Section 271(1)(c) inter alia provides that the AO or CIT(A) may levy a penalty where the taxpayer has concealed the particulars of his income or has furnished inaccurate particulars of his income.
Explanation 7 to s 271 provides that where transfer pricing addition is made under s 92C(4), the amount so added or disallowed shall be deemed to represent the income in respect of which particulars have been concealed or inaccurate particulars have been furnished. However, such deeming fiction will not apply if the taxpayer demonstrates to the satisfaction of the AO or the CIT(A) that the price charged or paid in such transaction was computed in accordance with the provisions of s 92C and in the manner prescribed under that section, in good faith and with due diligence. Therefore, if the taxpayer demonstrates that it computed the ALP in accordance with provisions contained in s 92C and in good faith and with due diligence, penalty under s 271(1)(c) shall not be levied.
Various issues have come up before the Courts in the context of levy of penalty under s 271(1)(c) in TP cases. These are discussed as follows:
A. Cases where penalty under section 271(1)(c) was deleted
Understanding and Applicability of Explanation 7 to sec 271(1)(c)
DCIT v RBS Equities India Ltd (2011) 133 ITD 77, (2011) 141 TTJ 0058, 13 Taxmann.com 30, (Mumbai ITAT) – The Assessee provided stock broking services to its AE as well as non-AE. In the TP study, the taxpayer adopted TNMM to compute ALP. The Assessee did not adopt CUP Method for the reason that comparability parameters are more stricter under CUP Method. Before the TPO, the taxpayer submitted details of various differences between AE and non-AE transactions. The TPO rejected the contentions of the taxpayer and adopted CUP Method and made TP adjustment. The taxpayer did not file the quantum appeal. The AO initiated and levied penalty under sec 271(1)(c). The CIT(A) deleted the penalty.
The ITAT observed that Explanation 1 to s 271(1)(c) is a general provision and Explanation 7 is a specific provision confined to additions made under s 92C(4). A special provision normally excludes the operation of a general provision. The ITAT therefore held that reliance placed by the tax department on judicial precedents on Explanation 1 was ‘wholly misconceived’.
As to the scope of connotations of expression ‘in good faith’ appearing in Explanation 7, ITAT referred to s 3(22) of General Clauses Act which states that “a thing shall be deemed to be done in ‘good faith’ where it is in fact done honestly, whether it is done negligently or not”. There is no way that an taxpayer can prove his honesty, because honesty, in practical terms, only implies lack of dishonesty, and proving not being dishonest is essentially proving a negative, which is almost impossible. However, as the expression ‘good faith’ is used along with ‘due diligence’, which refers to ‘proper care’. Therefore, it is also essential that not only the action of the taxpayer should be in good faith, ie, honestly, but also with proper care. An act done with due diligence would mean an act done with as much as care as a prudent person would take in such circumstances. The ITAT therefore concluded that, as long as no dishonesty is found in the conduct of the taxpayer and as long as he has done what a reasonable man would have done in his circumstances, to ensure that the ALP was determined in accordance with the scheme of s 92C, deeming fiction under Explanation 7 cannot be invoked.
The ITAT observed that the grounds on which the ALP determination by the taxpayer has been rejected are reasonably debatable. Lack of good faith and due diligence cannot be inferred when the grounds on which ALP determined by the taxpayer has been rejected are reasonably debatable, even if correct. The taxpayer has obtained a transfer pricing study from an outside expert and its objectivity is not in question. The ITAT observed that TNMM, which was followed by the taxpayer, is one of the prescribed method under s 92C(1) and the AO has not found any faults in computation of ALP in accordance with TNMM. The ITAT observed that the TPO has rejected the TNMM on the ground that CUP method could be applied in the facts of the case. The ITAT held that it is certainly a highly contentious issue whether a priority in the methods of determining ALPs can be said to exist, even implicitly, giving an edge to CUP method over other methods. In such a situation, it cannot be said that the taxpayer has not determined the ALP in accordance with the scheme of s 92C in good faith and with due diligence. The ITAT therefore held that the conditions precedent for invoking Explanation 7 to s 271(1)(c) did not exist on the facts of the case. Accordingly, the ITAT upheld the findings of the CIT(A).
