India Pistons Ltd, Chennai V. ACIT, Corporate Circle-2(3), Chennai

ITA 2207/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5040 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 11-09-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANATH KUMAR RAHA
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Transfer pricing; International transaction; Reasonable cause
• Section: 273B; 92D; 92F; 92E; 115JB; 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , !' . #$#% , & '' ( [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./I.T.A. NOS.2207 & 2208/CHNY/2017 / ASSESSMENT YEARS : 2004-05 & 2004-05. M/S.INDIA PISTONS LTD, ARJAY APEX CENTRE, NO.24, COLLEGE ROAD, CHENNAI 600 026. [ PAN AAACI 1439E ] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(3) CHENNAI 600 034. ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : SHRI. R. VIJAYARAGHAVAN, ADV. /RESPONDENT BY : SHRI. SANATH KUMAR RAHA, JCIT /DATE OF HEARING : 13-06-2018 ! /DATE OF PRONOUNCEMENT : 18-06-2018 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THESE ARE APPEALS FILED BY THE ASSESSEE, WHICH ARE DIRECTED AGAINST AN ORDER DATED 23.06.2017 OF THE L D. COMMISSIONER OF INCOME TAX (APPEALS)-6, CHENNAI, CONFIRMING PENALT Y LEVIED UNDER ITA NOS.2207 & 2208/17 :- 2 -: SECTIONS 271AA AND 271G OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. FACTS APROPOS ARE THAT ASSESSEE; ENGAGED IN A BUSIN ESS OF MANUFACTURING PISTONS AND PISTON ASSEMBLIES HAD FI LED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 29.10.20 04 DECLARING INCOME OF G NIL UNDER NORMAL PROVISION AND G7,03,68 ,754/- UNDER SECTION 115JB OF THE ACT. SINCE ASSESSEE HAD INTERN ATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISE ABROAD, LD. ASSESSIN G OFFICER MADE A REFERENCE TO THE LD. TRANSFER PRICING OFFICER DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS. LD. TPO ON TAKING UP THE TR ANSFER PRICING ANALYSIS NOTED THAT ASSESSEE HAD NOT MAINTAINED DOC UMENTS REQUIRED UNDER RULE 10D OF THE INCOME TAX RULES, 1962 (IN SH ORT THE RULES) AND THIS WAS REPORTED BY HIM TO THE LD. ASSESSING O FFICER. LD. ASSESSING OFFICER THEREUPON PUT THE ASSESSEE ON NO TICE AS TO WHY PENALTY UNDER SECTIONS 271AA AND 271G OF THE ACT SH OULD NOT BE LEVIED FOR FAILURE TO KEEP AND MAINTAIN INFORMATIO N AND DOCUMENTS AS REQUIRED UNDER SUB SECTIONS (1) AND (2) OF SECTION 92D OF THE ACT AND FAILURE TO FURNISH SUCH INFORMATION AND DOCUMENTS AS REQUIRED UNDER SUB SECTION (3) OF VERY SAME SECTION. REPLY OF THE ASSESSEE WAS THAT IT HAD