Control RIsks India Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 1098/DEL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6941 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I2
• Next Hearing Date: 30-06-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 02-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAUSHALENDRA TIWARI
• Keywords: Related party transaction; Transfer pricing; Opportunity of being heard; International transaction; Wholly owned subsidiary
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I-2 NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SH.PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A .NO.-1098/DE L/2016 (ASSESSMENT YEAR-2011-12) CONTROL RISKS INDIA PVT.LTD., 401, COPIA CORPORATE SUITS, JASOLA COMPLEX, NEW DELHI-110025. PAN-AADCC3008J (APPELLANT) VS DCIT, CIRCLE-6(2), NEW DELHI ( RESPONDENT) A SSESSEE BY SH.AJAY VOHRA, SR.ADV., SH. NEERAJ JAIN, ADV. & MS. DEEPIKA AGARWAL, CA R EVENUE BY SH.KAUSHALENDRA TIWARI, SR.DR ORDER PER DIVA SINGH, JM THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A SSAILING THE CORRECTNESS OF THE ORDER DATED 29.01.2016 OF ASSESSING OFFICER PASSED UNDER SECTION 143(3) READ WITH SECTION 144C OF THE INCOME TAX ACT, 1961 PERTAINING TO 2011 12 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS:- 1. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN COMPLETING THE ASSESSMENT UNDER SECTION 144C READ WITH SECTION 143 (3) OF THE INCOME-TAX ACT, 1961 ('THE ACT') AT AN INCOME OF RS. 2,89,58,2 99 AS AGAINST INCOME OF RS.39,43,589 RETURNED BY THE APPELLANT. 2. THAT THE AO/TPO ERRED ON FACTS AND IN LAW IN MAKING AN ADDITION OF RS. 2,44,78,815 ALLEGEDLY ON ACCOUNT OF DIFFERENCE IN T HE ARM'S LENGTH PRICE OF THE 'INTERNATIONAL TRANSACTIONS' ON THE BASIS OF THE OR DER PASSED UNDER SECTION 92CA(3) OF THE ACT BY THE TPO. DATE OF HEARING 30.06.2016 DATE OF PRONOUNCEMENT 28.09.2016 I.T.A .NO.-1098/DEL/2016 PAGE 2 OF 9 2.1 THAT THE DRP/AO ERRED ON FACTS AND IN LAW IN ARBITRARILY HOLDING THAT THE APPELLANT IS ENGAGED IN PROVIDING 'FINANCIAL ADVISO RY SERVICES' AND ALSO ERRED IN COMPARING THE APPELLANT WITH THE COMPANIES, VIZ., A PITCO LTD. PUSHPAK FINANCIAL SERVICES LTD., TSR DARASHAW LIMITED, WHICH ARE ENGA GED IN THE BUSINESS OF STOCK BROKING AND TRADING OF SHARES. 2.2. THE DRP/AO ERRED ON FACTS AND IN LAW IN DISRE GARDING THE BENCHMARKING ANALYSIS UNDERTAKEN BY THE APPELLANT APPLYING INTER NAL TNMM IN THE TRANSFER PRICING DOCUMENTATION ALLEGEDLY HOLDING THAT: (I) THE SEGMENTAL ANALYSIS/PROFITABILITY UNDERTAKEN BY THE APPELLANT IN THE TRANSFER PRICING DOCUMENTATION IS NOT APPEAR ING IN THE AUDITED FINANCIAL STATEMENT (II) THE INTERNAL TNMM, APPLIED BY THE