M/S N. M. SHAH & BROS., MUMBAI v. ACIT CIRCLE - 19(2), MUMBAI

ITA 3334/MUM/2019 | 2012-2013
Pronouncement Date: 12-03-2021 | Result: Allowed

Appeal Details

RSA Number 333419914 RSA 2019
Assessee PAN AAAFN1893J
Bench Mumbai
Appeal Number ITA 3334/MUM/2019
Duration Of Justice 1 year(s) 9 month(s) 25 day(s)
Appellant M/S N. M. SHAH & BROS., MUMBAI
Respondent ACIT CIRCLE - 19(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 12-03-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 12-03-2021
Last Hearing Date 20-10-2020
First Hearing Date 20-10-2020
Assessment Year 2012-2013
Appeal Filed On 17-05-2019
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI RAJESH KUMAR ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI JUDICIAL MEMBER ITA NO.3334/M/2019 ASSESSMENT YEAR: 2012-13 M/S. N.M. SHAH & BROS. 1011 PRASAD CHAMBERS OPERA HOUSE MUMBAI 400 004 PAN: AAAFN1893J VS. ACIT CIRCLE 19(2) MATRU MANDIR TARDEO ROAD MUMBAI (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : DR. K. SHIVARAM A.R. REVENUE BY : SHRI S. DESH PANDE D.R. DATE OF HEARING : 28.12.2020 DATE OF PRONOUNCEMENT : 12.03.2021 O R D E R PER RAJESH KUMAR ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 18.02.2019 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE VAR IOUS GROUNDS OF APPEAL IS AGAINST THE CONFIRMATION OF PE NALTY OF RS.1 25 62 633/- BY LD. CIT(A) AS LEVIED BY THE AO UNDER SECTION 271G OF THE ACT. 3. THE FACTS IN BRIEF ARE THAT A REFERENCE UNDER SE CTION 92CA(1) OF THE ACT DATED 09.03.2015B WAS MADE BY TH E AO TO TPO IN ORDER TO DETERMINE THE ARM LENGTH PRICE WITH REGARD TO TRANSACTIONS REPORTED IN FORM NO.3CEB FILED BY THE ASSESSEE QUA ITA NO.3334/M/2019 M/S. N.M. SHAH & BROS. 2 INTERNATIONAL TRANSACTIONS OF PURCHASE AND SALE OF RAW MATERIAL AS WELL AS FINISHED GOODS FROM AND TO ITS OVERSEAS GROUP ENTITY. THE ASSESSEE MADE DETAILED SUBMISSIONS FROM TIME T O TIME BEFORE THE TPO AS AND WHEN CALLED UPON AND TPO PROP OSED NO ADJUSTMENT TO THE ARM LENGTH PRICE OF INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS OVERSEAS ENTI TY HOWEVER INITIATED PENALTY PROCEEDINGS UNDER SECTION 271G FO R FAILURE OF THE ASSESSEE TO FURNISH THE REQUIRED DOCUMENTATIONS . THE TPO HELD THAT ASSESSEE HAS PREVENTED THE REVENUE FROM M AKING ANY DETERMINATION OF ARM LENGTH PRICE BY NOT FURNISHING THE REQUIRED DOCUMENTS AND THUS THE ASSESSEE HAS FAILED TO MAINTAIN AND FURNISH THE BASIC INFORMATION PERTAINI NG TO AE AND NON AE TRANSACTIONS AND CONSEQUENTLY THE TPO WAS PR EVENTED FROM ANY DETERMINATION OF ARM LENGTH PRICE. FOR THE WANT OF INFORMATION/DETAILS NO ADJUSTMENT WAS MADE TO THE INTERNATIONAL TRANSACTION BY OBSERVING THAT FROM TH E MATERIAL AVAILABLE ON RECORD IT CAN NOT BE CONCLUDED WHETHER INTERNATIONAL TRANSACTIONS ARE AT ARM LENGTH PRICE OR NOT. THE TPO REQUIRED THE ASSESSEE TO FILE THE AUDITED SEGME NTAL OF AE AND NON AE VIDE QUESTIONNAIRE ISSUED UNDER SECTION 92CE(3) READ WITH SECTION 92D(3) DATED 19.11.2015 WHICH WAS REPLIED BY THE ASSESSEE BY FURNISHING THE DETAILS ON 15.12.20 15 AND ON 04.01.2016 BY SUBMITTING THAT ASSESSEE HAS PURCHASE D ALL DIAMONDS FROM ITS AE TO THE TUNE OF RS.62 81 31 651 /- OUT OF THE TOTAL PURCHASE OF RS.1 19 28 19 140/-. THE ASS ESSEE FURTHER SUBMITTED THAT IT HAS SOLD ROUGH DIAMONDS