Section 92B and section 271AA of the Act –Penalty cannot be levied for failure to disclose share issue transaction in Form 3CEB filed before the 2012 amendment to the definition of international transaction.

13.
[2018] 93 taxmann.com 87 (Delhi)

ITO vs.
Nihon Parkerizing (India) (P.) Ltd.

ITA No. :
6409/Del/2015

A.Y:
2011-12

Date of
Order: 10^th April, 2018

Section 92B and section 271AA of the Act –Penalty cannot
be levied for failure to disclose share issue transaction in Form 3CEB filed
before the 2012 amendment to the definition of international transaction.

Facts

Taxpayer, an Indian company, had received certain sum as
share capital from its associated enterprise (AE) during FY 2010-11. Taxpayer
furnished the transfer pricing report in Form 3CEB disclosing other
international transactions u/s. 92E. However, Taxpayer did not report the share capital transaction in
Form 3CEB.

AO contended that due to retrospective amendment to
section 92B in the year 2012, share issue transaction qualifies as an
international transaction with retrospective effect. AO imposed penalty for
non-disclosure of the transaction of share capital issue in the Form 3CEB.
Taxpayer argued that the amendment to the definition of international
transaction was made by the Finance Act 2012 with retrospective effect, whereas
the report in Form 3CEB was filed by the Taxpayer much before the enactment of
the amendment. Taxpayer contended that as on the date of filing Form 3CEB,
there was no requirement to report the share issue transaction and hence
penalty cannot be levied.

Aggrieved by the order of AO, taxpayer appealed before
CIT(A). The CIT(A) deleted the penalty holding that that as on the date of
filing of Form 3CEB by the Taxpayer, there was no requirement to report the
share issue transaction and hence, no penalty was leviable. Aggrieved, AO
appealed before the Tribunal.

Held

– Section 92B of the Act was amended
by the Finance Act 2012 with retrospective effect from 01^st April
2002 to cover capital financing, including any type of long-term or short-term
borrowing, lending or guarantee, purchase of sale of marketable securities or
any type of advance, payments or deferred payments or receivable or any other
debt arising during the course of the business as international transaction.

– However, Form 3CEB disclosing
international transactions for the relevant year was filed by the Taxpayer
prior to such amendment and at that time the Taxpayer was not aware that there
would be retrospective amendment wherein the transaction of issue of shares
would be required to be reported in Form 3CEB.

– It is an established law that, for
imposition of penalty, the law in force at the time of filing Form 3CEB would
be applicable.

– It is true that issue of share
capital is an international transaction. However, as on the date of filing of
Form 3CEB in the above year, Taxpayer was not required to disclose the said
transaction. Since the law was later amended, though, with retrospective
effect, the issue had no clarity prior to amendment. Thus, there was a
reasonable cause for not disclosing the share capital issue as an international
transaction in the Form 3CEB by the Taxpayer and hence, penalty is to be
deleted.