Assessee was engaged in business of importing rough diamond, getting them cut and polished and, thereafter, exporting to various countries including its Associated Enterprises (AEs). It benchmarked international transaction with its AE as regards sale of polished diamond adopting Transactional Net Margin Method (TNMM) as most appropriate method (MAM). TPO observed that entity level margin of assessee included its combined profit on transactions with both AEs and non-AEs; therefore, he called upon assessee to furnish separate segmental result in respect of transactions with AEs and non-AEs along with segmental profitability, however, assessee failed to produce same and TPO accepted transaction with AEs to be at arm’s length due to lack of information furnished by assessee. TPO imposed penalty under section 271G alleging non-maintenance of specified documents. CIT(A) deleted the penalty. On appeal by revenue the Tribunal held that if TPO was not satisfied with benchmarking of assessee under TNMM, nothing prevented him from rejecting assessees’s benchmarking and determining arm’s length price of transaction with AEs independently by applying any one of prescribed methods. however, TPO having accepted benchmarking of assessee under TNMM, imposition of penalty under section 271G was to be deleted. (AY. 2011-12)