Transfer pricing penalty under section 271G falls away when the underlying adjustment is deleted and affirmed in appeal.

Penalty under section 271G could not stand once the related transfer pricing adjustment was deleted in quantum proceedings and that deletion was affirmed in further appeal. The Tribunal held that, with the primary adjustment removed, the penalty lost its independent foundation and could not survive on its own. The remaining jurisdictional and factual objections became academic after acceptance of the assessee's core contention, and the deletion of penalty was upheld in favour of the assessee.

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Issues: Whether penalty under section 271G of the Income-tax Act, 1961 could survive after the related quantum transfer pricing adjustment had been deleted.

Analysis: The penalty arose from the same transfer pricing adjustment that had been deleted in quantum proceedings and the deletion had been affirmed in further appeal. Once the basis of the penalty was removed, the Tribunal held that the penalty proceedings had no independent foundation to stand. In view of acceptance of the primary contention, the remaining grounds, including jurisdictional and factual objections, became academic.

Conclusion: The penalty under section 271G did not survive and the deletion of penalty was upheld, in favour of the assessee.

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