PROVIDED TO THE LD. TPO THE FOLLOWING PARTIC ULARS:- ITA NOS.2207 & 2208/17 :- 3 -: A) BRIEF NOTE ON THE INTERNATIONAL TRANSACTIONS ENTERE D INTO BY M/S. INDIA PISTONS LIMITED DURING A.Y. 2004-05. B) NATURE OF RELATIONSHIP WITH THE ASSOCIATE COMPANY. C) BRIEF DESCRIPTION ON THE NATURE OF BUSINESS CARRIED OUT BY THE ASSOCIATE COMPANY. D) DETAILS OF EXPORTS MADE TO ASSOCIATE COMPANY IN VOICE WIFE/PART NO. WISE WITH RELEVANT INVOICE COPIES FOR THE AY 2004-05. E) DETAILS OF IMPORTS MADE FROM ASSOCIATE COMPANIES WITH RELEVANT PURCHASE INVOICE COPY OF THE ASSOCIATE COM PANY WHICH, IN TURN, HAS PURCHASED FROM NON ASSOCIATE COMPANY, FOR THE A.Y. 2004-05. F) ) DETAILS OF ARM'S LENGTH PRICE PORT NO. WISE UNDER C OST PLUS METHOD WITH RELEVANT COST WORKINGS UNDER COST PLUS METHOD FOR ALL THE PART NOS., WHEREVER COMPARABLE P RICES ARE NOT AVAILABLE. G) DETAILS OF ARMS LENGTH PRICE PART NO. WISE UND ER COMPARABLE UNCONTROLLED PRICE METHOD WHEREVER COMPARABLE PRICES OF SIMILAR PRODUCTS WITH NON -ASS OCIATE COMPANIES ARE AVAILABLE WITH RELEVANT INVOICES- AS PER IT RULES 10D(G), AND (H) COMPARATIVE STATEMENT OF PRICES BETWEEN ASSOCIA TE AND NON ASSOCIATE COMPANIES FOR SIMILAR PART NOS. AS PER THE ASSESSEE, ALL DETAILS AND DOCUMENTS WHIC H WERE REQUIRED UNDER RULE 10(D), FOR SUPPORTING ITS TRANSFER PRICI NG STUDY WERE PROVIDED BY IT AND THEREFORE IT WAS NOT EXIGIBLE FOR ANY PENALTY UNDER SECTIONS 271AA OR 271G OF THE ACT. HOWEVER, LD. AS SESSING OFFICER ITA NOS.2207 & 2208/17 :- 4 -: WAS NOT IMPRESSED BY THE ABOVE REPLY. ACCORDING TO HIM, ASSESSEE HAD FAILED TO MAINTAIN DOCUMENTS AND INFORMATION WITH REFERENCE TO THE UNCONTROLLED TRANSACTIONS CONSIDERED FOR ARMS LENGTH PRICE ANALYSIS IN ITS TRANSFER PRICING STUDY. AS PER THE LD. ASSESSING OFFICER, ASSESSEE HAD VIOLATED REQUIREMENT OF RULE 10D OF T HE RULES, AND FAILED TO FURNISH THE INFORMATION AND RECORDS PROVI DED UNDER THE SAID RULE. PENALTY OF G1,84,808/- EACH WAS LEVIED U/S.2 71AA AND U/S.271G OF THE ACT. 3. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). ARGUMENT OF T HE ASSESSEE WAS THAT IT HAD MAINTAINED ALL REQUIRED DOCUMENTATI ON UNDER RULE 10D OF THE RULES AND FURNISHED SUCH DOCUMENTATIONS TO T HE LD. TPO. AS PER THE ASSESSEE, IT HAD FOLLOWED COST PLUS METHOD FOR ITS ARMS LENGTH PRICING STUDY AND IT WAS THEREFORE NOT NECESSARY TO MAINTAIN RECORDS RELATING TO TRANSACTIONS OF UNCONTROLLED COMPARABLE S. FURTHER, AS PER THE ASSESSEE, LD. TPO HAD FOLLOWED TRANSACTIONAL NE T MARGIN METHOD (HEREINAFTER REFERRED TO AS TNMM) FOR