TaxTMI 
TaxTMI 
2026 (9) TMI 1982
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....e, proposing the following substantial question of law arising out of the order dated 23.06.2025 passed by the Income Tax Appellate Tribunal, "C" Bench, Ahmedabad (for short, "the Tribunal") in ITA No. 1872/AHD/2024 for A.Y. 2009-10: (I) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was justified in deleting the penalty u/s. 271(1)(c) of Rs. 2,76,33,870/- without considering the material contained in the order of Assessing Officer? 3. Brief facts of the case are as follows: 4. The assessee is engaged in the manufacturing and trading of needle roller bearing and engine components. The Respondent-assessee had filed its return of income declaring loss of Rs. (-)19,80,74,542/-. The case wa....
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....naccurate particulars. The assessee challenged the said order of penalty before the CIT (Appeals). 8. The CIT (Appeals) upheld the order passed by the Assessing Officer for levy of the penalty. 9. Being aggrieved by the order passed by the CIT (Appeals), the assessee preferred an appeal before the Tribunal. The Tribunal remanded the case back to the CIT (Appeals) with a direction to provide a proper opportunity of hearing to the assessee. The CIT (Appeals) therefore in second round passed an order dated 15.11.2016 directing the Assessing Officer to recompute the Arm's Length Price (ALP) and based on the same, the DCIT, Pune vide order dated 16.01.2017 revised the TP adjustment to Rs. 8,13,00,000/- for the manufacturing segment and....
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....depreciation, interest and tax to sales (PBDIT/Sales) primarily due to higher depreciation rates charged by the assessee and underutilization of the fixed assets compared to comparables. Assessee therefore submitted that the TPO disagreed with the approach adopted by the assessee and thereby the comparable set was changed by relying on the data from the preceding year and certain filters adopted by the assessee were rejected, particularly the ones relating to the manufacturing revenue percentage and turnover multiples. It was therefore submitted that there was no intention on part of the assessee to furnish inaccurate particulars and therefore under Explanation 7 to Section 271(1)(c) of the Act, penalty for the transfer pricing adjustment c....
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.... opinion on a debatable issue should not attract a penalty. 16. The Tribunal has also considered Explanation 7 to the provisions of Section 271(1)(c) of the Act, which reads as under: "Explanation 7 to section 271(1)(c), which specifically governs penalty in transfer pricing cases, was neither invoked during the initiation nor discussed while levying the penalty. In the case of Chegg India (P) Ltd vs. ACIT (2021) 126 taxmann.com 272 (ITAT Delhi) and ITO vs. Carraro Technologies India (P) Ltd (2019) 102 taxmann.com 541 (ITAT Pune), it has been held that non-invocation of Explanation 7 makes the penalty unsustainable in transfer pricing matters. In the case of Principal Commissioner of Income Tax-2 vs. Sinosteel India (P.) Ltd. [2....
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....respondent-assessee had been able to discharge the onus placed upon them in terms of Explanation 7 to section 271(1)(c) of the Act and show that their stand and stance in not taking into consideration the internal transaction was in good faith and they had acted with due diligence. These findings of the Tribunal in the present case are factual and clearly plausible and reasonable." 18. The Tribunal ultimately deleted the penalty by observing as under: "8. In the instant case, the assessee had used a prescribed method (TNMM) under section 92C of the Act and disclosed the selection of filters, comparables, and operating margin computation in the transfer pricing study report. Neither the TPO nor CIT(A) ever held that the ALP was c....