APPELLANT, I S A SORT OF CUP AND ACCORDINGLY, STRICTLY COMPARABILITY IS REQUIRED FOR APPLYING CUP METHOD (III)THE SERVICES PROVIDED TO THE ASSOCIATED ENTERP RISES AND NON- ASSOCIATED ENTERPRISES ARE NOT IDENTICAL. (IV)THE DETAILS OF SERVICES AND BILLING STRUCTURE O F THE ASSOCIATED ENTERPRISES AND NON-ASSOCIATED ENTERPRISES IS NOT P ROVIDED BY THE APPELLANT 2.3. THAT THE DRP/AO ERRED ON FACTS AND IN LAW IN REJECTING THE FOLLOWING COMPANIES FOR UNDERTAKING BENCHMARKING ANALYSIS APP LYING TNMM ALLEGEDLY HOLDING THEM TO BE FUNCTIONALLY NOT COMPARABLE TO T HE APPELLANT FOR BENCHMARKING ANALYSIS: (I) KNIGHT WATCH SECURITY LTD. (II) BOMBAY INTELLIGENCE SECURITY (INDIA) LTD. (III) CENTRAL INVESTIGATION & SECURITY SERVICES LTD 2.4. THAT THE DRP/AO ERRED ON FACTS AND IN LAW I N INCLUDING THE FOLLOWING COMPANIES IN THE SET OF COMPARABLE COMPANIES FOR TH E PURPOSE OF UNDERTAKING BENCHMARKING ANALYSIS APPLYING TNMM NOT APPRECIATIN G THAT THEY WERE FUNCTIONALLY NOT COMPARABLE TO THE APPELLANT: (I) APITCO LTD. (II) LADDERUP CORPORATE ADVISORY PVT. LTD. (III) PUSHPAK FINANCIAL SERVICES LTD (IV) TSR DARASHAW LTD. 2.5 THAT THE DRP/AO ERRED ON FACTS AND IN LAW I N SELECTING TSR DARASHAW LTD. AS COMPARABLE NOT APPRECIATING THE FACT THAT T HE ANNUAL REPORT OF THE COMPANY FOR THE FINANCIAL YEAR 2010-11 IS NOT AVAIL ABLE IN PUBLIC DOMAIN. 2.6 THAT THE DRP/AO ERRED ON FACTS AND IN LAW I N SELECTING PUSHPAK FINANCIAL SERVICES LTD. AS COMPARABLE NOT APPRECIAT ING THE FACT THAT COMPANY IS NOT SATISFYING THE FILTER OF EMPLOYEE COST APPLIED BY THE TPO. 2.7. THAT THE DRP/AO ERRED ON FACTS AND IN LAW IN CONSIDERING APITCO LTD. AS COMPARABLE NOT APPRECIATING THAT THE INFORMATION WI TH RESPECT TO RELATED PARTY TRANSACTIONS IS NOT AVAILABLE IN THE ANNUAL REPORT OF THE COMPANY AND ACCORDINGLY, NOT SATISFYING THE FILTER OF RELATED P ARTY TRANSACTIONS APPLIED BY THE TPO. 2.8. THAT THE DRP/AO ERRED ON FACTS AND IN LAW IN NOT ALLOWING APPROPRIATE RISK ADJUSTMENT TO ESTABLISH COMPARABILITY ON ACCOUNT OF THE APPELLANT BEING A LOW- RISK-BEARING CAPTIVE SERVICE PROVIDER AS OPPOSED TO THE COMPARABLE COMPANIES WHO WERE INDEPENDENT COMPARABLE COMPANIES. I.T.A .NO.-1098/DEL/2016 PAGE 3 OF 9 2.9 WITHOUT PREJUDICE THAT THE ASSESSING OFFICE R/TPO ERRED ON FACTS AND IN LAW IN INCORRECTLY COMPUTING THE TRANSFER PRICING A DJUSTMENT AT RS. 2,29,27,042 AS AGAINST THE CORRECT ADJUSTMENT OF RS. 1,95,41,92 8. 3. THAT THE DRP/AO ERRED ON FACTS AND IN LAW IN DISALLOWING AN AMOUNT OF RS.5,35,894 BEING INTEREST ON LATE DEPOSIT OF TDS H OLDING THE SAME TO BE NOT AN ALLOWABLE EXPENDITURE. 4. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN LEVYING INTEREST UNDER SECTION 234B OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR VARY, ANY OF THE AFORESAID GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 2. REFERRING TO THE FACTS, QUA THE ISSUES RAISED THE LD.AR STATED THAT THOUGH HE IS CONFIDENT THAT AS PER SETTLED LEGAL PRINCIPLES AND JUDICIAL PRECEDENT THE ASSESSEE IS CONFIDENT OF ITS SUCCESS IN REGARD TO ITS PRAYER I N GROUND NOS. 2.3 AND 2.4. HOWEVER, THE REQUEST FOR ADMITTING FRESH EVIDENCES IN REGARD TO WHICH APPLICATION UNDER RULE 29 IS ON RECORD AND PRAYER FOR REMAND IN VIEW OF THE PRAYER IN GROUND NO.2.2 IT WAS SUBMITTED THAT FOLLOWING THE JUDICIAL PRECEDENT, THE ISSUE IN ORDE R TO CORRECTLY CHARACTERISE THE TAXPAYER MAY BE RESTORED TO THE TPO. REFERRING TO THE ARGUME NTS ADVANCED IN 2010 11 ASSESSMENT YEAR IN ITA NO.979/DEL/2015, IT WAS HIS SUBMISSION THAT ALTHOUGH HEREIN ALSO CONSIDERING THE PRECEDENT AVAILABLE, THE COMPARABLE S SELECTED WILL NEED TO BE EXCLUDED AS NOT ONLY THE COMPARABLE SELECTED SUFFER ON ACCOUNT OF THE FACT THAT SOME OF THEM UNLIKE THE TAXPAYER IN THE PRESENT PROCEEDINGS, ARE ENGAGE D IN FINANCIAL TRADING ACTIVITIES BUT EVEN OTHERWISE QUA SOME OF THEM EITHER THE EMPLOYEE COST FILTER OR THE RPT FILTER IS NOT SATISFIED AND IN SOME INSTANCES ADJUSTMENTS WOULD B E REQUIRED TO BE MADE QUA THE COMPARABLE. THE TAXPAYER IN THE PRESENT PROCEEDING S IT WAS SUBMITTED IS A LOW RISK BEARING CAPTIVE SERVICE PROVIDER. THUS, IT WAS ARGU ED THAT EVEN THOUGH THE ASSESSEE IS CONFIDENT OF ITS SUCCESS IN THE PRAYER FOR EXCLUSIO N AND INCLUSION OF COMPARABLE SELECTED HOWEVER SUCH A PRAYER IS NOT BEING MADE AS IT WOULD NOT BE APPROPRIATE IN VIEW OF THE FACT THAT PROPER CHARACTERIZATION OF THE TAX PAYER IS A CONTINUING ISSUE AND THE TAX PAYER I.T.A .NO.-1098/DEL/2016 PAGE 4 OF 9 CANNOT BE SAID TO HAVE ACCEPTED WRONG CHARACERTIZAT ION IN THE EARLIER YEARS HENCE THE PRAYER THAT FOR THE PURPOSES OF CHARACTERIZATION, T HE ISSUE BE RESTORED TO THE TPO IN THE FACTS OF THE PRESENT CASE ALSO. HEREIN ALSO IT WAS SUBMITTED THE TPO AT INTERNAL PAGE 2 PARA 3 APPRECIATES BY REPRODUCING FROM THE TRANSFER PRICING REPORT THAT THE TAXPAYER OFFERS A COMPREHENSIVE RANGE OF CONSULTANCY SERVICE S THAT ASSIST CLIENTS TO MANAGE POLITICAL, SECURITY, OPERATIONAL INTEGRITY RISK AT EVERY STAGE OF AN INVESTMENT HOWEVER WHILE CARRYING OUT THE SELECTION PROCESS OF COMPARABLE CO MPANIES HE AGAIN SELECTS PUSHPAK FINANCIAL SERVICES; TRS DARASHAW ETC COMPANIES W HO ADMITTEDLY ARE ENGAGED IN ACTUAL SHARE TRADING AND INVESTMENT ACCORDINGLY THE ISSUE HEREIN ALSO MAY BE RESTORED. PRAYER FOR ADMITTING FRESH EVIDENCE IN THE FACTS OF THE PR ESENT CASE WAS ALSO JUSTIFIED ON THE BASIS OF THE FOLLOWING DECISIONS NAMELY CIT VS TEXT HUNDRED INDIA PVT. LTD. 239 CTR 263 (DELHI HIGH COURT); CIT VS. HEWLETT PACKARD INDIA: 314 ITR 55 (DEL HC); CIT VS. CHANDRA KANT SAHU BHAI: 202 TAXMAN 262 (DEL HC); CI T VS. BETTERWAYS FINANCE: ITA 995 OF 2009 (DEL HC); JATIA INVESTMENT CO V. CI T: 206 ITR 718 (CAL HON'BLE HC); ELECTRA (JAIPUR) LTD. VS. IAC: 26 ITD 236 (DEL ITAT); AND Y.W.C. A OF INDIA VS. IAC: 29 ITD 620 (DEL ITAT). 