ACIT, New Delhi v. M/s. Global One India Pvt. Ltd., New Delhi

ITA 5164/DEL/2011 | 2005-2006
Pronouncement Date: 17-02-2012 | Result: Dismissed

Appeal Details

RSA Number 516420114 RSA 2011
Assessee PAN AABCG2558B
Bench Delhi
Appeal Number ITA 5164/DEL/2011
Duration Of Justice 2 month(s) 29 day(s)
Appellant ACIT, New Delhi
Respondent M/s. Global One India Pvt. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 17-02-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 17-02-2012
Date Of Final Hearing 08-02-2012
Next Hearing Date 08-02-2012
Assessment Year 2005-2006
Appeal Filed On 18-11-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI C BENC H BEFORE SHRI R.P. TOLANI JM & SHRI A.N. PAHUJA AM ITA NOS.5164 & 5165/DEL/2011 ASSESSMENT YEAR :2005-06 A.C.I.T. CIRCLE-12(1) NEW DELHI V/S. M/S GLOBAL ONE INDIA PVT. LTD. C-56 NEETI BAGH NEW DELHI-49 [PAN NO.: AABCG 2558 B] (APPELLANT) (RESPONDENT) ASSESSEE BY S/SHRI PAWAN KUMAR & JATIN JINDAL ARS REVENUE BY SHRI SALIL MISHRA DR DATE OF HEARING 08-02-2012 DATE OF PRONOUNCEMENT 17-02-2012 O R D E R A.N.PAHUJA:- THESE TWO APPEALS FILED ON 18.11.2011 BY THE REVENU E AGAINST TWO SEPARATE ORDERS ARE DATED 19.09.2011 OF THE LEA RNED CIT(A)-XX NEW DELHI RAISE THE FOLLOWING GROUNDS:- I.T.A. NO.5164/D/2011 1. WHETHER LD. CIT(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN DELETING TH E PENALTY OF ` ` 22 58 827/- LEVIED BY THE AO U/S 271G OF THE ACT. 2. THAT APPELLANT CRAVES LEAVE TO ADD ALTER OR AM END ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HE ARING. I.T.A. NO.5165/D/2011 1) WHETHER LD. CIT(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN DELETING TH E PENALTY OF ` `22 58 827/- LEVIED BY THE ASSESSING OFFICER U/S 271AA OF THE ACT. 2) THAT APPELLANT CRAVES LEAVE TO ADD ALTER OR AME ND ANY GROUND OF APPEAL RAISED AT THE TIME OF HEARING. ITA NOS.516 4&5165/DEL./2011 2 2. FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THA T RETURN DECLARING LOSS OF ` ` 36 03 300/- FILED ON 27.10.2005 BY THE ASSESSEE PR OVIDING TELECOMMUNICATION NETWORK SERVICES WITHIN INDIA FOR GLOBAL CONTRACTS ENTERED BY THE INDIAN CUSTOMERS WITH EGN BV THE PARENT COMPAN Y FORMED AND REGISTERED UNDER THE LAWS OF THE NETHERLANDS BESIDES PROVIDIN G INTERNATIONAL BANDWIDTH AND INTERNATIONAL TELECOMMUNICATION FACILITIES AFTER B EING PROCESSED U/S 143 (1) OF THE INCOME-TAX ACT 1961 (HEREAFTER REFERRED TO AS THE ACT) WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF NOTICE U/S 143(2) OF THE ACT I SSUED ON 30 TH OCTOBER 2006.SUBSEQUENTLY THE ASSESSEE SUBMITTED A REVISED COMPUTATION REVEALING LOSS OF ` 7 23 56 799/- DURING THE COURSE OF ASSESSMENT PROC EEDINGS THE ASSESSING OFFICER (A.O. IN SHORT) NOTICED THAT THE ASSESSEE HAD ENTERED IN TO INTERNATIONAL TRANSACTIONS WITH ITS A.E. SINCE THE VALUE OF SUCH TRANSACTIONS EXCEEDED ` 15 CRORES THE AO MADE A REFERENCE TO TRANSFER PRIC ING OFFICER[TPO] FOR DETERMINING ARMS LENGTH PRICE[ALP] OF THE INTER NATIONAL TRANSACTIONS. THOUGH THE TPO DID NOT SUGGEST ANY ADJUSTMENT IN HIS ORDER DATED 16 TH SEPTEMBER 2008 HE SUGGESTED INITIATION OF PENALTY PROCEEDING S U/S 271AA 271G AND 271BA OF THE ACT IN THE FOLLOWING TERMS:- 6. RECOMMENDATION FOR PENALTY: ON THE BASIS REFERENCE RECEIVED FROM ASSESSING OFFI CER A LETTER WAS ISSUED TO ASSESSEE 5 TH DECEMBER 2007 TO FURNISH DOCUMENTATION BY 28.12.2007. ON THE 27 TH DECEMBER IT WAS INFORMED BY THE COMPANY THAT IT WAS STILL IN PROCE SS OF FINALIZING CONTRACT. IT MAY BE MENTIONED THAT NO FORM 3CEB WA S RECEIVED ALSO. ANOTHER LETTER WAS ISSUED TO ASSESSEE ON 20. 02.08 FOR ASKING WHY PENALTY PROCEEDINGS U/S 271AA 271G 271BA SHOU LD NOT BE INITIATED. A COPY OF AUDITED ACCOUNTS WAS FILED ON 20.02.08 HOWEVER A COPY OF FORM 3CEB WAS FILED IN 04.03.08. THE DETAILED WORKING OF METHOD WAS FILED ON 26.03.08. I AM CONVINCED THAT ASSESSEE HAD COMMITTED DEFAULT FOR IMPOSITION PENALTY U/S 271AA 271G 271BA OF THE INCOME-TAX AC T 1961. I RECOMMEND THAT ASSESSING OFFICER SHALL IMPOSE PENAL TY UNDER THE SECTION MENTION ABOVE. ITA NOS.516 4&5165/DEL./2011 3 2.1 IN TERMS OF THE AFORESAID OBSERVATIONS OF THE TPO THE AO ISSUED A SHOW CAUSE NOTICE ON 30 TH DECEMBER 2008 SEEKING TO LEVY OF PENALTY U/S 271A A AND 271G OF THE ACT FOR FAILURE TO KEEP INFORMATIO N AND DOCUMENTS U/S 92D OF THE ACT AND ALSO FOR FAILURE TO FURNISH THE SAME. IN RESPONSE THE ASSESSEE REPLIED THAT THE DELAY IF ANY TO FURNISH THE FORM 3CEB AND THE RELATED BALANCE DETAILS/DOCUMENTS OCCURRED FOR THE REASONS BEYOND T HE CONTROL OF THE ASSESSEE AND AS SUCH THERE WAS A REASONABLE CAUSE OF NOT FURNISHING THE FORM 3CEB. HOWEVER THE AO DID NOT ACCEPT THE SUBMISSIONS OF T HE ASSESSEE AND IMPOSED A PENALTY OF ` ` 22 58 827/- U/S 271AA OF THE ACT AS UNDER:- THE SUBMISSION OF THE ASSESSEE HAS BEEN CONSIDERE D AND FOUND TO BE UNACCEPTABLE AND REJECTED AS THE ASSESS EE FAILS TO KEEP AND MAINTAIN INFORMATION AND DOCUMENT IN RESPE CT OF INTERNATIONAL TRANSACTION AS REQUIRED BY SUB-SECTIO N (1) OR SUB SECTION (2) OF SECTION 92D OF THE I.T. ACT 1961 DU RING THE COURSE OF ASSESSMENT OF INTERNATIONAL TRANSACTIONS BEFORE T HE TPO. THEREFORE IT IS CLEAR THAT IT IS A DELIBERATE DEFA ULT OF THE ASSESSEE. FURTHER THE CASE LAWS RELIED UPON BY THE ASSESSEE COMPANY IS DISTINGUISHABLE FROM THE FACTS OF THE PRESENT CASE. THEREFORE I AM CONVINCED THAT THE ASSESSEE HAD COM MITTED DEFAULT FOR IMPOSITION OF PENALTY U/S 271AA OF THE ACT FOR FAILURE TO KEEP AND MAINTAIN INFORMATION AND DOCUMENT IN RESPE CT OF INTERNATIONAL TRANSACTION. HENCE PENALTY U/S 271A A OF THE ACT 1961 LEVIABLE IN THIS CASE IS ` `22 58 827/-. THEREFORE PENALTY OF ` `22 58 827/- IS HEREBY IMPOSED. 