Penalty u/s 271G Invalid for Failure to Benchmark International Transactions | ITAT

Case Details: Deputy Commissioner of Income-tax vs. Atul Ltd. - [2025] 179 taxmann.com 323 (Ahmedabad-Trib.)

Judiciary and Counsel Details

• Siddhartha Nautiyal, Judicial Member & Narendra Prasad Sinha, Accountant Member
• Bhavin Marfatia, AR for the Appellant.
• Sher Singh, CIT-DR for the Respondent.

Facts of the Case

The assessee filed its return of income for the relevant assessment year, declaring total income. The case was selected for scrutiny, and the Assessing Officer (AO) noticed that the assessee had entered into certain international transactions and specified domestic transactions with its associated enterprises (AEs). The AO referred the matter to the Transfer Pricing Officer (TPO).

The TPO issued a notice to the assessee requiring it to produce all the evidence in support of the computation of ALP of international transactions and the specified domestic transactions, along with the transfer pricing study report. Since the assessee partially complied with the requirements of the TPO and did not furnish all the requisitioned details, the TPO issued a notice under section 271G.

The assessee submitted that the penalty under section 271G can be initiated only when the assessee fails to furnish any information or documents and not in the case where the information submitted by the assessee is not acceptable to the TPO. However, the TPO was not satisfied with the assessee’s explanation and levied the penalty.

The matter reached the Ahmedabad Tribunal.

ITAT Held

The Tribunal held that the penalty under Section 271G can be levied if the person who has entered into an international transaction fails to furnish any such information or documents as required under Section 92D(3) to the Assessing Officer or the TPO.

In the instant case, the penalty was levied for failing to benchmark international transactions in accordance with the provisions of the Act. The TPO did not bring on the specific default of the assessee in non-maintenance of documents/information record in the penalty order.

The penalty was imposed in the present case for not benchmarking the international transactions as per the provisions of the Act, which is not permissible under the provisions of section 271G. Therefore, the initiation of penalty proceedings under Section 271G for this reason was found to be misplaced.

List of Cases Referred to

• CIT v. Leroy Somer & Controls (India) (P.) Ltd [2013] 37 taxmann.com 407/ 218 Taxman 216/[2014] 360 ITR 532 (Delhi) (para 7.3).