TaxTMI 
TaxTMI 
2021 (5) TMI 747
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....d to its overseas group entity. The assessee made detailed submissions from time to time before the TPO as and when called upon and TPO proposed no adjustment to the Arm Length Price of international transactions entered into by the assessee with its overseas entity, however, initiated penalty proceedings under section 271G for failure of the assessee to furnish the required documentations. The TPO held that assessee has prevented the Revenue from making any determination of Arm Length Price by not furnishing the required documents and thus the assessee has failed to maintain and furnish the basic information pertaining to AE and non AE transactions and consequently the TPO was prevented from any determination of Arm Length Price. For the want of information/details no adjustment was made to the international transaction by observing that from the material available on record it can not be concluded whether international transactions are at Arm Length Price or not. The TPO required the assessee to file the audited segmental of AE and non AE vide questionnaire issued under section 92CE(3) read with section 92D(3) dated 19.11.2015 which was replied by the assessee by furnishing th....
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.... Conclusion: a. Non furnishing of AE & Non-AE audited segmental accounts; It is seen from appellant's submission that appellant has claimed that it has not entered into any sales transaction with any of its AEs and the international transaction with AEs were only in respect of import/purchase of rough diamonds only. Appellant further submitted that segmental profit and loss account was prepared and submitted only in respect of sale of imported rough diamonds of Rs. 169418305/-. The operating margin is calculated based on the sales made to non-AEs in respect for purchase of rough diamonds of Rs. 15.4 Crores from AEs and that there is in fact no sales to AEs in order to prepare a segmental account. The appellant has submitted only calculation of operating profit margin on sale of rough diamonds of Rs. 16,94,18,305/-. The bench marking for ALP was required to be done for the entire transaction with the A.E i.e. 62.81 crore, but in this case appellant has taken only Rs. 15.47 crores in the calculation of OPM. Further assessee has not considered reduction in variation of closing stock of Rs. 74,80,387/- The TPO has correctly concluded tha....
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.... it is clear that appellant has failed to furnish information called for under Rule 10D(1) by not providing complete segmental accounts with regard to purchase made from AEs and non AEs segments and sales made to AEs and non-AEs segments. Similarly appellant has also failed to furnish the supporting authentic documentation required under Rule 10D(3). Thus the appellant has clearly violated documentation requirements under Rule10D(1) and Rule 10D(3). Based on above discussion and analysis, the penalty imposed by the TPO for u/s 271 G of the Act for violation of Rule 10D(1) and 10D(3) thereof, ie 2 % of the value of the International Transactions comes out to ( 2% on Rs. 62,81,31,651/-) Rs. 1,25,62,633/- is hereby confirmed and the grounds of appeal on these issues are dismissed .Thus Appeal for the AY 2012-13 is Dismissed. 5. Thus appeal filed by the appellant is Dismissed u/s.250 r.w.s 251 of the Income Tax Act 1961." 5. The Ld. A.R. vehemently submitted before the Bench that assessee has maintained proper records as prescribed under section 92D of the Act. The Ld. A.R. submitted that segmental reporting is not possible when there is no sales to AEs and therefo....
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.....) Ltd [2019] 106 taxmann.com 243 (Mumbai - Trib.) 6. The Ld. A.R. submitted that in view of the ratio laid down in the above decisions, the penalty levied under section 271G of the Act may kindly be deleted. The Ld. A.R. also without prejudice submitted that there was reasonable cause for not maintaining the segment wise information in respect of AE and non AEs. The Ld. A.R. submitted that there was a practical difficulty in furnishing the profit and loss account of AE segment and non AE segment and therefore the same could not be furnished. The Ld. A.R. submitted that there is a practical difficulty in furnishing the segmental with AE and non AE in the diamond industry and therefore same constitute a reasonable cause and penalty as levied by the AO and confirmed by Ld. CIT(A) may kindly be deleted. In defence of his arguments, the Ld. A.R. relied on the following decisions: 1. D. Navinchandra Exports (P.) Ltd. (Supra). 2. Dilipkumar V. Lakhi [IT Appeal No. 2142 (M) of 2017, dated 2-8-2018] page 549-556 3. Dy. CIT v. Firestone International (P.) Ltd. [IT Appeal No. 5304 (Mum.) of 2016, dated 1-12-2018] 4. Dy. CIT v. Interjewel (P.) Ltd. [IT A....
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....Length Price, the imposition of penalty under section 271G of the Act for non furnishing of segmental audited statement of AE and non AE was wrong and against the provisions of law. We find merit in the argument of the assessee as the TPO could have gone for its own determination of ALP of the international transactions by following one of the methods prescribed under the Act, however, the TPO has not done so. Therefore, we find merit in the contentions of the assessee that once the TPO has accepted the bench marking of the assessee to be at Arm Length, the penalty under section 271G of the Act can not be levied. The case of the assessee finds support from the decision of the co-ordinate Bench of the Tribunal in the case of CIT v. Decent Dia Jewels (P.) Ltd. (supra) wherein the Tribunal has held that where the TPO having accepted the bench marking of the assessee under TNMM, the imposition of penalty under section 271G of the Act was to be deleted under similar facts. The operative part is extracted as under: "7. We have considered rival submissions in the light of the decisions relied upon and perused the material on record. The material on record makes it clear tha....
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.... of the orders passed by the Departmental Authorities as well as the material placed on record, it is noticed that the assessee has maintained books of account and other information to benchmark the international transaction with AE by applying TNMM and the transfer pricing study report containing such benchmarking was furnished before the Transfer Pricing Officer along with various other details. However, the Transfer Pricing Officer was of the view that the international transaction with AE should be benchmarked by applying CUP method and called upon the assessee to furnish segment-wise details of AE and non- AE sales, ft is observed, before the Transfer Pricing Officer the assessee has made submissions explaining why it is not possible for a person engaged in manufacturing and sale of diamond and diamond jewellery to maintain segment-wise details of sales made to the AE and non-AEs for the purpose of applying CUP method. It was explained by the assessee that CUP method could not be applied as invoice of sale of AE and non-AE include different types of goods sold at different price. U is further observed, in the preceding years also, the assessee had benchmarked international tra....