The TPO had made transfer pricing adjustment in respect of idle capacity adjustment and intra group services. The TPO had also considered CUP as the ‘Most Appropriate Method’ instead of CPM adopted by the Assessee. AO levied penalty by merely relying on the TPO’s order. CIT(A) confirmed the penalty as Assessee had accepted the transfer pricing adjustments. On appeal, the Tribunal held that assessee has obtained transfer pricing study report from an outside expert and the objectivity of the same was not questioned. Also, the ground on which the ALP as determined by Assessee had been rejected was also debatable. Therefore, it could not be said that the Assessee has not determined ALP in accordance with law, in good faith and with due diligence, the pre-condition for invoking Explanation 7 to s. 271(1)(c). Accordingly, the penalty was deleted. (ITA No. 2647/Del/2016 dt. 31/10/2017) (AY. 2010-11)