GROHE INDIA PRIVATE LIMITED,IMT MANESAR, GURGAON V. ASSESSMENT UNIT, INCOME TAX DEPARTMENT, DELHI

ITTPA 1/DEL/2024

AI Insights

Grohe India Private Limited appealed against the final assessment order passed by the Assessing Officer, which was based on the TPO's original order despite the DRP's directions for a nil adjustment. The case involved scrutiny of international transactions and transfer pricing adjustments for the Assessment Year 2020-21. The Tribunal observed procedural lapses by the Assessing Officer in not following the DRP's directions and the TPO's subsequent order proposing nil adjustments. The Tribunal's decision highlighted the importance of adherence to procedural norms and the correct application of transfer pricing regulations under the Income Tax Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 31538 (ITAT-DELHI)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 23-01-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2020-2021
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S.K. JADHAV
• Assessee Lawyers: NITIN NARANG
• Keywords: Transfer pricing; International transaction; Period of limitation; Time period of passing order; Related party transaction
• Section: 143(3); 142(1); 143(2); 92CA; 144C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘H’: NEW DELHI BEFORE SHRIS.RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI ANUBHAV SHARMA, JUDICIAL MEMBER IT (TP) A.No.1/DEL/2024 (Assessment Year: 2020-21) Grohe India Private Limited, vs. Assessment Unit, Plot No.75, Sector 8, IMT Manesar, Income Tax Department, Gurgaon – 122 050 (Haryana). Delhi. (PAN :AACCG6062B) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Nitin Narang, CA Ms. Divya Mathur, CA REVENUE BY : Shri S.K. Jadhav, CIT DR Date of Hearing : 09.01.2025 Date of Order : 23.01.2025 ORDER PER S.RIFAUR RAHMAN,AM: 1. This appeal is filed by the assessee against the final assessment order dated 26.06.2024 passed u/s 143(3) r.w.s.144C (13) of the Income Tax Act, 1961 (hereinafter called ‘the Act’) subsequent to the directions of the Ld. Dispute Resolution Panel (DRP)/TPO vide order dated 31.05.2024 for Assessment Year 2020-21. 2. Brief facts of the case are, assessee is engaged in distribution of various types of sanitary ware products and bathroom fittings in India. The assessee 2 IT (TP) A.No.1/DEL/2024 imports the goods in India for resale to third party distributors, dealers, retailers, institutional customers etc. on a regular basis. The assessee filed its return of income on 13.02.2021 declaring total income of Rs.23,83,72,340/-. The case of the assessee was selected for complete scrutiny under CASS to verify the following issues :- a. International related party transactions; b. International Transactions; c. ICDS compliance and adjustment; and d. Claim of any other amount allowable as deduction in schedule BP. 3. Accordingly, notices under section 143(2) and 142(1) of the Act were issued and served on the assessee. In response, ld. AR of the assessee appeared and submitted the information as called for. The case of the assessee was referred to Transfer Pricing Officer (TPO) and based on the order of TPO, TP adjustments proposed by the TPO was added to the income of the assessee and accordingly, assessment was completed by passing a draft assessment order u/s 144C(1) of the Act read with section 143(3) rws 144B of the Act determining the total taxable income at Rs.37,44,15,039/-. 4. Aggrieved with the above order, assessee filed objections before the ld. Dispute Resolution Panel (DRP)-1, New Delhi. After considering the submissions of the assessee, ld. DRP passed the order dated 31.05.2024. After considering the recommendations of the ld. DRP, TPO passed the order 3 IT (TP) A.No.1/DEL/2024 giving effect to ld. DRP directions u/s 144C dated 26.06.2024 and he determined the 35th percentile at 3.61% of the comparables as per the directions of ld. DRP and determined the 65th percentile at 8.40% with a median of 5.93%. the TPO found that the margin of the assessee for the aggregated international transactions at entity level is 4.28% which is in the range of finally accepted comparables, therefore, he proposed nil adjustment. 5. Meanwhile, the Assessing Officer passed the final assessment order also on 26.06.2024 with the observation that ld. DRP has directed to recompute certain TP adjustment and rejected the remaining objections as mentioned in the order and a copy of the same was endorsed to the concerned TPO. Considering the fact that no observations of the TPO in compliance with the directions of ld. DRP have so far been received and the limitation period for passing the final order is 30.06.2024, the order is being passed with the adjustment proposed by the TPO in the original order passed u/s 92CA (3) of the Act dated 30.07.2023. In the result, he sustained the additions proposed by the TPO in the original TPO order. 6. With the above facts on record, assessee is in appeal before us against the final assessment order raising following grounds of appeal :- “General Grounds : 1. That on the facts and circumstances of the case and in law, the order of assessment framed by the Assessment Unit, Income Tax Department (hereinafter referred to as \"Ld. AO\") pursuant to the directions passed by the Hon'ble Dispute 4 IT (TP) A.No.1/DEL/2024 Resolution Panel (hereinafter referred to as \"Hon'ble DRP\") under Section 144C(5) of the Income Tax Act, 1961 (\"the Act\") read with Income Tax Rules, 1962 (\"the Rules\"), is bad in law and void as it is not in conformity with the legal provisions of the Act. Legal Grounds : 2. That on facts and circumstances of the case and in law, the Ld. AO has merely sidestepped the directions of the Hon'ble DRP and have erroneously chosen to follow the original order of the Ld. TPO that was under dispute before the Hon'ble DRP, without following the specific directions issued by the Hon'ble DRP. That the order passed by the Ld. AO should be quashed as per provisions of Section 144C(1O) of the Act read with Section 144C(13) of the Act. 3. That on facts and circumstances of the present case and in law, the final assessment order passed by the Ld. AO was not in conformity with the order giving effect on transfer pricing- issues as passed by the Ld. TPO, pursuant to the directions of Hon'ble DRP. Thus, the final assessment order is bad in law as per the provisions of Section 144C(10) of the Act read with Section 144C(13) of the Act and hence, liable to be quashed. Other Consequential Grounds : 4. That on the facts and circumstances of the case and in law, the Ld. AO has erred in proposing to initiate penalty proceedings under Section 270A of the Act, against the Appellant, when the transfer pricing adjustment is reduced to Nil as per the order giving effect of the Ld. TPO pursuant to the directions of Hon'ble DRP. 5. That on the facts and circumstances of the case and in law, the Ld. AO has erred in proposing a demand under Section 156 of the Act, against the Appellant, when the transfer pricing adjustment is reduced to Nil as per the order giving effect of the Ld. TPO pursuant to the directions of Hon'ble DRP.” 5 IT (TP) A.No.1/DEL/2024 7. At the time of hearing, ld. AR of the assessee brought to our notice above facts on record and submitted that while passing the final assessment order, the Assessing Officer has not followed the directions of ld. DRP and also he brought to our notice that the TPO also passed the order giving effect to the order of ld. DRP on 26.06.2024. He submitted that TPO has considered the directions of ld. DRP and proposed nil adjustment considering the fact that the margin declared by the assessee at entity level is within the range of comparables finalized by the TPO based on the direction of ld. DRP. He submitted that the final assessment order passed by the Assessing Officer is against the provisions of section 144C wherein he is supposed to follow the directions of the ld. DRP. Therefore, the final assessment order deserves to be quashed. So even otherwise in the order giving effect, the TPO has proposed nil adjustment, therefore, the additions made by the Assessing Officer does not survive. 8. On the other hand, ld. DR of the Revenue did not object the above submission considering the facts on record and however, he relied on the findings of the lower authorities. 9. Considered the rival submissions and material placed on record. We observed that the Assessing Officer has passed the final assessment order on 26.06.2024 without waiting for order giving effect from TPO. In the given case, we observed that the TPO has passed the order giving effect on 6 IT (TP) A.No.1/DEL/2024 26.06.2024 and the Assessing Officer also passed the final assessment order on 26.06.2024. It is a fact on record that the period of limitation ends on 30.06.2024 and Assessing Officer without waiting for the order from the TPO, he proceeded to sustain the addition made by the TPO in the original TP order passed u/s 92CA(3) of the Act dated 30.07.2023. It is also brought to our notice that assessee has filed a rectification application before the Assessing Officer dated 05.07.2024 highlighting the above defects. The assessee has filed a copy of the same in the paper book. It is brought to our notice that the Assessing Officer has not acted upon the above rectification application until now. 10. After considering the submissions of both the parties and factual matrix brought on record, we observed that the Assessing Officer has not followed the directions of ld. DRP before passing the final assessment order which itself is in violation of provisions of section 144C of the Act. At the same time, we also observed that the TPO has passed the order giving effect on 26.06.2024 at 1.46 PM and the Assessing Officer has passed the final assessment order on 26.06.2024 at 20.52 hours. However, the TPO has proposed nil adjustment considering the fact that the margin declared by the assessee at entity level is within the range of comparables finalized by the TPO. Therefore, as such, there is no adjustment required relating to transfer pricing in the international transactions carried on by the assessee during the 7 IT (TP) A.No.1/DEL/2024 current assessment year. Therefore, we are inclined to delete the TP adjustments proposed by the Assessing Officer of Rs.9,61,57,599/-. 11. In the result, grounds no.2 & 3 raised by the assessee are allowed. 12. Ground No.1 is general in nature, grounds no.4 & 5 are premature and consequential in nature. 13. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on this 23rd day of January, 2025. Sd/- sd/- (ANUBHAV SHARMA) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 23.01.2025 TS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "