M/s. DRHL India Services Pvt. Ltd, Bangalore V. DCIT, Bangalore

ITA 1211/BANG/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7706 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 08-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K AMBUSTHA CITI
• Assessee Lawyers: DINESH P
• Keywords: Transfer pricing; Principle of natural justice; Bonafide belief; Additional evidence

Judgement Text

ITA.1211/BANG/2010 PAG E - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SHRI. N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI. GEORGE GEORGE K. JUDICIAL MEMBER I.T.A NO.1211/BANG/2010 (ASSESSMENT YEAR : 2006-07) M/S. DRHL INDIA SERVICES PVT. LTD, NO.14, 7TH MAIN, 80 FEET ROAD, SUBBANAPALYA EXTENSION, BANGALORE 560 033 .. APP ELLANT PAN : AABCD5225A V. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 11(1), BANGALORE .. RESPONDENT APPELLANT BY : SHRI. DINESH P, ADVOCATE RESPONDENT BY : SHRI. S. K. AMBUSTHA, CIT-I, DR DATE OF HEARING : 10.07.2012 DATE OF PRONOUNCEMENT : 10.07.2012 O R D E R PER N. BARATHVAJA SANKAR, VICE PRESIDENT : THIS IS AN APPEAL PREFERRED BY THE ASSESSEE, M/S. DRHL INDIA SERVICES PVT. LTD., BANGALORE, FOR THE ASSESSMENT Y EAR 2006-07, AGAINST THE ORDER OF THE DCIT, CIRCLE -11(1), BANGA LORE, DEALING WITH TRANSFER PRICING ADJUSTMENT. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE READ AS UNDER : I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED ASSESSING AUTHORITY OUGHT TO HAVE ACCEPTED THE ITA.1211/BANG/2010 PAG E - 2 EXPLANATION AND REFRAINED FROM MAKING THE IMPUGNED ADDITION TO ARMS LENGTH PRICE (ALV FOR SHORT) BY FO LLOWING THE ORDER PASSED US.92CA OF THE ACT BY THE TRANSFER PRICING OFFICER (TPO) AS APPROVED BY THE DISPUTE RESOLUTION PANEL (FOR SHORT DRP). II) THE LEARNED ASSESSING AUTHORITY OUGHT TO HAVE APPRE CIATED THAT THE REFERENCE TO TPO WAS WITHOUT JURISDICTION AND AGAINST LAW, FACTS AND CIRCUMSTANCES AND IN VIOLATI ON OF PRINCIPLES OF NATURAL JUSTICE SINCE NO OPPORTUNITY WAS GIVEN TO THE APPELLANT PRIOR TO THE REFERENCE. III) THE DRT HAS ALSO ERRED IN UPHOLDING THE REFERENCE T O TPO. IV) THE LEARNED ASSESSING AUTHORITY/DRP OUGHT TO HAVE APPRECIATED THAT THE COMPARABLE CASES CITED BY THE TPO WERE TOTALLY UNCOMPARABLE AND THERE WERE CONTRADICT ION REASONING OF THE TPO AND CONSEQUENTLY THE DIFFERENC E IN ALP AS DETERMINED BY THE TPO AND AS APPROVED BY THE DRP ARE UNREASONABLE AND UNWARRANTED AND THUS THE IMPUG NED ADDITION AS MADE WAS LIABLE TO BE DELETED. V) THE LEARNED ASSESSING AUTHORITY/DRP ERRED IN NOT FO LLOWING THE METHOD FOR DETERMINATION OF ALP AS ADOPTED BY T HE APPELLANT WHICH WAS AS APPROVED BY THE STATUTE. VI) WITHOUT PREJUDICE, THE LEARNED TPO/DRP OUGHT TO HAV E CONSIDERED THE OBJECTIONS RAISED BY THE APPELLANT A ND THE COMPARABLE CASES PROVIDED BY THE APPELLANT ALONG WI TH CASE LAW AND OUGHT TO HAVE REFRAINED FROM THE DETERMINAT ION OF DIFFERENCE IN ALP TO SUGGEST THE IMPUGNED ADDITIONS TO THE INCOME DECLARED BY THE APPELLANT. VII) WITHOUT PREJUDICE, THE ADDITIONS ARE EXCESSIVE, ARB ITRARY AND UNREASONABLE AND OUGHT TO BE REDUCED SUBSTANTIALLY. ITA.1211/BANG/2010 PAG E - 3 02. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE PLACED ON RECORD A PAPER BOOK CONSISTING OF 150 PAG ES COMPRISING THEREIN THE FOLLOWING MATERIALS : I) TRANSFER PRICING NOTE ON COMPARABLES II) ANNEXURES TO NOTE III) SANCTION LETTER FROM HSBC IV) INSURANCE POLICY COPY FROM UNION ASSURANCE LTD V) POLICY NOTE SRILANKA EXPORT CREDIT INSURANCE CORP ORATION VI) FORM 36B VII) COPY OF ASSESSMENT ORDER VIII) COPY OF PROCEEDINGS OF THE DRP, BANGALORE IX) FORM 35A X) ORDER U/S.92CA XI) TRANSFER PRICING CORRESPONDENCES XII) FRANCHISE AGREEMENT XIII) FORM 3CEB XIV) FINANCIAL STATEMENTS BY PLACING THE ABOVE PAPER BOOK ON RECORD, THE LEAR NED COUNSEL FOR THE ASSESSEE WAS FAIR ENOUGH TO SUBMIT THAT ALL THESE M ATERIAL ARE ADDITIONAL EVIDENCES FILED BEFORE THE TRIBUNAL FOR THE FIRST TIME. HE HAS ALSO MADE AN APPLICATION UNDER RULE 29, WHEREIN IT IS STATED THAT EXCEPT FRANCHISE AGREEMENT, NONE OF THE OTHER DOCUM ENTS FORMING PART OF THE ADDITIONAL EVIDENCES, COMPILED IN THE PAPER BOOK COULD BE PRODUCED BEFORE THE LOWER AUTHORITIES SINCE THE ASS ESSEE WAS UNDER THE BONAFIDE BELIEF THAT HAVING FURNISHED THE REQUIRED EXPLANATION, IT WAS ABLE TO CONVINCE THE ASSESSING OFFICER AND FURTHER SINCE THE ASSESSING ITA.1211/BANG/2010 PAG E - 4 OFFICER DID NOT ASK FOR FURTHER DETAILS, THE ASSESS EE ASSUMED THAT NO FURTHER DOCUMENTS ARE REQUIRED. IT WAS ALSO MENTIO NED IN THE APPLICATION THAT THE DOCUMENTS (ADDITIONAL EVIDENCE S FILED) ARE VERY CRUCIAL IN ORDER TO JUSTIFY THE ALP AS ADMITTED BY THE APPELLANT AND THE NON-PRODUCTION OF THESE DOCUMENTS BEFORE THE LOWER AUTHORITIES ON ACCOUNT OF BONAFIDE REASONS NARRATED SUPRA AND NOT DUE TO MALAFIDE INTENTION. THUS, IT WAS PRAYED THAT THE ABOVE DOCU MENTS MAY BE ADMITTED IN THE INTEREST OF JUSTICE AND EQUITY. 03. WE HAVE ALSO HEARD THE LEARNED DR WHO SUBMITTED THAT IN CASE THESE ADDITIONAL EVIDENCES ARE ADMITTED THE MATTER HAS TO BE REMITTED BACK TO THE ASSESSING OFFICER FOR FRESH DECISION FO R DETERMINING THE ALP. WE HAVE GONE THROUGH THE ADDITIONAL EVIDENCES FILED BEFORE US IN THE LIGHT OF THE SUBMISSIONS OF BOTH THE PARTIES . IN OUR CONSIDERED OPINION, THESE MATERIALS FILED FOR THE FIRST TIME B EFORE US ARE CRUCIAL IN DETERMINING THE ALP AND HENCE WE ADMIT THESE ADDITI ONAL EVIDENCES. 04. HAVING ADMITTED THE ADDITIONAL EVIDENCES, WE DE EM IT FIT AND PROPER IN THE INTEREST OF NATURAL JUSTICE TO RESTOR E THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION IN RESPECT OF DETERMINATION OF ALP. THE ASSESSEE SHALL PRODUCE C OPIES OF THE ADDITIONAL EVIDENCES FILED BEFORE US TO THE ASSESSI NG OFFICER AND THE ASSESSING OFFICER AFTER CONSIDERING THESE MATERIALS AND AFTER GIVING EFFECTIVE OPPORTUNITY OF HEARING TO THE ASSESSEE, D ECIDE THE ISSUE IN ITA.1211/BANG/2010 PAG E - 5 RESPECT OF THE ALP. THE ASSESSEE SHALL ALSO COOPER ATE WITH THE ASSESSING OFFICER BY PRODUCING THE MATERIALS THAT M AY BE REQUIRED BY HIM. 05. THE ASSESSEE HAS ALSO TAKEN A GROUND IN RESPECT OF LEVY OF INTEREST U/S.234D OF THE IT ACT. SINCE WE HAVE RES TORED THE MATTER TO DECIDE THE MAIN ISSUE RELATING TO TRANSFER PRICING, WE DIRECT THE ASSESSING OFFICER TO REDECIDE THIS ISSUE RELATING T O INTEREST U/S.234D OF THE ACT WHILE GIVING EFFECT TO OUR DIRECTION IN RES PECT OF TRANSFER PRICING. 06. IN THE RESULT, THE ASSESSEE'S APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT AFTER THE COMPLE TION OF THE HEARING ON 10.07.2012. SD/- SD/- (GEORGE GEORGE K) (N. BARATHVAJA SANKAR) JUDICIAL MEMBER VICE PRESIDENT