ALAN DICK & CO. (I) P. LTD, THANE V. JT CIT RG 1, KALYAN

ITA 1629/MUM/2014

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2799 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Next Hearing Date: 14-09-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 10-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Additional evidence
• Section: 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHR I N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO. 1629 / MUM . /201 4 ( ASSESSMENT YEAR : 2009 10 ) ALAN DICK & CO. INDIA PVT. LTD. UNIT NO.1 4, BLDG. NO.K 6 SHRI ARIHANT COMPOUND VILLAGE KOPER TALUKA BHIWANDI DIST. THANE 421 302 PAN AAECA2445G . APPELLANT V/S JT. COMMISSIONER OF INCOME TAX RANGE 1, MUMBAI . RESPONDENT ASSESSEE BY : MS. DINKLE HARIYA REVENUE BY : SHRI SUBHASH KULKARNI A/W SHRI ANAND MOHAN DATE OF HEARING 21.08.2019 DATE OF ORDER 30.08.2019 O R D E R PER SAKTIJIT DEY. J.M. CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AGAINST FINAL ASSESSMENT ORDER DATED 2 1 ST JANUARY 2014, PASSED UNDER SECTION 143(3) R/W SECTION 144C(13) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 20 09 10 IN PURSUANCE TO THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL 1, MUMBAI, (FOR SHORT THE DRP ). 2 ALAN DICK & CO. INDIA PVT. LTD. 2 . THE GROUNDS RAISED BY T H E A SSESSEE ARE AGAINST THE ADDITION MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT OF ` 2,60,72,599. 3 . BRIEF FACTS ARE, THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING TELECOM AND BROADCASTING EQUIPMENT S AND PROVIDING INFRASTRUCTURE SOLUTIONS IN THE FIELD OF TELECOMMUNICATION. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 29 TH SEPTEMBER 2009, DECLARING TOTAL INCOME OF ` 6,04,46,552. IN THE COURSE OF ASSESSMENT PROCEEDIN GS, THE ASSESSING OFFICE R NOTICING THAT DURING THE YEAR THE ASSESSEE HAS ENTERED INTO VARIOUS INTERNATIONAL TRANSACTION S WIT H ITS ASSOCIATED ENTERPRISES (A E) MADE A REFERENCE TO THE TRANSFER PRICING OFFICER FOR DETERMINING THE ARMS LENGTH PRICE . A FTER CAL LING FOR AND EXAMINING VARIOUS INFORMATION AND DOCUMENTS, THE TRANSFER PRICING OFFICER ULTIMATELY REJECTED ASSESSEES CLA IM THAT TRANSACTIONS WITH THE AE ARE AT ARM'S LENGTH. AFTER REJECTING THE CLAIM OF THE ASSESSEE, THE TRANSFER PRICING OFFICER PROCEEDED TO DETERMINE THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION S INDEPENDENTLY BY APPLYING TRANSACTIONAL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD AND SELECTED THREE FRESH COMPARABLES WITH ARITHMETIC M EAN OF 22.70%. APPLYING THE ARITHME TIC MEAN OF THE COMPARABLES TO THE OPERATING COST, THE TRANSFER PRICING OFFICER WORKED OUT ADJUSTMENT OF ` 7,12,57,027. ON THE BASIS OF ADJUSTMENT PROPOSED 3 ALAN DICK & CO. INDIA PVT. LTD. BY THE TRANSFER PRICING OFFICER, THE ASSESSING OFFICER FRAMED THE DRAFT ASSESSMENT ORDER INCORPORATI NG THE ADJUSTMENT PROPOSED BY THE ASSESSING OFFICER. AGAINST THE DRAFT ASSESSMENT ORDER SO PASSED, THE ASSE SSEE FILED OBJECTIONS BEFORE LEARNED DRP . 4 . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIAL ON RECORD, LEARNED DRP GRANTED PARTIAL RELIED TO THE ASSESSEE BY DIRECTING THE ASSESSING OFFICER/ TRANSFER PRICING OFFICER TO WORK OUT THE ADJUSTMENT ON THE INTERNATIONAL TRANSACTION RELATING TO SALES OF FINISHED GOODS ONLY WITH AE AND NOT AT ENTITY LEVEL. IN VIEW OF SUCH DIR ECTION OF LEARNED DRP, THE ADJUSTMENT WAS REDUCED TO ` 2,60,72,599. ON THE BASIS OF DIRECTIONS OF LEARNED DRP, THE ASSESSING OFFICER PASSED THE IMPUGNED ASSESSMENT ORDER. 5 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE TRANSFER PRICING OFFICER DURING THE COURSE OF PROCEEDINGS DID NOT PROVIDE PROPER OPPORTUNITY TO OBJECT TO THE COMPARABLES PROPOSED BY HIM. SHE SUBMITTED , HE ALSO DID NOT CONSIDER THE INTERNA L COMPARABLES SUBMITTED BEFORE HIM FOR COMPUTING THE ARMS LENGTH PRICE. SH E SUBMITTED , EXTERNAL TNMM WAS APPLIED AS MOST APPROPRIATE METHOD WITHOUT PROVIDING PROPER OPPORTUNITY TO THE ASSESSEE. SHE SUBMITTED , DUE TO LACK OF PROPER REPRESENTATION , VARIOUS ASPECTS RELATING TO THE TRANSFER PRICING ADJUSTMENT COULD NOT BE BROUGHT TO THE NOTICE OF THE 4 ALAN DICK & CO. INDIA PVT. LTD. TRANSFER PRICING OFFICER , AS A RESULT , NON COMPARABLES WERE TREATED AS COMPARABLE S . SHE SUBMITTED , BEFORE LEARNED DRP, THOUGH THE ASSESSEE FURNISHED EVIDENCES TO SUPPORT ITS CLAIM THAT THE METHOD ADOPTED AND COMPARABLE S SELECTED BY THE TRANSFER PRIC ING OFFICER ARE NOT PROPER, HOWEVER, LEARNED DRP WITHOUT CONSIDERING THE ADDITION AL EVIDENCES FILED BY THE ASSESSEE ON TECHNICAL REASON PROCEEDED TO SUSTAIN A PART OF THE ADDITION. THEREFORE, SHE SUBMITTED , THE ASSESSEE MAY BE PROVIDED AN OPPORTUNITY TO PR OVE ITS CASE BEFORE THE ASSESSING OFFICER . 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE , THOUGH , RELIED UPON THE OBSERVATIONS OF LEARNED DRP, HOWEVER, HE SUBMITTED THAT THE ASSESSEE CAN BE GIVEN AN OPPORTUNITY TO JUSTIFY ITS CLAIM. 7 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AS COULD BE SEEN FROM THE FACT S ON RECORD, THE ASSESSEE BENCH MARKED THE INTERNATIONAL TRANSACTION RELATING TO SA LE OF FINISHED GOODS WITH ITS AE BY APPLYING INTERNAL TNMM. WHEREAS, THE TRANSFER PRICING OFFICE R HAS REJECTED INTERNAL TNMM AND DETERMINED THE ARMS LENGTH PRICE BY APPLYING EXTERNAL TNMM WITH FRESH SET OF COMPARABLES. IT IS THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT DUE TO LACK OF PROPER REPRESENTATION, THE ASSESSEE COULD NOT JUST IFY ITS CLAIM OF APPLICABILITY OF INTERNAL TNMM AND NON COMPARABILITY OF THE COMPARABLE S SELECTED BY THE TRANSFER PRICING OFFICER. FURTHER, IT IS SEEN 5 ALAN DICK & CO. INDIA PVT. LTD. FROM RECORD, BEFORE LEARNED DRP, THE ASSESSEE HAD FURNISHED CERTAIN ADDITIONAL EVIDENCE S WHICH WERE NOT A DMITTED ON THE REASONING THAT THEY WERE NOT PRODUCED BEFORE THE TRANSFER PRICING OFFICER. LEARNED DRP HAS ALSO OBSERVED THAT THE DIRECTORS REPORT TO THE AUDIT ED ACCOUNT HAS NOT BEEN SUBMITTED. IN OUR VIEW, IF THE ASSESSEE FURNISHES CERTAIN EVIDENCES EVEN AT THE APPELLATE STAGE WHICH MAY HAVE A CRUCIAL BEARING ON THE ISSUE, THEY SHOULD NOT BE REJECTED ON TECHNICAL GROUND. T HEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO RESTORE THE ISSUE TO THE ASSESSING OFFICER/ TRANSFER PR ICING OFFICER FOR DE NOVO ADJUDICATION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECT ED TO FURNISH ALL THE EVIDENCES/ MATERIAL TO JUSTIFY APPLICABILITY OF INTERNAL TNMM AND TO DEMONSTRATE THAT THE EXTERNAL C OMPARABLE S SELECTED BY THE TRANSFER PRICING OFFICER ARE NOT COMPARABLES. THE OBJECTIONS RAISED BY THE ASSESS EE SHOULD BE PROPERLY EVALUATED / CONS IDERED BY THE ASSESSING OFFICER/ TRANSFER PRICING OFFICER AND THE ISSUE MAY BE DECIDED IN ACCORDANCE WITH LAW. GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. 8 . IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN C OURT ON 30.08.2019 SD/ - N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 30.08.2019 6 ALAN DICK & CO. INDIA PVT. LTD. COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI