TaxTMI 
TaxTMI 
2022 (12) TMI 1584
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....ite the fact that there is no failure on the part of assessee to keep and maintain information and documents as required under section 92D or in furnishing of incorrect information or documents. 4) On the facts and circumstances of the case, Ld. CIT(A) has erred, both on facts and in law, in confirming the penalty rejecting the contention of the assessee that the wrong mention of the method employed in the TP report was on account of an inadvertent error on the part of the assessee. 5) On the facts and circumstances of the case, Ld. CIT(A) has erred, both on facts and in law, in confirming the penalty ejecting the contention of the assessee that the notice issued by the A.O. initiating the penalty proceedings under section 271AA is bad in law in view of non-mentioning of the limb under which the penalty was initiated. 6) On the facts and circumstances of the case, Ld. CIT(A) has erred, both on facts and in law, in confirming the penalty despite the fact that the Ld. TPO has drawn no adverse inference and no adjustment on account of difference in Arm's Length Price (ALP) was proposed by him. 7) That the provisions for levying of penalty under sect....
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....pealed before the Ld. CIT(A). 5. The Ld. CIT(A) upheld the order of the penalty by observing as under:- "4.3.2. It is seen from the order of the AO that the Assessing Officer has clearly mentioned in his penalty order that the assessee could not give any cogent reason for wrong reporting of benchmarking transaction in TP report as "Net Margin/TNMM method". The submission of the assessee that it is a clerical mistake is not acceptable as accounts are audited by Sr. Chartered Accountant and TP report is also prepared by a qualified Chartered Accountant. It may also be noted here that as per provisions of section 92D read with rule 10D of I.T. Rules the assessee is required to maintain 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 specified domestic transaction and the comparable uncontrolled transactions, or between the enterprises entering into such transactions. However, the assessee has failed to do so. The assessee has reported two different ....
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.... report such transaction which he is required to do so; or (iii) maintains or furnished an incorrect information or document, the Assessing Officer or Commissioner (Appeals) may direct that such person shall pay, by way of penalty, a sum equal to two per cent of the value of each international transaction or specified domestic transaction] entered into by such person. 6[(2) If any person fails to furnish the information and the document as required under sub-section (4) of section 92D, the prescribed income-tax authority referred to in the said sub-section may direct that such person shall pay, by way of penalty, a sum of five hundred thousand rupee" It can be seen that there are three limbs under which this penalty may be levied. However, while issuing notice under Section 271AA of the Act, the Ld. AO has nowhere mentioned the specific charge levied by him against the assessee. The copy of notice is placed at PB Pg. 31. It is a settled law that no adverse inference against the assessee can be drawn without apprising him the specific charge. Reliance is placed on the following judgments:- 1. SSA's Emerald Meadows, C.C. No. 11485....
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....AB, section 271FB, section 271G, section 271GA, section 271GB, section 271H section 271-1, section 271J, clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub- section (1) of section 272AA or section 272B or sub-section (1) or sub-section (1A) of section 272BB or] sub-section (1) of section 272BBB or clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure." Section 271AA is covered under Section 273B where it has been provided that in case the assessee is able to prove the reasonable cause for failure, penalty should not be levied. In the present case, from the face of the facts only, it becomes too clear that the mistake occurred only out of a simple human error. In the background of the fact that the Ld. TPO has not proposed any adjustment and no loss to Revenue is occurring because of such failure, it is quite evitable that it was just an innocent error which should not result in such heavy penalty. N....