3. THE LD. SR. DR DID NOT HAVE ANY OBJECTION EITHER T O THE ADMISSION OF FRESH EVIDENCE NOR TO THE RESTORATION OF THE ISSUE BACK TO THE FIL E OF THE TPO. HIS ONLY ARGUMENT WAS THAT THE EVIDENCE IS NEW AND HE WOULD NOT WANT TO ADDRES S THE SAME AS FIRST IT SHOULD BE LOOKED INTO BY THE AO. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT THE PRAYER FOR FRESH EVIDENCE AND R EMAND IS NOT OPPOSED BY THE REVENUE. I.T.A .NO.-1098/DEL/2016 PAGE 5 OF 9 WE FIND THAT THOUGH THE TPO IN PARA 1 AND 3 OF HIS ORDER HAS EXTRACTED THE ACTIVITIES AS UNDER:- 1. TAXPAYERS PROFILE CONTROL RISK INDIA PVT. LTD. THE COMPANY IS A 100% SUBSIDIARY OF CONTROL RISKS GROUP HOLDING LTD., LONDON. DURING THE FINAN CIAL YEAR 2010-11, CONTROL RISK INDIA PRIVATE LIMITED FOR THE PURPOSE OF BUSINESS OF CONSULTING BUSINESS INTELLIGENCE SERVICES, FRAUD INVESTIGATION , ETC. ENTERED INTO THE CROSS BORDER TRANSACTION WITH ITS OFFSHORE AFFILIATES. . 2. IN RESPECT OF FUNCTIONAL PROFILE OF THE ASSESSEE, IT IS REPORTED IN YOUR TRANSFER PRICING REPORT IN PAGE 5 THAT CONTROL RISK S INDIA PRIVATE LIMITED WAS INCORPORATED IN AUGUST, 2007 FOR OFFERING A COMPREHENSIVE RANGE OF CONSULTANCY SERVICES THAT ASSIST CLIENTS TO MANAGE POLITICAL, SECURITY, OPERATIONAL AND INTEGRITY RISKS AT EVERY STAGE OF AN INVESTMENT. (EMPHASIS PROVIDED) 4.1. HOWEVER, THEREAFTER HE CONCLUDED IN PARA 5.1 INTER NAL PAGE 13 THAT AS PER THE TP REPORT SUBMITTED, TAXPAYER IS ENGAGED IN PROVIDING INVESTMENT AND OTHER FINANCIAL ADVISORY TO ITS AE . 4.2. ACCORDINGLY AS A RESULT OF THE ABOVE WRONG CHARACT ERIZATION, THE CONSEQUENTIAL STEPS OF SELECTION OF COMPARABLE COMPANIES ENGAGED IN TRADING IN SHARES; SHARE TRANSFER SERVICES ETC. SUFFERS FROM FOUNDATIONAL FUNDAMENTAL ERRORS AND MISTAKES. WE NOTE THAT IN THE FUNCTIONAL PROFILE AS PER THE TRANSFER PRICING STUDY PLACED ON RECORD, THE ASSESSEE HAS BEEN DESCRIBED AS UNDER (INTERNAL PAGES 5 TO 8 OF T HE TPOS ORDER) :- 4.3. FUNCTIONAL PROFILE THE ASSESSEES TRANSFER PRICING STUDY GIVES THE FOL LOWING DETAILS ABOUT THE FUNCTIONS PERFORMED BY THE ASSESSEE:- D. FUNCTIONS PERFORMED 4.7. CRIPL PROVIDES CONSULTANCY SERVICES TO A NUMBE R OF LARGE MULTINATIONAL BASED GROUPS AND GOVERNMENTS. THE DIAGRAM BELOW PRO VIDES AN OVERVIEW OF THE CONSULTING FUNCTION AND THE WAY IN WHICH SERVIC ES ARE DELIVERED TO CLIENTS...... 4.8 INVESTIGATIONS INVESTIGATIONS ARE FURTHER CATEGORIZED INTO: BUSINESS INTELLIGENCE AND INVESTIGATION I.T.A .NO.-1098/DEL/2016 PAGE 6 OF 9 4.9 HIDDEN AGENDAS AM EASILY DERAIL THE BEST PLANS AND REPUTATIONS CAN BE DAMAGED. THEREFORE BUSINESSES NEED TO BE FULLY AWAR E OF A WIDE SPECTRUM OF RISKS. BUSINESS INTELLIGENCE AND DUE DILIGENCE REPR ESENT BOTH ESSENTIAL RISK MANAGEMENT AND A SIGNIFICANT SOURCE, OF COMPETITIVE ADVANTAGE. 4.10 CONTROL RISK CERTIFIED FRAUD EXAMINERS AND INV ESTIGATORS THAT CAN HIGHLIGHT THE RISKS IN FINANCIAL SECURITY OR ACCOUNTING SYSTE MS, AND IDENTIFY THE CULPRIT TO AN EVIDENTIAL STANDARD OF PROOF DURING OR AFTER THE EVENT. THE FOLLOWING ARE THE SERVICE PROVIDED UNDER BUSINESS INTELLIGENCE.: (A) DUE DILIGENCE (B) ANTI-MONEY LAUNDERING COMPLIANCE AND INVESTIGATIONS (C) FORENSIC ACCOUNTING SERVICES (D) ASSET TRACING AND RECOVERY (E) BRAND PROTECTION/ ANTI-COUNTERFEITING CONSULTANCY (F) POLITICAL AND SECURITY RISK ANALYSIS FRAUD INVESTIGATION & PREVENTION 4.11. CONTROL RISKS PROVIDES TIN' EXPERT PROFE SSIONAL ADVICE THAT COMPANIES NEED TO WITHSTAND CRISES, AND EMERGE S TRONGER FROM THE EXPERIENCE WITH BETTER PREVENTIVE MEASURES. SERVIC E INCLUDES: A. CORPORATE INVESTIGATIONS B. FORENSIC ACCOUNTING C. LITIGATION SUPPORT D. AUDIO FORENSICS E. VIDEO FORENSICS F. COURT PRESENTATION G. DOCUMENT CAPTURE H CRIME SCENE RECONSTRUCTION I. PDA ANALYSIS J. MOBILE PHONE ANALYSIS K. CELL SITE ANALYSIS 4.12 CRISIS AND SECURITY CONSULTANCY THESE ARE FURTHER DIVIDED INTO: SECURITY MANAGEMENT AND CONSULTANCY 4.13 NO TWO ORGANIZATIONAL ENTITIES ARE ALIKE AN D THAT A WHOLE HOST OF ISSUES SUCH AS NATURE OF THEIR BUSINESS, PROFILE OF EMPLOY EES AND THE GEOGRAPHICAL SPREAD OF THEIR ASSETS, UNIQUELY DETERMINE THEIR LE VEL OF EXPOSURE. FURTHER, COMPANY SUCCESS IS UNDERPINNED BY ITS ASSETS AND PR OTECTING THAN IN HOSTILE AND COMPLEX BUSINESS ENVIRONMENTS IS VITAL TO THE C OMPETITIVE ADVANTAGE OF ANY COMMERCIAL ENTITY. 4.14 CONTROL RISK ADVICE ORGANIZATIONS ON DEVELOPIN G AND IMPLEMENTING AN OVERALL CORPORATE SECURITY STRATEGY AND ALSO ADVICE ON HOW TO REDUCE THE RISKS TO THEIR MOST VALUABLE ASSETS - PEOPLE, REPUTATION, INFORMATION AND PHYSICAL ASSETS. CRISIS MANAGEMENT 4.15 PROTECTING ORGANIZATION'S REPUTATION, ENVIRONM ENT, KEY BUSINESS ASSETS, EMPLOYEES AND OTHER STAKE HOLDERS IS AN ONGOING CHA LLENGE ESPECIALLY IN THE FACE OF EXTREME,, COMPLEX AND CONSTANTLY CHANGING R ISKS. I.T.A .NO.-1098/DEL/2016 PAGE 7 OF 9 4.16 CONTROL RISKS CRISIS MANAGEMENT CONSULTANTS ID ENTIFY THE THREATS AND RISKS TO THE ORGANIZATION. IT SUPPORT IN DEVELOPING AND I MPLEMENTING SYSTEMS AND STRATEGIES TO MANAGE CRISES. IT ALSO DESIGNS AND RU N STIMULATION TO RIGOROUSLY TEST PLANS AND PREPARES PEOPLE. RESPONSE 4.17 THERE ARE CERTAIN CRISES THAT NO BUSINESS, NO MATTER HOW RESILIENT, CAN BE EXPECTED TO DEAL WITH ON ITS OWN. LIKE HANDLING CRI SES SUCH AS KIDNAP-FAR RANSOM, HOSTAGE-INKING, POLITICAL DETENTION OR EXTO RTION REQUIRES THE UTMOST SENSITIVITY. 