Whether the penalty under Section 271AA was valid for non-reporting of a reimbursement transaction in Form 3CEB.
Pune Tribunal in the case of Sequence Design India Pvt Ltd (ITA No. 2106/PUN/2024) was concerned with the issue of Whether the penalty under Section 271AA was valid for non-reporting of a reimbursement transaction in Form 3CEB.
The ITAT, allowed the appeal filed by Sequence Design (India) Pvt. Ltd. for AY 2015–16. The ITAT held that the penalty of Rs 26,59,958 levied under Section 271AA of the Act was not justified, as the transaction in question was a reimbursement related to earlier years and not a new international transaction requiring disclosure in Form 3CEB. The ITAT also accepted assessee’s claim of reasonable cause under Section 273B and reversed the penalty order.
Let us have a Short Overview of the case:
Key Issues:
Whether the penalty under Section 271AA was valid for non-reporting of a reimbursement transaction in Form 3CEB.
Whether the reimbursement of ₹4,07,42,345 received from the AE was a new international transaction for AY 2015–16.
Assessee’s Arguments:
The ₹4.07 crore was a reimbursement from the AE for transfer pricing adjustments made in earlier years (AYs 2009–10 to 2014–15) based on DRP directions.
The amount was not a new international transaction for AY 2015–16 and was excluded from the income computation for that year.
The transaction was not reported in Form 3CEB due to a bona fide belief and reasonable cause, invoking protection under Section 273B.
The penalty was wrongly levied on the entire value of international transactions instead of the specific reimbursement amount.
The penalty was initiated against a non-existent entity post-amalgamation.
Revenue’s Arguments:
The assessee failed to report the transaction in Form 3CEB, violating Section 92D(1), justifying penalty under Section 271AA.
The reimbursement was received during the year and should have been disclosed.
Tribunal’s decision:
The Tribunal found that:
The reimbursement was not a new international transaction but related to earlier years’ TP adjustments.
The debit notes were issued in March 2015, and the amount was received in April 2015.
The assessee had already offered the income to tax in earlier years and excluded it from AY 2015-16.
There was a reasonable cause for non-reporting, and the assessee maintained proper documentation.
Section 273B applied, and no penalty should be levied when reasonable cause is proven.
The copy of the order is as under:
