Karvy Computershare Pvt.Ltd. Hyd, Hyderabad V. Addl. CIT, Range-2, Hyd, Hyderabad

ITA 739/HYD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2352 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-12-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 18-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H PHANI RAJU
• Keywords: Transfer pricing; International transaction; Bonafide belief; Reasonable cause; Arm length price; Ignorance of law
• Section: 92D; 92E; 27; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS. 737, 738, 739 & 740/HYD/2016 ASSESSMENT YEARS: 2010-11 & 2011-12 KARVY COMPUTERSHARE PVT. LTD., HYDERABAD. PAN AACCK 2193D VS. ADDL. COMMISSIONER OF INCOME-TAX, RANGE 2, HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. GOPAL REVENUE BY : SHRI H. PHANI RAJU DATE OF HEARING : 21-06-2017 DATE OF PRONOUNCEMENT : 07-07-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: THESE FOUR APPEALS PERTAIN TO THE ASSESSEE ARE DIR ECTED AGAINST THE ORDERS OF THE LEARNED COMMISSIONER OF INCOME-TA X (A) - 2 HYDERABAD, ALL DATED 29/02/2016 FOR AYS 2010-11 AND 2011-12 ITA NOS. 737 & 740/HYD/2016 FOR AYS 2010-11 & 2011- 12 2. AS THE ISSUE IN BOTH THE APPEALS ARE COMMON, WHI CH IS PERTAINING TO LEVY OF PENALTY U/S 271BA, WE REFER T O THE FACTS FROM AY 2010-11. 3. THE ASSESSEE IS ENGAGED IN PROVIDING REGISTRY SE RVICES TO VARIOUS COMPANIES AND MUTUAL FUNDS. DURING THE SCRU TINY PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE DID N OT FURNISH REPORT IN FORM NO. 3CEB AS REQUIRED U/S 92E R/W RULE 10E. AS THERE WAS A 2 ITA NOS. 737, 738, 739 & 740/H/16 KARVY COMPUTERSHARE PVT. LTD. NON-COMPLIANCE, PENALTY PROCEEDINGS U/S 271BA WERE INITIATED BY WAY OF ISSUE OF NOTICE DT. 25/03/2013. IN RESPONSE TO T HE SAID NOTICE, THE ASSESSEE FILED WRITTEN SUBMISSIONS, THE CONTENTS OF WHICH ARE AS UNDER: A) THE ASSESSEE WAS UNDER THE IMPRESSION THAT SEPAR ATE COMPLIANCE U/S.92E IS NOT REQUIRED ONCE APPROVAL WA S OBTAINED FOR PAYMENT OF ROYALTY. EVEN IN THE ASSESSMENT PROC EEDINGS, THE REPORT COULD NOT BE FILED DUE TO PAUCITY OF TIM E AND AS THE ASSESSEE HAD DOUBTS ABOUT THE LEGAL VALIDITY OF THE REPORTS. FURTHER, THE TRANSACTIONS ARE DISCLOSED IN THE FINA NCIAL REPORTS . B) THE DETAILS ARE AVAILABLE IN AUDIT REPORT U/S 44 AB. C) THE ASSESSEE IS PAYING ROYALTY SINCE A.Y 2004-05 AND THE PREVIOUS OFFICERS WERE ACCEPTING THE NON-FILING OF REPORT IN FORM 3CEB. D) THE RELEVANT DETAILS WERE FILED WHEN CALLED FOR AND NO ADJUSTMENT IS ALSO MADE TO