TO THE TU NE OF RS.16 94 18 305/- TO THIRD PARTIES WITHOUT MANUFACT URING. THE ASSESSEE ALSO FURNISHED THE COPIES OF INVOICES OF P URCHASES BEFORE THE AO AND THUS SUBMITTED THAT ENTIRE SALE O F ROUGH ITA NO.3334/M/2019 M/S. N.M. SHAH & BROS. 3 DIAMONDS MADE TO THE THIRD PARTIES DURING THE YEAR WERE OUT OF ROUGH DIAMONDS PURCHASED FROM THE AE. ACCORDING TO THE TPO THE ASSESSEE HAS NOT PREPARED THE AUDITED SEGMENTAL OF AE AND NON AE BASED ON ACTUAL TRANSACTIONS WITH THE AE AND NON AE AND THUS THE ASSESSEE HAS FAILED TO PROVE THAT THE DIAMONDS SOLD TO THIRD PARTIES WERE EXCLUSIVELY FROM ROUGH DIAMON DS PURCHASED FROM THE AES. THE ASSESSEE IS CARRYING O N THE BUSINESS OF TRADING OF ROUGH DIAMONDS. DURING THE PENALTY PROCEEDINGS A SHOW CAUSE NOTICE UNDER SECTION 271G OF THE ACT WAS ISSUED TO THE ASSESSEE ON 27.01.2016 CALLING UP ON THE ASSESSEE AS TO WHY THE PENALTY SHOULD NOT BE LEVIED FOR FAILURE TO FURNISH THE DOCUMENTS CALLED FOR UNDER SECTION 92CA READ WITH SECTION 92D(3) OF THE ACT WHICH WAS FOLLOWED BY ANO THER SHOW CAUSE NOTICE DATED 16.06.2016 CALLING UPON THE ASSE SSEE AS TO WHY THE PENALTY SHOULD NOT BE LEVIED FOR FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 92D(3) READ WITH RULE 10D (1) WHICH WAS REPLIED BY THE ASSESSEE VIDE WRITTEN SUBMISSION DAT ED 19.07.2016 WHICH ARE EXTRACTED BY THE TPO IN PARA 7 OF THE PENALTY ORDER. THE TPO THEREAFTER REJECTED THE SUB MISSIONS OF THE ASSESSEE AND CAME TO CONCLUSION THAT ASSESSEE H AS FAILED TO FOLLOW THE RULES WITH REGARD TO MAINTENANCE OF RECO RDS AND FINALLY LEVIED A PENALTY OF RS.1 25 62 633/- BY HOL DING THAT ASSESSEE HAS FAILED TO FURNISH THE INFORMATION OR D OCUMENTS IN RESPECT OF SEGMENTAL ACCOUNTS RELATING TO TRANSACTI ONS MADE WITH THE AES AND NON AES FOR DETERMINATION OF ARM L ENGTH PRICE OF INTERNATIONAL TRANSACTIONS AS REQUIRED BY TPO UN DER PRESCRIBED RULE AND THUS LEVIED A PENALTY EQUAL TO 2% OF VALUE OF INTERNATIONAL TRANSACTIONS WITH THE AE BY PASSING O RDER DATED 29.07.2016. ITA NO.3334/M/2019 M/S. N.M. SHAH & BROS. 4 4. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE TH E LD. CIT(A) CHALLENGING THE PENALTY ORDER PASSED BY THE TPO HOWEVER THE LD. CIT(A) ALSO DISMISSED THE APPEAL O F THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: 4. CONCLUSION: A. NON FURNISHING OF AE & NON-AE AUDITED SEGMENTAL ACCOUNTS; IT IS SEEN FROM APPELLANT'S SUBMISSION THAT APPELLA NT HAS CLAIMED THAT IT HAS NOT ENTERED INTO ANY SALES TRANSACTION WITH ANY OF ITS AES AND THE INTERNATIONAL TRANSACTION WITH AES WERE ONLY IN RESPECT OF IMPORT /PURCHASE OF ROUGH DIAMONDS ONLY. APPELLANT FURTHER SUBMITTED THAT SEGMENTAL PR OFIT AND LOSS ACCOUNT WAS PREPARED AND SUBMITTED ONLY IN RESPECT OF SALE OF I MPORTED ROUGH DIAMONDS OF RS.169418305/-. THE OPERATING MARGIN IS CALCULATED BASED ON THE SALES MADE TO NON-AES IN RESPECT FOR PURCHASE OF ROUGH DIAMONDS O F RS. 15.4 CRORES FROM AES AND THAT THERE IS IN FACT NO SALES TO AES IN ORDER TO P REPARE A SEGMENTAL ACCOUNT. THE APPELLANT HAS SUBMITTED ONLY CALCULATION OF OPE RATING PROFIT MARGIN ON SALE OF ROUGH DIAMONDS OF RS.16 94 18 305/-. THE BE NCH MARKING FOR ALP WAS REQUIRED TO BE DONE FOR THE ENTIRE TRANSACTION WITH THE A.E I.E. 62.81 CRORE BUT IN THIS CASE APPELLANT HAS TAKEN ONLY RS.15.47 