WHICH INF ORMATION WAS GATHERED THROUGH PROWESS DATABASE. ACCORDING TO TH E ASSESSEE, THERE WAS NO FAILURE OF THE NATURE ALLEGED BY THE LD. ASS ESSING OFFICER. RELIANCE WAS PLACED ON THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF DCIT VS. MAGICK WOODS EXPORTS PVT. LTD (2012) 53 S OT 293 . ITA NOS.2207 & 2208/17 :- 5 -: 4. HOWEVER, LD. COMMISSIONER OF INCOME TAX (APPEALS) W AS NOT IMPRESSED BY THE ABOVE ARGUMENTS. ACCORDING TO HIM , DEFENSE TAKEN BY THE ASSESSEE WERE PRIMARILY ON TWO GROUNDS VIZ T HERE WAS SUBSTANTIAL COMPLIANCE WITH THE REQUIREMENTS OF RU LE 10D AND EVEN IF THERE WAS ANY DEFAULT IT WAS VENIAL IN NATURE. AS PER THE LD. COMMISSIONER OF INCOME TAX (APPEALS) BOTH OF THESE ARGUMENTS COULD NOT BE ACCEPTED. IN THE OPINION OF LD. COMMISSIONER OF INCOME TAX (APPEALS) COMPLIANCE COULD BE TERMED SUBSTANTIAL O NLY WHEN IT SATISFIED THE CRITICAL REQUIREMENTS FOR JUSTIFYING THE ARMS LENGTH PRICE ADOPTED BY THE ASSESSEE. HE WAS OF THE OPINION THAT ASSESSEE HAD NOT MAINTAINING REQUIRED DATA AS LAID OUT IN SUB RULE S (1) & (2) OF RULE 10D AND FAILED TO FURNISH SUCH INFORMATION WITHIN T HE TIME ALLOWED UNDER SUB RULE (3) OF THE SAID RULE. HE CONFIRMED THE PENALTY UNDER SECTIONS 271AA AND SECTION 271G OF THE ACT. 5. NOW BEFORE US, LD. AUTHORISED REPRESENTATIVE STRONG LY ASSAILING THE PENALTY ORDER SUBMITTED THAT ASSESS EE HAVING FOLLOWED COST PLUS METHOD, IT HAD CONSIDERED ONLY INTERNAL COMPARABLES. ACCORDING TO HIM, ASSESSEE HAD TRANSACTIONS SIMILAR TO WHAT WERE ENTERED WITH ITS ASSOCIATED ENTERPRISE, DURING THE RELEVANT PREVIOUS YEAR, WITH UNRELATED PARTIES IN INDIA. IN OTHER WOR DS, ACCORDING TO HIM, DOMESTIC TRANSACTIONS WERE CONSIDERED BY THE ASSESS EE AS GOOD ITA NOS.2207 & 2208/17 :- 6 -: COMPARABLES FOR ITS COST PLUS ANALYSIS. CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT ALL LIMBS OF RULE 10D WERE NOT UNIVERSALLY APPLICABLE, AND COST PLUS METHOD DID NOT REQUIRE MA INTENANCE OF DOCUMENTS WITH REGARD TO EXTERNAL COMPARABLES. ACC ORDING TO HIM, SUBSTANTIAL COMPLIANCE WITH SUCH RULES WERE SUFFICI ENT. AS PER THE LD. AUTHORISED REPRESENTATIVE, LEVY OF PENALTY SECTION S 271AA AND 271G OF THE ACT WERE NOT WARRANTED. 6. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTED THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS). 