POSCO Holdings INC Vs DCIT (ITAT Mumbai)
Section 271AA Penalty Deleted for Non-Reporting of International Transaction; CIT(A)’s Enhancement of Section 271AA Penalty Set Aside; Section 271AA Penalty Cannot Survive Where Reasonable Cause Is Established: ITAT Mumbai
Material Facts
The assessee, a company domiciled in the Republic of Korea and engaged in manufacturing and exporting steel products, filed its return of income for Assessment Year 2021-22 declaring total income of ₹7,71,08,714.
The case was selected for scrutiny and referred to the Transfer Pricing Officer (TPO). The TPO accepted the arm’s length price (ALP) of the international transactions reported by the assessee and made no transfer pricing adjustment. However, the TPO observed that the assessee had not reported transactions relating to sale of raw materials to its associated enterprise (AE), POSCO Maharashtra Steel Pvt. Ltd., and requested the Assessing Officer (AO) to examine levy of penalty under Section 271AA.
The AO completed the assessment without making any addition to income but initiated penalty proceedings under Section 271AA. A penalty of ₹49,35,25,762, being 2% of the value of the alleged unreported international transaction of ₹2,467,62,88,079, was levied.
On appeal, the CIT(A) upheld the penalty and further enhanced it by levying additional penalty on transactions relating to guarantee fees and payment of trade affairs services.
