Under Explanation 7 to s. 271(1)(c), the onus on the assessee is only to show that the ALP is computed in accordance with the scheme of s. 92 C in good faith and due diligence.

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judgement

Halcrow Consulting India Pvt. Ltd vs. DCIT (ITAT Delhi)

S. 271(1)(c) Penalty: Under Explanation 7 to s. 271(1)(c), the onus on the assessee is only to show that the ALP is computed in accordance with the scheme of s. 92 C in good faith and due diligence. The fact that the TPO changes the method of computation of ALP does not mean it is a fit case for imposition of penalty if there is no dishonesty is found in the conduct of the assessee

The scheme of Explanation 7 to section 271(1)(c) of the Act makes it clear that the onus on the assessee is only to show that the ALP was compute by the assessee in accordance with the scheme of section 92 C of the Act in good faith and due diligence. It is not in dispute here that the ALP was compute in accordance with the scheme of section 92C inasmuch as Cost Plus Method was use. The TPO only substituted Cost Plus Method with TNMM and also computed the ALP of intra group services by taking the ALP as nil by applying the CUP Method. Whatever may be the merits in the action of the TPO changing the method of computation of ALP. The same cannot be a fit case for imposition of penalty inasmuch as. It cannot be say that the ALP had not been compute by the assessee. Under the scheme of section 92C

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