The AO has levied a s.271AA penalty saying I did not maintain transfer pricing documentation, without saying which documents. Does that penalty stand?
No, on this decision. A penalty under s.271AA has to identify the information or document prescribed by s.92D read with rule 10D that was not maintained or furnished; a general assertion will not do, and here neither the assessment order nor the penalty order said which document was missing. The Tribunal gave a second and independent ground: the penalty was passed in a perfunctory manner without the requisite show-cause notice and without proper opportunity, the officer having called for rule 10D documents without naming any clause of the rule. That the transactions the penalty was levied on had not been adjusted by the Transfer Pricing Officer at all was added as a further point, not as the basis of the decision.
Decided by the ITAT (ITAT Ahmedabad Bench 'C'; T.R. Senthil Kumar (Judicial Member) and Narendra Prasad Sinha (Accountant Member)) on 2025-01-21, reported as ITA Nos. 317 to 324/Ahd/2024; [2025] 171 taxmann.com 177 (Ahmedabad-Trib.). It bears on section 271AA, section 92D, section 92CA, section 153A, section Rule 10D of the Income Tax Act 1961, in Penalty and Assessment & Scrutiny matters.
Section 271AA is charged at two per cent of the value of each international transaction, so on a large-volume business it dwarfs the adjustment: here the penalty for the lead year alone was Rs. 5.36 crore on vessel purchases of about Rs. 268 crore, and similar penalties were levied for each of seven earlier years. The practical defence is procedural and it works: make the officer specify the default. The department's usual counter is that the documentation obligation is absolute and independent of whether an adjustment was made, which is true as far as it goes, but it does not relieve the officer of identifying what was not maintained.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee, a private company in ship breaking, recycling and the sale of scrap, was covered by a search under s.132 in November 2019. For the lead year, assessment year 2019-20, the assessment was made under s.143(3) read with s.92CA(3) and s.153A. The Transfer Pricing Officer made an upward adjustment of Rs. 1,54,77,374 - Rs. 67,96,987 on the benchmarking of services rendered to the associated enterprise and Rs. 86,80,387 on a corporate guarantee given to it. Neither adjustment touched the assessee's purchases of vessels from its associated enterprise, Best Oasis Limited, of Rs. 268,12,90,414 for that year, which had been reported in Form 3CEB filed before the date of the search and had not been doubted in an earlier assessment of 5 March 2015. The penalty under s.271AA was levied on those vessel purchases at two per cent of their value, Rs. 5,36,25,808 for the lead year, with similar penalties for each of the earlier years back to 2012-13, on the footing that the assessee had failed to maintain the information and documents prescribed by s.92D read with rule 10D. The Commissioner (Appeals) deleted the penalties and the revenue appealed for all eight years.
All eight revenue appeals were dismissed and the deletion of the penalties upheld. Penalty under s.271AA cannot be levied without specifying which of the documents or information prescribed by s.92D read with rule 10D the assessee failed to maintain or furnish; and the penalty orders were in any event passed without the requisite show-cause notice and without proper opportunity of hearing. The Tribunal decided the point and restored nothing.
The Tribunal set out s.271AA, which reaches three distinct defaults - failing to keep and maintain the information and document required by s.92D, failing to report a transaction required to be reported, and maintaining or furnishing incorrect information or a document. That structure decided the case, because the Assessing Officer never said which limb the assessee had fallen foul of: in the penalty order he simply observed that in view of s.271AA the assessee had committed the default and must pay two per cent of the value of each international transaction, and neither there nor in the assessment order did he point out which of the documents prescribed by s.92D read with rule 10D had not been maintained. Setting out two co-ordinate bench decisions, one of them on identical facts, the Tribunal adopted the rule that the revenue must first identify the document or information required to be furnished and not furnished within the time allowed, and that it must be one specified in rule 10D, and recorded that the point is no longer res integra. The second ground stands on its own: the penalty order was passed in a perfunctory manner without the requisite show-cause notice and without affording proper opportunity, the officer having asked for documents maintained as per rule 10D without specifying any clause. The arm's-length position comes in only as an 'even otherwise' point - the two adjustments the Transfer Pricing Officer made were unconnected with the vessel purchases the penalty was levied on, and on those purchases he made no adjustment and did not doubt the price, which the earlier assessment had also accepted, and which had been reported in Form 3CEB before the search.
Thus, neither in the Assessment Order nor in Penalty Order, the Ld AO pointed out as to which of the documents prescribed u/s.92D r.w.r. 10D have not been maintained by the assessee.