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. CONTENTION OF TH E ASSESSEE IS THAT IT HAD FOLLOWED COST PLUS METHOD IN ITS TRANSFER PRICI NG STUDY AND THEREFORE IT WAS NOT REQUIRED TO MAINTAIN AND PRODU CE DATA REGARDING COMPARABLES. FORM 3CEB WHICH IS THE AUDIT REPORT PRESCRIBED UNDER SECTION 92E OF THE ACT FILED BY THE ASSESSEE SHOWS THE METHOD USED BY THE ASSESSEE FOR DETERMINING ARMS LENGTH PRICE AS UNDER:- COMPARABLE UNCONTROLLED PRICE METHOD. LARGELY SALE OF GOODS MADE TO ASSOCIATED ENTERPRISE HAVE BEEN AT HIGHER RATES WHEN COMPARED WITH SALE OF SI MILAR PRODUCTS TO THIRD PARTIES EXCEPT FOR THREE SUPPLIES WHERE THE ITA NOS.2207 & 2208/17 :- 7 -: COMPANY HAS ADOPTED LOWER RATES DUE TO THE REASONS STATED BELOW:- 1) SALES TO THIRD PARTIES ARE OCCASIONAL/ ONE TIME SU PPLY AND THE PRICE CHARGED INCLUDES ELEMENT OF RISK WHIC H IS NOT SO IN CASE OF SALE TO ASSOCIATES. 2) THE VARIATION IS ALSO ATTRIBUTABLE TO DIFFERENT CUR RENCY AND EXCHANGE RATE. IN THE ABSENCE OF COMPETITIVE INTERNATIONAL RATES, WE ARE UNABLE TO COMMENT. A READING OF THE ABOVE CLEARLY INDICATE THAT ASSE SSEE HAD ADOPTED CUP METHOD AND COMPARISON WAS ATTEMPTED WITH SALE O F SIMILAR PRODUCTS TO THIRD PARTIES. ASSOCIATED ENTERPRISES O F THE ASSESSEE, AS IT APPEAR AT PAGE 2 OF LD. TPO ORDER WERE M/S. FEDERA L MOGUL CORPORATION, M/S. FEDERAL MOGUL BURSUCHEID GMBH, M /S. T & N PISTON PRODUCT GROUP AND M/S. WALLACE CARTRIGHT & CO LTD. ANNEXURE A TO THE AUDIT REPORT IN FORM 3CEB GIVES THE DETAILS OF TR ANSACTIONS WITH M/S. FEDERAL MOGUL CORPORATION AND WALLACE CARTWRIGHT & COMPANY BOTH OF WHICH WERE ASSOCIATED ENTERPRISES OF THE ASSESSEE. NO DATA WHATSOEVER REGARDING THE INTERNAL COMPARABLES CONSI DERED BY THE ASSESSEE ARE AVAILABLE IN SUCH REPORT. THERE IS N OTHING ON RECORD TO SHOW THE PRICES AT WHICH ASSESSEE SOLD PRODUCTS TO UNRELATED PARTIES, WHICH PRODUCTS WERE SIMILAR TO WHAT IT HAD SOLD TO ITS ASSOCIATED ENTERPRISE. OR IN OTHER WORDS, THE DATA WITH REGAR D TO COMPARABILITY ITA NOS.2207 & 2208/17 :- 8 -: WHETHER EXTERNAL OR INTERNAL WERE NOT AVAILABLE O N RECORDS NOR MADE AVAILABLE BY THE ASSESSEE TO LD. TPO. 8. SECTION 92D OF THE ACT AS IT STOOD AT THE RELEVA NT POINT OF TIME IS REPRODUCED HEREUNDER:- 1) EVERY PERSON WHO HAS ENTERED INTO AN INTERNATION AL TRANSACTION OR SPECIFIED DOMESTIC TRANSACTION SHALL KEEP AND MAINTAIN SUCH INFORMATION AND DOCUMENT IN RESPECT T HEREOF, AS MAY BE PRESCRIBED. (2) WITHOUT PREJUDICE TO THE PROVISIONS CONTAINED IN SUB- SECTION (1), THE BOARD MAY PRESCRIBE THE PERIOD FOR WHICH THE INFORMATION AND DOCUMENT SHALL BE KEPT AND MAIN TAINED UNDER THAT SUB-SECTION. (3) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) MAY, IN THE COURSE OF ANY PROCEEDING UNDER THIS ACT , REQUIRE