Halcrow Consulting India (P) Ltd v DCIT  87 taxmann.com 331 (Delhi ITAT) – The ITAT observed that scheme of Explanation 7 to section 271(1)(c) makes it clear that the onus on the assessee is only to show that the ALP was computed in accordance with the provisions of section 92C in good faith and due diligence. The ITAT observed that the Assessee computed ALP by CPM. The TPO only substituted CPM with TNMM and also computed the ALP of intra group services by taking the ALP as nil by applying the CUP Method. The ITAT held that 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 said that the ALP had not been computed by the assessee under the scheme of section 92C.
Mitsui Prime Advanced Composites India (P.) Ltd. v. DCIT  70 taxmann.com 123 (Delhi – Trib.) – The Assessee had availed specified business and consultancy services, engineering support services and management support services. The TPO computed ALP of these services as NIL. Due to loss, the Assessee did not file appeal. The AO levied penalty.
The ITAT observed that the TPO has not brought out any comparable transaction under the CUP method and his entire case is based on duplication of services and/or non-availment of any services by the assessee from its AEs, which has been found to be untenable. With respect to contention of the Revenue that every case of TP adjustment invariably means absence of good faith and due diligence, the ITAT held that such proposition is too wide and clearly unacceptable inasmuch as the intention of the legislature is to impose penalty due to addition on account of transfer pricing adjustment only when good faith and due diligence are lacking and not because of a genuine and valid difference of opinion in the determination of ALP of an international transaction. Revenue appeal to HC is dismissed – Mitsui Prime Advanced Composites India Pvt. Ltd [TS-135-HC-2017(DEL)-TP].
Sinosteel India Pvt Ltd [TS-833-HC-2018(DEL)-TP] – The Assessee was providing procurement support services to AE and was receiving commission. It provided similar services to third parties at higher rate of commission. The Assessee justified exclusion of internal comparable due to small volume and isolated transaction. These details were duly disclosed to the revenue. The TPO made additions based on the internal comparables. Additions were confirmed by the Tribunal and quantum appeal was pending before the High Court.
The AO levied penalty, which was reversed by ITAT. The HC held that there was a divergence of view whether the internal isolated/sole unrelated third party transaction should be taken as a internal comparable. The HC held that assessee was able to discharge its onus in terms of Explanation 7 to Sec 271(1)(c) and show that its stand in not taking into consideration the internal transaction was in good faith and it had acted with due diligence. The HC observed that “Conduct of the assessee is the distinguishing and relevant factor to be adjudicated in the penalty proceedings. Onus to establish bona fides and exercise of due diligence is on the assessee. Explanation of the assessee on the computation of arms length price may be the same, but appreciation and consideration is from a different point of view, i.e. bona fides and due diligence”. The Revenue appeal was dismissed.
Babcock & Brown India Pvt Ltd [TS-564-ITAT-2015(Mum)-TP] – The assessee was engaged in the business of providing investment advisory services. During the TP assessment, TP adjustment was made, which was confirmed by DRP. The Assessee accepted the order of the AO to avoid protracted litigation as the company was under the process of voluntary winding up. AO levied penalty under sec 271(1)(c) for filing inaccurate particulars of income. The ITAT observed that there was no dispute on selection of TNMM and the TP adjustment was made on account of different sets of comparables chosen by TPO. The ITAT held that “the determination of reasonable arm’s length price is a matter of estimate. Merely because it is possible to arrive at two different estimates of arm’s length price, it cannot be held that the lower of the two estimates is based on inaccurate particulars, while higher one is accurate.” The penalty was therefore deleted.
PCIT v Global Vantedge Pvt Ltd [TS-193-HC-2018(DEL)-TP] – Delhi HC dismisses Revenue’s appeal against ITAT order deleting penalty u/s 271(1)(c) in respect of TP adjustment. Observes that “the Tribunal’s reasoning that the question was debatable (more so since the original amounts added were reduced by the CIT(A) and further affirmed by the Tribunal) is reasonable”.
Gap International Sourcing India Ltd [TS-425-HC-2017(DEL)-TP] – Delhi HC confirms ITAT’s (Gap International Sourcing India Pvt Ltd [TS-611-ITAT-2016(DEL)-TP]) deletion of concealment penalty. In the quantum proceedings, assessee had conceded to the mark-up of 32% on operational costs based on decision in the case of Li & Fung (India) Private Limited. The HC held that “the entire proceedings, therefore, show that there was no deliberate attempt by the Assessee to conceal any income or to underpay tax”.
DCIT v M/s Hinduja Ventures Ltd TS-540-ITAT-2011(Mum)-TP – the ITAT deleted the penalty on the ground that the taxpayer had acted in good faith and with due diligence and the explanation offered by the taxpayer was bona fide.
ACIT v Boston Scientific India (P.) Ltd  67 taxmann.com 288 (Delhi ITAT) – The Assessee adopted RPM for ALP computation of distribution activity. During the assessment proceedings, the TPO adopted TNMM and made TP adjustment. The AO levied penalty applying provisions of Explanation 1 of section 271(1)(c). The ITAT observed that in the instant case the Assessing Officer wrongly invoked Explanation 1 of section 271(1)(c) instead of Explanation 7 of section 271(1)(c). The ITAT observed that the twin requirements of the Act as envisaged in Explanation 7 of section 271(1)(c) may be capable of being summed up in the term ‘best efforts’ which not only presuppose ‘due diligence’ but also ‘good faith’ as best efforts may incorporate not only ‘a diligent standard’ but can also subsume ‘a good faith standard’.
Perot Systems TSI (India) Pvt Ltd v ACIT TS-97-ITAT-2016(DEL)-TP – The TPO made additions for interest free loan given to the AE and additions were confirmed by the Tribunal. The AO levied penalty. On appeal, the ITAT held that The transfer pricing is at the nascent stage and where the taxpayer acts bonafidely, and in good faith, exercising due diligence and computes ALP in accordance with the provisions contained in section 92C and in the manner prescribed under that section, then no penalty can be levied even if the TP adjustment made by the TPO has been confirmed by the Tribunal. The ITAT also observed that the issue agitated by the taxpayer has been admitted as a substantial question of law by the Hon’ble High Court and this shows that the issue is debatable and the taxpayer’s contention that it acted on a boanfide belief cannot be shot down simply because TP adjustment made by the TPO has been upheld by the Tribunal.
C.G. International Pvt. Ltd. [TS-388-ITAT-2014(Mum)-TP] – The ITAT deleted the concealment penalty levied u/s 271(1)(c) as explanation furnished by assessee was bona-fide & ALP computation by assessee was in good faith with due diligence.
Kodak Graphic Communication (I) Pvt Ltd [TS-649-ITAT-2016(Mum)-TP] – TP adjustment on assessee’s payment towards travel and salary costs of specialized technical personnel providing technical support. In quantum proceedings, ITAT had confirmed TP adjustment observing that assessee has not furnished any material or evidence with regard to rendering of services. In the penalty appeal, ITAT observed that TPO / DRP erred in determining ALP at Nil without giving any analysis as to why such an adjustment was required to be made when TNMM had been applied and when overall profit margin and method had not been disturbed. The ITAT held that no penalty u/s 271(1)(c) was to be levied for non-furnishing of the information and documents as required u/s 92D(3), for which separate penal provision u/s 271G has been prescribed.
Carraro Technologies India Pvt Ltd [TS-1097-ITAT-2018(PUN)-TP] – AO levied penalty u/s 271(1)(c). CIT(A) deleted penalty primarily on the ground that while levying penalty, provisions of Explanation 7 to Sec 271(1)(c) were not invoked. The ITAT observes that neither at the time of recording satisfaction for initiating penalty proceedings nor at the time of levy of penalty, AO has made any reference to Explanation 7 or specified the charge for which penalty is being levied i.e. ‘concealment of income’ or ‘furnishing inaccurate particulars of income’. The ITAT holds that “The order levying penalty suffers from incurable defect of ambiguity” and therefore penalty was deleted.
Honda Trading Corporation India Pvt Ltd [TS-157-ITAT-2020(DEL)-TP] – ITATdeletes penalty observing that “Just because the assessee has not filed an appeal against the appeal effect order of the AO (retaining a portion of the adjustment made), it does not tantamount to agreeing with the adjustment made by the TPO and furthermore to entail any penalty under section 271(1)(c)”.
No Penalty were all facts disclosed
DCIT v Vertex Customer Services P Ltd. (2009) 34 SOT 532: (2009) 126 TTJ 184 (ITAT Delhi) – Assesseewas engaged in the business of call centre. In the TP Study, the taxpayer made adjustment towards excess capacity, first year of operation and provision for doubtful debts. During the assessment proceeding, the TPO accepted the adjustment towards excess capacity and first year of operation. However, TPO held that provision for doubtful debt is operating in nature and made TP adjustment. The taxpayer did not challenge the addition. The AO levied penalty under section 271(1)(c) and held that the taxpayer has not fully and truly disclosed the real operating cost. The CIT(A) deleted the penalty relying on Explanation 7 to sec 271(1)(c). The ITAT observed that the Assessee has taken services of reputed consultants to compute the ALP.
The ITAT observed that TNMM, comparables and adjustment towards excess capacity and first year of operation are not disturbed by the TPO. The ITAT observed that necessary facts relating to adjustment for provision for bad debt were disclosed by the Assessee. The fact that the taxpayer has agreed to the addition and not challenged the addition has no impact on the penalty proceedings. The addition was on a debatable point and Assessee’s computation cannot be said to have been done, not in good faith and not with due diligence. The conduct of the Assessee was not mala fide or contumacious. The ITAT therefore upheld the CIT(A)’s order.
Mastek Limited v DCIT  28 taxmann.com 292 (ITAT Ahd) – the ITAT held that penalty under sec 271(1)(c) cannot be levied when the taxpayer has furnished all the required details called for from time to time. The ITAT observed that the AO has not given any finding indicating that the taxpayer had failed to provide any information or the information provided was false. The ITAT concluded that the taxpayer has not concealed any material fact and the information given by the taxpayer has not been found to be incorrect.
Bosch Rexroth (India) Limited v ACIT TS-671-ITAT-2011(Ahd)-TP – the ITAT deleted the penalty on the ground that the taxpayer had furnished all the details.
DCIT v Advanced Systek Pvt. Ltd TS-321-ITAT-2012(Ahd)-TP – the ITAT deleted addition on the ground that the taxpayer had furnished all the details.
Penalty when TP Adjustment due to change of Method Selection of Method
ACIT v M/s Firmenich Aromatics (India) Pvt Ltd 2010-TII-17-ITAT-Mum-TP, ITA no. 4654/Mumbai/2009 (ITAT Mumbai) – The taxpayer in its TP study had adopted TNMM as the most appropriate method to compute ALP. During the assessment proceedings, the TPO adopted CUP method and made TP adjustment. AO observed that the taxpayer has furnished inaccurate particulars and thereby concealed his income and levied penalty under s 271(1)(c). The CIT(A) deleted the penalty. The ITAT observed that selection of method was bona fide difference of opinion and cannot be the ground for levy of penalty under s 271(1)(c). The ITAT held that the taxpayer had furnished the basic data on the basis of which only TPO invoked the CUP method. The order of the CIT(A) was therefore upheld.
Serdia Pharmaceuticals (India) Pvt. Ltd. v CIT(A) (Mum ITAT),  37 taxmann.com 198, TS-232-ITAT-2013(Mum)-TP – The Assessee had adopted TNMM for ALP computation. During the assessment proceedings, the TPO adopted CUP method and made TP adjustment. The taxpayer had rejected the application of CUP method due to non-availability of data in the public domain and the TPO had collected the data by exercising the powers under s 133(6). The AO levied the penalty under s 271(1)(c). The ITAT deleted the penalty and observed that penalty under s 271(1)(c) cannot be levied for change in the method since the taxpayer had adopted TNMM with good faith and with due diligence.
ACIT v Boston Scientific India (P.) Ltd  67 taxmann.com 288 (Delhi ITAT) – The Assessee adopted RPM for ALP computation of distribution activity. During the assessment proceedings, the TPO adopted TNMM and made TP adjustment. The AO levied penalty applying provisions of Explanation 1 of section 271(1)(c). With respect to selection of method, the ITAT observed that no mala fide has been alleged by the revenue in the facts of the present case to show that the selection of RPM by the Assessee was with a deliberate attempt to defraud the revenue and the said method could never have been selected in good faith with due diligence in the given facts. The ITAT held that mere change of method by the TPO by itself is not enough for levying penalty. Once the taxpayer has given sufficient and cogent reasons for selection of method, the onus shifts to the revenue to demonstrate that even on following the best efforts, the said method could never have been selected i.e. the due diligence requirements and good faith requirements were breached due to the active selection of this method.
Johnson Matthey India Pvt Ltd [TS-936-ITAT-2019(DEL)-TP] – In quantum appeals, the ITAT had deleted TP adjustments pertaining to cost recharges to AE and upheld TP-adjustment on sales commission. The ITAT held that addition by changing the MAM from TNMM to CUP Method by the TPO is not sufficient to attract provisions contained u/s 271(1)(c) of the Act as it is a mere change of opinion.