4.18 CONTROL RISKS NET EXCLUSIVELY AS ADVISORS, AN ALYZING THE SITUATION AND GUIDING CLIENTS IN HANDLING COMMUNICATIONS WITH ALL THOSE INVOLVED AND EXPLAINING THE LIKELY SEQUENCE OF EVENTS. IT ALSO P ROVIDE POST-INCIDENT SUPPORT TO VICTIMS 4.19 HOWEVER, THESE SERVICES ARE EXCLUSIVELY PROVID ED BY CRGPIL IN LONDON AND NOT BY ANY OTHER SUBSIDIARY COMPANY. IF PROJECT IS RECEIVED BY SUBSIDIARY COMPANY THEN, THE SAME WILL BE FORWARDED TO CRGHL. GLOBAL RISK ANALYSIS 4.20 'THE INFORMATION CONTAINED WITHIN THE NEWLY BR ANDED CONTROL RISKS GLOBAL RISK ANALYSIS BUSINESS IS UTILIZED TO PRODUCE BESPO KE POLITICAL AND SECURITY ENVIRONMENT RISK ANALYSIS REPORTS FOR CLIENTS. BUSINESS ETHICS AND ANTI-CORRUPTION 4.21 CONTROL RISKS' ANTI-CORRUPTION PRACTICE IS THE SCOPE AND DEPTH OF EXPERTISE WITHIN ITS GLOBAL TEAM. IT PROVIDES CLIENTS WITH IN TEGRITY INFORMATION WHICH IS REQUIRED BY THEM BEFORE ENTERING INTO NEW MARKETS O R EMBARKING ON NEW BUSINESS RELATIONSHIPS. OUTSOURCED SECURITY MANAGEMENT 4.22 LARGE MULTINATIONALS, GOVERNMENTS AND NGOS HAV E OPERATIONS WHICH ARE. OFTEN IN RISKY OR HOSTILE ENVIRONMENTS SUCH AS IRAQ OR THE NIGER DELTA. WHETHER THE CAUSE OF RISK IS POLITICAL, SOCIAL, CRIMINAL O R MILITARY, CONTROL RISKS GROUP HAS THE EXPERIENCE AND EXPERTISE TO DELIVER SOLUTIO NS TO THESE ORGANIZATIONS. IT IS WITH THIS BACKGROUND THAT THE FUNCTIONAL SIMI LARITY OF COMPARABLE IS REQUIRED TO BE EXAMINED. 5. THESE FACTS SET OUT IN THE TP STUDY REPORT ON THE B ASIS OF DISTRIBUTION AND SALES AGREEMENT ENTERED INTO BY THE ASSESSEE AND ITS AE HA VE ADMITTEDLY NOT BEEN CONSIDERED AND THE CHARACTERIZATION BASED ON PAST PRECEDENT BY THE TPO HAS BEEN FOLLOWED IN HASTE. ACCORDINGLY CONSIDERING THE JUDICIAL PRECEDENT AND THE MATERIAL AVAILABLE ON RECORD, IN THE LIGHT OF THE SUBMISSIONS OF THE PARTIES BEFORE THE BENCH, WE DEEM IT APPROPRIATE TO ADMIT THE FRESH EVIDENCES FILED. THESE EVIDENCES HAVE BE EN DISCUSSED IN DETAIL AND ARE IDENTICAL I.T.A .NO.-1098/DEL/2016 PAGE 8 OF 9 TO WHAT HAS BEEN FILED IN TIA NO.979/DEL/2015 IN OR DER DATED 27.09.2016. THE EVIDENCES HAVE BEEN CONSIDERED TO BE RELEVANT AND CRUCIAL FOR DETERMINING THE ISSUES AS IT ELABORATES AND SUPPORTS THE ORIGINAL CLAIMS OF THE TAX PAYER. ACCORDINGLY FOLLOWING THE JUDICIAL PRECEDENT THE EVIDENCES ARE ADMITTED. SINCE THE EV IDENCES HAVE TO BE CONSIDERED FOR THE FIRST TIME AGAIN FOLLOWING THE PRECEDENT THESE ARE REMITTED TO THE TPO WITH THE DIRECTION TO PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW AFT ER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 6. THE NEXT ISSUE AGITATED BY THE TAXPAYER AND ARGUED BEFORE THE BENCH IS GROUND NO. 3, THE RELEVANT FACTS ARE FOUND ADDRESSED IN PARA 4 OF THE ASSESSMENT ORDER:- 4. DISALLOWANCE OF LATE DEPOSIT OF TDS 4.