ANY PERSON WHO HAS ENTERED INTO AN INTERNATIONAL TR ANSACTION OR SPECIFIED DOMESTIC TRANSACTION TO FURNISH ANY IN FORMATION OR DOCUMENT IN RESPECT THEREOF, AS MAY BE PRESCRIBE D UNDER SUB-SECTION (1), WITHIN A PERIOD OF THIRTY DAYS FRO M THE DATE OF RECEIPT OF A NOTICE ISSUED IN THIS REGARD : PROVIDED THAT THE ASSESSING OFFICER OR THE COMMISSI ONER (APPEALS) MAY, ON AN APPLICATION MADE BY SUCH PERSO N, EXTEND THE PERIOD OF THIRTY DAYS BY A FURTHER PERIO D NOT EXCEEDING THIRTY DAYS. REQUIREMENT OF SUB SECTION (1) IS THAT AN ASSESSEE WHO HAS ENTERED INTO INTERNATIONAL TRANSACTION NECESSARILY HAS TO KEEP AND MAINTAIN INFORMATION AND DOCUMENTS PRESCRIBED IN RULE 10D. RULE 10D IS REPRODUCED HEREUNDER:- (1) EVERY PERSON WHO HAS ENTERED INTO AN THE INTERN ATIONAL TRANSACTION OR THE SPECIFIED DOMESTIC TRANSACTION SHALL KEEP AND M AINTAIN THE FOLLOWING INFORMATION AND DOCUMENTS, NAMELY :- ITA NOS.2207 & 2208/17 :- 9 -: (A) A DESCRIPTION OF THE OWNERSHIP STRUCTURE OF THE ASSESSEE ENTERPRISE WITH DETAILS OF SHARES OR OTHER OWNERSHIP INTEREST HELD THEREIN BY OTHER ENTERPRISES ; (B) A PROFILE OF THE MULTINATIONAL GROUP OF WHICH T HE ASSESSEE ENTERPRISE IS A PART ALONG WITH THE NAME, ADDRESS, LEGAL STATU S AND COUNTRY OF TAX RESIDENCE OF EACH OF THE ENTERPRISES COMPRISED IN T HE GROUP WITH WHOM INTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TR ANSACTIONS, AS THE CASE MAY BE HAVE BEEN ENTERED INTO BY THE ASSESSEE, AND OWNERSHIP LINKAGES AMONG THEM ; (C) A BROAD DESCRIPTION OF THE BUSINESS OF THE ASSE SSEE AND THE INDUSTRY IN WHICH THE ASSESSEE OPERATES, AND OF THE BUSINESS OF THE ASSOCIATED ENTERPRISES WITH WHOM THE ASSESSEE HAS TRANSACTED ; (D) THE NATURE AND TERMS (INCLUDING PRICES) OF INTE RNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TRANSACTIONS ENTERED INTO WIT H EACH ASSOCIATED ENTERPRISE, DETAILS OF PROPERTY TRANSFERRED OR SERV ICES PROVIDED AND THE QUANTUM AND THE VALUE OF EACH SUCH TRANSACTION OR C LASS OF SUCH TRANSACTION ; (E) A DESCRIPTION OF THE FUNCTIONS PERFORMED, RISKS ASSUMED AND ASSETS EMPLOYED OR TO BE EMPLOYED BY THE ASSESSEE AND BY T HE ASSOCIATED ENTERPRISES INVOLVED IN THE INTERNATIONAL TRANSACTI ON OR THE SPECIFIED DOMESTIC TRANSACTION ; (F) A RECORD OF THE ECONOMIC AND MARKET ANALYSES, F ORECASTS, BUDGETS OR ANY OTHER FINANCIAL ESTIMATES PREPARED BY THE ASSES SEE FOR THE BUSINESS AS A WHOLE AND FOR EACH DIVISION OR PRODUCT SEPARAT ELY, WHICH MAY HAVE A BEARING ON THE INTERNATIONAL TRANSACTIONS OR THE SPECIFIED DOMESTIC TRANSACTIONS ENTERED INTO BY THE ASSESSEE ; (G) A RECORD OF UNCONTROLLED TRANSACTIONS TAKEN INT O ACCOUNT FOR ANALYSING THEIR COMPARABILITY WITH THE INTERNATIONA L TRANSACTIONS OR THE SPECIFIED DOMESTIC TRANSACTIONS ENTERED INTO, INCLU DING A RECORD OF THE NATURE, TERMS AND CONDITIONS RELATING TO ANY UNCONT ROLLED TRANSACTION WITH THIRD PARTIES WHICH MAY BE OF RELEVANCE TO THE PRICING OF THE INTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TR ANSACTIONS, AS THE CASE MAY BE; (H) A RECORD OF THE ANALYSIS PERFORMED TO EVALUATE COMPARABILITY OF UNCONTROLLED TRANSACTIONS WITH THE RELEVANT INTERNA TIONAL TRANSACTION ; (I) A DESCRIPTION OF THE METHODS CONSIDERED FOR DET ERMINING THE ARM'S LENGTH PRICE IN RELATION TO EACH INTERNATIONAL TRAN SACTION OR SPECIFIED DOMESTIC TRANSACTION OR CLASS OF TRANSACTION, THE M ETHOD SELECTED AS THE MOST APPROPRIATE METHOD ALONG WITH EXPLANATIONS AS TO WHY SUCH METHOD WAS SO SELECTED, AND HOW SUCH METHOD WAS APP LIED IN EACH CASE ; (J) A RECORD OF THE ACTUAL WORKING CARRIED OUT FOR DETERMINING THE ARM'S LENGTH PRICE, INCLUDING DETAILS OF THE COMPARABLE D ATA AND FINANCIAL INFORMATION USED IN APPLYING THE MOST APPROPRIATE M ETHOD, AND ADJUSTMENTS, IF ANY, WHICH WERE MADE TO ACCOUNT FOR DIFFERENCES BETWEEN THE INTERNATIONAL TRANSACTION OR THE SPECIF IED DOMESTIC ITA NOS.2207 & 2208/17 :- 10 -: TRANSACTION AND THE COMPARABLE UNCONTROLLED TRANSAC TIONS, OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS ; (K) THE ASSUMPTIONS, POLICIES AND PRICE NEGOTIATION S, IF ANY, WHICH HAVE CRITICALLY AFFECTED THE DETERMINATION OF THE ARM'S LENGTH PRICE ; (L) DETAILS OF THE ADJUSTMENTS, IF ANY, MADE TO TRA NSFER PRICES TO ALIGN THEM WITH ARM'S LENGTH PRICES DETERMINED UNDER THES E RULES AND CONSEQUENT ADJUSTMENT MADE TO THE TOTAL INCOME FOR TAX PURPOSES ; (M) ANY OTHER INFORMATION, DATA OR DOCUMENT, INCLUD ING INFORMATION OR DATA RELATING TO THE ASSOCIATED ENTERPRISE, WHICH M AY BE RELEVANT FOR DETERMINATION OF THE ARM'S LENGTH PRICE. (2) .......................... (2A) ....................... (3) THE INFORMATION SPECIFIED IN SUB-RULES (1) AND (2A) SHALL BE SUPPORTED BY AUTHENTIC DOCUMENTS, WHICH MAY INCLUDE THE FOLLOWING : (A) OFFICIAL PUBLICATIONS, REPORTS, STUDIES AND DAT A BASES FROM THE GOVERNMENT OF THE COUNTRY OF RESIDENCE OF THE ASSOC IATED ENTERPRISE, OR OF ANY OTHER COUNTRY ; (B) REPORTS OF MARKET RESEARCH STUDIES CARRIED OUT AND TECHNICAL PUBLICATIONS BROUGHT OUT BY INSTITUTIONS OF NATIONA L OR INTERNATIONAL REPUTE ; (C) PRICE PUBLICATIONS INCLUDING