TaxTMI 
2026 (11) TMI 338
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.... the de novo transfer pricing proceedings, as clearly recorded in the TP order and the penalty order. 2. The Ld. CIT(A) failed to appreciate that the valuation report relied upon by the assessee itself necessitated furnishing of foundational inputs, including assumptions, projections and management-provided information, which are mandatorily required to be maintained and furnished under Rule 10D, and non-furnishing thereof squarely attracted penalty under section 271G. 3. The Ld. CIT(A) erred in shifting the statutory burden of compliance from the assessee to the TPO by holding that the TPO could have exercised powers under section 133(6), overlooking that sections 92D and Rule 10D cast a primary obligation on the assessee to maintain and furnish prescribed documentation. 4. The Ld. CIT(A) erred in holding that no default occurred merely because certain documents were furnished in earlier proceedings, without appreciating that the first-round submissions were found insufficient, fresh notices under section 92D(3) were issued, and the penalty was levied specifically for failure to comply with such requisitions during the relevant proceedings." 2. Briefl....
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....quivalent to transaction value of purchase of securities. 5. During the transfer-pricing proceedings, the TPO asked the assessee to furnish documents and information underlying the assumptions and projections used by the valuer, particularly information obtained from the management of Girnar Software. The assessee furnished various documents but stated that the underlying information from Girnar was not available with it. The TPO rejected the explanation, treated the information underlying the valuation as essential documentation under Rule 10D(1)(f) and (k), and initiated penalty proceedings under section 271G of the Act. 6. Subsequently, the assessee raised objections before the ld DRP which were dismissed and following the directions of the ld DRP, the final assessment order dated 14.03.2023 was passed by the Assessing officer. 7. The assessee challenged the final assessment order before the Tribunal. In the interim, the matter relating to penalty was thereafter taken up by the TPO and the TPO, vide order dated 13.03.2023, levied a penalty of Rs. 2,02,94,740/- being 2% of the value of the international transaction of Rs. 101,47,36,976/-. The TPO held that the assessee h....
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....Hon'ble Delhi High Court vide judgment order dated 01/03/2021 in ITA No.1007 of 2019, which held that a start-up's DCF valuation cannot be discarded merely because projections did not match actual performance. The Coordinate Bench also gave weight to the fact that reputed investors such as Sequoia, Google Capital, etc. had invested at the same or higher prices, between Rs. 67,993/- and Rs. 88,350/- per share which it said, acts as an external CUP and itself establishes the arm's length price. It further held that tax authorities cannot replace projections with actuals, citing OECD Guidelines and the UN Transfer Pricing Manual against the inappropriate use of hindsight based valuation. Accordingly, the Coordinate Bench rejected the reasoning of the TPO and the NAV-based valuation as upheld by ld DRP, and deleted the entire adjustment of Rs. 98,02,84,080/-. 9. The matter relating to levy of penalty was thereafter decided by the ld CIT(A) and levy of penalty was deleted vide order dated 02/12/2025. The ld CIT(A) held that under Rule 10D, the documents required depend upon the nature of the international transaction and the information actually relevant for determining the ALP. The ....
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....hat the Ld. CIT(A) failed to appreciate that the valuation report relied upon by the assessee itself necessitated furnishing of foundational inputs, including assumptions, projections and management-provided information, which are mandatorily required to be maintained and furnished under Rule 10D, and non-furnishing thereof squarely attracted penalty under section 271G. It was submitted that the Ld. CIT(A) erred in shifting the statutory burden of compliance from the assessee to the TPO by holding that the TPO could have exercised powers under section 133(6), overlooking that sections 92D and Rule 10D cast a primary obligation on the assessee to maintain and furnish prescribed documentation. It was submitted that the ld. CIT(A) erred in holding that no default occurred merely because certain documents were furnished in earlier proceedings, without appreciating that the first-round submissions were found insufficient, fresh notices under section 92D(3) were issued, and the penalty was levied specifically for failure to comply with such requisitions during the relevant proceedings. 11. The Ld. AR supported the order and findings of the Ld. CIT(A) and submitted that the very founda....
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.... using material available within its possession. Furthermore, it was submitted that the Tribunal specifically observed in the quantum proceedings that the assessee could not be expected to justify third-party projections, and the Transfer Pricing Officer could have exercised powers under Section 133(6) to obtain any additional details directly from Girnar or the valuer. Finally, the ld. AR refutes the Revenue's claim that the CIT(A) erred by relying on compliance from the initial assessment round. The ld. AR submitted that it explicitly responded to and complied with fresh requisitions issued during the denovo proceedings via its submissions dated April 6, 2022. It was submitted that the CIT(A) rightly deleted the penalty after verifying the compliances on part of the assessee and concluding that all required documents within the assessee's possession had been furnished, rendering the Section 271G penalty legally unsustainable. 12. We have heard the rival contentions and perused the material available on record. The limited issue for our consideration is whether the assessee can be said to have failed to furnish document or information as required under section 92D(3) of the....
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.... assessee was undertaking certain internal restructuring where the securities were to be transferred from one AE to another AE and for that purposes, the assessee obtained the valuation report from Girnar for benchmarking its transactions and which was later furnished to the TPO. The assessee was only an investor which acquired the securities from its AE (and subsequently sold to its another AE), an existing investor which had acquired the shares initially and invested in Girnar. It is also not the case of the TPO that the assessee had itself made any assumptions or the projections have been undertaken by the assessee and commissioned the valuation which critically affected the ALP. In our view, therefore, the internal inputs provided by Girnar's management to the valuer cannot be brought strictly within the ambit of clauses (f) and (k) of Rule 10D(1). Further, the proviso to Rule 10D(2) itself requires the assessee to substantiate its computation on the basis of the material available with it, and as held in Cargill India (P.) Ltd. (supra), it is only the clauses of Rule 10D relevant to the nature of the transaction which are to be attracted and the authority is required to examin....
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....n 271G must be interpreted reasonably and where there is substantive compliance with Rule 10D, the same is sufficient to discharge the assessee's burden and cannot form the basis for levy of penalty u/s 271G which is discretionary in nature. 17. Besides, the Coordinate Bench in the assessee's own case in quantum proceedings has deleted the adjustment, upheld the DCF-based valuation done by an independent valuer, and thus, the very assumptions and methodology sought by the TPO related to a valuation approach which had already been accepted by the Coordinate Bench on merits, the basis for alleging non-furnishing of such information was substantially undermined. The Coordinate Bench has recorded that basis same report, other investors have also invested in Girnar at the same and higher price which also demonstrate that the DCF valuation report cannot be discarded. In a similar situation, the Coordinate Mumbai Benches in Essar Power Gujarat Ltd (supra) has upheld the deletion of a penalty under section 271G once the addition on which the penalty proceedings were founded stood deleted. 18. As regards the contention of the Ld. DR that the information was sought afresh in the de....