. The penalty was directed to be deleted.

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Issues: Whether penalty under section 271BA of the Income-tax Act, 1961 was leviable for failure to furnish the accountant's report under section 92E, in the facts where the assessee acted under a bona fide belief, later filed the return in response to notice under section 148, and furnished the report during assessment proceedings.

Analysis: The assessee, a foreign company resident in the USA, did not initially file a return under the belief that its India-sourced royalty income had already suffered tax deduction at source. The return was thereafter filed pursuant to notice under section 148. The assessment was completed under section 143(3) read with section 147 at the returned income, and no transfer pricing adjustment was made. The accountant's report under section 92E was furnished during the scrutiny proceedings. On these facts, the default was not found to be a fit case warranting penalty.

Conclusion: Penalty under section 271BA was not sustainable and was directed to be deleted.

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