STOCK EXCHANGE AND COMMODITY MARKET QUOTATIONS ; (D) PUBLISHED ACCOUNTS AND FINANCIAL STATEMENTS REL ATING TO THE BUSINESS AFFAIRS OF THE ASSOCIATED ENTERPRISES ; (E) AGREEMENTS AND CONTRACTS ENTERED INTO WITH ASSO CIATED ENTERPRISES OR WITH UNRELATED ENTERPRISES IN RESPECT OF TRANSAC TIONS SIMILAR TO THE INTERNATIONAL TRANSACTIONS OR THE SPECIFIED DOMESTI C TRANSACTIONS, AS THE CASE MAY BE; (F) LETTERS AND OTHER CORRESPONDENCE DOCUMENTING AN Y TERMS NEGOTIATED BETWEEN THE ASSESSEE AND THE ASSOCIATED ENTERPRISE ; (G) DOCUMENTS NORMALLY ISSUED IN CONNECTION WITH VA RIOUS TRANSACTIONS UNDER THE ACCOUNTING PRACTICES FOLLOWED. (4) THE INFORMATION AND DOCUMENTS SPECIFIED UNDER S UB-RULES (1) AND (2), SHOULD, AS FAR AS POSSIBLE, BE CONTEMPORANEOUS AND SHOULD EXIST LATEST BY THE SPECIFIED DATE REFERRED TO IN CLAUSE (IV) OF SECTION 92F : PROVIDED THAT WHERE AN INTERNATIONAL TRANSACTION OR A SPECIFIED DOMESTIC TRANSACTION CONTINUES TO HAVE EFFECT OVER MORE THAN ONE PREVIOUS YEAR, FRESH DOCUMENTATION NEED NOT BE MAINTAINED SEPARATE LY IN RESPECT OF EACH PREVIOUS YEAR, UNLESS THERE IS ANY SIGNIFICANT CHAN GE IN THE NATURE OR TERMS ITA NOS.2207 & 2208/17 :- 11 -: OF THE INTERNATIONAL TRANSACTION OR THE SPECIFIED D OMESTIC TRANSACTION, IN THE ASSUMPTIONS MADE, OR IN ANY OTHER FACTOR WHICH COUL D INFLUENCE THE TRANSFER PRICE, AND IN THE CASE OF SUCH SIGNIFICANT CHANGE, FRESH DOCUMENTATION AS MAY BE NECESSARY UNDER SUB-RULES (1), (2) AND (2A) SHALL BE MAINTAINED BRINGING OUT THE IMPACT OF THE CHANGE ON THE PRICIN G OF THE INTERNATIONAL TRANSACTION OR THE SPECIFIED DOMESTIC TRANSACTION. (5) THE INFORMATION AND DOCUMENTS SPECIFIED IN SUB- RULES (1), (2) AND (2A) SHALL BE KEPT AND MAINTAINED FOR A PERIOD OF E IGHT YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. SUB CLAUSE (G) AND (H) OF RULE 10D(1) REQUIRE AN AS SESSEE TO KEEP A RECORD OF UNCONTROLLED TRANSACTION WHICH ARE RELEVA NT FOR ANALYSING THE PRICING OF ITS INTERNATIONAL TRANSACTIONS. CLAUSE ( 3) OF RULE 10D, REQUIRE THAT INFORMATION SPECIFIED IN RELATION TO SUCH UNC ONTROLLED TRANSACTION SHALL BE AUTHENTIC. APART FROM THIS, ASSESSEE IS REQUIRED TO KEEP A RECORD OF THE ANALYSIS PERFORMED TO EVALUATE COMPAR ABILITY OF UNCONTROLLED TRANSACTIONS, WITH THE INTERNATIONAL T RANSACTIONS WITH ASSOCIATED ENTERPRISES. OBVIOUSLY, ASSESSEE HERE HA D NOT COMPLIED WITH THE ABOVE REQUIREMENTS. ASSESSEE ALSO FAILED T O FURNISH DOCUMENTS PRESCRIBED UNDER SUB SECTION (1) OF SECT ION 92D WITHIN THE PERIOD OF THIRTY DAYS FROM THE DATE OF RECEIPT OF N OTICE ISSUED IN THIS REGARD. 