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Handle my notice → Ask a CA on WhatsAppNo, on this decision. A penalty under s.271AA has to identify the information or document prescribed by s.92D read with rule 10D that was not maintained or furnished; a general assertion will not do, and here neither the assessment order nor the penalty order said which document was missing. The Tribunal gave a second and independent ground: the penalty was passed in a perfunctory manner without the requisite show-cause notice and without proper opportunity, the officer having called for rule 10D documents without naming any clause of the rule. That the transactions the penalty was levied on had not been adjusted by the Transfer Pricing Officer at all was added as a further point, not as the basis of the decision. This was decided by the ITAT (ITAT Ahmedabad Bench 'C'; T.R. Senthil Kumar (Judicial Member) and Narendra Prasad Sinha (Accountant Member)) and bears on section 271AA, section 92D, section 92CA, section 153A, section Rule 10D of the Income Tax Act 1961. It is reported as ITA Nos. 317 to 324/Ahd/2024; [2025] 171 taxmann.com 177 (Ahmedabad-Trib.). Section 271AA is charged at two per cent of the value of each international transaction, so on a large-volume business it dwarfs the adjustment: here the penalty for the lead year alone was Rs. 5.36 crore on vessel purchases of about Rs. 268 crore, and similar penalties were levied for each of seven earlier years. The practical defence is procedural and it works: make the officer specify the default. The department's usual counter is that the documentation obligation is absolute and independent of whether an adjustment was made, which is true as far as it goes, but it does not relieve the officer of identifying what was not maintained. If it applies to you, the first step is this: Ask, in the reply to the show-cause, which clause of rule 10D the officer says was not complied with, and for the record of what was called for and not produced.
The assessee, a private company in ship breaking, recycling and the sale of scrap, was covered by a search under s.132 in November 2019. For the lead year, assessment year 2019-20, the assessment was made under s.143(3) read with s.92CA(3) and s.153A. The Transfer Pricing Officer made an upward adjustment of Rs. 1,54,77,374 - Rs. 67,96,987 on the benchmarking of services rendered to the associated enterprise and Rs. 86,80,387 on a corporate guarantee given to it. Neither adjustment touched the assessee's purchases of vessels from its associated enterprise, Best Oasis Limited, of Rs. 268,12,90,414 for that year, which had been reported in Form 3CEB filed before the date of the search and had not been doubted in an earlier assessment of 5 March 2015. The penalty under s.271AA was levied on those vessel purchases at two per cent of their value, Rs. 5,36,25,808 for the lead year, with similar penalties for each of the earlier years back to 2012-13, on the footing that the assessee had failed to maintain the information and documents prescribed by s.92D read with rule 10D. The Commissioner (Appeals) deleted the penalties and the revenue appealed for all eight years. The matter was decided on 2025-01-21 by the ITAT (ITAT Ahmedabad Bench 'C'; T.R. Senthil Kumar (Judicial Member) and Narendra Prasad Sinha (Accountant Member)). On those facts the ITAT held as follows. All eight revenue appeals were dismissed and the deletion of the penalties upheld. Penalty under s.271AA cannot be levied without specifying which of the documents or information prescribed by s.92D read with rule 10D the assessee failed to maintain or furnish; and the penalty orders were in any event passed without the requisite show-cause notice and without proper opportunity of hearing. The Tribunal decided the point and restored nothing.
The Tribunal set out s.271AA, which reaches three distinct defaults - failing to keep and maintain the information and document required by s.92D, failing to report a transaction required to be reported, and maintaining or furnishing incorrect information or a document. That structure decided the case, because the Assessing Officer never said which limb the assessee had fallen foul of: in the penalty order he simply observed that in view of s.271AA the assessee had committed the default and must pay two per cent of the value of each international transaction, and neither there nor in the assessment order did he point out which of the documents prescribed by s.92D read with rule 10D had not been maintained. Setting out two co-ordinate bench decisions, one of them on identical facts, the Tribunal adopted the rule that the revenue must first identify the document or information required to be furnished and not furnished within the time allowed, and that it must be one specified in rule 10D, and recorded that the point is no longer res integra. The second ground stands on its own: the penalty order was passed in a perfunctory manner without the requisite show-cause notice and without affording proper opportunity, the officer having asked for documents maintained as per rule 10D without specifying any clause. The arm's-length position comes in only as an 'even otherwise' point - the two adjustments the Transfer Pricing Officer made were unconnected with the vessel purchases the penalty was levied on, and on those purchases he made no adjustment and did not doubt the price, which the earlier assessment had also accepted, and which had been reported in Form 3CEB before the search. In the words reproduced by the source cited on this page: "Thus, neither in the Assessment Order nor in Penalty Order, the Ld AO pointed out as to which of the documents prescribed u/s.92D r.w.r. 10D have not been maintained by the assessee."