3. SIMILARLY THE AO IMPOSED A PENALTY OF ` ` 22 58 827/- U/S 271G OF THE ACT HOLDING AS UNDER:- THE SUBMISSION OF THE ASSESSEE HAS BEEN CONSIDERE D AND FOUND TO BE UNACCEPTABLE AND REJECTED AS THE ASSESS EE FAILS TO KEEP AND MAINTAIN INFORMATION AND DOCUMENT IN RESPE CT OF INTERNATIONAL TRANSACTION AS REQUIRED BY SUB-SECTIO N (1) OR SUB SECTION (3) OF SECTION 92D OF THE I.T. ACT 1961 DU RING THE COURSE OF ASSESSMENT OF INTERNATIONAL TRANSACTIONS BEFORE T HE TPO. THEREFORE IT IS CLEAR THAT IT IS A DELIBERATE DEFA ULT OF THE ASSESSEE. FURTHER THE CASE LAWS RELIED UPON BY THE ASSESSEE COMPANY IS DISTINGUISHABLE FROM THE FACTS OF THE PRESENT CASE. ITA NOS.516 4&5165/DEL./2011 4 THEREFORE I AM CONVINCED THAT THE ASSESSEE HAD COM MITTED DEFAULT FOR IMPOSITION OF PENALTY U/S 271G OF THE A CT FOR FAILURE TO KEEP AND MAINTAIN INFORMATION AND DOCUMENT IN RESPE CT OF INTERNATIONAL TRANSACTION. HENCE PENALTY U/S 271G OF THE ACT 1961 LEVIABLE IN THIS CASE IS ` ` 22 58 827/-. THEREFORE PENALTY OF ` ` 22 58 827/- IS HEREBY IMPOSED. 4.. ON APPEAL THE LED CIT(A) AFTER HAVING COMMENT S OF THE TPO ON THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE CANCELLE D THE PENALTY U/S 271AA OF THE ACT HOLDING AS UNDER:- 5. THE APPELLANT HAD SUBMITTED CHRONOLOGY OF EVENTS BEFORE THE TPO. ON 16 DIFFERENT OCCASIONS THE APPEL LANT EITHER PRESENTED THE CASE BEFORE THE TPO OR SUBMITT ED DETAILS AS ASKED FOR. AS CAN BE CLEARLY SEEN FROM T HE SUBMISSION OF THE APPELLANT DOCUMENTS MAINTAINED B Y THE COMPANY WAS FURNISHED TO THE TPO. EVEN THE REMAND REPORT HAS NOT DENIED THESE FACTS. THE TPO W AS SATISFIED WITH THE DOCUMENTATION AND THAT IS WHY NO ADJUSTMENT WAS MADE TO THE INTERNATIONAL TRANSACTIO N. NOWHERE IT IS PROVED THAT APPELLANT DID NOT FURNISH THE DOCUMENTS AS REQUIRED UNDER SUB SECTION 3 OF SECTIO N 92D OF THE IT ACT. 5.1. FAILURE OF THE APPELLANT WAS IN GETTING HIS BOOKS AUDITED IN TIME AND FILE REPORT IN FORM NO. 3CEB. T HE APPELLANT HAS STATED THAT MANY KEY EMPLOYEES OF THE COMPANY ENTRUSTED WITH THE RESPONSIBILITY OF LOOKIN G AFTER COMPANY'S FINANCE/ ACCOUNTS LEFT THE COMPANY WITHOU T PROPER HANDING OVER AND ALSO CERTAIN RECORDS WERE MISPLACED FOR CERTAIN ACCOUNTS. HOWEVER DOCUMENTAT ION U/R 10D DOES NOT REQUIRE AN AUDITED ACCOUNT TO MAIN TAIN SUCH DOCUMENTS. RATHER SECTION 92D AND RULE 10D CONTEMPLATES CONTEMPORANEOUS DOCUMENTATION BY IMPLICATION THESE DOCUMENTS ARE PERTAINING TO PRE- AUDITED PERIOD. THE APPELLANT WAS ABLE TO PRODUCE T HESE DOCUMENTS BEFORE THE TPO AND THEREFORE PENALTY U/S 271G IS NOT JUSTIFIED IN THIS CASE. 5.2. THE ISSUE OF 'REASONABLE CAUSE' FOR NOT GETTIN G THE BOOKS OF ACCOUNTS AUDITED WAS DECIDED BY THE HON'BL E ITAT IN THE CASE OF JJ EXPORTS LTD. VS. DCIT (136 TT J 629). IN THIS CASE THE APPELLANT COMPANY PLEADED TH AT THE DELAY IN OBTAINING/ FILING OF AUDIT REPORT WAS DUE TO LACK OF ITA NOS.516 4&5165/DEL./2011 5 KNOWLEDGE ON THE PART OF THE ACCOUNTANT OF THE APPE LLANT COMPANY WHO WAS AT THE RELEVANT TIME MORE THAN 65 YEARS OLD AND DUE TO HEALTH REASONS HE HAD ULTIMATE LY LEFT THE ORGANIZATION. HON'BLE ITAT CALCUTTA BENCH HAS DECIDED THE CASE IN FAVOR OF THE APPELLANT AND AGAI NST THE REVENUE BY HOLDING THAT THIS WAS A REASONABLE CAUSE AND THEREFORE LEVY OF PENALTY WAS DELETED. 5.3 COMPLIANCE BEFORE THE TPO CLEARLY SHOWS THAT THE APPELLANT HAD MAINTAINED THE DOCUMENTATION U/S 92D OF THE IT ACT AND THE SAME WAS PRODUCED BEFORE THE TPO . SECONDLY ORDER OF THE AO HAS NOT ESTABLISHED THAT THE APPELLANT HAD NO REASONABLE CAUSE AS MANDATED U]S 2 73B OF THE IT ACT. IN VIEW OF THE ABOVE LEVY OF PENALT Y U/S 271G IS NOT JUSTIFIED. THE AO IS DIRECTED TO DELETE THE PENALTY. 5. LIKEWISE THE LD. CIT(A) CANCELLED THE PENALTY LEVIED U/S 271G OF THE ACT IN THE FOLLOWING TERMS:- 5. THE APPELLANT HAD SUBMITTED CHRONOLOGY OF EVENTS BEFORE THE TPO. ON 16 DIFFERENT OCCASIONS THE APPEL LANT EITHER PRESENTED THE CASE BEFORE THE TPO OR SUBMITT ED DETAILS AS ASKED FOR. AS CAN BE CLEARLY SEEN FROM T HE SUBMISSION OF THE APPELLANT DOCUMENTS MAINTAINED B Y THE COMPANY WAS FURNISHED TO THE TPO. EVEN THE REMAND REPORT HAS NOT DENIED THESE FACTS. THE TPO W AS SATISFIED WITH THE DOCUMENTATION AND THAT IS WHY NO ADJUSTMENT WAS MADE TO THE INTERNATIONAL TRANSACTIO N. NOWHERE IT IS PROVED THAT APPELLANT DID NOT MAINTAI N THE DOCUMENTS AS REQUIRED U/S 92D OF THE IT ACT. 5.1. FAILURE OF THE APPELLANT WAS IN GETTING HIS BOOKS AUDITED IN TIME AND FILE REPORT IN FORM NO. 3CEB. T HE APPELLANT HAS STATED THAT MANY KEY EMPLOYEES OF THE COMPANY ENTRUSTED WITH THE RESPONSIBILITY OF LOOKIN G AFTER COMPANY'S FINANCE/ ACCOUNTS LEFT THE COMPANY WITHOU T PROPER HANDING OVER AND ALSO CERTAIN RECORDS WERE MISPLACED FOR CERTAIN ACCOUNTS. HOWEVER DOCUMENTAT ION U/R IOD DOES NOT REQUIRE AN AUDITED ACCOUNT TO MAIN TAIN SUCH DOCUMENTS. RATHER SECTION 92D AND RULE IOD CONTEMPLATES CONTEMPORANEOUS DOCUMENTATION BY IMPLICATION THESE DOCUMENTS