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AR OF THE ASSESSEE COMPANY WAS ASKED TO SHOW CAUSE AS TO WHY NOT LATE DEPOSIT OF TDS AMOUNTING TO RS.5,35,884/- TO BE ADDED THE INCOME. IN RESPONSE TO THE SAME, THE AR OF THE ASSESSEE COMPANY SUBMITTED ITS REPLY VIDE ITS LETTER DATED 27.02.2015, WHEREIN STATING THAT IN THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2011-12, THE ASSESSEE HAS PAID AN AMOUNT OF RS.5,35,894/- ON ACCOUNT OF INTEREST ON LATE DEPOSI T OF TDS AND THAT THE SAID AMOUNT DOES NOT MERIT DISALLOWANCE. 4.2. THE SUBMISSION OF ASSESSEE HAD BEEN CONSIDERED BUT FOUND NOT TENABLE AS EXPENSES ON ACCOUNT OF INTEREST ON LATE DEPOSIT OF TDS IS NOT AN ALLOWABLE EXPENDITURE AS PER THE PROVISION OF THE ACT. ACCORD INGLY, AN AMOUNT OF RS.5,35,894/- WAS DISALLOWED AND ADDED TO THE INCOM E OF THE ASSESSEE COMPANY. 4.3. IN THIS CASE A DRAFT OF THE PROPOSED ORDER OF ASSESSMENT WAS PASSED ON 31.12.2014 AND SENT TO THE ASSESSEE. THE ASSESSEE F ILED OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL (DRP) AGAINST THE VARIATIO N PROPOSED TO BE MADE IN THE DRAFT ORDER. THE DISPUTE RESOLUTION PANEL HAS R EJECTED THE OBJECTIONS OF THE ASSESSEE AND UPHELD THE ADDITION MADE BY THE AO VID E ORDER DATED 23.12.2015. 4.4. IN COMPLIANCE OF THE DIRECTIONS OF THE HON'BLE DRP, THE ADDITION AMOUNTING TO RS.5,35,894/- IS BEING MODE ON ACCOUNT OF ALP. (ADDITION : RS.5,35.894/-) FOR THE ABOVE MENTIONED REASONS, I AM SATISFIED THA T ASSESSEE COMPANY CONCEALED THE INCOME/FILED IN ACCURATE PARTICULARS, HENCE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I. T. ACT ARE INITIATED. I.T.A .NO.-1098/DEL/2016 PAGE 9 OF 9 AS PER THE DIRECTIONS OF THE HON'BLE DRP, A COPY OF THE DIRECTIONS OF THE DRP DATED 23.12.2015 AND ALSO THE ORDER OF THE TPO DATE D 14.01.2016 ARE PLACED AS ANNEXURES TO BE READ AS A PART OF THIS ORDER.'' 7. IT WAS A COMMON STAND OF THE PARTIES BEFORE THE BE NCH THAT THE ARGUMENTS ADVANCED QUA THE SAID ISSUE ON SIMILAR FACTS AND CI RCUMSTANCES CONTINUES TO REMAIN THE SAME. ACCORDINGLY RELYING UPON THE JUDICIAL PRECED ENT CITED WHERE NO CHANGE IN FACTS AND CIRCUMSTANCES HAS BEEN BROUGHT TO THE NOTICE OF THE BENCH THE SAID GROUND FOLLOWING THE PRECEDENT IS REJECTED. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER 2016. SD/- SD/- (PRASHANT MAHARISHI) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR, ITAT NEW DELHI