ALP. THEREFORE, THE MIST AKE IS ONLY TECHNICAL IN NATURE AND THERE IS NO REVENUE LOSS E) RELIANCE PLACED ON THE DECISION IN THE CASES OF RAVI KUMAR RAWAT (2011) (10 TAXMANN.COM 248) WHEREIN IT WAS HE LD THAT WHEN THERE IS A BONA FIDE MISTAKE IN NOT OBTAINING FORM 3CEB, THE SAME WILL NOT INVOKE LEVY OF PENALTY. RELIANCE IS ALSO PLACED ON THE DECISION OF ITAT, KOLKATA BENCH IN THE CASE OF J.J. EXPORTS LTD (2011) (15 TAXMANN.COM 348) WHERE IN IT WAS HELD THAT WHEN THE ACCOUNTS ARE DULY AUDITED U/S 44AB AN D EVIDENCES WERE WITH THE AO, PENALTY CANNOT BE LEVIE D U/S 271BA. 4. AFTER CONSIDERING THE FACTS AND SUBMISSIONS OF T HE AR, THE AO MADE THE FOLLOWING OBSERVATIONS: (A) STATUTE CASTS CLEAR OBLIGATION ON THE ASSESSEE TO FURNISH REPORT IN FORM NO. 3CEB WITHIN 'DUE DATE. THIS OBLIGATION IS COMPULSORY. THE SPECIFIC PURPOSE FOR IMPOSING SUCH OBLIGATION WAS T O ENSURE THAT THE ASSESSES WHO ARE ENTERING INTO INTERNATIONAL TRANSA CTIONS WOULD REPORT THEM. IGNORANCE OF LAW IS NO EXCUSE, MORE SO WHEN T HE ASSESSEE ENGAGES QUALIFIED PROFESSIONALS FOR AUDIT AND REPR ESENTATIONS. 3 ITA NOS. 737, 738, 739 & 740/H/16 KARVY COMPUTERSHARE PVT. LTD. (B) OBTAINING PERMISSION FOR PAYMENT OF ROYALTY FRO M RBI OR ANY OTHER GOVERNMENT AUTHORITY IS A TOTALLY DIFFERENT PROCESS AND THERE IS NO EXCEPTION U/S 92E OR RULE IDE FOR SUCH A CASE. THE ASSESSEE CANNOT DECIDE FOR ITSELF THAT REPORT IN FORM 3CEB IS NOT N ECESSARY. (C) IF THE CASE WERE NOT TO BE SELECTED UNDER SCRU TINY, THE FACT THAT FORM NO. 3CEB WAS NOT FILED COULD NOT HAVE BEEN NOT ICED. EVEN DURING THE SCRUTINY PROCEEDINGS, THE REPORT WAS NOT FILED. THEREFORE THERE IS DELIBERATE DEFAULT. (D) THE ADJUSTMENT TO ALP IS NOT A CRITERION TO DET ERMINE WHETHER THERE IS DEFAULT OR NOT. IT IS QUITE UNLIKELY THAT THE DEPARTMENT WOULD HAVE NOTICED THAT THERE ARE INTERNATIONAL TRANSACTI ONS BECAUSE 3CEB REPORT IS THE ONLY SOURCE FROM WHICH THE DEPARTMENT WOULD GET' TO KNOW THE SAME. ON ACCOUNT OF THE DEFAULT OF THE ASS ESSEE, THIS OPPORTUNITY WAS DEPRIVED TO THE DEPARTMENT. (E) THE ARGUMENT THAT EARLIER OFFICERS WERE ACCEPTI NG THE CASE WITHOUT FILING OF REPORT IN FORM 3CEB IS NOT ACCEPTABLE. ME RELY BECAUSE AN OFFICER IS IGNORANT OF' LAW OR NEGLIGENT DOES NOT M EAN THAT THE SUCCESSOR CANNOT IMPLEMENT THE LAW CORRECTLY. SUCH AN ILLEGAL DEMAND IS CANNOT BE ENTERTAINED. (F) THE ARGUMENT THAT ALL THE DETAILS ARE AVAILABLE AS THE CASE IS AUDITED U/S 44AB AND EVIDENCE IS IN RECORD IS ALSO DEVOID OF MERIT. (G) FIRSTLY, THERE IS NO COLUMN