M/s.Softtek India Pvt Ltd., Bangalore V. DCIT- Circle-6(1)(2), Bangalore

ITA 1747/BANG/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5535 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 06-07-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 06-10-2016
• Court: TRIBUNAL
• Department Lawyers: G KAMALADHAR
• Assessee Lawyers: CHYTHANYA K K
• Keywords: Transfer pricing; International transaction
• Section: 92C; 143(3); 92D; 92A; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER IT(TP)A NO. 1747/BANG/2016 ASSESSMENT YEAR : 2012-13 M/S. SOFTEK INDIA PVT. LTD., (PREVIOUSLY KNOWN AS M/S. SYSTECH INTEGRATORS INDIA PVT. LTD.), OZONE MANAY TECH PARK, 2 ND FLOOR, # 56/18 & 55/9, HOSUR MAIN ROAD, BANGALORE 560 068. PAN: AAICS 1151K VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-6(1)(2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI CHYTHANYA K.K., ADVOCATE RESPONDENT BY : SHRI G. KAMALADHAR, STANDING COUNSEL DATE OF HEARING : 16.03.2017 DATE OF PRONOUNCEMENT : 12.04.2017 IT(TP)A NO. 1747/BANG/2016 PAGE 2 OF 21 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER THE APPELLANT IS A COMPANY ENGAGED IN THE BUSINESS OF DEVELOPMENT OF SOFTWARE. DURING THE PREVIOUS YEAR 2011-12 RELE VANT TO THE ASSESSMENT YEAR THE APPELLANTS INTERNATIONAL TRANSACTIONS ARE AS PER DETAILS BELOW. 2. THE APPELLANT FILED ITS RETURN OF INCOME ON 27.09.2 012 FOR THE ASSESSMENT YEAR DECLARING THE TOTAL INCOME OF RS. 2 ,81,61,719/-. THE CASE OF THE APPELLANT IS SELECTED FOR SCRUTINY AND THEREFORE A NOTICE U/S. 143(2) WAS ISSUED TO THE APPELLANT. SI NCE THE ASSESSMENT PROCEEDINGS INVOLVES INTERNATIONAL TRANSACTIONS THE REFORE AFTER TAKING DUE PERMISSIONS THE MATTER WAS REFERRED FOR COMPUTATION OF ARMS LENGTH PRICE IN RELEVANT TO INTERNATIONAL TRAN SACTION U/S. 92CA(1) OF THE ACT. BEFORE THE LD. DCIT(TPO) THE A SSESSEE VIDE LETTER DATED 31.03.2012 FILED THE TRANSFER PRICING REPORT. THE LD. IT(TP)A NO. 1747/BANG/2016 PAGE 3 OF 21 DCIT(TPO) VIDE ORDER DATED 22.01.2016 PASSED ORDER U/S. 92CA CALLED FOR AN ADJUSTMENT. 3. THE ASSESSEE WAS ASKED TO SUBMIT THE DOCUMENTS MAIN TAINED IN TERMS OF SECTION 92D ALONG WITH THE FINANCIAL, ANNU AL REPORT AND COPIES OF THE AGREEMENT. THE ASSESSEE FURNISHED TH E SAME. THE TP DOCUMENT CONTAINED THE ELEVEN COMPARABLES IN RESPEC T OF SOFTWARE DEVELOPMENT ACTIVITIES SELECTED BY THE TAX PAYER. BY APPLYING CERTAIN FILTERS AND TNMM WAS APPLIED AS MOST APPROP RIATE METHOD. THE TAX PAYER HAS SELECTED THE COMPARABLE ENGAGED I N THE SAME NATURE VERTICAL AS TAX PAYER. THE ASSESSEE WAS GIV EN A SHOW CAUSE NOTICE ON 06.11.2015 WITH PROCEEDINGS U/S. 92CA OF THE ACT FOR THE YEAR 2011-12 AND 2012-13. IN THE SAID NOTICE IT IS MENTIONED AS UNDER. 4.SOFTWARE SEGMENT: YOU HAVE SELECTED 11 COMPANIES AS COMPARABLES ON THE BASIS OF THE SEARCH CONDUCTED IN THE PUBLIC DATA BASES. PROWESS & CAPITALINE. THE SEARCH CRITERIA AND THE ACCEPTANCE / REJECTION MATRIX APPLIED BY THE COMPANY FOR SCREENING THE INITIALLY IDENTIFIED CASES FOR ARRIVING AT A FINAL COMPARABLE SET ARE AS UNDER: SL.NO PARTICULARS REMARK OF THE TPO 1 COMPANIES FOR WHICH SUFFICIENT FINANCIAL OR DESCRIPTIVE INFORMATION IS NOT AVAILABLE TO UNDERTAKE ONLY CURRENT YEAR DATA HAS BEEN USED AS MANDATED UNDER 10(B)(4) OF THE INCOME TAX RULES AND AS HELD BY VARIOUS IT(TP)A NO. 1747/BANG/2016 PAGE 4 OF 21 ANALYSIS. COURTS. 2 COMPANIES THAT HAVE BEEN DECLARED SICK OR HAVE PERSISTENT NEGATIVE NET WORTH THE TPO HAS USED THE FILTER OF PERSISTENT LOSSES FOR THE LAST THREE YEARS INCLUDING THE CURRENT YEAR. THE TPO HAS ALSO NOT CONSIDERED COMPANIES WHICH HAVE BEEN DECLARED SICK. THIS IS BECAUSE; NO COMPANY WOULD LIKE TO SUSTAIN LOSSES BEYOND REASONABLE PERIOD. A COMPANY WHOSE PERFORMANCE IS EXTREMELY DIVERGENT FROM THE NORMAL INDUSTRY TREND CANNOT BE CONSIDERED AS A NORMAL COMPARABLE. 3 COMPANIES THAT HAVE CEASED BUSINESS OPERATIONS OR ARE CURRENTLY INACTIVE THE TPO HAS ALSO NOT CONSIDERED SUCH COMPANIES. 4 COMPANIES UNDERTAKING SIGNIFICANTLY DIFFERENT FUNCTIONS COMPARED TO TAXPAYER. THE TPO HAS ALSO NOT CONSIDERED SUCH COMPANIES. 5 COMPANIES THAT DO NOT HAVE SIGNIFICANT (LESS THAN 25%) FOREIGN EXCHANGE EARNINGS. THE TPO HAS MODIFIED THIS FILTER AND APPLIED EXPORT EARNINGS OF MORE THAN 75% ON TOTAL REVENUES SINCE THE TAXPAYER IS A HUNDRED PERCENT EXPORT ORIENTED COMPANY. 6 COMPANIES THAT HAVE SUBSTANTIAL (EXCESS OF 25%) TRANSACTIONS WITH RELATED PARTIES APPROPRIATE FILTER. TPO APPLIED 25% AS THE THRESHOLD LIMIT FOLLOWING THE PROVISIONS OF SECTION 92A (2)(A) WHICH PROVIDES A LIMIT OF 26% OF THE EQUITY CAPITAL CARRYING VOTING RIGHTS FOR TREATING AN ENTERPRISE AS ASSOCIATED ENTERPRISE. 7 COMPANIES WHICH HAVE BEEN INCURRING PERSISTENT OPERATING LOSSES THE TPO HAS ALSO APPLIED THIS FILTER TO ELIMINATE COMPANIES WITH LOSSES FOR CONTINUOUS 3 YEARS TO GIVE IT SUFFICIENT TIME TO REVERSE THE TREND AND SHOW GROWTH. 8 COMPANIES THAT HAVE EXCEPTIONAL YEAR(S) OF OPERATION THE TPO HAS APPLIED A MORE APPROPRIATE FILTER OF REJECTING COMPANIES WHICH HAVE HAD EXCEPTIONAL ECONOMIC ACTIVITY IT(TP)A NO. 1747/BANG/2016 PAGE 5 OF 21 THAT HAS A BEARING ON THE PROFITS. 9 COMPANIES THAT ARE DUPLICATED IN THE DATABASES WITH DIFFERENT NAMES OR MERGED TO FORM ANOTHER COMPANY THIS IS AN APPROPRIATE FILTER. 4. THE ASSESSEE FILED THE REPLY TO THE SHOW CAUSE NOTI CE ON 08.01.2016. THE LD. DCIT VIDE ORDER DATED 22.01.2016 HAS PASSED AN ORDER U/S. 92CA(3) AND THEREBY CALLED FOR ADJUSTMENT TO THE VA LUE OF INTERNATIONAL TRANSACTION TO THE EXTENT OF RS. 1,99 ,61,449/-. BASED ON THE ORDER PASSED U/S. 92CA(3) BY THE TPO, THE AO HAS ALSO PASSED A DRAFT ASSESSMENT ORDER ON 10.02.2016. 