ARE PERTAINING TO PRE- AUDITED PERIOD. THE APPELLANT WAS ABLE TO PRODUCE T HESE DOCUMENTS BEFORE THE TPO AND THEREFORE PENALTY U/S ITA NOS.516 4&5165/DEL./2011 6 271G IS NOT JUSTIFIED IN THIS CASE. 5.2. THE ISSUE OF 'REASONABLE CAUSE' FOR NOT GETTIN G THE BOOKS OF ACCOUNTS AUDITED WAS DECIDED BY THE HON'BL E ITAT IN THE CASE OF JJ EXPORTS LTD. VS. DCIT (136 TT J 629). IN THIS CASE THE APPELLANT COMPANY PLEADED TH AT THE DELAY IN OBTAINING/ FILING OF AUDIT REPORT WAS DUE TO LACK OF KNOWLEDGE ON THE PART OF THE ACCOUNTANT OF THE APPE LLANT COMPANY WHO WAS AT THE RELEVANT TIME MORE THAN 65 YEARS OLD AND DUE TO HEALTH REASONS HE HAD ULTIMATE LY LEFT THE ORGANIZATION. HON'BLE ITAT CALCUTTA BENCH HAS DECIDED THE CASE IN FAVOR OF THE APPELLANT AND AGAI NST THE REVENUE BY HOLDING THAT THIS WAS A REASONABLE CAUSE AND THEREFORE LEVY OF PENALTY WAS DELETED. 5.3 COMPLIANCE BEFORE THE TPO CLEARLY SHOWS THAT THE APPELLANT HAD MAINTAINED THE DOCUMENTATION U]S 92D OF THE IT ACT. IT WAS NOT POSSIBLE FOR THE ASSESSEE TO PRODUCE DOCUMENTS IF IT HAD NOT MAINTAINED THE DOCUMENTS. E VEN FOR THE SAKE OF ARGUMENT IF ASSESSEE HAD NOT MAINT AINED THE DOCUMENT THE ORDER OF THE AO HAS NOT ESTABLISH ED THAT THE APPELLANT HAD NO REASONABLE CAUSE AS MANDA TED U]S 273B OF THE IT ACT. IN VIEW OF THE ABOVE LEVY OF PENALTY U/S 271G IS NOT JUSTIFIED. THE AO IS DIRECT ED TO DELETE THE PENALTY. 6. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR SUPPORTED T HE ORDER OF THE AO WHILE NARRATING THE CHRONOLOGY OF EVENTS AS UNDER:- CHRONOLOGY OF EVENTS .RETURN OF INCOME FOR A.Y. 2005-06 WAS FILED ON 27/ 10/2005 . :. THE DUE DATE FOR FILING RETURN OF INCOME WAS 31 /10/2005. THEREFORE THE PRESCRIBED TP DOCUMENTATION SHOULD H AVE EXISTED LATEST BY 31/10/2005 IN TERMS OF RULE 10D (4). :. IN THE COURSE OF ASSESSMENT PROCEEDINGS A REF ERENCE TO TPO WAS MADE WITH PRIOR APPROVAL OF CIT TO DETERM INE THE ALP OF INTERNATIONAL TRANSACTIONS. * TPO ISSUED NOTICE UNDER SECTION 92CA(3) READ WITH SECTION 92D (3) OF THE INCOME TAX ACT ON 05/12/2007 ITA NOS.516 4&5165/DEL./2011 7 REQUIRING THE ASSESSEE TO FILE THE TP DOCUMENTATION . ON 25/01/2008 A SKETCHY TP REPORT WAS SUBMITTED INDICATING MARGINS OF THE COMPARABLE COMPANIES. THE MARGINS AND FINANCIALS OF THE TESTED PARTY WERE NOT SUBMITTED WITH THIS TP REPORT. ON 01/02/2008 AUTHORIZED REPRESENTATIVE SUBMITT ED BEFORE THE TPO THAT FINANCIALS OF THE COMPANY HAD N OT YET BEEN FINALIZED. THE AUTHORIZED REPRESENTATIVE WAS A SKED TO EXPLAIN AS TO HOW THE ALP COULD BE COMPUTED IN ABSE NCE OF COMPLETE FINANCIALS FOR THE YEAR UNDER CONSIDERATIO N. IT IS REITERATED HERE THAT THE REQUISITE TP DOCUMENTATION SHOULD HAVE EXISTED LATEST BY THE DUE DATE OF FILING RETUR N I.E 31/10/2005 BUT THE SAME WAS NOT READY EVEN AFTER L APSE OF NEARLY TWO YEARS AND THREE MONTHS :. ON 20/02/2008 AUTHORIZED REPRESENTATIVE SUBMI TTED BEFORE THE TPO THAT THE AUDITORS REPORT IN FORM NO. 3CEB IS NOT YET FINALIZED . :. THE TPO ISSUED A SHOW CAUSE TO ASSESSEE ON 20/02/2008 AS TO WHY PENALTY SHOULD NOT BE IMPOSED UNDER SECTION 271AA 271G AND 271BA OF THE INCOME TAX ACT . :. THE AUDITORS REPORT IN FORM NO. 3CEB ALONG WIT H OTHER DETAILS/DOCUMENTS REQUISITIONED BY THE TPO WAS FILE D BY THE ASSESSEE ON 04/03/2008. IT IS REITERATED HERE THAT THE COMPLETE DOCUMENTS REQUISITIONED BY THE TPO VIDE NO TICE DATED 05/12/2007 SHOULD HAVE BEEN FILED WITHIN 30 D AYS FROM THAT DATE. I.E LATEST BY 05/01/2008. HOWEVER COMPL IANCE TO ALL THE TERMS OF THE SAID NOTICE ISSUED BY TPO WAS MADE AFTER NEARLY 90 DAYS FROM THE DATE OF NOTICE. THERE IS NOTHING ON RECORD TO SUGGEST THAT ANY EXTENSION OF TIME PER IOD WAS SOUGHT BY THE ASSESSEE. CONCLUSION IN THE FACTS AND CIRCUMSTANCES OF THE CASE ASSESSE E HAS COMMITTED FOLLOWING DEFAULTS WHICH ARE LIABLE FOR P ENAL ACTION AS PER THE PROVISIONS OF INCOME TAX ACT:- A. NOT MAINTAINING THE PRESCRIBED TP DOCUMENTATION THE TP COMPLETE DOCUMENTATION SHOULD HAVE EXISTED L ATEST BY 31/10/2005. HOWEVER AS PER ASSESSEE'S OWN ADMIS SION ITA NOS.516 4&5165/DEL./2011 8 BEFORE THE TPO THE TP DOCUMENTATION WAS NOT COMPLE TE EVEN BY FEBRUARY 2008 I.E AFTER LAPSE OF 2 YEARS & 3 MONTHS. B. NOT FURNISHING THE INFORMATION REQUISITIONED BY TP O THE TPO ISSUED NOTICE ON 05/12/2007 REQUIRING DETAI LS AND DOCUMENTS IN RESPECT OF THE INTERNATIONAL TRANSACTI ON. THE COMPLIANCE TO ALL THE TERMS OF THE NOTICE WAS MADE BY 04/03/2008. I.E AFTER NEARLY 90 DAYS. THE TIME PERI OD PRESCRIBED BY THE STATUTE FOR SUCH COMPLIANCE IS 30 DAYS FROM DATE OF RECEIPT OF THE NOTICE. THE TIME PERIOD CAN BE EXTENDED ONCE FOR FURTHER TIME OF 30 DAYS ON AN AP PLICATION MADE BY THE ASSESSEE. AS PER ASSESSEE OWN ADMISSION THE SAID NOTICE OF TPO WAS RECEIVED BY IT ON 26/12/2007 . THEREFORE COMPLIANCE WITH ALL THE TERMS OF THE NOT ICE SHOULD HAVE BEEN MADE NOT LATER THAT 25/02/2008 EVEN AFTE R TAKING INTO ACCOUNT THE EXTENDED TIME PERIOD. PLEA OF REASONABLE CAUSE .:. THE ASSESSEE HAS TAKEN THE PLEA THAT THE ACCOUN TANT REPORT IN FORM NO. 3CEB WAS FILED BELATEDLY DUE TO NON-FINALIZATION OF COMPANY'S ACCO UNTS PURSUANT TO CERTAIN UNFORESEEN CIRCUMSTANCES FACED BY THE ASSESSEE. :. THIS PLEA DOES NOT COME TO ASSESSEE'S RESCUE F OR FOLLOWING REASONS:- 1) THERE COULD BE NO REASONABLE CAUSE FOR NOT FINALIZ ING THE COMPANY'S ACCOUNTS EVEN LAPSE OF 2 YEARS AND 11 MON THS AFTER THE CLOSE OF RELEVANT FINANCIAL YEAR UNDER CO NSIDERATION. 