Penalty u/s 271G non-leviable on assessee if TPO asked for doc. unavailable in public domain: ITAT

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  • Last Updated on 3 May, 2022

Transfer pricing; Computation of arm’s length price;

Case Details: ACIT v. DA Jhaveri - [2022] 137 336 (Mumbai - Trib.)

Judiciary and Counsel Details

    • Vikas Awasthy, Judicial Member and Prashant Maharishi, Accountant Member
    • Hiro Rai, AR for the Appellant. 
    • Satya Pinisetty, DR for the Respondent.

Facts of the Case

Assessee-company was engaged in the business of cutting and polishing diamonds. It had entered into an international transaction of purchase of rough diamonds and export of rough and polished diamonds.

Transfer Pricing Officer (TPO) asked the assessee to furnish details and documents to work out the profitability of associated enterprises and non-associated enterprises. Assessee expressed his inability to submit the same. Consequently, he held that the assessee had not maintained relevant documentation under Rule 10D(1) and, thus, a penalty proceeding was initiated under section 271G.

On appeal, the Commissioner (Appeals) deleted the penalty. Aggrieved revenue filed the instant appeal before the Mumbai Tribunal.


The Mumbai Tribunal held that the TPO had asked the assessee to give bifurcation of profit derived from transactions with Associated Enterprises and non-associated Enterprises. Assessee expressed its inability in view of peculiar trade transactions and non-availability of information in the public domain.

Further, the benchmarking of the assessee was accepted on identical facts and circumstances in the Assessment Years (AY) before the relevant AY. In such prior years, TPO hadn’t asked for such requisite detail and no adjustment was made by him.

Therefore, the details asked for by TPO may be relevant for the determination of Arm’s Length price but it was asked for the first time and not questioned in past TP Assessments. Thus, the assessee had a belief that such information was not required as well as not available. Accordingly, the assessee had ‘reasonable cause’ under section 273B for not maintaining the same. Thus, there was no infirmity in the order of the learned CIT (A) in deleting the penalty.

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