TaxTMI 
TaxTMI 
TaxTMI 
2018 (6) TMI 1098
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....course of assessment proceedings. Ld. TPO on taking up the transfer pricing analysis noted that assessee had not maintained documents required under Rule 10D of the Income Tax Rules, 1962 (in short ''the Rules'') and this was reported by him to the ld. Assessing Officer. Ld. Assessing Officer thereupon put the assessee on notice as to why penalty under Sections 271AA and 271G of the Act should not be levied for failure to keep and maintain information and documents as required under Sub Sections (1) and (2) of Section 92D of the Act and failure to furnish such information and documents as required under Sub Section (3) of very same Section. Reply of the assessee was that it had provided to the ld. TPO the following particulars:- a) Brief note on the international transactions entered into by M/s. India Pistons Limited during A.Y. 2004-05. b) Nature of relationship with the Associate Company. c) Brief description on the nature of business carried out by the Associate Company. d) Details of exports made to Associate Company invoice wife/part no. wise with relevant Invoice Copies for the AY 2004-05. e) Details of imports made from Associate Companies with relevant purcha....
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.... taken by the assessee were primarily on two grounds viz there was substantial compliance with the requirements of Rule 10D and even if there was any default it was venial in nature. As per the ld. Commissioner of Income Tax (Appeals) both of these arguments could not be accepted. In the opinion of ld. Commissioner of Income Tax (Appeals) compliance could be termed substantial only when it satisfied the critical requirements for justifying the Arms Length Price adopted by the assessee. He was of the opinion that assessee had not maintaining required data as laid out in Sub rules (1) & (2) of Rule 10D and failed to furnish such information within the time allowed under Sub rule (3) of the said rule. He confirmed the penalty under Sections 271AA and Section 271G of the Act. 5. Now before us, ld. Authorised Representative strongly assailing the penalty order submitted that assessee having followed cost plus method, it had considered only internal comparables. According to him, assessee had transactions similar to what were entered with its Associated Enterprise, during the relevant previous year, with unrelated parties in India. In other words, according to him, domestic transactions....
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....he prices at which assessee sold products to unrelated parties, which products were similar to what it had sold to its Associated Enterprise. Or in other words, the data with regard to comparability whether external or internal were not available on records nor made available by the assessee to ld. TPO. 8. Section 92D of the Act as it stood at the relevant point of time is reproduced hereunder:- (1) Every person who has entered into an international transaction or specified domestic transaction shall keep and maintain such information and document in respect thereof, as may be prescribed. (2) Without prejudice to the provisions contained in subsection (1), the Board may prescribe the period for which the information and document shall be kept and maintained under that sub-section. (3) The Assessing Officer or the Commissioner (Appeals) may, in the course of any proceeding under this Act, require any person who has entered into an international transaction or specified domestic transaction to furnish any information or document in respect thereof, as may be prescribed under sub-section (1), within a period of thirty days from the date of receipt of a notice issued in this r....
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....luding a record of the nature, terms and conditions relating to any uncontrolled transaction with third parties which may be of relevance to the pricing of the international transactions or specified domestic transactions, as the case may be; (h) a record of the analysis performed to evaluate comparability of uncontrolled transactions with the relevant international transaction ; (i) a description of the methods considered for determining the arm's length price in relation to each international transaction or specified domestic transaction or class of transaction, the method selected as the most appropriate method along with explanations as to why such method was so selected, and how such method was applied in each case ; (j) a record of the actual working carried out for determining the arm's length price, including details of the comparable data and financial information used in applying the most appropriate method, and adjustments, if any, which were made to account for differences between the international transaction or the specified domestic transaction and the comparable uncontrolled transactions, or between the enterprises entering into such transactions ; ....
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....e, and in the case of such significant change, fresh documentation as may be necessary under sub-rules (1), (2) and (2A) shall be maintained bringing out the impact of the change on the pricing of the international transaction or the specified domestic transaction. (5) The information and documents specified in sub-rules (1), (2) and (2A) shall be kept and maintained for a period of eight years from the end of the relevant assessment year. Sub clause (g) and (h) of rule 10D(1) require an assessee to keep a record of uncontrolled transaction which are relevant for analysing the pricing of its international transactions. Clause (3) of Rule 10D, require that information specified in relation to such uncontrolled transaction shall be authentic. Apart from this, assessee is required to keep a record of the analysis performed to evaluate comparability of uncontrolled transactions, with the international transactions with Associated Enterprises. Obviously, assessee here had not complied with the above requirements. Assessee also failed to furnish documents prescribed under Sub Section (1) of Section 92D within the period of thirty days from the date of receipt of notice issued in th....