2) THE PENALTY HAS BEEN LEVIED FOR NOT MAINTAINING TH E TP DOCUMENTATION BY THE SPECIFIED DATE. I.E BY 31/10/2 005 AND FOR NOT FURNISHING THE TP DOCUMENTATION AND OTHER INFORMATION REQUISITIONED BY THE TPO VIDE NOTICE DA TED 05/12/2007. IN OTHER WORDS SINCE NO PENALTY HAS BE EN LEVIED FOR DELAY IN FURNISHING THE REPORT IN FORM NO. 3CEB THE EXPLANATION OFFERED FOR THE DELAY IS NOT AT ALL REL EVANT FOR THE CASE. 3) THE TP DOCUMENTATION WAS REQUIRED TO HAVE EXISTED BY 31/10/2005 BUT THE SAME WAS NOT READY EVEN BY FEBRU ARY 2008. THUS THE DELAY IN FINALIZING THE TP DOCUMENT ATION IS NEARLY 2 YEARS & 3 MONTHS. BY NO STRETCH OF IMAGINATION THE EXPLANATION OFFERED FOR DELAY IN FINALIZATION OF AC COUNTS CAN ITA NOS.516 4&5165/DEL./2011 9 BE TREATED AS A REASONABLE CAUSE HAVING REGARD TO FACTS AND CIRCUMSTANCES OF THE CASE. 7. ON THE OTHER HAND THE LD. AR ON BEHALF OF THE ASSESSEE SUPPORTED THE FINDINGS OF LEARNED CIT(A) WHILE RELYING UPON D ECISION DATED 09.11.2011 OF THE MUMBAI BENCH IN THE CASE OF ACIT VS. SMITH AND NEPHEW HEALTH CARE PVT. LTD. IN I.T.A. NO.5779/MUM/2007 FOR THE ASSESSMENT YEAR 2003-04 . IT WAS FURTHER SUBMITTED THAT T HE ASSESSEE COMPLIED WITH THE REQUIREMENT OF MAINTAINI NG 'CONTEMPORANEOUS DOCUMENTATION' IN THE FORM OF TP S TUDY BEFORE THE DUE DATE I.E. OCTOBER 31 2005 AND ALSO FURNISHED THE DOCUMENTATION/ INFORMATION A S REQUIRED BY THE TPO WELL WITHIN THE STIPULATED TIME . SINCE THERE WAS A REASONABLE CAUSE FOR DELAY IN FILING OF FORM 3CEB AND WHICH H AD NO EFFECT ON PREPARATION OF DOCUMENTATION U/S 92D OF THE ACT LEVY OF PENALTY U /S 271AA & 271G OF THE ACT WAS NOT JUSTIFIED. 8. WE HAVE HEARD BOTH THE PARTIES AND GONE THR OUGH THE FACTS OF THE CASE.. THE ISSUE BEFORE US RELATES TO LEVY OF PE NALTY OF ` ` 22 58 830/- IMPOSED U/S 271AA OF THE ACT FOR FAILURE TO KEEP AND MAINT AIN INFORMATION AND DOCUMENTS AS STIPULATED UNDER SEC. 92D(1) & 92D(2) OF THE ACT WITHOUT ANY REASONABLE CAUSE & ALSO OF LEVY OF AN EQUIVALENT AMOUNT OF PE NALTY OF ` ` 22 58 830/- U/S 271G OF THE ACT FOR NOT FURNISHING INFORMATION AND DOCUMENTS WITHIN THE TIME SPECIFIED IN NOTICE U/S 92D(3) OF THE ACT. BEFORE P ROCEEDING FURTHER WE MAY HAVE A LOOK AT THE RELEVANT PROVISIONS GOVERNING MAINTEN ANCE OF INFORMATION AND DOCUMENTS AND THEIR SUBMISSION BEFORE THE REVENUE A UTHORITIES FOR DETERMINING THE ALP. THE AO/TPO REQUIRES CERTAIN INFORMATION AN D DOCUMENTS ON CONTROLLED AND UNCONTROLLED INTERNATIONAL TRANSACTIONS AND OTH ER RELEVANT EVIDENCE. IN THIS CONNECTION RELEVANT RULE 10D OF INCOME-TAX RULES 19 62 LAYS DOWN AS UNDER: RULE 10D. INFORMATION AND DOCUMENTS TO BE KEPT AND MAINTAINED UNDER SECTION 92D. (1) EVERY PERSON WHO HAS ENTERED INTO AN TIME/FORM WHEN INTERNATIONAL TRANSACTION SHALL KEEP AND MAINTAIN INFORMATION IS TO ITA NOS.516 4&5165/DEL./2011 10 THE FOLLOWING INFORMATION AND DOCUMENTS NAMELY:- BE FURNISHED AS PER CLAUSE. NO.1 NO.2 (A) A DESCRIPTION OF THE OWNERSHIP STRUCTURE OF THE ASSESSEE ENTERPRISE WITH DETAILS OF SHARES OR OTHER OWNERSHIP INTEREST HELD THEREIN BY OTHER ENTERPRISES; (A) IN THE AUDIT REPORT ON FORM 3CEB. (B) A PROFILE OF THE MULTINATIONAL GROUP OF WHICH THE ASSESSEE ENTERPRISE IS A PART ALONG WITH THE NAME ADDRESS LEGAL STATUS AND COUNTRY TO TAX RESIDENCE OF EACH OF THE ENTERPRISES COMPRISED IN THE GROUP WITH WHOM INTERNATIONAL TRANSACTIONS HAVE BEEN ENTERED INTO BY THE ASSESSEE AND OWNERSHIP LINKAGES AMONG THEM; (B) SAME (C) A BROAD DESCRIPTION OF THE BUSINESS OF THE ASSESSEE AND THE INDUSTRY IN WHICH THE ASSESSEE OPERATES AND OF THE BUSINESS OF THE ASSOCIATED ENTERPRISES WITH WHOM THE ASSESSEE HAS TRANSACTED; (C) SAME - (D) THE NATURE AND TERMS (INCLUDING PRICES) OF INTERNATIONAL TRANSACTIONS ENTERED INTO WITH EACH ASSOCIATED ENTERPRISE DETAILS OF PROPERTY TRANSFERRED OR SERVICES PROVIDED AND THE QUANTUM AND THE VALUE OF EACH SUCH TRANSACTION OR CLASS OF SUCH TRANSACTION; (D) IN FORM 3CEB IN THE AUDIT REPORT OR U/S 92D(3) OR U/S 92CA(2) (E) A DESCRIPTION OF THE FUNCTIONS PERFORMED RISKS ASSUMED AND ASSETS EMPLOYED OR TO BE EMPLOYED BY THE ASSESSEE AND BY THE ASSOCIATED ENTERPRISES INVOLVED IN THE INTERNATIONAL TRANSACTION; (E) SAME - (F) A RECORD OF THE ECONOMIC AND MARKET (F) SAME ITA NOS.516 4&5165/DEL./2011 11 ANALYSES FORECASTS BUDGETS OR ANY OTHER FINANCIAL ESTIMATES PREPARED BY THE ASSESSEE FOR THE BUSINESS AS A WHOLE AND FOR EACH DIVISION OR PRODUCT SEPARATELY WHICH MAY HAVE A BEARING ON THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE; (G) A RECORD OF UNCONTROLLED TRANSACTIONS TAKEN INTO ACCOUNT FOR ANALYZING THEIR COMPARABILITY WITH THE INTERNATIONAL TRANSACTIONS ENTERED INTO INCLUDING A RECORD OF THE NATURE TERMS AND CONDITIONS RELATING TO ANY UNCONTROLLED TRANSACTION WITH THIRD PARTIES WHICH MAY BE OF RELEVANCE TO THE PRICING OF THE INTERNATIONAL TRANSACTIONS; (G) SAME (H) A RECORD OF THE ANALYSIS PERFORMED TO EVALUATE COMPARABILITY OF UNCONTROLLED TRANSACTIONS WITH THE RELEVANT INTERNATIONAL TRANSACTION; (H) SAME (I) A DESCRIPTION OF THE METHODS CONSIDERED FOR DETERMINING THE ARMS LENGTH PRICE IN RELATION TO EACH INTERNATIONAL TRANSACTION OR CLASS OF TRANSACTION THE METHOD SELECTED AS THE MOST APPROPRIATE METHOD ALONG WITH EXPLANATIONS AS TO WHY SUCH METHOD WAS SO SELECTED AND HOW SUCH METHOD WAS APPLIED IN EACH CASE; (I) SAME - (J) A RECORD OF THE ACTUAL WORKING CARRIED OUT FOR DETERMINING THE ARMS LENGTH PRICE INCLUDING DETAILS OF THE COMPARABLE DATA AND FINANCIAL INFORMATION USED IN APPLYING THE MOST APPROPRIATE METHOD AND ADJUSTMENTS IF ANY WHICH WERE MADE TO ACCOUNT FOR DIFFERENCES BETWEEN THE INTERNATIONAL TRANSACTION AND THE (J) SAME ITA NOS.516 4&5165/DEL./2011 12 COMPARABLE UNCONTROLLED TRANSACTIONS OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS; (K) THE ASSUMPTIONS POLICIES AND PRICE NEGOTIATIONS IF ANY WHICH HAVE CRITICALLY AFFECTED THE DETERMINATION OF THE ARMS LENGTH PRICE; (K) SAME (L) DETAILS OF THE ADJUSTMENTS IF ANY MADE TO TRANSFER PRICES TO ALIGN THEM WITH ARMS LENGTH PRICES DETERMINED UNDER THESE RULES AND CONSEQUENT ADJUSTMENT MADE TO THE TOTAL INCOME FOR TAX PURPOSES; (L) SAME - ANY OTHER INFORMATION DATA OR DOCUMENT INCLUDING INFORMATION OR DATA RELATING TO THE ASSOCIATED ENTE RPRISE WHICH MAY BE RELEVANT FOR DETERMINATION OF THE ARM S LENGTH PRICE. (M) SAME - (2) NOTHING CONTAINED IN SUB-RULE (1) SHALL APPLY IN A CASE WHERE THE AGGREGATE VALUE AS RECORDED IN THE BOOKS OF ACCOUNT OF INTE RNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE DOES NOT EXCEED ONE CRORE RUPE ES : PROVIDED THAT THE ASSESSEE SHALL BE REQUIRED TO SUBSTANTIAT E ON THE BASIS OF MATERIAL AVAILABLE WITH HIM THAT INCOME ARISING FR OM INTERNATIONAL TRANSACTIONS ENTERED INTO BY HIM HAS BEEN COMPUTED IN ACCORDANCE WITH SECTION 92. (3) THE INFORMATION SPECIFIED IN SUB-RULE (1) SHALL BE SUPPORTED BY AUTHENTIC DOCUMENTS WHICH MAY INCLUDE THE FOLLOWING : (A) OFFICIAL PUBLICATIONS REPORTS STUDIES AND DA TA 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 NATIONAL OR INTERNAT IONAL REPUTE; (C) PRICE PUBLICATIONS INCLUDING STOCK EXCHANGE AN D COMMODITY MARKET QUOTATIONS; (D) PUBLISHED ACCOUNTS AND FINANCIAL STATEMENTS RE LATING TO THE BUSINESS AFFAIRS OF THE ASSOCIATED ENTERPRISES; (E) AGREEMENTS AND CONTRACTS ENTERED INTO WITH ASS OCIATED ENTERPRISES OR WITH UNRELATED ENTERPRISES IN RESPECT OF TRANSACTIO NS SIMILAR TO THE INTERNATIONAL TRANSACTIONS; ITA NOS.516 4&5165/DEL./2011 13 (F) LETTERS AND OTHER CORRESPONDENCE DOCUMENTING A NY TERMS NEGOTIATED BETWEEN THE ASSESSEE AND THE ASSOCIATED ENTERPRISE; (G) DOCUMENTS NORMALLY ISSUED IN CONNECTION WITH V ARIOUS 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 E XIST LATEST BY THE SPECIFIED DATE REFERRED TO IN CLAUSE (IV) OF SECTION 92F: PROVIDED THAT WHERE AN INTERNATIONAL TRANSACTION CONTINUES TO HAVE EFFECT OVER MORE THAN ONE PREVIOUS YEAR FRESH DOCUMENTATION NE ED NOT BE MAINTAINED SEPARATELY IN RESPECT OF EACH PREVIOUS YEAR UNLESS THERE IS ANY SIGNIFICANT CHANGE IN THE NATURE OR TERMS OF THE INTERNATIONAL TRANSACTION IN THE ASSUMPTIONS MADE OR IN ANY OTHER FACTOR WHICH COULD INFLUENCE THE TRANSFER PRICE AND IN THE CASE OF SUCH SIGNIFICANT CHANGE FRESH DOCUMENTATIO N AS MAY BE NECESSARY UNDER SUB-RULES (1) AND (2) SHALL BE MAINTAINED BRI NGING OUT THE IMPACT OF THE CHANGE ON THE PRICING OF THE INTERNATIONAL TRANSACT ION. (5) THE INFORMATION AND DOCUMENTS SPECIFIED IN SUB- RULES (1) AND (2) SHALL BE KEPT AND MAINTAINED FOR A PERIOD OF EIGHT YEARS FRO M THE END OF THE RELEVANT ASSESSMENT YEAR. 8.1 AS IS EVIDENT FROM THE AFORESAID RULE 10D D OCUMENTS AND INFORMATION PRESCRIBED THEREUNDER ARE VOLUMINOUS AND IT WOULD ONLY BE IN RARE CASES THAT ALL THE CLAUSES OF AFORESAID SUB-RULES WOULD BE ATTRACT ED. IT WOULD ALL DEPEND UPON THE FACTS AND CIRCUMSTANCES OF THE CASE MORE PARTI CULARLY THE NATURE OF INTERNATIONAL TRANSACTIONS CARRIED OR SERVICES INVO LVED. LIKEWISE SUPPORTING DOCUMENTS OFFICIAL PUBLICATIONS REPORTS MARKET R ESEARCH STUDIES TECHNICAL PUBLICATIONS OF GOVERNMENT OR OTHER INSTITUTE OF NA TIONAL OR INTERNATIONAL REPUTE AND ALL THE DOCUMENTS MENTIONED IN RULE 10D(3) MAY NOT BE NECESSARY IN CASE OF EVERY ASSESSEE. APPLICATION OF ONE OR MORE CLAUS ES OF SUB-RULE (3) WOULD DEPEND UPON FACTS & CIRCUMSTANCES INVOLVED IN THE INTERNATIONAL TRANSACTIONS. APPARENTLY THE ASSESSEE AND THE TAX AUTHORITIES H AVE TO APPLY THEIR MIND TO SEE AS TO WHAT INFORMATION AND DOCUMENTS PRESCRIBED IN SUB-RULES OF RULE 10D AND WHICH PARTICULAR CLAUSE ARE RELEVANT AND THEREFORE NECESSARY FOR DETERMINING ALP. THE CONSIDERATION OF THESE ASPECTS IS MATERIAL BEFORE ISSUING NOTICE U/S 92D(3) OF THE ACT IF IT IS TO SERVE ITS PURPOSE. I N FACT THE INITIAL INFORMATION RELATING TO INTERNATIONAL TRANSACTIONS IS GATHERED FROM THE ASSSESSEE IN THE ITA NOS.516 4&5165/DEL./2011 14 PRESCRIBED AUDIT REPORT IN FORM 3CEB IN TERMS OF PR OVISIONS OF SEC. 92E OF THE ACT. ON THE BASIS OF FORM 3CEB AO DETERMINES THE QUESTION AS TO WHETHER TOTAL VALUE OF THE TRANSACTIONS IS MORE OR LESS THAN ` 15 CRORE TO CONSIDER THE QUESTION WHETHER OR NOT DETERMINATION OF ALP IS TO BE REFERR ED TO THE TRANSFER PRICING OFFICER (TPO). IF THE TOTAL VALUE EXCEEDS THE PRESC RIBED LIMITS THE AO HAS TO REFER THE MATTER TO THE TPO. SINCE THE INFORMATION PRESC RIBED UNDER RULE 10D IN DIFFERENT COLUMNS IS VOLUMINOUS & ALTERNATIVE IT HAS TO BE EXAMINED AS TO WHAT INFORMATION FROM WHICH CLAUSE IS REQUIRED ON THE FACTS OF THE GIVEN CASE. ARMED WITH THE PRESCRIBED INITIAL INFORMATION AND IN THE LIGHT OF DETAILS OF INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE AND THE MET HOD EMPLOYED TO DETERMINE THE ALP OF TRANSACTIONS FURTHER PROCEEDINGS ARE CO NDUCTED TOWARDS DETERMINATION OF ALP IN TERMS OF PROVISIONS OF SEC. 92C 92CA & 92D OF THE ACT. SEC. 271AA STIPULATES PENALTY FOR FAILURE TO KEEP AND MAINTAIN INFORMATION AND DOCUMENT IN RESPECT OF INTERNATIONAL TRANSACTION WH ILE SEC. 271G PROVIDES FOR PENALTY FOR FAILURE TO FURNISH INFORMATION OR DOCUM ENT UNDER SECTION 92D OF THE ACT. HOWEVER SEC. 273B OF THE ACT PROVIDES THAT P ENALTY UNDER THESE PROVISIONS SHALL NOT BE IMPOSABLE IF THE ASSESSEE ESTABLISHES REASONABLE CAUSE. 8.2 IN THE INSTANT CASE WE ARE CONCERNED WITH LEVY OF PENALTY U/S 271AA FOR FAILURE TO KEEP AND MAINTAIN INFORMATION AND DOCUME NTS AS STIPULATED UNDER SEC. 92D(1) & 92D(2) OF THE ACT WITHOUT ANY REASONABLE C AUSE & U/S 271G OF THE ACT FOR FAILURE TO FURNISH INFORMATION / DOCUMENTS REQU IRED BY SUB-SECTION (3) OF SECTION 92D WHICH STIPULATES THAT THE SAID PROVIS ION CAN BE APPLIED IN THE FOLLOWING CIRCUMSTANCES: (I) IN THE COURSE OF THE PROCEEDINGS UNDER THE ACT BEFORE THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS). (II) ANY DOCUMENTS OR INFORMATION PRESCRIBED UNDER SUB-SECTION (1) & SUB- SECTION (2) AS MAY BE REQUIRED. ITA NOS.516 4&5165/DEL./2011 15 (III) REQUIRED TO BE FURNISHED UNDER SUB-SECTION (3 ) WITHIN 30 DAYS (AS EXTENDED BY ANOTHER 30 DAYS) FROM THE RECEIPT OF NO TICE ISSUED IN THIS REGARD. 8.21 WE HAVE ALREADY MENTIONED THE DOCUMENTS R EQUIRED TO BE KEPT AND MAINTAINED IN TERMS OF PROVISIONS OF SUB-SECTION(1) AND SUB-SECTION(2) OF SEC. 92D OF THE ACT. IN TERMS OF PROVISIONS OF SEC. 92D( 3) OF THE ACT THE AO MAY REQUIRE FROM ANY PERSON ENTERING INTO INTERNATIONA L TRANSACTION ANY INFORMATION OR DOCUMENT AS MAY BE PRESCRIBED. THE WORD ANY I NFORMATION OR DOCUMENT DOES NOT MEAN ALL THE DOCUMENTS PRESCRIBED UNDER RULE 10D OF THE IT RULES 1962. THE WORD REQUIRED IS IMPORTANT AS IT RULES OUT OPTION WITH THE ASSESSEE AND MAKES IT OBLIGATORY TO FURNISH THE REQ UISITE INFORMATION. AFTER HAVING A REPORT IN FORM NO. 3CEB IN THE FIRST INSTA NCE NEXT STEP IS TO ISSUE NOTICE U/S 92CA(2) OF THE ACT TO THE ASSESSEE TO PRODUCE EVIDENCE IN SUPPORT OF ALP. UNDER SUB-SECTION (2) OF SECTION 92CA OF THE ACT E VIDENCE IN SUPPORT OF ALP MAY INCLUDE INFORMATION AND DOCUMENTS REFERRED TO I N SUB-SECTION (3) OF SECTION 92D WHICH ARE PRESCRIBED IN VARIOUS CLAUSES OF RUL E 10D(1) AS AFORESAID. IF ON CONSIDERATION OF EVIDENCE PRODUCED BY THE ASSESSEE THE TPO IS SATISFIED THAT ALP HAS BEEN PROPERLY AND CORRECTLY DETERMINED BY T HE ASSESSEE IT IS THE END OF THE MATTER. HOWEVER IF COMPLETE INFORMATION IS NO T FURNISHED OR OTHERWISE TPO IS OF THE VIEW THAT MORE INFORMATION ON SPECIFIED P OINTS IS REQUIRED FROM THE ASSESSEE THE TPO CAN ISSUE NOTICE UNDER SUB-SECTIO N (3) OF SECTION 92D. TPO CAN ALSO ISSUE NOTICE U/S 92CA(3) OF THE ACT DEPEN DING UPON THE FACTS OF THE CASE AND THE INFORMATION NEEDED. ONLY IN THE EVENT OF FAILURE OF THE ASSESSEE TO SUPPORT ITS ALP BY FILING NECESSARY EVIDENCE QUEST ION OF REQUIRING ASSESSEE TO FURNISH PRESCRIBED INFORMATION WOULD ARISE. THERE I S NO RATIONALITY IN REQUIRING INFORMATION OR DOCUMENTS FROM THE ASSESSEE FIRST UN DER SECTION 92D(3) AND THEREAFTER PROVIDE OPPORTUNITY TO THE ASSESSEE TO SUPPORT ITS ALP AS OBSERVED IN CARGIL INDIA PRIVATE LTD. 300 ITR (AT) 223 (DEL.). MOREOVER HAVING REGARD TO PURPOSE OF THE REGULATIONS THE NOTICE U/S 92D(3) M UST REQUIRE SPECIFIC INFORMATION OR DOCUMENTS WHICH THE ASSESSEE FAILED TO FURNISH U/S 92CA(2) OF THE ITA NOS.516 4&5165/DEL./2011 16 ACT BUT WHICH ACCORDING TO THE TPO ARE NECESSARY FO R DETERMINATION OF ALP OF INTERNATIONAL TRANSACTIONS. THEREFORE NOTICE U/S 92D(3) CANNOT BE VAGUE BUT MUST REQUIRE SPECIFIC INFORMATION AND HAS TO BE CON FINED TO THE FURNISHING OF INFORMATION OR DOCUMENT AS MAY BE PRESCRIBED. FUR THER THERE IS NO RESTRICTION OF FURNISHING PRESCRIBED INFORMATION IN RESPONSE TO A NOTICE U/S 92CA(2) OF THE ACT TO SUPPORT THE COMPUTATION OF ALP BY THE ASSESS EE. HOWEVER THERE IS NO AUTHORITY U/S 92D(3) WITH THE T.P.O. TO REQUIRE THE ASSESSEE TO FURNISH NON- SPECIFIED INFORMATION OR SUCH INFORMATION OR DOCUME NT ALREADY FILED BY THE ASSESSEE OR USE OF THE PROVISION WITHOUT ASKING TH E ASSESSEE TO SUPPORT FIRST ITS ALP OF INTERNATIONAL TRANSACTIONS. IN NUTSHELL AP PLICATION OF MIND TO ASCERTAIN AND CONSIDERATION OF MATERIAL ON RECORD AND TO SEE WHAT FURTHER INFORMATION ON SPECIFIC POINTS IS REQUIRED IS ESSENTIAL BEFORE IS SUING NOTICE U/S 92D(3) OF THE ACT TO THE ASSESSEE. IT IS NOT A ROUTINE NOTICE WHICH CAN BE CASUALLY ISSUED CALLING FOR ANY INFORMATION OR ALL PRESCRIBED INFORMATION. WHER E THE ASSESSEE HAS OPTION TO SELECT RELEVANT INFORMATION IT IS NOT A NOTICE U/S 92D(3) AS OPTION AND WORD REQUIRE DO NOT GO TOGETHER. IN THIS CONNECTION WE FIND THAT THE ASSESSEE SUBMITTED THE FOLLOWING REPLY BEFORE THE AO IN RES PECT OF MAINTENANCE AND FURNISHING OF PRESCRIBED INFORMATION : NATURE OF INFORMATION/ DOCUMENTS PRESCRIBED UNDER RULE 10D(1) NATURE OF INTERNATIONAL TRANSACTION (MANNER OF COMPLIANCE WITH THE PROVISION) A) A DESCRIPTION OF THE OWNERSHIP STRUCTURE OF THE ASSESSEE ENTERPRISE WITH DETAILS OF SHARES OR OTHER OWNERSHIP INTEREST HELD THEREIN BY OTHER ENTERPRISES THE APPELLANT HAS PROVIDED THIS AS A PART OF ITS GROUP OVERVIEW ON PAGE 4 OF THE TP REPORT FOR FY 2004-05 FILED WITH THE TPO. B) A PROFILE OF THE MULTINATIONAL GROUP OF WHICH THE ASSESSEE ENTERPRISE IS A PART ALONG WITH THE NAME ADDRESS LEGAL STATUS AND COUNTRY OF TAX RESIDENCE OF EACH OF THE ENTERPRISES THE APPELLANT HAS PROVIDED THE PROFILE OF THE MULTINATIONAL GROUP AS A PART OF THE TP REPORT FILED WITH LD. TPO. THE DETAILS (NAME ADDRESS LEGAL STATUS AND ITA NOS.516 4&5165/DEL./2011 17 COMPRISED IN THE GROUP WITH WHOM INTERNATIONAL TRANSACTIONS HAVE BEEN ENTERED INTO BY THE ASSESSEE AND OWNERSHIP LINKAGES AMONG THEM COUNTRY OF TAX RESIDENCE) OF THE ENTITIES WITH WHOM GOIPL HAS ENTERED INTO INTERNATIONAL TRANSACTIONS DURING THE FINANCIAL YEAR2004-05 ARE PROVIDED IN THE FORM 3CEB. C) A BROAD DESCRIPTION OF THE BUSINESS OF THE ASSESSEE AND THE INDUSTRY IN WHICH THE ASSESSEE OPERATES AND OF THE BUSINESS OF THE ASSOCIATED ENTERPRISES WITH WHOM THE ASSESSEE HAS TRANSACTED THE APPELLANT HAS PROVIDED THIS AS A PART OF GROUP/COMPANY OVERVIEW AND INDUSTRY ANALYSIS ON PAGES 4-16 OF THE TP REPORT READ WITH THE FORM 3CEB FOR FY 2004-05. D) NATURE AND TERMS (INCLUDING PRICES) OF INTERNATIONAL TRANSACTIONS ENTERED INTO WITH EACH ASSOCIATED ENTERPRISE DETAILS OF PROPERTY TRANSFERRED OR SERVICES PROVIDED AND THE QUANTUM AND THE VALUE OF EACH SUCH TRANSACTION OR CLASS OF SUCH TRANSACTION. THE APPELLANT HAS PROVIDED THIS AS A PART OF THE TP REPORT READ WITH FORM 3CEB. AS SET OUT IN THE TP REPORT THE QUANTUM AND VALUE OF THE INTERNATIONAL TRANSACTIONS IS DETERMINED USING THE GLOBAL PROFIT SPLIT METHOD THEREBY INDICATING MAINTENANCE AND AVAILABILITY OF THIS INFORMATION WITH THE APPELLANT. E) DESCRIPTION OF FUNCTIONS PERFORMED RISKS ASSUMED AND ASSETS EMPLOYED OR TO BE EMPLOYED OR TO BE EMPLOYED BY .THE ASSESSEE AND BY THE ASSOCIATED ENTERPRISES INVOLVED IN THE INTERNATIONAL TRANSACTION. THE APPELLANT HAS PROVIDED THIS AS A PART OF ITS FUNCTIONAL ANALYSIS ON PAGES 17-28 OF THE TP REPORT FOR FINANCIAL YEAR 2004-05 F) RECORD OF THE ECONOMIC AND MARKET ANALYSES FORECASTS BUDGETS OR ANY OTHER FINANCIAL ESTIMATES PREPARED BY THE SINCE THE APPELLANT IS JUST ONE OF THE PARTICIPANTS OF THE PROFIT SPLIT METHOD APPLIED TO THE GROUP GLOBALLY SUCH FINANCIAL ESTIMATES/ ITA NOS.516 4&5165/DEL./2011 18 ASSESSEE FOR THE BUSINESS AS A WHOLE AND FOR EACH DIVISION OR PRODUCT SEPARATELY WHICH MAY HAVE A BEARING ON THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE. BUDGETS ETC. (IF ANY) AT THE GROUP/GLOBAL LEVEL ARE PREPARED/ MAINTAINED BY THE OVERSEAS GROUP COMPANIES. THE AUDITED FINANCIAL STATEMENTS OF THE APPELLANT WERE SUBMITTED TO THE LD. TPO. G) RECORD OF UNCONTROLLED TRANSACTIONS TAKEN INTO ACCOUNT FOR ANALYSING THEIR COMPARABILITY WITH THE INTERNATIONAL TRANSACTIONS ENTERED INTO INCLUDING A RECORD OF THE NATURE TERMS AND CONDITIONS RELATING TO ANY UNCONTROLLED TRANSACTION WITH THIRD PARTIES WHICH MAY BE OF RELEVANCE TO THE PRICING OF THE INTERNATIONAL TRANSACTIONS. THE APPELLANT HAS PROVIDED RECORD OF UNCONTROLLED TRANSACTIONS WITH RESPECT TO ROUTINE ADMINISTRATIVE/ SUPPORT ACTIVITIES UNDERTAKEN BY GOIPL IN INDIA AS A PART OF ITS ECONOMIC ANALYSIS ON PAGE 35 AND APPENDIX C OF THE TP REPORT FOR FY 2004-05. H) RECORD OF THE ANALYSIS PERFORMED TO EVALUATE COMPARABILITY OF UNCONTROLLED TRANSACTIONS WITH THE RELEVANT INTERNATIONAL TRANSACTION. FURTHER WITH RESPECT TO ROUTINE ADMINISTRATIVE/ SUPPORT ACTIVITIES UNDERTAKEN BY GOIPL IN INDIA THE APPELLANT HAS PROVIDED THIS AS A PART OF ITS ECONOMIC ANALYSIS (BASIS AND MANNER OF APPLICATION OF RESIDUAL PSM) ON PAGE 35 AND APPENDIX C OF THE TP REPORT FOR FY 2004-05. I) DESCRIPTION OF THE METHODS CONSIDERED FOR DETERMINING THE ALP IN RELATION TO EACH INTERNATIONAL TRANSACTION OR CLASS OF TRANSACTION THE METHOD SELECTED AS THE MOST APPROPRIATE METHOD ALONG WITH EXPLANATIONS AS TO WHY THE APPELLANT HAS PROVIDED THIS AS A PART OF ITS ECONOMIC ANALYSIS ON PAGES 29-38 READ WITH APPENDIX C OF THE TP REPORT FOR FY 2004-05. IT IS PERTINENT TO NOTE HERE THAT THE APPELLANT HAS SELECTED THE RESIDUAL PROFIT SPLIT METHOD (PSM) AS THE ITA NOS.516 4&5165/DEL./2011 19 SUCH METHOD WAS SO SELECTED AND HOW SUCH METHOD WAS APPLIED IN EACH CASE. MOST APPROPRIATE METHOD FOR ESTABLISHING THE ARM'S LENGTH STANDARD FOR ITS INTERNATIONAL TRANSACTIONS. IN APPLICATION OF PSM WITH RESPECT TO THE ROUTINE ADMINISTRATIVE/SUPPORT SERVICES UNDERTAKEN BY GOIPL THE COMPANY HAS UNDERTAKEN A COMPARABILITY ANALYSIS WITH DUE REGARD TO RULE L0B WHEREIN THE COMPARABILITY FOR THIS PURPOSE HAS BEEN ESTABLISHED WITH REFERENCE TO THE RELEVANT FUNCTIONAL ASSET AND RISK ANALYSIS. J) RECORD OF THE ACTUAL WORKING CARRIED OUT FOR DETERMINING THE ALP INCLUDING DETAILS OF THE COMPARABLE DATA AND FINANCIAL INFORMATION USED IN APPLYING THE MOST APPROPRIATE METHOD AND ADJUSTMENTS IF ANY WHICH WERE MADE TO ACCOUNT FOR DIFFERENCES BETWEEN THE INTERNATIONAL TRANSACTION AND THE COMPARABLE UNCONTROLLED TRANSACTIONS OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS. THE APPELLANT HAS PROVIDED THIS AS A PART OF ITS ECONOMIC ANALYSIS ON PAGES 29-38 OF THE TP REPORT FOR FY 2004-05. IT IS PERTINENT TO NOTE THAT THE ARM'S LENGTH PRICE HAS BEEN DEFINED UNDER SECTION 92F AS THE 'PRICE WHICH IS APPLIED OR PROPOSED TO BE APPLIED IN A TRANSACTION BETWEEN PERSONS OTHER THAN ASSOCIATED ENTERPRISES IN UNCONTROLLED CONDITIONS'. IN THE INSTANT CASE THE QUANTUM/ VALUE OF INTERNATIONAL TRANSACTIONS IS DETERMINED USING THE PRINCIPLES AND COMPUTATION MECHANISM SET OUT AND EXPLAINED IN DETAIL IN THE TRANSFER PRICING REPORT. MOREOVER WITH RESPECT TO THE ROUTINE ADMINISTRATIVE/ SUPPORT ACTIVITIES UNDERTAKEN BY THE COMPANY BY COMPUTING THE NET MARGINS ACHIEVED BY COMPARABLE ITA NOS.516 4&5165/DEL./2011 20 UNCONTROLLED COMPANIES THE APPELLANT HAS COMPLIED WITH THIS REQUIREMENT OF DETERMINING THE ARM'S LENGTH PRICE FOR SUCH ACTIVITIES IN INDIA. K) THE ASSUMPTIONS POLICIES AND PRICE NEGOTIATIONS IF ANY WHICH HAVE CRITICALLY AFFECTED THE DETERMINATION OF THE ALP. . THE DETAILED METHODOLOGY OF ARRIVING AT THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS FOR THE APPELLANT IS DISCUSSED AND PROVIDED IN THE TRANSFER PRICING REPORT. THE TP REPORT IS A SUMMARY OF THE PRESCRIBED INFORMATION AND ANY DETAILS REQUIRED THEREOF WOULD BE TIMELY PROVIDED BY THE APPELLANT. I) DETAILS OF THE ADJUSTMENTS IF ANY MADE TO TRANSFER PRICES TO ALIGN THEM WITH ALPS DETERMINED UNDER THESE RULES AND CONSEQUENT ADJUSTMENT MADE TO THE TOTAL INCOME FOR TAX PURPOSES NOT RELEVANT AS THE TRANSFER PRICES IN THE INSTANT CASE ARE DETERMINED/ FIXED BASED ON THE ARM'S LENGTH PRICE OF SUCH TRANSACTIONS APPLYING THE PROFIT SPLIT METHOD. M) ANY OTHER INFORMATION DATA OR DOCUMENT INCLUDING INFORMATION OR DATA RELATING TO THE ASSOCIATED ENTERPRISE WHICH MAY BE RELEVANT FOR DETERMINATION OF THE ALP . THE TP REPORT PROVIDED TO THE LD. TPO IS A SUMMARY OF THE PRESCRIBED INFORMATION AND ANY OTHER DETAILS REQUIRED WERE PROVIDED BY THE APPELLANT AS AND WHEN DESIRED BY THE LD. TPO 8.3 IN THE INSTANT CASE THE ASSESSEE STATED THA T THEY HAD KEPT AND MAINTAINED ALL THE DOCUMENTS IN TERMS OF PROVISIONS OF SEC. 92 D(1)& 92D(2) OF THE ACT. THE TPO ISSUED FIRST NOTICE ON DECEMBER 5 2007 U/S 92 CA(2) AND 92D(3) OF THE ACT SEEKING INFORMATION AND EVIDENCE .ACCORDING TO THE ASSESSEE THE SAID NOTICE WAS SERVED ON 26.12.2007. IMMEDIATELY THEREAFTER ON 27.12.2007 THE ASSESSEE SOUGHT EXTENSION OF TIME UNTIL 15 TH JANUARY 2008. THE NECESSARY DOCUMENTATION ITA NOS.516 4&5165/DEL./2011 21 WAS FILED ON 25.1.2008 WHILE AUDITED ACCOUNTS WERE SUBMITTED ON 20.2.2008. APPARENTLY THE ASSESSEE SUBMITTED THE DOCUMENTATI ON WITHIN THE TIME PRESCRIBED U/S 92D(3) OF THE ACT. THESE FACTS HAVE NOT BEEN DISPUTED BEFORE US. HERE WE MAY POINT OUT THAT THE AO ALSO IMPOSED A PE NALTY OF ` 1LAC U/S 271BA OF THE ACT FOR FAILURE TO SUBMIT A REPORT OF ACCOUNTAN T IN FORM 3CEB IN ACCORDANCE WITH PROVISIONS OF THE SEC. 92E OF THE ACT. HOWEVER THE LD. CIT(A) CANCELLED THE PENALTY VIDE ORDER DATED 19.9.2011 ON THE GROUND TH AT THE ASSESSEE HAD A REASONABLE CAUSE FOR DELAY IN SUBMITTING REPORT IN FORM NO.3CEB. THERE IS NOTHING TO SUGGEST AS TO WHETHER OR NOT ANY APPEAL HAS BEEN PREFERRED AGAINST THIS ORDER OF THE LD. CIT(A). NEITHER THE TPO/AO IN THEIR RESPECTIVE ORDERS NOR EVEN THE LD. DR APPEARING BEFORE US SPECIFIED THE PARTICULAR INFORMATION OR DOCUMENTATION WHICH WAS NOT KEPT OR MAINTAINED BY T HE ASSESSEE OR WAS NOT FURNISHED BEFORE THE TPO. IN ANY CASE THE TPO OBSE RVED THAT THE TRANSFER PRICING DOCUMENTATION CONTAINING FUNC TIONAL AND ECONOMIC ANALYSIS PRESCRIBED UNDER RULE 10D OF THE INCOME TAX RULES WAS SUBMITTED AND PLACED ON RECORD. 8.31 AFTER REFERRING TO THE INTERNATIONAL TRANSA CTIONS THE TPO FURTHER OBSERVED 4. THE TRANSFER PRICING DOCUMENTATION WHICH CONTA INS THE FUNCTIONAL AND ECONOMIC ANALYSIS OF COMPARABLES AND OF ASSESSEE H AS BEEN EXAMINED AND PLACED ON RECORD. 5. IN VIEW OF THE FUNCTIONAL AND ECONOMIC ANALYSIS OF THE ASSESSEE COMPARABLES NO ADVERSE INFERENCE IS DRAWN OF THE I NTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE DURING THE FY 2004-05 9 . IN THE LIGHT OF AFORESAID FINDINGS OF THE TPO THE LD. CIT(A) CONCLUDED THAT THE ASSESSEE HAD MAINTAINED THE DOCUMENTATION U/S 9 2D OF THE ACT AND ALSO PRODUCED BEFORE THE TPO. ACCORDINGLY THE LD. CIT(A ) CANCELLED THE PENALTY LEVIED U/S 271AA & 271G OF THE ACT.. IN THE PENALTY ORDERS PASSED BY THE AO ITA NOS.516 4&5165/DEL./2011 22 THERE IS NOTHING TO SUGGEST AS TO WHICH PARTICULAR INFORMATION OR DOCUMENT WAS NOT SUBMITTED BY THE ASSESSEE NOR THE EXACT NATURE OF DEFAULT HAS BEEN BROUGHT OUT. IN THESE CIRCUMSTANCES ESPECIALLY WHEN THE RE VENUE HAVE NOT PLACED BEFORE US ANY MATERIAL CONTROVERTING THE AFORESAID FINDINGS OF THE LD. CIT(A) SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MAT TER WE ARE NOT INCLINED TO INTERFERE. THEREFORE GROUND NO.1 THESE APPEALS IS DISMISSED. 10. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND NO.2 IN THESE APPEALS ACCORDINGLY THIS GRO UND IS DISMISSED. 11. IN RESULT BOTH THESE APPEALS ARE DISMISSED. SD/- SD/- (R.P. TOLANI) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. M/S GLOBAL ONE INDIA PVT. LTD. C-56 NEETI BA GH NEW DELHI-49 2. A.C.I.T. CIRCLE-12(1) NEW DELHI 3. CIT(A)-XX NEW DELHI. 4. CIT CONCERNED. 5. DR ITAT C BENCH NEW DELHI 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT DELHI ORDER PRONOUNCED IN OPEN COURT