IN INCOME-TAX APPELLATE TRIBUNAL D BENCH, CHENNAI Before Shri Sanjay Arora, Accountant Member & Shri Duvvuru RL Reddy, Judicial Member ITA. No. 1454/Mds/2014 Assessment Year:2007-08 M/s. Indian Additives Limited, Assistant Commissioner of Express Highway, Manali, Vs. Income Tax, Chennai 600 068. Company Circle II(3), Chennai 600 034. [PAN:AAACI1445G] (Appellant) (Respondent) Appellant by : Shri M. Viswanathan, C.A. Respondent by : Shri Muruga Bhoopathy, Sr. DR Date of hearing : 17.10.2016 Date of order : 18.10.2016 ORDER Per Sanjay Arora, AM: This Appeal by assessee is directed against Order of Ld. Commissioner of Income Tax (Appeals)-II, Chennai [ CIT(A) for short] dated 06.02.2014 confirming levy of penalty under section 271AA of Income Tax Act, 1961 [ Act for short] vide penalty order dated 10.08.2011 for assessment year (AY) 2007-08. 2 I.T.A. No.1454/M/14 2. facts of case in brief are that assessment in instant case was made under section 143(3) r.w.s. 92CA(3) of Act on 25.02.2011 at income of .1654.98 lakhs, including Transfer Pricing [TP] adjustment of .752 lakhs by determining Arm s Length Price [ALP] of purchases from Associated Enterprise [AE] at .1653 lakhs. Penalty proceedings under section 271AA of Act were initiated in respect of said purchases during assessment proceedings, with Assessing Officer [AO] observing in assessment order that assessee has not made analysis to evaluate comparability with international transactions, as provided under section 92D r/w rule 10D of Income Tax Rules, 1962 ( Rules here- in-after). assessee was, in penalty proceedings, show caused on non-disclosure of international transactions with its AE (at .11.87 cr.) in report under section 92E r/w r.10E in Form 3CEB, thereby contravening section 92D(1) of Act. assessee s explanation of no adjustment in respect of these transactions having been made by Transfer Pricing Officer (TPO) was found by Assessing Officer (AO) as irrelevant in view of clear failure to report transactions per Form 3CEB. Whether same resulted in any revenue impact in assessment subsequently was immaterial. assessee had also not pleaded any reasonable cause, much less established one (refer para 5 of penalty order). Penalty under section 271AA of Act was accordingly levied at .23.74 lakhs, i.e., at 2 per cent of unreported transactions, which was confirmed in first appeal for same reasons. 3. Before us, assessee s plea was of having in fact reported transactions per Form 3CEB, and that it had wrongly conceded to non reporting in earlier proceedings, furnishing reconciliation toward same. ld. DR, on other hand, relied on orders of Revenue authorities, further contending that in case of admission of assessee s plea, matter may be remanded to file of AO for verification. 3 I.T.A. No.1454/M/14 4. We have heard both parties and perused materials on record. We may begin by reproducing section 271AA, which reads as under: Penalty for failure to keep and maintain information and document, etc., in respect of certain transactions. 271AA. Without prejudice to provisions of section 271 or section 271BA, if any person in respect of international 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 incorrect information or document, Assessing Officer or Commissioner (Appeals) may direct that such person shall pay, by way of penalty, sum equal to two per cent of value of each international transaction entered into by such person. While section 92D casts obligation on any person entering international transaction to keep and maintain information and documents in respect thereof as may be prescribed, s. 92E casts further obligation to report same, duly verified and signed by Accountant, in prescribed form (Form 3CEB), furnishing same by specified date. requirement, per rule 10D of Rules, includes evaluating comparability of those transactions and determining their ALP. Section 271AA of Act seeks to penalize any of defaults specified therein, of course without any reasonable cause for same being shown, onus of which is clearly on assessee (s. 273B). legal position in matter, and on which we observe no dispute, is clear. Non reporting of international transactions which alone becomes finally relevant, attracts s. 271AA of Act, even as we observe ld. CIT(A) to have relied on decision by Tribunal in case of G.I. Systems Org. India (P.) Ltd. v. ITO [2012] 145 TTJ 94 (Ahd) relied on by ld. CIT(A). On facts, our first observation in matter is that there is no mention of purchase transactions, stated as unreported in Form 3CEB which constitutes default being sought to be penalized, either in assessment order or in penalty 4 I.T.A. No.1454/M/14 order, or even appellate order. This, despite impugned order stating at two places of assessee having not reported above mentioned international transactions (at paras 4.4 and 4.7) required to be furnished by law [s. 92E]. We agree with Revenue s stand that it is non-reporting of international transactions that is relevant and constitutes default, and not whether same led to any adjustment to returned income in assessment, subsequent event. Further, true, assessee admitted it s default before Revenue authorities, seeking to explain same in manner aforesaid, but it s claim cannot be ousted at least at outset, in-as-much as transactions claimed to be unreported remain unspecified. How did TPO, in face of non reporting, one may ask, find relevant transactions? Even assuming same to have been so in TPO s order (not on record), there is no reference thereto in assessment order or orders following it. Why, even name of AE/s, from whom unreported purchases are made, also stating of no comparative analysis qua international transactions having been furnished, are not stated in penalty order or even in assessment order. assessee s conduct, admitting default of not reporting relevant transactions, both implicitly and explicitly, justifying same on basis of absence of any adjustment in assessment, is again quizzical to say least. In fact, first thing that assessee would ask, in case of uncertainty, is for being supplied details of unreported international transactions. assessee s volte-face has not been explained. We, in fact, observe another contradiction. While assessee states and which in view of non rebuttal, is admitted position, that while no adjustment u/s. 92C(4) was made qua relevant purchases, AO (per para 3.1 r/w para 3.2) states of downward adjustment of Rs. 7.52 cr. qua purchases (from AE). same (the TP adjustment), we may though clarify, being subsequent event, is of no consequence, so that it being revised [from .7.52 crores] to .5.91 crores [vide order under section 154 dated 17.09.2014] would have been no bearing in matter. assessee s reconciliation also leaves much to be desired, and is hardly 5 I.T.A. No.1454/M/14 moving. transaction of purchase of product OLOA 200 (at 286.98 MT for Rs 2.41 cr.), which is stated to be in fact reported twice, once as forming part of transactions for Rs. 2.81 cr., being purchases from AE/s, and another as part of purchase of raw materials, proprietary in nature (Ann. II to F/3CEB), and both of which stand reduced from aggregate transactions of Rs. 17.09 cr. (per Ann. II) in reconciliation statement to arrive at figure of Rs. 11.87 cr. Now, it is purchases (to extent of) Rs. 11.87 cr., and not that reduced from total purchases (Rs. 5.22 cr.), that are stated as not reported. reconciliation , rather than clarifying, further confounds what ought to be simple matter of reporting or, as case may be, non- reporting of some purchase transactions stated by assessee before us to be that of OLOA 200, per prescribed Form 3CEB, which should ordinarily be manifest and apparent from bare browse of said report. 4. What emerges from foregoing analysis is contrary claims (by either side), which are also internally inconsistent. Surely, no ambiguity qua default sought to be penalized, i.e., non-reporting of international transactions, which alone is relevant, can be countenanced. Under circumstances, we only consider it proper that matter is restored back to file of AO. assessee agitating impugned levy on no other ground, we may also clarify that set aside of penalty order thus is limited to determining this aspect thereof only, i.e., if any part of purchase transactions from AE/s remain unreported per Form 3CEB furnished for year, as in fact admitted to be inadvertently so by assessee in penalty and appellate proceedings. assessee claiming reporting, further question of reasonable cause for default does not stand to arise. AO shall decide on levy of penalty based on his definite findings of fact, issued after hearing assessee. 6 I.T.A. No.1454/M/14 5. In result, appeal by assessee is allowed for statistical purposes. Order pronounced in open court on October 17, 2016. Sd/- Sd/- (DUVVURU RL REDDY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER Chennai, Dated, 18.10.2016 Vm/- Copy to: 1. Appellant, 2. Respondent, 3. CIT(A), 4. CIT, 5. DR & 6. GF. M/s. Indian Additives Limited v. Assistant Commissioner of Income-tax, Company Circle-II(3), Chennai