DCIT Vs Priya Blue Recycling LLP (ITAT Ahmedabad)
Income Tax Appellate Tribunal (ITAT) Ahmedabad upheld the order of the Commissioner of Income Tax (Appeals) [CIT(A)], which deleted a penalty of ₹1.2 crore imposed under Section 271AA of the Income Tax Act on Priya Blue Recycling LLP. The case arose from a search operation conducted on the Priya Blue Group in November 2019, leading to assessments under Sections 153A and 148 of the Act. The Assessing Officer (AO) referred the matter to the Transfer Pricing Officer (TPO) to determine the arm’s length price for the alleged international transactions. The TPO found no adjustments necessary and did not initiate any penalty proceedings. Despite this, the AO imposed a penalty under Section 271AA, claiming non-maintenance of transfer pricing documentation related to transactions with Best Oasis Ltd.
In the appeal before CIT(A), the assessee argued that no international transactions occurred with Best Oasis Ltd. in AY 2017-18 and 2018-19. Instead, purchases were made from Priya Blue Industries Pvt. Ltd., a domestic entity. The Tax Audit Report submitted by the assessee supported this claim, showing the transactions were domestic and subject to Section 40A(2)(b) rather than international transfer pricing provisions under Section 92D. The CIT(A) found that the AO had wrongly assumed international transactions existed and imposed a penalty without specifying which documents were missing. Additionally, since the TPO made no adjustments or penalty recommendations, the CIT(A) held that the AO’s penalty lacked justification and deleted it.