IN AUDIT REPORT U/S 44AB ON INTERNATIONAL TRANSACTIONS. IF SUCH WERE THE CASE, THERE WAS NO N EED FOR THE GOVERNMENT OF INDIA TO PRESCRIBE A SPECIFIC REPORT ON THE ACT/RULES VIDE FORM NO. 3CEB. SECONDLY, AS ALREADY REFERRED, IF THE CASE WERE NOT SELECTED IN SCRUTINY, THE DEPARTMENT CANNOT CON E TO NOTICE OF THE INTERNATIONAL TRANSACTIONS AT ALL WITHOUT 3CEB REPO RT. IN ITS DECISION IN 4 ITA NOS. 737, 738, 739 & 740/H/16 KARVY COMPUTERSHARE PVT. LTD. THE CASE OF J.J. EXPORTS LTD, ITAT DID NOT CONSIDER THIS ASPECT AT ALL. THEREFORE, THE CASE IS DISTINGUISHABLE. (H) THE ASSESSEE CAN ESCAPE FROM THE LEVY OF PENALT Y, IF HE CAN ESTABLISH REASONABLE CAUSE. IN THE PRESENT CASE, NO SUCH REASONABLE CAUSE IS ESTABLISHED BY THE ASSESSEE EXCEPT STATING THAT NO ADJUSTMENT WAS MADE TO ALP. AS THERE IS NO REASONAB LE CAUSE ON THE PART OF THE ASSESSEE AND THE CLAIM IS ALSO NOT BONA FIDE, THE DECISION OF ITAT IN THE CASE OF RAVI KUMAR RAWAT IS NOT APPL ICABLE. 4.1 IN VIEW OF THE ABOVE OBSERVATIONS, THE AO HELD THAT THIS IS A FIT CASE FOR LEVY OF PENALTY U/S 271BA AND ACCORDINGLY, PENALTY OF RS. 1,00,000/- WAS LEVIED. 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED APPEAL BEFORE THE CIT(A) AND CONTENDED BEFORE THE C IT(A) THAT ASSESSEE BEING LAW ABIDING COMPANY HAS NOT DEFAULT ED ON ANY OF ITS OBLIGATIONS TILL NOW. IT WAS SUBMITTED THAT THE TRA NSFER PRICING BEING EMERGING SUBJECT, THE ASSESSEES FINANCE MANAGER WA S NOT AWARE OF HIS OBLIGATIONS IN THIS REGARD AND NO PROPER ADVICE HAD BEEN GIVEN TO THE ASSESSEE TO COMPLY WITH THE PROVISIONS OF SECTI ON 92E OF THE ACT. FURTHER, IT WAS SUBMITTED THAT THE ASSESSEE HAD TRI ED TO FILE THE CERTIFICATE DURING THE COURSE OF ASSESSMENT PROCEED INGS BUT IT COULD NOT OBTAIN DUE TO PAUCITY OF THE TIME AND ALSO DOUB TS RAISED ABOUT THE LEGAL VALIDITY OF THE SAME. HE RELIED ON FEW CASE L AWS IN SUPPORT OF ITS CASE, WHICH WERE EXTRACTED BY THE CIT(A) AT PAGES 6 TO 9 OF HIS ORDER. 6. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) OBSERVED THAT THE AO HAS DEALT THE ISSUE INVOLVED E LABORATELY IN THE RELEVANT PARAS OF THE ASSESSMENT ORDER, WHICH WERE PROPER AND JUSTIFIABLE. AS THE AR OF THE ASSESSEE HAS NOT GOT ANY MATERIAL TO CONTRADICT THE CONCLUSIONS DRAWN BY THE AO, THE PEN ALTY LEVIED BY THE AO U/S 271BA WAS CONFIRMED BY THE CIT(A). 5 ITA NOS. 737, 738, 739 & 740/H/16 KARVY COMPUTERSHARE PVT. LTD. 7. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-2, HYDERABAD [HEREINAFTER. REFERRED TO AS 'CIT(A)'] ER RED IN CONFIRMING THE ACTION OF THE LD. A.O. IN LEVYING PE NALTY OF RS.1,00,000/- UNDER SECTION 271BA OF THE ACT WITHOU T APPRECIATING THE FACT AND CIRCUMSTANCES OF THE CASE . THE APPELLANT, THEREFORE, SUBMITS THAT THE LEVY OF PENA LTY UNDER SECTION 271BA MAY BE DELETED. 2. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE APP ELLANT WAS UNDER THE BONA FIDE BELIEF THAT THE REPORT UNDER SE CTION 92E IS NOT REQUIRED AS IT HAS PAID THE ROYALTY AFTER OBTAI NING THE RBI APPROVAL. HENCE, LEVY OF PENALTY AMOUNTING TO RS. 1 ,00,000/- UNDER SECTION 271BA IS UNJUSTIFIED AND THE SAME MAY BE DELETED. 3. THE LD. CIT(A) FURTHER FAILED TO APPRECIATE THAT THE APPELLANT HAS FURNISHED AN EXPLANATION FOR NOT FURNISHING THE AUDIT REPORT UNDER SECTION 92E ON TIME AND THE SAME HAS NOT FOUN D TO BE FALSE. HENCE, LEVY OF PENALTY UNDER SECTION 271BA I S WITHOUT ANY BASIS AND THE SAME MAY BE DELETED. 8. LD. AR REITERATED THE SUBMISSIONS AS MADE BEFORE THE CIT(A) AND PRAYED FOR DELETION OF PENALTY AS THE ASSESSEE WAS IN BONAFIDE BELIEF THAT REPORT U/S 92E IS NOT REQUIRED. THE INF ORMATION REQUIRED WAS SUBMITTED DURING THE ASSESSMENT PROCEEDINGS, WH ICH WAS FOUND TO BE CORRECT. HE PRAYED THAT PENALTY MAY BE DELETE D. 9. LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORITI ES. 10. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. THE AR OF THE ASSESSEE HAS PLEADED THAT THE NON- SUBMISSION WAS NOT INTENTIONAL BUT BONAFIDE BELIEF AND IGNORANCE OF FINANCE MANAGER IN COMPLYING THE PROVISION U/S 92E. MERE IGNORANCE AND BONAFIDE BELIEF THAT WILL NOT BE CONSIDERED AS REASONABLE CAUSE TO DELETE THE PENALTY. IT IS CLEARLY THE OBLIGATION ON THE PART OF THE ASSESSEE TO COMPLY WITH THE PROVISIONS OF SECTION 9 2E. HENCE, THE ACTION INITIATED BY THE AO IN LEVYING PENALTY U/S 2 71BA IS PROPER IN 6 ITA NOS. 737, 738, 739 & 740/H/16 KARVY COMPUTERSHARE PVT. LTD. THESE CASES. ACCORDINGLY, WE UPHOLD THE ORDER OF TH E CIT(A) IN CONFIRMING THE PENALTY LEVIED BY THE AO. 10.1 AS THE FACTS AND ISSUE IN AY 2011-12 ARE MATER IALLY IDENTICAL TO THAT OF AY 2010-11, FOLLOWING THE CONCLUSIONS DRAWN THEREIN, WE UPHOLD THE ORDER OF CIT(A) AND DISMISS THE GROUNDS RAISED BY THE ASSESSEE. 11. IN THE RESULT, BOTH THE APPEALS UNDER CONSIDERA TION ARE DISMISSED. ITA NOS. 738 & 739/HYD/2016 FOR AYS 2010-11 & 2011- 12 12. AS THE ISSUE IN BOTH THE APPEALS ARE COMMON, WH ICH IS PERTAINING TO LEVY OF PENALTY U/S 271G, WE REFER TO THE FACTS FROM AY 2010-11. 13. DURING THE SCRUTINY PROCEEDINGS FOR AY 2010-11, THE ASSESSEE WAS REQUIRED TO FILE THE TP STUDY MAINTAINED U/S 92 D(3) R/W RULE 10D. ACCORDINGLY, A REQUEST WAS MADE BY THE AO TO THIS E FFECT AND THE ASSESSEE FILED ITS REPORT ON 12/02/2013. ON VERIFIC ATION OF THE SAME, THE AO NOTICED THAT IT DOES NOT COMPLY WITH THE REQ UIREMENTS LAID DOWN UNDER RULE 10D AND, HENCE, PENALTY PROCEEDINGS U/S 271G WERE INITIATED BY WAY OF ISSUE OF NOTICE ON 25/03/2013. IN RESPONSE, THE ASSESSEE FILED ITS WRITTEN SUBMISSIONS ON 16/04/201 3, WHICH WERE AS UNDER: A) FULL INFORMATION WAS FILED ON 10-02-2013. B) THE ASSESSEE OBTAINED PERMISSION FROM RBI TO PAY ROYALTY @ 5% BUT PAID ONLY 1%. THE ASSESSEE ADOPTED THE RBI R ATE AS THE BENCH MARK FOR DETERMINATION OF ALP. C) NO NOTICE WAS ISSUED AS REQUIRED U/S 92D(3). 7 ITA NOS. 737, 738, 739 & 740/H/16 KARVY COMPUTERSHARE PVT. LTD. D) RELIANCE WAS PLACED ON THE DECISION OF ITAT, HYD ERABAD BENCH IN THE CASE OF ANNAPURNA BUSINESS SOLUTIONS ( 2012) (17 TAXMANN.COM 125), WHEREIN IT WAS HELD THAT WHEN THE ASSESSEE FURNISHED ALL PARTICULARS ON THE BASIS OF WHICH THE ASSESSING OFFICER COULD DETERMINE THE ALP, NO PENALTY CAN BE LEVIED U/S 271G. E) RELIANCE WAS ALSO PLACED ON THE DECISION OF ITAT , CHENNAI BENCH IN THE CASE OF MAGIC WOODS EXPORTS PVT LTD (2 012) (25TAXMANN.COM) WHERE IN IT WAS HELD THAT DELAY IN FILING DETAILS OF INTERNATIONAL TRANSACTIONS WAS JUSTIFIAB LE WHEN THE AO DID NOT MAKE ADDITIONS TO ALP AND PENALTY CANNOT BE LEVIED. 14. AFTER CONSIDERING THE FACTS AND SUBMISSIONS OF THE AR, THE AO MADE THE FOLLOWING OBSERVATIONS: (A) THE ASSERTION THAT NO NOTICE WAS ISSUED U/S 92D (3) IS INCORRECT. SECTION 92D(3) DOES NOT PRESCRIBE ANY FORMAT FOR NO TICE. NOTICE DOES NOT MEAN THAT A SEPARATE LETTER HAS TO BE ISSUED. A N ORDER SHEET NOTING IS ALSO A NOTICE. IN THE PRESENT CASE, SUCH NOTICE WAS ISSUED ON 04-02-13 AND THE ASSESSEE FILED REPORT ON 12-02- 13. THEREFORE, THE ARGUMENT THAT THERE WAS PAUCITY OF TIME IS ALSO AN ARGUMENT OF CONVENIENCE. IN FACT, FOR THE PURPOSE OF FILING 3CE B REPORT, DETERMINATION OF ALP IS VITAL AND WITHOUT THE STUDY U/S 92D(3), ALP COULD NOT HAVE BEEN ASCERTAINED BY THE ASSESSEE. (B) - SPECIFIC METHODS FOR DETERMINATION OF ALP ARE PRESCRIBED IN 92C(1). THE ARGUMENT THAT THE PERMISSION OF RBI IS A BENCH MARK DOES NOT FIND PLACE IN ANY OF THE METHODS PRESCRIBE D U/S 92C(1). (C) IN THE REPORT FILED BY THE ASSESSEE, THE METHOD ADOPTED FOR TP STUDY IS STATED TO BE 'CUP' METHOD. CUP MEANS 'COMP ARABLE UNCONTROLLED PRICE' AND PERMISSION OF RBI TO THE AS SESSEE OR ANY OTHER ENTITY CANNOT BE TREATED AS A REFERENCE PRICE UNDER 'CUP' BY ANY STRETCH OF IMAGINATION. IT APPEARS THAT THE AUD ITOR WHO CONDUCTED THE TP STUDY DOES NOT KNOW EVEN THE FUNDAMENTALS IN THIS REGARD. 