Sec. 271AA Penalty Could Not Be Levied if AO Failed to Provide Details Regarding Docs. Not Submitted Before TPO | ITAT

Case Details: DCIT v. Priya Blue Industries (P.) Ltd - [2025] 171 taxmann.com 177 (Ahmedabad-Trib.)

Judiciary and Counsel Details

• T.R. Senthil Kumar, Judicial Member & Narendra Prasad Sinha, Accountant Member
• Tushar Hemani, Sr. Adv. & Parimalsinh B. Parmar, A.Rs. for the Appellant.
• Rignesh Das, Sr. D.R. for the Respondent.

Facts of the Case

Assessee company was engaged in the business of Ship Breaking, Recycling and Sale of Scrapes. While passing the order under section 92CA(3), the Transfer Pricing Officer (TPO) accepted the transactions in relation to the vessel purchase to be at Arm’s Length Pricing (ALP). Therefore, no adjustments were made with respect to the transaction.

However, the TPO made adjustments regarding other transactions entered into by the assessee. The Assessing Officer (AO) levied a penalty on the alleged ground that the assessee failed to maintain documents specified under section 92D read with Rule 10D.

On appeal, the CIT(A) deleted the penalties. The matter reached before the Tribunal.

ITAT Held

The Tribunal held that the AO levied the penalty under section 271AA for all the assessment years with regard to the purchase of vessels made with the associated enterprise (AE). In the Penalty Order, the AO simply observed that the assessee had committed the default within the meaning of section 271AA. Thus, the AO levied the penalty without pointing out which of the documents prescribed under section 92D r.w.r. 10D have not been maintained by the assessee.

It is seen that the TPO passed the order under section 92CA, wherein he made two TP adjustments unconnected with purchase transactions of vessels made with AE. Thus, the TPO did not doubt such purchase price nor made any upward adjustments relating to purchase transactions with AE, which means that such transactions are recorded at arms-length price.

It is further seen that such transactions are also mentioned in Form 3CEB filed before the date of the search. The AO did not doubt such purchase value in the final assessment order. The Tribunal in various cases held that penalty under section 271AA cannot be levied without specifying the required documents failed to be maintained/furnished by the assessee. Thus, the issue is no more res-integra.

Further, it is noticed that the penalty order was passed in a perfunctory manner without giving a requisite show-cause notice and without affording a proper opportunity of hearing to the assessee. Moreover, the AO had merely show caused the assessee to file details/documents maintained as per rule 10D of Income-tax Rules, without specifying any particular clause itself. Thus, there is no merit in levying penalty holding that the assessee has not maintained proper documents.

List of Cases Referred to

• Dy. CIT v. Indian Additives Express High Way [2017] 88 taxmann.com 954 (Chennai – Trib.) (para 7)
• Asstt. CIT v. Smith & Newphew Healthcare (P.) Ltd. [2011] 16 taxmann.com 5/48 SOT 607 (Mumbai) (para 7)
• Dy. CIT v. Bebo Technologies (P.) Ltd. [2013] 40 taxmann.com 168/[2014] 148 ITD 122 (Chandigarh – Trib.) (para 7)
• Dy. CIT v. Convergys Customer Management Group Inc. [2022] 143 taxmann.com 43/[2023] 198 ITD 100 (Delhi – Trib.) (para 7.1)
• ITO (OSD) v. PPN Power Generating Co. (P.) Ltd. [2012] 18 taxmann.com 127/50 SOT 26 (Chennai) (para 7.1)
• Asstt. CIT v. Global One India (P.) Ltd. [2012] 19 taxmann.com 249/53 SOT 106 (Delhi) (para 7.1)
• CIT v. Leroy Somer & Controls (India) (P.) Ltd. [2013] 37 taxmann.com 407/218 Taxman 216/[2014] 360 ITR 532 (Delhi) (para 7.1)
• Tapi JWil JV v. ITO [2024] 158 taxmann.com 433 (Delhi – Trib.) (para 7.1)
• Apace Realty v. ITO [2022] 140 taxmann.com 257 (Mumbai – Trib.) (para 7.1)
• Dy. CIT v. Francois Compressors India (P.) Ltd. [2021] 129 taxmann.com 260 (Pune – Trib.) (para 7.1)
• DCIT v. Bebo Technologies Pvt. Ltd 40 Taxman 160 (para 8.3).