CRORES IN THE CALCULATION OF OPM. FURTHER ASSESSEE HAS NOT CONSIDERED REDUCTION IN VA RIATION OF CLOSING STOCK OF RS.74 80 387/- THE TPO HAS CORRECTLY CONCLUDED THAT ASSESSEE'S CON TENTION THAT SINCE IT DOES NOT HAVE SALES TRANSACTION WITH THE AE THE AS SESSEE IS NOT REQUIRED TO MAINTAIN SEGMENTAL IN RESPECT OF TRANSACTION WITH A E OR NON AE IS MISCONSTRUED. THE PURPOSE OF DRAWING SEGMENTAL RESULT IS TO DETER MINE SEPARATELY WHAT IS PROFIT OR LOSS ON ACCOUNT OF PURCHASE OR SALES OR BOTH TRA NSACTION WITH THE AE AND WITH NON AE. IT DOES NOT MEAN THAT THE ASSESSEE SHOULD H AVE SIMULTANEOUSLY DONE BOTH TRANSACTION OF PURCHASE AND SALE. IF THE ASSESSEE H AS TRANSACTION OF PURCHASES WITH THE AE AND SALES ARE TO NON AE THEN WHAT IS THE OP ERATING PROFIT MARGIN EARNED BY THE ASSESSEE VIS-A-VIS THE PROFIT EARNED IN A SITUA TION WHEN BOTH PURCHASE AND SALE ARE WITH NON AE. THUS IN THE INSTANT CASE THE ASSES SEE HAS FAILED TO PRODUCE SEGMENTAL P/L A/C AE AND NON AE WISE. B. NON FURNISHING OF RELEVANT DETAILS FROM BENCHMAR KING UNDER CUP THE APPELLANT HAS USED TNMM METHOD AT ENTITY LEVEL TO BENCHMARK THE TRANSACTIONS. THE RULE 10B(1)( E) INDICATES THAT FO R THE PURPOSE OF APPLICATION OF TNMM PROFIT FROM THE INTERNATIONAL TRANSACTIONS AL ONE HAS TO BE CONSIDERED. THE APPELLANT HAS NOT FURNISHED SATISFACTORY DETAILS WI TH EVIDENCE FOR THE APPLICATION OF TNMM AND HAS THUS VIOLATED THE RULE 10B(1)(E). IN T HE INSTANT CASE CUP METHOD SHOULD HAVE BEEN ADOPTED TO BENCHMARK THE ASSESSEE' S TRANSACTION. HOWEVER THE QUALITATIVE DETAILS OF AES AND NON-AES TRANSACTIONS AND SEPARATE RECORDS OF DIFFERENT QUALITY HAVE NOT BEEN MAINTAINED BY THE A PPELLANT. THE TPO HAS CORRECTLY CONCLUDED THAT THE APPELLANT HAS APPLIED TNMM DELIBERATELY AND PREVENTED THE DEPARTMENT FROM THE BENCHMARKING UNDER CUP BY ITA NO.3334/M/2019 M/S. N.M. SHAH & BROS. 5 WAY OF NON FURNISHING OF RELEVANT DETAILS COLLECTED BY THE TPO FOR THE PURPOSE OF CUP ANALYSIS. C. NON FURNISHING OF INFORMATION OR DOCUMENTS IN RE SPECT OF SEGMENTAL ACCOUNTS RELATING TO TRANSACTIONS MADE WITH AES AND NON AES UNDER RULE 10D(1)AND10D(3) THE APPELLANT HAS FAILED TO FURNISH INFORMATION UND ER RULE 10D(1) AND SUPPORTING AUTHENTIC DOCUMENTATION UNDER RULE 100(3 ). THE ASSESSEE HAS CONTENDED THAT FAILURE TO COMPLY WITH CLAUSE(G)(H)( I)(J) OF RULE 10D(1) IS DUE TO PECULIARITIES OF THE DIAMOND INDUSTRY AND THE INDUS TRY PRACTICE OF NOT MAINTAINING SEPARATE RECORD OF STOCK RELATING TO TRADING AND MA NUFACTURING ACTIVITIES AS ALSO AE AND NON AE SOURCES. FROM THE FACTS AND CIRCUMSTANCE S OF THE CASE IT IS CLEAR THAT APPELLANT HAS FAILED TO FURNISH INFORMATION CALLED FOR UNDER RULE 10D(1) BY NOT PROVIDING COMPLETE SEGMENTAL ACCOUNTS WITH REGARD T O PURCHASE MADE FROM AES AND NON AES SEGMENTS AND SALES MADE TO AES AND NON- AES SEGMENTS. SIMILARLY APPELLANT HAS ALSO FAILED TO FURNISH THE SUPPORTING AUTHENTIC DOCUMENTATION REQUIRED UNDER RULE 10D(3). THUS THE APPELLANT HAS CLEARLY VIOLATED DOCUMENTATION REQUIREMENTS UNDER RULE10D(1) AND RULE 10D(3). BASED ON ABOVE DISCUSSION AND ANALYSIS THE PENALTY IMPOSED BY THE TPO FOR U/S 271 G OF THE ACT FOR VIOLATION OF RULE 10D(1) AND 1 0D(3) THEREOF IE 2 % OF THE VALUE OF THE INTERNATIONAL TRANSACTIONS COMES OUT TO ( 2% ON RS.62 81 31 651/-) RS.1 25 62 633/- IS HEREBY CONFIRMED AND THE GROUND S OF APPEAL ON THESE ISSUES ARE DISMISSED .THUS APPEAL FOR THE AY 2012-13 IS DISMIS SED. 5. THUS APPEAL FILED BY THE APPELLANT IS DISMISSE D U/S.250 R.W.S 251 OF THE INCOME TAX ACT 1961. 