9. SECTION 271AA AND SECTION 271G OF THE ACT ARE RE PRODUCED HEREUNDER:- SECTION 271AA OF THE ACT:- WITHOUT PREJUDICE TO THE PROVISIONS OF SECTION 271 OR SECTION 271BA, IF ANY PERSON IN RESPECT OF AN ITA NOS.2207 & 2208/17 :- 12 -: INTERNATIONAL TRANSACTION OR SPECIFIED DOMESTIC TRANSACTION, (I) FAILS TO KEEP AND MAINTAIN ANY SUCH INFORMATION AND DOCUMENT AS REQUIRED BY SUB-SECTION (1) OR SUB- SECTION (2) OF SECTION 92D ; (II) FAILS TO REPORT SUCH TRANSACTION WHICH HE IS REQUIRED TO DO SO ; OR (III) MAINTAINS OR FURNISHES AN INCORRECT INFORMATI ON OR DOCUMENT, THE ASSESSING OFFICER OR COMMISSIONER (APPEALS) MAY DIRECT THAT SUCH PERSON SHALL PAY, BY WAY OF PENALT Y, A SUM EQUAL TO TWO PER CENT. OF THE VALUE OF EACH INTERNATIONAL TRANSACTION OR SPECIFIED DOMESTIC TRANSACTION ENTERED INTO BY SUCH PERSON (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 RUPEES. SECTION 271G OF THE ACT:- IF ANY PERSON WHO HAS ENTERED INTO AN INTERNATIONAL TRANSACTION OR SPECIFIED DOMESTIC TRANSACTION FAILS TO FURNISH ANY SUCH INFORMATION OR DOCUMENT AS REQUIRE D BY SUB-SECTION (3) OF SECTION 92D, THE ASSESSING OFFICER OR THE TRANSFER PRICING OFFICER AS REFERRE D TO IN SECTION 92CA OR THE COMMISSIONER (APPEALS) MAY DIRECT THAT SUCH PERSON SHALL PAY, BY WAY OF PENALT Y, A SUM EQUAL TO TWO PER CENT. OF THE VALUE OF THE INTERNATIONAL TRANSACTION OR SPECIFIED DOMESTIC TRANSACTION FOR EACH SUCH FAILURE THESE SECTIONS WERE ENACTED ONLY FOR THE PURPOSE OF PENALIZING THE DEFAULTS OF THE NATURE COMMITTED BY THE ASSESSEE. NO DOUBT S ECTION 273B MANDATES THAT PENALTY UNDER SECTIONS 271AA AND 271G OF THE ACT ARE NOT IMPOSABLE IF ITA NOS.2207 & 2208/17 :- 13 -: THE ASSESSEE PROVES THAT THERE WAS A REASONABLE CA USE FOR FAILURE. HOWEVER, ASSESSEE BEFORE US IN OUR OPINION HAS NOT BEEN ABLE TO SHOW ANY REASONABLE CAUSE FOR NOT COMPLYING WITH RULES NOR F OR ITS FAILURE TO PRODUCE INFORMATION CALLED FOR BY THE LD. TPO. IN THE CIRCU MSTANCES, WE ARE OF THE OPINION THAT LEVY OF PENALTY UNDER SECTIONS 271AA A S WELL AS 271G OF THE ACT WERE JUSTIFIED. WE DO NOT FIND ANY REASON TO I NTERFERE WITH THE ORDERS OF THE LOWER AUTHORITIES. 10. IN THE RESULT, THE APPEALS OF THE ASSESSEE AR E DISMISSED. ORDER PRONOUNCED ON MONDAY, THE 18TH DAY OF JUNE, 2 018, AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( !' . #$#% ) (ABRAHAM P. GEORGE) & / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED:18TH JUNE, 2018. KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF