Sections 271BA, 273B of the Act – Non-filing of Form 3CEB on the basis that no AE relationship is created on combined reading of section 92A(2) and section 92A(1) is a reasonable cause – penalty not leviable u/s. 271BA

1.       TS-631-ITAT-2017(Mum)

Palm Grove beach vs. DCIT

A.Y.: 2011-12, Date of Order: 9^th August, 2017

Facts

Taxpayer, an Indian company entered into a transaction with a
Non Resident (NR). Taxpayer contended that the definition of AE in terms of
section 92A(2) is to be read with section 92A(1) of the Act and consequently,
NR does not qualify as Associated Enterprise (AE) of the Taxpayer.
Consequently, Taxpayer did not file Form 3CEB as it had no other international
transaction.

AO rejected contentions of the Taxpayer and levied penalty
u/s. 271BA of the Act on ICo for failure to file Form 3CEB. Aggrieved, Taxpayer
appealed before CIT(A), who upheld the order of AO.

Aggrieved, the Taxpayer appealed before the Tribunal

Held

–   The Taxpayer did not file Form 3CEB in
respect of its transaction with the NR on the grounds that NR did not
constitute its AE u/s. 92A. Taxpayer was under a bonafide belief that the
provisions of section 92A(2) of the Act cannot be read in isolation but in
combination with section 92A(1) of the Act. Since the conditions specified in
both the sections were not satisfied in respect of Taxpayer’s transaction with
the NR, he took a view that NR does not qualify as its AE.

–   The view that section 92A(2) of the Act
cannot be read independent section 92A(1) of the Act is one of the possible
interpretations of section 92A of the Act. Thus the Taxpayer was prevented by
sufficient cause from furnishing the TP audit report in Form 3CEB.