Penalty when TP Adjustment due to Assessee adopting multi-year data
M/s Verizon Communication India P. Ltd v DCIT  27 taxmann.com 328 (Del),  140 ITD 122 (Del ITAT) – The Assessee was engaged in the business of providing marketing support services. The TPO made TP adjustment. Given the fact that the Assessee was making losses, it did file the quantum appeal. The AO levied penalty on the ground that the taxpayer has given no explanation for using multi-year data. The AO also held that the taxpayer has not disclosed material facts. On appeal, CIT(A) confirmed the penalty. The taxpayer filed an appeal to ITAT.
The ITAT observed that at the time when the taxpayer carried on its TP study there was a legal debate as to whether multiple year data can be used or the current year data has to be used. This being a debatable issue at the point of time when the taxpayer filed its return of income, the taxpayer adopting multiple year data for arriving at arm’s length price is a bona fide exercise. Thus, penalty levied on that account cannot be sustained. Further, it was held that selection of comparables is a subjective exercise and Assessee has seriously contested the conclusions drawn by the TPO on selection of comparables. Thus, it was held that deletion of comparables cannot be a ground for imposition of penalty under s 271(1)(c). The penalty was therefore deleted.
Same conclusion in AY 2007-08, reported in TS-183-ITAT-2014(DEL)-TP. On department appeal, the Delhi High Court (ITA No. 460/2016) held that “The Court is also of the opinion that in the absence of any overt act, which disclosed conscious and material suppression, invocation of Explanation 7 in a blanket manner could not only be injurious to the assessee but ultimately would be contrary to the purpose for which it was engrafted in the statute.”
ACIT v Boston Scientific India (P.) Ltd  67 taxmann.com 288 (Delhi ITAT) – The Assessee adopted RPM for ALP computation of distribution activity. During the assessment proceedings, the TPO adopted TNMM and made TP adjustment. The AO levied penalty applying provisions of Explanation 1 of section 271(1)(c). With respect to use of multiple year data, the ITAT observed that on a consideration of the jurisprudence available thereon, it is found that even on this ground the claims of exercise of due diligence and good faith by the assessee in computing the TP study in accordance with the provision of section 92C is not eroded. The ITAT observed that the issue of multi-year data was debatable when TP study was done by the Assessee.
Kyungshin Industrial Motherson Ltd [TS-1137-ITAT-2018(DEL)-TP] – The ITAT deleted penalty Section 271(1)(c) as selection of PLI & multiple year data issues were ‘debatable’ for AY 2003-04
Giesecke and Devrient [I] Pvt Ltd [TS-479-ITAT-2018(DEL)-TP] – Delhi ITAT deletes penalty under sec 271(1)(c) for AY 2005-06 as both the issues (use of multiple year data and assessee’s claim that benefit under proviso to Sec 92C(2) is a standard deduction) were highly debatable issues when Assessee filed return. With respect to Revenue’s contention that Assessee’s non-filing of appeal indicated its acceptance of the addition, observes that this cannot lead to imposition of penalty u/s 271(1)(c) of the Act for the simple reason that both the assessment and penalty proceedings are distinct from each other. The ITAT observed that if the contention of Revenue is accepted, then there was no need for separate penalty proceedings. Also refer Giesecke & Devrient India (P) Ltd. v. DCIT  116 taxmann.com 908 (Delhi – Trib.).
Tianjin Tianshi India Pvt Ltd [TS-207-ITAT-2020(DEL)-TP – In the instant case, TP adjustment arose due to difference in selection of comparables, use of current year data instead of multiple year data and difference in use of PLI. The ITAT observed that these issues are debatable and had not attained finality when return was filed.
Penalty when TP Adjustment due to change in comparables
ACIT v M/s ADP Pvt. Ltd.  40 taxmann.com 314 – The ITAT observed that the TPO had not rejected the methodology adopted by the Assessee in the TP report. The difference in ALP arose only on account of difference in opinion between taxpayer and the TPO with regard to the use of multiple year data and selection of certain companies as comparables. The ITAT held that penalty cannot be levied because the TP adjustment arose only due to difference of opinion with regard to certain issues and not due to lack of good faith and lack of due diligence on part of taxpayer.
ACIT v Boston Scientific India (P.) Ltd  67 taxmann.com 288 (Delhi ITAT) – The Assessee adopted RPM for ALP computation of distribution activity. During the assessment proceedings, the TPO adopted TNMM and made TP adjustment. The AO levied penalty applying provisions of Explanation 1 of section 271(1)(c). With respect to selection of comparables, the ITAT observed that the additions are based on the comparables offered by the assessee and no comparable has been introduced by the TPO. The fact that all the comparables offered were not accepted by the TPO or alternatively the TPO has partially accepted the comparables offered by the assessee are facts which support the due diligence and good faith standards. The ITAT observed that no case has been made by the revenue to show that by offering the comparables excluded the assessee was so careless, negligent or lacking in good faith that the exercise was done with mala fide to defraud the revenue.
Ensim India Pvt Ltd [TS-729-ITAT-2019(PUN)-TP] – The ITAT held that difference in comparables selection is neither concealment not furnishing inaccurate particulars and deletes penalty under Sec 271(1)(c). Same view in QAD India Private Limited [TS-105-ITAT-2019(Mum)-TP].
Penalty when TP Adjustment on AMP issue
Panasonic India Pvt Ltd [TS-1003-ITAT-2016(CHNY)-TP] – TPO made addition on AMP issue. The Tribunal confirmed the addition on the basis of bright line test relying on Special Bench decision in LG Electronics. AO levied penalty. ITAT observed that By virtue of Hon’ble Delhi High Court decision in the case of Sony Ericsson Mobile Communications India (P) Ltd.(supra), the question whether expenditure incurred in India can be subject to application of a test like bright line test itself is debatable. Therefore, ITAT deletes penalty u/s 271(1)(c).
B. Cases where Penalty under s 271(1)(c) was confirmed
Deloitte Consulting India (P) Ltd v ACIT  46 taxmann.com 89 (Mumbai – Trib.) – The Assessee filed revised return making suo-motu disallowance of entire marketing expenses. The Assessee enhanced the claim of deduction under s 10A post suo-motu disallowance of entire marketing expenses. The TPO assessed the ‘transfer price’ of marketing expenses paid at ‘Nil’. Further, the AO disallowed the claim of the taxpayer for enhanced deduction under s 10A on disallowance of reimbursement of marketing services in view of the provisions of s 92C(4). The AO also observed that the revised returns were invalid. The ITAT confirmed [TS-224-ITAT-2012(Mum)] the TP adjustment as well as non-grant of s 10A deduction on such adjustment. Subsequently, penalty under sec 271(1)(c) was levied for raising false claim of reimbursement of marketing expenses. On appeal, the CIT(A) confirmed the penalty order.
The ITAT held that the revised returns were filed after initiation of transfer pricing proceedings, in anticipation of transfer pricing adjustment. Therefore, the revised returns filed by the taxpayer were not valid. Accordingly, the only valid return filed by the taxpayer is its original return, whereby claim for marketing expenses has been made. Accordingly, it was held that the enhancement of its income is only in consequence of its adjustment to the return income under s 92C(4) r/w s 92CA(4) of the Act. The ITAT held that Explanation 1 to s 271(1)(c), thus, gets attracted in full rigour since the taxpayer in fact made a bogus claim per its original return/s. Therefore, the ITAT held that penalty is leviable in the case of taxpayer.
Genom Biotech (P.) Ltd. v. ITO  67 taxmann.com 219 (Mumbai – Trib.) – Assessee supplied materials to its AE, which in turn sold said goods to buyers in Ukraine. The Assessee adopted CPM to compute ALP. The TPO made TP adjustment based on CUP Method as AE was buying similar products from unrelated partes also for sale of same in Ukraine . Assessee accepted the addition. AO levied penalty under section 271(1)(c). The ITAT confirmed the penalty since assessee failed to adopt CUP method and did not benchmark each of international transaction separately. The ITAT observed that the Assessee was well aware about the availability of CUPs and therefore due diligence is not in existence in not using the CUP method.
Clestra Life Sciences Pvt Ltd [TS-676-ITAT-2016(Mum)-TP] – TP adjustment was made based on internal comparables, where the price charged was higher. Assessee accepted the addition. The ITAT confirmed the penalty on the ground that the price charged by the assessee in international transactions referred to has not been computed in accordance with the provisions contained in section 92C of the Act, nor in the manner provided thereunder or in good faith and with due diligence.