It was decided by the ITAT on 2025-01-21 and is reported as ITA Nos. 317 to 324/Ahd/2024; [2025] 171 taxmann.com 177 (Ahmedabad-Trib.). Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 271AA, section 92D, section 92CA, section 153A, section Rule 10D, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. All eight revenue appeals were dismissed and the deletion of the penalties upheld. Penalty under s.271AA cannot be levied without specifying which of the documents or information prescribed by s.92D read with rule 10D the assessee failed to maintain or furnish; and the penalty orders were in any event passed without the requisite show-cause notice and without proper opportunity of hearing. The Tribunal decided the point and restored nothing. It arises in Penalty and Assessment & Scrutiny matters, on section 271AA, section 92D, section 92CA, section 153A, section Rule 10D of the Income Tax Act 1961, and was decided by ITAT Ahmedabad Bench 'C'; T.R. Senthil Kumar (Judicial Member) and Narendra Prasad Sinha (Accountant Member). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where the transfer pricing order made no adjustment on the very transactions the penalty is levied on, say so and show it - here the adjustments that were made related to entirely different transactions. Take the notice point separately - the Tribunal treated the absence of a proper show-cause notice and of a proper hearing as a defect in its own right. Put the Form 3CEB filing and any earlier assessment that accepted the same transactions on the penalty record.
Validity check could not be completed. A citation search returns nothing citing this order - the only documents carrying its citation are copies of the order itself - and there is no later-treatment banner and no note of an appeal or a special leave petition. Absence of contrary authority is not good law and the status stays. Two points bear on how the entry should be read. The appeal-history question can be narrowed but not closed: there is a Gujarat High Court decision of 14 October 2025 in this assessee's name, Pr. CIT (Central) v. Priya Blue Industries (P.) Ltd. [2025] 181 taxmann.com 745 (Guj.), and it was opened and checked - it is not an appeal against this penalty order but a separate matter under ss.68 and 69 about undated cheques found in the same search, for assessment year 2020-21. Whether the revenue has filed an appeal against this order that has not yet been reported cannot be told from here. Second, the proposition is much better supported than this decision: the order records that the point is no longer res integra and rests on a line of co-ordinate bench decisions and on the Delhi High Court in CIT v. Leroy Somer & Controls (India) (P.) Ltd. [2014] 360 ITR 532. Those two things must not be conflated. On the provision, no current text of s.271AA could be confirmed from an official page, the departmental copy being a 2009 snapshot, so check the section as it stands for the year you are working on. That finding was checked against a published source, which is linked on this page, on 2026-08-24. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The sentence previously quoted here was not the Tribunal's. It is para 5.7 of the Commissioner (Appeals)' order, reproduced inside the Tribunal's order, and it describes an assessment made under s.143(3) read with s.144C, which this was not: the assessment was made under s.143(3) read with s.92CA(3) and s.153A, and the assessee never went to the Dispute Resolution Panel. The passage now quoted is the Tribunal's own finding. Take care with the name. A separate order of the same Bench dated 11 December 2024 concerns Priya Blue Recycling LLP, a differently named entity, and there is also a Gujarat High Court decision of 14 October 2025 in this assessee's name which arises from the same search but is a different matter, on undated cheques under ss.68 and 69 for a later year; neither is the appeal history of this order. The date of the order is 21 January 2025, as the report of it carries; a secondary page giving 23 January 2025 is wrong. The reasoning has two independent grounds - the default was never specified, and the penalty was passed without a proper show-cause notice or hearing - and the arm's-length position is not one of them, being introduced as an additional point. The penalty figure of Rs. 5,36,25,808 is the lead year's, not the total for the eight years. It does not decide what happens where the officer does specify the default and the assessee's documentation is genuinely incomplete, and it says nothing about the separate penalty under s.271AA(2) for the master file. Reasonable cause under s.273B was not argued and is not mentioned in the order, so this is not authority on that defence. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
All eight revenue appeals were dismissed and the deletion of the penalties upheld. Penalty under s.271AA cannot be levied without specifying which of the documents or information prescribed by s.92D read with rule 10D the assessee failed to maintain or furnish; and the penalty orders were in any event passed without the requisite show-cause notice and without proper opportunity of hearing. The Tribunal decided the point and restored nothing.
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