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The Tax Publishers Mahindra World City Developers Ltd. v. Asstt. CIT [Tax Case Appeal Nos. 245, 247 and 248 of 2019, dt. 22-4-2019] : 2019 TaxPub(DT) 3826 (Mad-HC) Penalty under section 271G when imposable *Facts:* Assessee was called to submit TP submissions which was done in bits and pieces. No untoward additions were made under TP and the transactions were found to be at arms length. Subsequently TPO levied penalty under section 271G at 2% of AE transactions for non-submission of TP report. The assessees plea was whatever submissions were asked they were complied with within the 30 day period and in the extended period of 60 days thus no penalty is warranted. Commissioner (Appeals) sustained the penalty. On further appeal: Held in favour of the assessee that no penalty was warranted under section 271G as the assessee has substantially in principle complied with the requirements for computation of ALP. There is no specific report prescribed under rule 10D. TPO has confirmed that submissions were made. Section 271G reads may and not shall thus penalty is not mechanical and compulsory. Specific finding is reqd to levy penalty under section 271G - CIT v. Bumi Hiway Pvt. Ltd. 51 Taxmann.com 572 (Del HC). On reading of Rule 10D we do not find any such nomenclature of information contained in that Rule. However, it is also a matter of common knowledge that combined information mentioned in Rule 10D is generally called "TP Study Report" which is prepared by assessee containing all the details. However assessee feigns ignorance about the same which cannot be brushed aside lightly so far as the issue of penalty is concerned. It is also undisputed that assessee has requested for seeking further time of 30 days for submission of details vide Letter, dated 20-12-2011. The notice under section 92CA was sent to the assessee on 25-10-2011 and assessee has submitted all the details by 30-12-2011. Assessee has also sought extension of time by further 30 days vide Letter, dated 20-12-2011. It is not case of learned assessing officer that assessee has not submitted the required information before that date. Merely because the assessee has not sought extension of time earlier the penalty under section 271G cannot be imposed upon the assessee. Before us the learned AR relied on the decision of Honble Delhi High Court in case CIT v. Jonson Mathey India Pvt. Ltd. 54 Taxmann.com 406, wherein an identical facts and circumstances the penalty under section 271G has been deleted. Similarly Honble Delhi High court in case of CIT v. Leroy Somer and Controls India pvt. Ltd. 37 Taxmann.com 407 has held that where there is general and substantive compliance of the provisions of Rule 10D it is sufficient. Identically in the case of the Assessee there is a substantial compliance. Honorable high court has further held that "Thus, indicating the documentation/information may be floating, transient and changeable. Constant assimilation may be required. Besides, data/information can also vary. The Tribunal has rightly concluded that with such a broad rule, which requires documentation and information voluminous and virtually unlimited, section 271G has to be interpreted reasonably and in a rational manner. Information or documentation, which is assessee specific or specific to the associated enterprises, should be readily available, whereas other documentation or information relates to data bases or transactions entered into by third parties may require collation/collection from time to time. There cannot be any end or limit to the documentation or information relating to data bases or third parties. When there is general and substantive compliance with the provisions of rules 10D, it is sufficient. The Legislature was conscious of this fact and, therefore, had specifically stipulated in section 92D(3) that the assessing officer or the Commissioner (Appeals) may require a person to furnish any information or document in respect thereof and on failure of the said person to furnish the documentation within the specified time, penalty under section 271G can be imposed. Thus, for imposing penalty the Revenue must first mention the document and information, which was required to be furnished but was not furnished by the assessee within the specified time. The documentation or information should be one specified in rule 10D, which has been formulated in terms of section 92D(1) of the Act."

The Tax Publishers

Mahindra World City Developers Ltd. v. Asstt. CIT [Tax Case Appeal Nos. 245, 247 and 248 of 2019, dt. 22-4-2019] : 2019 TaxPub(DT) 3826 (Mad-HC)

Penalty under section 271G when imposable

Facts:

Assessee was called to submit TP submissions which was done in bits and pieces. No untoward additions were made under TP and the transactions were found to be at arms length. Subsequently TPO levied penalty under section 271G at 2% of AE transactions for non-submission of TP report. The assessees plea was whatever submissions were asked they were complied with within the 30 day period and in the extended period of 60 days thus no penalty is warranted. Commissioner (Appeals) sustained the penalty. On further appeal:

Held in favour of the assessee that no penalty was warranted under section 271G as the assessee has substantially in principle complied with the requirements for computation of ALP.

There is no specific report prescribed under rule 10D. TPO has confirmed that submissions were made. Section 271G reads may and not shall thus penalty is not mechanical and compulsory. Specific finding is reqd to levy penalty under section 271G - CIT v. Bumi Hiway Pvt. Ltd. 51 Taxmann.com 572 (Del HC).

On reading of Rule 10D we do not find any such nomenclature of information contained in that Rule. However, it is also a matter of common knowledge that combined information mentioned in Rule 10D is generally called "TP Study Report" which is prepared by assessee containing all the details. However assessee feigns ignorance about the same which cannot be brushed aside lightly so far as the issue of penalty is concerned. It is also undisputed that assessee has requested for seeking further time of 30 days for submission of details vide Letter, dated 20-12-2011. The notice under section 92CA was sent to the assessee on 25-10-2011 and assessee has submitted all the details by 30-12-2011. Assessee has also sought extension of time by further 30 days vide Letter, dated 20-12-2011. It is not case of learned assessing officer that assessee has not submitted the required information before that date. Merely because the assessee has not sought extension of time earlier the penalty under section 271G cannot be imposed upon the assessee. Before us the learned AR relied on the decision of Honble Delhi High Court in case CIT v. Jonson Mathey India Pvt. Ltd. 54 Taxmann.com 406, wherein an identical facts and circumstances the penalty under section 271G has been deleted.

Similarly Honble Delhi High court in case of CIT v. Leroy Somer and Controls India pvt. Ltd. 37 Taxmann.com 407 has held that where there is general and substantive compliance of the provisions of Rule 10D it is sufficient. Identically in the case of the Assessee there is a substantial compliance. Honorable high court has further held that "Thus, indicating the documentation/information may be floating, transient and changeable. Constant assimilation may be required. Besides, data/information can also vary. The Tribunal has rightly concluded that with such a broad rule, which requires documentation and information voluminous and virtually unlimited, section 271G has to be interpreted reasonably and in a rational manner. Information or documentation, which is assessee specific or specific to the associated enterprises, should be readily available, whereas other documentation or information relates to data bases or transactions entered into by third parties may require collation/collection from time to time. There cannot be any end or limit to the documentation or information relating to data bases or third parties. When there is general and substantive compliance with the provisions of rules 10D, it is sufficient. The Legislature was conscious of this fact and, therefore, had specifically stipulated in section 92D(3) that the assessing officer or the Commissioner (Appeals) may require a person to furnish any information or document in respect thereof and on failure of the said person to furnish the documentation within the specified time, penalty under section 271G can be imposed. Thus, for imposing penalty the Revenue must first mention the document and information, which was required to be furnished but was not furnished by the assessee within the specified time. The documentation or information should be one specified in rule 10D, which has been formulated in terms of section 92D(1) of the Act."