The Finance Minister Nirmala Sitharaman while presenting the Direct taxes under Budget 2023 proposed the maximum time period for the production of documents of international transaction by the assessee under section 92D of the Income Tax Act, 1961.
The budget proposed to reduce the minimum period for production of documents from 30 days to 10 days.
It was proposed to reduce the minimum time period required to be provided by the transfer pricing officer to assessee for production of documents and information from 30 days to 10 days.
A transaction involving two or more connected businesses that are either one or both non-residents is referred to as an international transaction. The transaction must proceed with the creation of an understanding or agreement between the involved parties.
A transaction between two associated enterprises shall be assumed to have been entered into by an enterprise with a person other than an associated enterprise, according to the Income Tax Department.
The Assessing Officer may request the documents and information kept by the assessee, in which case it must be produced within 30 days or the additional time permitted by the authority, which is now being recommended to be shortened to 10 days.
To avail an extension, the concerned person must file an application for the same to the Assessing Officer.
The assessee shall be fined 2% of the value of any foreign transaction or certain domestic transaction if the assessee fails to comply with any of the rules.
In contrast, a taxpayer will be charged a fine of Rs. 5,00,000 if an assessee that is a component entity of an international group neglects to provide information and documentation regarding an international group.
According to the section 92D of Income Tax Act, every person who has entered into an international transaction or specified domestic transaction shall keep and maintain such information and document in respect thereof, as may be prescribed:
Provided that the person, being a constituent entity of an international group, shall also keep and maintain such information and document in respect of an international group as may be prescribed.