TaxTMI 
TaxTMI 
TaxTMI 
2012 (11) TMI 1348
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....Rs. 42,63,640/-. The report in Form No. 3CEB, as required under section 92E was filed separately in the tapal on 01.12.2003. During the course of assessment proceedings the assessee was called upon to explain as to why reference under section 92CA be not made due to its transaction with M/s. Poly Diam NV of Rs. 8,51,41,549/-. The assessee submitted that the transactions with M/s. Ploy Diam NV cannot be subjected to transfer pricing regulations since both the enterprises are not associated enterprises within the meaning of section 92A of the Act. It was explained that none of the partners of the assessee firm have any stake in M/s. Poly Diam NV and vice versa. M/s. Poly Diam NV was stated to be an entity registered in Belgium owned by S....
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....party". Applying the average method, the AO worked out the excessive payment made to M/s. Poly Diam NV and accordingly made addition of Rs. 89,83,540/- under section 40A(2)(b) on account rough purchases of diamonds from M/s. Poly Diam NV. From the computation of total income at the end of the assessment order, it can be seen that this addition has been made with the remarks "Addition on account of excess payment u/s. 40A(2)(b) of the I.T. Act as discussed in order". Thereafter penalty proceedings were initiated under section 271AA and a penalty of Rs. 17.81 lakhs was imposed. 3. When the appeal of the assessee came up before the learned CIT(A), it was argued on behalf of the assessee that there was no participation in the management or c....
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....der section 271AA. He, therefore, upheld the penalty. 4. We have considered the rival submissions and perused the relevant material on record. Penalty under section 271AA is leviable due to failure to keep and maintain documents in respect of international transactions. Maintenance of such information or documents, etc. is required as per section 92D. Section 92D, in turn, applies to persons who have entered into an international transaction. An international transaction has been defined under section 92B(1) as a transaction between two or more associated enterprises, either or both of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, etc.. Thus it is manifest that section 92D can apply ....
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....e, as obtaining before us, has been considered by way of an example in which one brother is in Belgium and owns a company and the other brother is in India and owns another company. A view has been expressed in this article that under section 92A(2)(j) the two companies will be AEs, but condition under section 92A(1) will not be fulfilled as none of the brothers or their companies participate in the capital, control or management of each other hence both the companies will not be AEs. 7. Here it is relevant to note that section 271AA is subject to section 273B. Section 273B, in turn, provides that notwithstanding anything contained in the provisions of the relevant sections including section 271AA, no penalty shall be imposed if one prov....
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....A) deleted the addition in the quantum proceedings. When the matter came up before the Tribunal, the matter has been restored to the file of the AO for considering the issue afresh as per the judgement of the Hon'ble Bombay High Court, as referred to in the order, within the provisions of section 40A(2)(b). Needless to say that the provisions of section 40A(2)(b) apply for computing excess amount of expenditure incurred in relation to the persons specified in clause (b) of section 40A(2), being the related persons/concerns. It is unlike section 92A under which only the international transactions between the associated enterprises, as defined under section 92A, can be considered under Chapter X of the Act. Thus the difference between the....