5. THE LD. A.R. VEHEMENTLY SUBMITTED BEFORE THE BEN CH THAT ASSESSEE HAS MAINTAINED PROPER RECORDS AS PRESCRIBE D UNDER SECTION 92D OF THE ACT. THE LD. A.R. SUBMITTED THA T SEGMENTAL REPORTING IS NOT POSSIBLE WHEN THERE IS NO SALES TO AES AND THEREFORE THERE IS NO FAILURE ON THE PART OF THE AS SESSEE TO FURNISH THE DOCUMENTS BEFORE THE TPO. THE LD. A.R. SUBMITTED THAT WHATEVER THE TPO REQUIRED THE ASSESSEE TO FURN ISH WAS DULY FURNISHED. THE LD. A.R. SUBMITTED THAT THE SEGMENT AL AUDITED ACCOUNTS OF AE AND NON AE ARE NOT POSSIBLE TO PREPA RE. THE LD. A.R. ALSO SUBMITTED THAT THE TPO HAS ACCEPTED THE A RM LENGTH PRICE OF INTERNATIONAL TRANSACTIONS AS PER THE ASSE SSEES VERSION AND ALSO ACCEPTED THE METHOD USED FOR BENCH MARKING THE INTERNATIONAL TRANSACTIONS AND CONSEQUENTLY PROPOSE D NO ITA NO.3334/M/2019 M/S. N.M. SHAH & BROS. 6 ADJUSTMENT TO THE INTERNATIONAL TRANSACTIONS. THE LD. A.R. ALSO SUBMITTED THAT IN CASE THE TPO HAS NOT ACCEPTED THE METHOD FOR BENCH MARKING THE TRANSACTIONS THE TPO COULD HAVE GONE FOR INDEPENDENT BENCH MARKING OF INTERNATIONAL TRANSACT IONS WITH THE AES. THE LD. A.R. SUBMITTED THAT ASSESSEE HAS M AINTAINED ALL PRIMARY BOOKS OF ACCOUNTS/DOCUMENTS IN RESPECT OF ITS BUSINESS TRANSACTIONS WITH AES AND NON AES AND IT I S DUE TO PRACTICAL DIFFICULTY IN PREPARING THE SEGMENT-WISE PROFIT AND LOSS WITH AES AND NON AES IN DIAMOND INDUSTRY AND THEREF ORE THE SAME COULD NOT FURNISHED BEFORE THE TPO AS DESIRED. WITHOUT PREJUDICE TO THE ABOVE THE LD. A.R. SUBMITTED THAT IF THE TPO WAS NOT SATISFIED WITH THE BENCH MARKING OF INTERNA TIONAL TRANSACTIONS UNDER TNMM THE TPO COULD HAVE REJECTE D THE ASSESSEES BENCH MARKING AND DETERMINED THE ARM LEN GTH PRICE OF INTERNATIONAL TRANSACTIONS WITH THE AES INDEPEND ENTLY BY APPLYING ANY OF THE PRESCRIBED METHODS HOWEVER TP O HAS ACCEPTED THE BENCH MARKING OF THE ASSESSEE UNDER TN MM. THE LD. A.R. ARGUED THAT WHEN THE TPO HAS ACCEPTED THE BENCH MARKING OF INTERNATIONAL TRANSACTIONS AND ALSO THE METHOD OF BENCH MARKING THE IMPOSITION OF PENALTY UNDER SECTI ON 271G OF THE ACT CAN NOT BE LEVIED AND HAS TO BE DELETED. I N DEFENCE OF HIS ARGUMENT THE LD. A.R. RELIED ON A SERIES OF DECISI ONS AS UNDER: 1. CIT V. DECENT DIA JEWELS (P.) LTD. [2020] 117 TA XMANN.COM 358 (MUMBAI - TRIB.) 2. DTY. CIT V. LEO SCHACHTER DIAMONDS INDIA (P.) LT D. [2020] 116 TAXMANN.COM 994 (MUMBAI - TRIB.) 3. ACIT V. D. NAVINCHANDRA EXPORTS (P.) LTD. [2017] 87 TAXMANN.COM 306 (MUMBAI -TRIB.) 4. DTY. CIT V. K. GIRDHARILAL INTERNATIONAL LTD [20 19] 111 TAXMANN.COM 322 (MUM-TRIB) 5. DTY. CIT V. ASIAN STAR COMPANY LTD [2020] 116 TA XMANN. COM 448 (MUMBAI - TRIB.) 6. DTY. CIT V. ANKIT GEMS (P.) LTD [2019] 106 TAXM ANN.COM 243 (MUMBAI - TRIB.) ITA NO.3334/M/2019 M/S. N.M. SHAH & BROS. 7 6. THE LD. A.R. SUBMITTED THAT IN VIEW OF THE RATIO LAID DOWN IN THE ABOVE DECISIONS THE PENALTY LEVIED UNDER SE CTION 271G OF THE ACT MAY KINDLY BE DELETED. THE LD. A.R. ALSO W ITHOUT PREJUDICE SUBMITTED THAT THERE WAS REASONABLE CAUSE FOR NOT MAINTAINING