8 ITA NOS. 737, 738, 739 & 740/H/16 KARVY COMPUTERSHARE PVT. LTD. (D) THE ADJUSTMENT TO ALP OR NOT IS NOT A CRITERION TO DETERMINE WHETHER THERE IS DEFAULT OR NOT. IN THIS CASE EVEN 3CEB REPORT WAS NOT FILED. IT IS QUITE UNLIKELY THAT THE DEPARTMENT WOU LD HAVE NOTICED THAT THERE ARE INTERNATIONAL TRANSACTIONS BECAUSE 3CEB R EPORT IS THE ONLY SOURCE FROM WHICH THE DEPARTMENT WOULD GET TO KNOW THE SAME. ON ACCOUNT OF FURTHER DEFAULT OF THE ASSESSEE IN FILI NG AN IMPROPER TP STUDY, THE DEPARTMENT WAS FURTHER DEPRIVED. THE ARG UMENT THAT NO DATA IS AVAILABLE IN PUBLIC DOMAIN IS NOT ACCEPTABL E. IN FACT THE REQUIREMENTS UNDER THE ACT ARE PLACED ON THE ASSESS EE FOR THE VERY REASON THAT IT WAS OBLIGATORY ON THE PART OF THE AS SESSEE TO SEARCH FOR SUCH DATA. (E) WHEN THE ASSESSEE CLAIMS THAT HE IS FOLLOWING C UP METHOD, IT IS INCUMBENT ON HIM TO SHOW THE COMPARABLES. THE ASSES SEE DID NOT SHOW A SINGLE COMPARABLE. IT MAY ALSO BE MENTIONED HERE THAT THE UNDERSIGNED WAS SERIOUSLY CONSTRAINED IN DETERMINAT ION OF ALP ON ACCOUNT OF THE FACT THAT AN IMPROPER AND INCOMPLETE STUDY WAS FILED BY THE ASSESSEE. (F) THIS IS NOT A CASE WHERE FULL DETAILS ARE FILED TO ENABLE THE ASSESSING OFFICER TO DETERMINE ALP NOR THERE IS ISS UE OF DELAY IN FILING. HENCE, THE CASE LAWS CITED ARE NOT APPLICAB LE. 14.1 IN LIGHT OF THE ABOVE OBSERVATIONS, THE AO HE LD THAT THIS IS A FIT CASE FOR LEVY OF PENALTY U/S 271G AND PENALTY OF RS . 4,23,634/- WAS LEVIED BEING 2% OF THE VALUE OF INTERNATIONAL TRANS ACTIONS OF RS. 2,11,81,697/-. 15. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER CONSIDERING THE CONTENTIONS OF THE ASSESSEE, WHICH WERE EXTRACTED AT PAGES 5 TO 11 OF HIS ORDER, THE CIT(A) CONFIRMED THE PENALTY LEVIED BY THE AO ON TH E GROUND THAT THE 9 ITA NOS. 737, 738, 739 & 740/H/16 KARVY COMPUTERSHARE PVT. LTD. AR OF THE ASSESSEE HAS NOT GOT ANY MATERIAL TO CONT RADICT THE CONCLUSIONS DRAWN BY THE AO. 16. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-2, HYDERABAD [HEREINAFTER REFERRED TO AS THE 'CIT(A) E RRED IN CONFIRMING THE ACTION OF THE LD. A.O. IN LEVYING TH E PENALTY OF RS. 4,23,634/- UNDER SECTION 271G OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE 'ACT'] WITHOUT APPR ECIATING THE FACT AND CIRCUMSTANCES OF THE CASE. THE APPELLANT, THEREFORE, PRAYS THAT THE LEVY OF PENALTY UNDER SECTION 271G O F THE ACT IS NOT JUSTIFIED AND THE SAME MAY BE DELETED. 2. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE APP ELLANT HAS FURNISHED ALL THE INFORMATION AND PARTICULARS BEFOR E THE LD. A.O. TO ENABLE HIM TO DETERMINE THE ARM LENGTH PRICE AND THE SAME WAS ACCEPTED BY THE LD. A.O. WITHOUT FINDING IT INC ORRECT. THUS, THE PENALTY OF RS. 4,23,634 LEVIED UNDER SECTION 27 1G OF THE ACT IS UNJUSTIFIED AND THE SAME MAY BE DELETED. 3. WITHOUT PREJUDICE TO THE ABOVE THE LD. CIT(A) FA ILED TO APPRECIATE THAT THE APPELLANT HAS SATISFIED ALL THE CONDITIONS PRESCRIBED UNDER SECTION 92D OF THE ACT. HENCE, THE LEVY OF PENALTY UNDER SECTION 271G OF THE ACT IS WITHOUT AN Y BASIS AND THE SAME MAY BE DELETED. 17. LD. AR SUBMITTED THAT THE AO HAS MENTIONED IN T HE NOTICE THAT THE APPELLANT HAS NOT FILED THE FULL INFORMATION / DOCUMENTS AS REQUIRED U/S 92D (3) OF THE ACT. LD. AR SUBMITTED T HAT NO NOTICE WHAT SO EVER HAS BEEN SERVED ON THE ASSESSEE SO AS TO CO MPLY WITH SUCH NOTICE. HE SUBMITTED THAT FOR LEVY OF PENALTY UNDE R THIS SECTION, IT IS NECESSARY FOR THE A.O TO DEMONSTRATE HOW THE NON-FI LING OF THE INFORMATION IMPACTED THE DETERMINATION OF THE ALP S O AS TO CALL FOR FURTHER INFO U/S 92D(3) OF THE ACT. HE SUBMITTED TH AT THE INFORMATION FURNISHED BY ASSESSEE HAS BEEN ACCEPTED AND ASSESSM ENT COMPLETED ACCORDINGLY. IN THIS REGARD, LD. AR RELIED ON THE FOLLOWING CASES: 10 ITA NOS. 737, 738, 739 & 740/H/16 KARVY COMPUTERSHARE PVT. LTD. 1. ANNAPURNA BUSINESS SOLUTIONS V. ASSISTANT COMMI SSIONER OF INCOME-TAX, CIRCLE 6(1) [2012] 17 TAXMANN.COM 125 ( HYD.) IN THIS CASE, IT WAS HELD THAT WHERE ASSESSEE ENTERED INTO INTERNATIONAL TRANSACTION WITH ITS ASSOCIATED ENTER PRISES AND FURNISHED ALL PARTICULARS ON BASIS OF WHICH ASSESSI NG OFFICER COULD DETERMINE ARM'S LENGTH PRICE OF SAID TRANSACT ION, NO PENALTY COULD BE LEVIED UNDER SECTION 271G FOR NON- FURNISHING OF INFORMATION WHICH WAS NOT IN PUBLIC D OMAIN. 2. DCIT VS MAGIC WOODS EXPORTS (P) LTD 25 TAXMANN.C OM 20 (CHENNAI) (2012) IN THIS CASE, IT WAS HELD THAT WHE RE DELAY IN FILING DETAILS OF INTERNATIONAL TRANSACTION WAS REA SONABLE AND, MOREOVER, TPO HAD NOT SUGGESTED ANY ADJUSTMENT IN A LP REPORTED BY ASSESSEE, PENALTY UNDER SECTION 271G WA S NOT TO BE LEVIED. 3. ITO VS, NETSOFT INDIA LTD [2013] 35 TAXMANN.COM 579 (MUMBAI TRLB.) IN THIS CASE, IT WAS HELD THAT PENA LTY UNDER SECTION 271G, FOR FAILURE TO FURNISH INFORMATION UN DER SECTION 92D, CANNOT BE IMPOSED UNLESS NOTICE IS ISSUED SPEC IFYING INFORMATION TO BE PRODUCED BY PERSON ENTERING INTO AN INTERNATIONAL TRANSACTION. 18. LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORIT IES. 19. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. LD. AO INITIATED THE PENALTY PROCEEDINGS BECAUSE ASSESSEE HAS NOT FILED THE INFORMATION REQUIRED AS PER RULE 10D. HOWEVER, THE ASSESSEE HAS FILED THE RELEVANT INFORMATION DURING ASSESSMENT PROCEEDINGS AND ACCORDINGLY, AO COMPLETED THE ASSES SMENT. ON CAREFUL READING OF SECTION 271G & 92D(3), PENALTY C AN BE LEVIED ONLY WHEN AO ISSUES NOTICE U/S 92D(3) AND ASSESSEE FAILS TO FURNISH INFORMATION FOR COMPLETING THE ASSESSMENT. FURTHER, ON APPLICATION BY 11 ITA NOS. 737, 738, 739 & 740/H/16 KARVY COMPUTERSHARE PVT. LTD. THE ASSESSEE, THE AO CAN EXTEND THE PERIOD FOR SUBM ISSION BY FURTHER PERIOD OF 30 DAYS. IN THE GIVEN CASE, AO HAS NOT IS SUED ANY NOTICE, HOWEVER, AO OPINED THAT IT IS NOT NECESSARY TO ISSU E NOTICE BUT ORDER SHEET NOTICE/ENTRY ALSO AMOUNTS TO NOTICE ISSUED U/ S 92D(3). WE FIND THAT THE ASSESSEE HAS IN FACT FILED THE RELEVANT IN FORMATION AS SOON AS IT IS BROUGHT TO THE NOTICE AND AO HAS COMPLETED TH E ASSESSMENT WITHOUT MAKING ANY ADJUSTMENT. IT SHOWS THAT THE AS SESSEE HAS COMPLIED WITH THE PROVISIONS OF SECTION 92D(3). CON SIDERING THE FACTS ON RECORD AND OTHER JUDICIAL PRONOUNCEMENTS RELIED ON BY THE ASSESSEE, WE ARE INCLINED TO ACCEPT THE CONTENTION OF LD. AR AND IN OUR OPINION, PENALTY U/S 271G IS UNCALLED FOR AND A CCORDINGLY, IT IS DELETED. 19.1 AS THE FACTS AND ISSUE IN AY 2011-12 ARE MATER IALLY IDENTICAL TO THAT OF AY 2010-11, FOLLOWING THE CONCLUSIONS DRAWN THEREIN, WE DELETE THE PENALTY LEVIED U/S 271G AND ALLOW THE GR OUNDS RAISED BY THE ASSESSEE. 20. IN THE RESULT, BOTH THE APPEALS UNDER CONSIDERA TION ARE ALLOWED. 21. TO SUM UP, APPEALS IN ITA NOS. 737 & 740/HYD/20 16 ARE DISMISSED AND APPEALS IN ITA NOS. 738 & 739/HYD/20 16 ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 7 TH JULY, 2017. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RA HMAN) JUDICIAL MEMBER AC COUNTANT MEMBER HYDERABAD, DATED: 7 TH JULY, 2017. KV 12 ITA NOS. 737, 738, 739 & 740/H/16 KARVY COMPUTERSHARE PVT. LTD. COPY TO:- 1) KARVY COMPUTERSHARE PVT. LTD., KARVY HOUSE, 46 A VENUE 4, STREET NO. 1, BANJARA HILLS, HYDERABAD 500 03 4 2) ADDL. CIT, RANGE 2, ROOM NO. 821, B-BLOCK, 8 TH FLOOR, IT TOWERS, HYDERABAD 3) CIT(A) - 2, HYDERABAD 4) PR. CIT - 2, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER