ITAT Affirms Decision, Deletes Penalty for Assessee in Diamond Industry Due to Substantial Compliance.

The ITAT dismissed the revenue's appeal, affirming the Ld. CIT(A)'s decision to delete the penalty under section 271G. The ITAT found that despite the complexities of the diamond industry, the assessee substantially complied by attempting to provide the requested data, and no Arm's Length Price adjustment was necessary.

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Issues: Transfer Pricing Adjustment, Penalty under section 271G

Transfer Pricing Adjustment:
The appeal was filed by the revenue against the order of the Learned Commissioner of Income-Tax (Appeals) regarding international transactions for the assessment year 2011-12. The assessee had entered into international transactions and benchmarked them using the TNMM Method. During the assessment proceedings, the Transfer Pricing Officer requested the assessee to provide separate profit level indicators in AE and Non-AE segments to demonstrate that the transactions were at Arm's Length Price. The assessee submitted segment-wise data on AE and Non-AE sales and worked out the OP/Sales Margins. Despite the complexities in the diamond industry, the Transfer Pricing Officer accepted the ALP without proposing any adjustment but proceeded to levy a penalty under section 271G for failure to furnish required information.

Penalty under section 271G:
In the absence of representation from the assessee, the case was heard with the assistance of the Ld. DR. The Ld. DR supported the order of the Transfer Pricing Officer in imposing the penalty. The ITAT observed that the assessee had not submitted segment-wise results of purchase and sales of polished and unpolished diamonds related to international transactions. However, the assessee had attempted to segregate the data as requested. The ITAT noted that the Transfer Pricing Officer did not discuss this submission but still imposed the penalty under section 271G. Referring to previous decisions, the ITAT found that penalties had been deleted in similar cases by other Coordinate Benches of the Tribunal. The ITAT agreed with the Ld. CIT(A) who had relied on precedent cases and deleted the penalty under section 271G, citing the nature of the diamond trade, substantial compliance by the assessee, and the absence of any Arm's Length Price adjustment as justifications. The ITAT dismissed the revenue's appeal, upholding the decision of the Ld. CIT(A).

In conclusion, the ITAT dismissed the revenue's appeal, affirming the deletion of the penalty under section 271G by the Ld. CIT(A) due to the reasons mentioned above.

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