THE SEGMENT WISE INFORMATION IN RESPECT OF AE AND NON AES. THE LD. A.R. SUBMITTED THAT THERE WAS A P RACTICAL DIFFICULTY IN FURNISHING THE PROFIT AND LOSS ACCOUN T OF AE SEGMENT AND NON AE SEGMENT AND THEREFORE THE SAME COULD NOT BE FURNISHED. THE LD. A.R. SUBMITTED THAT THERE IS A PRACTICAL DIFFICULTY IN FURNISHING THE SEGMENTAL WITH AE AND NON AE IN THE DIAMOND INDUSTRY AND THEREFORE SAME CONSTITUTE A RE ASONABLE CAUSE AND PENALTY AS LEVIED BY THE AO AND CONFIRMED BY LD. CIT(A) MAY KINDLY BE DELETED. IN DEFENCE OF HIS AR GUMENTS THE LD. A.R. RELIED ON THE FOLLOWING DECISIONS: 1. D. NAVINCHANDRA EXPORTS (P.) LTD. (SUPRA). 2. DILIPKUMAR V. LAKHI [IT APPEAL NO. 2142 (M) OF 2017 DATED 2-8-2018] PAGE 549-556 3. DY. CIT V. FIRESTONE INTERNATIONAL (P.) LTD. [IT AP PEAL NO. 5304 (MUM.) OF 2016 DATED 1-12-2018] 4. DY. CIT V. INTERJEWEL (P.) LTD. [IT APPEAL NO. 5628 (M) OF 2016 DATED 1-11- 2018]PAGE 557- 585 7. THE LD. D.R. ON THE OTHER HAND RELIED HEAVILY ON THE ORDER OF AUTHORITIES BELOW BY SUBMITTING THAT ASSESSEE HA S NOT SUBMITTED AND FURNISHED THE DETAILS AS REQUIRED BY THE TPO TO DETERMINE THE ARM LENGTH PRICE OF INTERNATIONAL TRA NSACTIONS WITH ITS AE AS THE ASSESSEE HAS FAILED TO FURNISH T HE SEGMENTAL AUDITED ACCOUNTS OF AE AND NON AE WHICH PREVENTED T HE TPO FROM MAKING ANY ADJUSTMENT TO THE INTERNATIONAL TRA NSACTIONS AND THUS THE TPO HAS TO ACCEPT ARM LENGTH PRICE AND ALSO THE METHOD FOLLOWED IN BENCH MARKING THE INTERNATIONAL TRANSACTIONS AS SUBMITTED BY THE ASSESSEE. THE LD. D.R. ITA NO.3334/M/2019 M/S. N.M. SHAH & BROS. 8 SUBMITTED THAT THE ASSESSEE IS UNDER OBLIGATION TO MAINTAIN ITS ACCOUNTS IN A PRESCRIBED FORMAT SO THAT THE INFORMA TION WHICH PLACED BEFORE THE TPO IN THAT FORMAT AND ONLY THEN THE TPO CAN MAKE ANALYSIS AND DETERMINE WHETHER THE ARM LENGTH PRICE OF INTERNATIONAL TRANSACTIONS BY THE ASSESSEE IS CORR ECT OR NOT. BUT IN THE PRESENT CASE THE ASSESSEE HAS FAILED TO MAINTAIN THESE RECORDS IN TERMS OF THE PROVISIONS OF THE ACT UNDER SECTION 92D(3) OF THE ACT. THE LD. D.R. THEREFORE PRAYED THAT THE APPEALS OF THE ASSESSEE MAY KINDLY BE DISMISSED AND ORDER OF LD. CIT(A) MAY KINDLY BE AFFIRMED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD INCLUDING THE ORDER OF TPO PASSE D UNDER SECTION 271G OF THE ACT AS WELL AS THE APPELLATE OR DER PASSED BY LD. CIT(A). WE FIND THAT IN THIS CASE THE ASSESSEE HAS ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS AE OF IMPO RT OF ROUGH DIAMONDS WHICH WERE SOLD TO THE THIRD PARTIES. THE ASSESSEE HAS NOT MAINTAINED SEGMENTAL ACCOUNTS OF TRANSACTIO NS WITH AE AND NON AE HOWEVER THE TPO HAS ACCEPTED THE ARM L ENGTH PRICE OF INTERNATIONAL TRANSACTIONS AS SUBMITTED BY THE ASSESSEE AND ALSO THE METHOD OF BENCH MARKING I.E. TNMM WITH CERTAIN OBSERVATIONS THAT ASSESSEE HAS NOT MAINTAINED THE DOCUMENTATION IN TERMS OF PROVISIONS OF SECTION 92D (3) OF THE ACT AND THEREFORE HE WAS NOT IN A POSITION TO PROPO SE ANY ADJUSTMENT TO ARM LENGTH PRICE TO THE INTERNATIONAL TRANSACTIONS AND HAS TO ACCEPT THE VERSION OF THE A SSESSEE AND THUS LEVIED A PENALTY EQUAL TO 2% OF THE VALUE OF I NTERNATIONAL TRANSACTIONS WITH THE AE UNDER SECTION 271G OF THE ACT. THE PRIMARY ARGUMENT OF THE LD. A.R. IS THAT SINCE THE TPO HAS ACCEPTED THE BENCH MARKING OF THE ASSESSEE UNDER TN MM TO BE ITA NO.3334/M/2019 M/S. N.M. SHAH & BROS. 9 AT ARM LENGTH PRICE THE IMPOSITION OF PENALTY UNDE R SECTION 271G OF THE ACT FOR NON FURNISHING OF SEGMENTAL AUD ITED STATEMENT OF AE AND NON AE WAS WRONG AND AGAINST TH E PROVISIONS OF LAW. WE FIND MERIT IN THE ARGUMENT O F THE ASSESSEE AS THE TPO COULD HAVE GONE FOR ITS OWN DETERMINATIO N OF ALP OF THE INTERNATIONAL TRANSACTIONS BY FOLLOWING ONE OF THE METHODS PRESCRIBED UNDER THE ACT HOWEVER THE TPO HAS NOT DONE SO. THEREFORE WE FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT ONCE THE TPO HAS ACCEPTED THE BENCH MARKING OF THE ASSESSEE TO BE AT ARM LENGTH THE PENALTY UNDER SECTION 271G OF THE ACT CAN NOT BE LEVIED. THE CASE OF THE ASSESSEE FINDS SUPP ORT FROM THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL I N THE CASE OF CIT V. DECENT DIA JEWELS (P.) LTD. (SUPRA) WHEREIN THE TRIBUNAL HAS HELD THAT WHERE THE TPO HAVING ACCEPTED THE BEN CH MARKING OF THE ASSESSEE UNDER TNMM THE IMPOSITION OF PENAL TY UNDER SECTION 271G OF THE ACT WAS TO BE DELETED UNDER SIM ILAR FACTS. THE OPERATIVE PART IS EXTRACTED AS UNDER: 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS IN THE LIG HT OF THE DECISIONS RELIED UPON AND PERUSED THE MATERIAL ON RECORD. THE MATERIAL ON RECORD MAKES IT CLEAR THAT THE ASSESSEE HAS MAINTAINED PRIMARY BOOKS OF ACCOUNT/DO CUMENTS IN RESPECT OF ITS BUSINESS ACTIVITY. THE FACT THAT THE DOCUMENTS RELA TING TO TRANSACTION WITH THE AE HAVE ALSO BEEN MAINTAINED BY THE ASSESSEE IS EVIDEN T FROM THE TRANSFER PRICING STUDY REPORT WHEREIN THE TRANSACTION WITH THE AE HAS BEEN BENCHMARKED UNDER TNMM. THIS SHOWS THAT THE ASSESSEE HAS MAINTAINED D OCUMENTS/BOOKS OF ACCOUNT AS REQUIRED UNDER THE STATUTE. IT IS ALSO EVIDENT IN THE COURSE OF PROCEEDINGS BEFORE THE TRANSFER PRICING OFFICER THE ASSESSEE HAS MADE SUBSTANTIAL COMPLIANCE BY FURNISHING TRANSFER PRICING STUDY REPORT AS WELL AS MANY OTHER DOCUMENTS. WHAT THE ASSESSEE HAS FAILED TO FURNISH IS THE SEGMENTAL PR OFITABILITY OF THE AE AND NON-AE TRANSACTIONS. THE INABILITY TO FURNISH THE AFORESAI D DETAILS WAS ALSO WELL EXPLAINED BY THE ASSESSEE BEFORE THE TRANSFER PRICING OFFICER AN D LEARNED COMMISSIONER (APPEALS) BY DEMONSTRATING THE PRACTICAL DIFFICULTY IN MAINTAINING THOSE DETAILS CONSIDERING THE NATURE OF BUSINESS CARRIED ON. NOTA BLY THOUGH THE TRANSFER PRICING OFFICER HAS ALLEGED THAT NON-FURNISHING OF SEGMENTA L PROFITABILITY MAKES IT DIFFICULT FOR HIM TO CORRECTLY ASCERTAIN THE ARM'S LENGTH PRI CE HOWEVER ULTIMATELY THE TRANSFER PRICING OFFICER HAS ACCEPTED THE TRANSACTI ON WITH THE AE TO BE AT ARM'S LENGTH. IF THE TRANSFER PRICING OFFICER WAS NOT SAT ISFIED WITH THE BENCHMARKING OF THE ASSESSEE UNDER TNMM NOTHING PREVENTED HIM FROM REJ ECTING ASSESSEE' BENCHMARKING AND DETERMINING THE ARM'S LENGTH PRICE OF THE TRANSACTION WITH THE ITA NO.3334/M/2019 M/S. N.M. SHAH & BROS. 10 AE INDEPENDENTLY BY APPLYING ANY ONE OF THE PRESCRI BED METHODS. THE BLAME FOR FAILURE ON THE PART OF THE TRANSFER PRICING OFFICER TO DETERMINE THE ARM'S LENGTH PRICE CANNOT BE FASTENED WITH THE ASSESSEE. AS COUL D BE SEEN UNDER IDENTICAL FACTS AND CIRCUMSTANCES THE TRIBUNAL IN ANKIT GEMS (P.) LTD. (SUPRA] OBSERVED AS UNDER:- '5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D MATERIAL ON RECORD. WE HAVE ALSO APPLIED OUR MIND TO THE DECISIONS RELI ED UPON. ON A CAREFUL READING OF THE PENALTY ORDER PASSED UNDER SECTION 2 71G OF THE ACT IT IS EVIDENT THE TRANSFER PRICING OFFICER HAS PROCEEDED TO IMPOSE PENALTY UNDER THE AFORESAID PROVISION ALLEGING THAT THE ASSESSEE HAS FAILED TO FURNISH CERTAIN INFORMATION/DOCUMENTS WHICH PREVENTED HIM F ROM DETERMINING THE ARM'S LENGTH PRICE PROPERLY. HOWEVER ON A PERUSAL OF THE ORDERS PASSED BY THE DEPARTMENTAL AUTHORITIES AS WELL AS THE MATERIA L PLACED ON RECORD IT IS NOTICED THAT THE ASSESSEE HAS MAINTAINED BOOKS OF A CCOUNT AND OTHER INFORMATION TO BENCHMARK THE INTERNATIONAL TRANSACT ION WITH AE BY APPLYING TNMM AND THE TRANSFER PRICING STUDY REPORT CONTAINI NG SUCH BENCHMARKING WAS FURNISHED BEFORE THE TRANSFER PRICING OFFICER A LONG WITH VARIOUS OTHER DETAILS. HOWEVER THE TRANSFER PRICING OFFICER WAS OF THE VIEW THAT THE INTERNATIONAL TRANSACTION WITH AE SHOULD BE BENCHMA RKED BY APPLYING CUP METHOD AND CALLED UPON THE ASSESSEE TO FURNISH SEGMENT-WIS E DETAILS OF AE AND NON- AE SALES FT IS OBSERVED BEFORE THE TRANSFER PRICI NG OFFICER THE ASSESSEE HAS MADE SUBMISSIONS EXPLAINING WHY IT IS NOT POSSIBLE FOR A PERSON ENGAGED IN MANUFACTURING AND SALE OF DIAMOND AND DIAMOND JEWEL LERY TO MAINTAIN SEGMENT-WISE DETAILS OF SALES MADE TO THE AE AND NO N-AES FOR THE PURPOSE OF APPLYING CUP METHOD. IT WAS EXPLAINED BY THE ASS ESSEE THAT CUP METHOD COULD NOT BE APPLIED AS INVOICE OF SALE OF AE AND N ON-AE INCLUDE DIFFERENT TYPES OF GOODS SOLD AT DIFFERENT PRICE. U IS FURTHE R OBSERVED IN THE PRECEDING YEARS ALSO THE ASSESSEE HAD BENCHMARKED INTERNATIO NAL TRANSACTION WITH AE BY APPLYING TNMM WHICH WAS ACCEPTED BY THE REVENUE. LT IS RELEVANT TO OBSERVE THE TRANSFER PRICING OFFICER HAS ULTIMATEL Y ACCEPTED THE BENCHMARKING DONE BY THE ASSESSEE UNDER TNMM METHOD . ON GOING THROUGH THE PROVISIONS OF SECTION 92D AND RULE 10D WE FIND THAT THE ASSESSEE IS REQUIRED TO MAINTAIN CERTAIN INFORMATIO N/DOCUMENTS WHICH MAY BE REQUIRED BY THE TRANSFER PRICING OFFICER FOR DET ERMINING ARM'S LENGTH PRICE. IN THE PRESENT CASE IT IS NOT A FACT THAT T HE ASSESSEE HAS NOT MAINTAINED ANY INFORMATION AS REQUIRED UNDER SECTIO N 92D(1) R/W RULE 10D(1). THE FACTS ON RECORD CLEARLY INDICATE THAT T HE ASSESSEE INDEED HAS MAINTAINED A NUMBER OF INFORMATION/DOCUMENTS AS REQ UIRED UNDER THE STATUTORY PROVISIONS. FURTHER THE ASSESSEE HAS ALS O EXPLAINED WHY IT IS NOT POSSIBLE TO FURNISH CERTAIN INFORMATION SOUGHT BY T HE TRANSFER PRICING OFFICER QUA APPLICABILITY OF CUP METHOD. IN THIS REGARD DE TAILED WRITTEN SUBMISSION HAS BEEN FILED BY THE ASSESSEE BEFORE THE TRANSFER PRICING OFFICER WHICH HAS BEEN PROPERLY EVALUATED BY THE LEARNED COMMISSIONER (APPEALS) AND THE DIFFICULTY IN MAINTAINING THE INFORMATION SOUGHT BY THE TRANSFER PRICING OFFICER HAS BEEN WELL EXPLAINED AND ANALYSED. IT IS ALSO NECESSARY TO OBSERVE ULTIMATELY THE TRANSFER PRICING OFFICER HAD ACCEPTE D THE BENCHMARKING DONE BY THE ASSESSEE UNDER TNMM AND NO VARIATION/ADJUSTM ENT WAS MADE BY ITA NO.3334/M/2019 M/S. N.M. SHAH & BROS. 11 HIM TO THE ARM'S LENGTH PRICE. EVEN ASSUMING THAT THE ASSESSEE HAS NOT MAINTAINED DOCUMENTS AS REQUIRED OR WAS UNABLE TO S UPPORT THE BENCHMARKING DONE BY IT UNDER TNMM NOTHING PREVENT ED THE TRANSFER PRICING OFFICER IN DISCARDING THE BENCHMARKING DONE BY THE ASSESSEE AND DETERMINING THE ARM'S LENGTH PRICE OF THE INTERNATI ONAL TRANSACTION WITH THE AE INDEPENDENTLY BY APPLYING ANYONE OF THE PRESCRIB ED METHOD. WHEN THE STATUTORY PROVISIONS CONFER ENOUGH POWER ON THE TRA NSFER PRICING OFFICER TO BENCHMARK THE INTERNATIONAL TRANSACTION AS PER THE PROVISIONS OF THE ACT THE ALLEGATION OF THE TRANSFER PRICING OFFICER THAT BY NON-FURNISHING OF DOCUMENTS BY THE ASSESSEE HE WAS PREVENTED FROM DET ERMINING THE ARM'S LENGTH PRICE UNDER CUP METHOD IS UNACCEPTABLE. THER EFORE WHEN THE TRANSFER PRICING OFFICER HAS ACCEPTED THE BENCHMARK ING OF THE ASSESSEE THE IMPOSITION OF PENALTY UNDER SECTION 271C OF THE ACT IS UNSUSTAINABLE. THE DECISIONS RELIED UPON BY THE LEARNED AUTHORISED REP RESENTATIVE DEALING WITH IDENTICAL ISSUE OF IMPOSITION OF PENALTY UNDER SECT ION 271G OF THE ACT ARE SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT APP EAL. IN VIEW OF THE AFORESAID WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF LEARNED COMMISSIONER (APPEALS) IN DELETING THE PENALTY IMPOSED UNDER SEC TION 27 IG OF THE ACT. GROUNDS ARE DISMISSED.' 8. SIMILARLY IN THE CASE OF DTY. CIT V. LEO SCHACH TER DIAMONDS INDIA (P.) LTD. (SUPRA) THE BENCH HAS HELD THAT NO PENALTY IS LEVIABLE WHERE THE TPO HAS ACCEPTED THE BENCH MARKING OF THE ASSESSEE UNDER TNMM UNDER SIMILAR FA CTS. IN THIS CASE ALSO THE ASSESSEE HAS FURNISHED ALL THE D ETAILS BEFORE THE TPO QUA THE TRANSACTIONS WITH THE AES AND NON A ES AND ASSESSEE HAS SUBMITTED THAT IT IS NOT PRACTICALLY P OSSIBLE TO MAINTAIN SUCH RECORDS IN THE DIAMOND INDUSTRY. THE BENCH HELD THAT IF THE TPO WAS NOT SATISFIED WITH THE BENCH MA RKING OF THE ASSESSEE UNDER TNMM NOTHING PREVENTED HIM FROM REJE CTING THE ASSESSEES BENCH MARKING AND DETERMINING THE ARM LE NGTH PRICE WITH THE AE INDEPENDENTLY BY APPLYING ANY ONE OF TH E PRESCRIBED METHODS. THE BENCH HELD THAT ASSESSEE HAS COMPLIED WITH ALL THE DIRECTIONS OF THE TPO AND PLACED ON RECORD THE REQUISITE INFORMATION. THE BENCH FURTHER HELD THAT ACCORDING TO US THERE WAS A REASONABLE CAUSE IN NOT COMPLYING WITH PROVIS IONS OF SECTION 92D OF THE ACT DUE TO PRACTICAL DIFFICULTIE S. ITA NO.3334/M/2019 M/S. N.M. SHAH & BROS. 12 SINCE THE FACTS BEFORE US ARE QUITE SIMILAR TO THE FACTS OF THE DECISIONS AS CITED ABOVE WHEREIN THE CO-ORDINATE BE NCHES OF THE TRIBUNAL HAS HELD THAT PENALTY CAN NOT BE LEVIED UN DER SECTION 271G WHERE THE ASSESSEE HAS FURNISHED REQUISITE INF ORMATION BEFORE THE AO THOUGH NOT FURNISHING SEGMENTAL AUDIT ED STATEMENT OF AE AND NON AE DUE TO PRACTICAL DIFFICU LTIES IN THE DIAMOND INDUSTRIES AND THE TPO HAVING ACCEPTED THE ARM LENGTH PRICE OF THE ASSESSEE AND ALSO THE METHOD OF DETERMINING ARM LENGTH PRICE I.E. TNMM IN OUR OPINION THE ORD ER OF LD. CIT(A) IS WRONG AND CAN NOT BE SUSTAINED. ACCORDIN GLY WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE TPO TO DELETE THE PENALTY. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.03.2021. SD/- SD/- ( RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 12.03.2021. * KISHORE SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT (A) CONCERNED MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR ITAT MUMBAI.