5. THE ASSESSEE FEELING AGGRIEVED BY THE DRAFT ASSESSM ENT ORDER FILED ITS OBJECTION BEFORE THE DRP ON 10.03.2016 AND ALSO FILED ADDITIONAL GROUNDS OF OBJECTIONS ON 07.06.2016 HOWEVER THE DRP HAS PARTLY ACCEPTED CERTAIN OBJECTIONS AND HAS REJECTED THE RE MAINING. THE AO PASSED THE ASSESSMENT ORDER U/S. 143 R.W.S. 144C ON 26.07.2016 GIVING EFFECT TO THE DIRECTIONS OF THE DRP. FEELIN G AGGRIEVED BY THE ASSESSMENT ORDER PASSED U/S. 143(3) R.W.S. 144C, TH E ASSESSEE HAS FILED THE PRESENT APPEAL ON VARIOUS GROUNDS AS MENT IONED IN THE PETITION. IT(TP)A NO. 1747/BANG/2016 PAGE 6 OF 21 6. DURING THE COURSE OF ARGUMENT, THE ASSESSEE HAS NOT PRESSED GROUND NOS. 1 TO 3 AND THEREFORE THE SAID GROUNDS ARE DISM ISSED BEING NOT PRESSED. 7. THE ASSESSEE HAS RAISED VARIOUS OTHER GROUNDS IN TH E GROUNDS APPEAL. HOWEVER IN RESPECT OF GROUND NO. 4, THE AS SESSEE HAS RELIED UPON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT I N THE MATTER OF VALVOLINE CUMMINS LTD. VS DCIT (307 ITR 103) MORE P ARTICULARLY PARAGRAPH 29 AND 30. THE SAME ARE REPRODUCED HEREI N BELOW. 29. IT APPEARS TO US QUITE CLEARLY THAT THERE IS A DIS TINCTION BETWEEN CONCURRENT EXERCISE OF POWER AND JOINT EXER CISE OF POWER. WHEN POWER HAS BEEN CONFERRED UPON TWO AUTHO RITIES CONCURRENTLY, EITHER ONE OF THEM CAN EXERCISE THAT POWER AND ONCE A DECISION IS TAKEN TO EXERCISE THE POWER BY A NY ONE OF THOSE AUTHORITIES, THAT EXERCISE MUST BE TERMINATED BY THAT AUTHORITY ONLY. IT IS NOT THAT ONE AUTHORITY CAN ST ART EXERCISING A POWER AND THE OTHER AUTHORITY HAVING CONCURRENT JUR ISDICTION CAN CONCLUDE THE EXERCISE OF THAT POWER. THIS PERHA PS MAY BE PERMISSIBLE IN A SITUATION WHERE BOTH THE AUTHORITI ES JOINTLY EXERCISE POWER BUT IT CERTAINLY IS NOT PERMISSIBLE WHERE BOTH THE AUTHORITIES CONCURRENTLY EXERCISE POWER. ONE EX AMPLE THAT IMMEDIATELY COMES TO THE MIND IS THAT OF GRANT OF A NTICIPATORY BAIL. BOTH THE SESSIONS JUDGE AND THE HIGH COURT HA VE CONCURRENT POWER. IT IS NOT AS IF A PART OF THAT PO WER CAN BE EXERCISED BY THE HIGH COURT AND THE BALANCE POWER C AN BE EXERCISED BY THE SESSIONS JUDGE. IF THE HIGH COURT IS SEIZED OF AN APPLICATION FOR ANTICIPATORY BAIL IT MUST DEAL W ITH IT AND SIMILARLY IF THE SESSIONS JUDGE IS SEIZED OF AN ANT ICIPATORY BAIL, HE MUST DEAL WITH IT. THERE CAN BE NO JOINT EXERCIS E OF POWER BOTH BY THE HIGH COURT AS WELL AS BY THE SESSIONS J UDGE IN RESPECT OF THE SAME APPLICATION FOR ANTICIPATORY BA IL. IT(TP)A NO. 1747/BANG/2016 PAGE 7 OF 21 30. IN THE FACTS OF THE PRESENT CASE, SINCE THE ADDITI ONAL COMMISSIONER HAD EXERCISED THE POWER OF AN ASSESSIN G OFFICER, HE WAS REQUIRED TO CONTINUE TO EXERCISE TH AT POWER TILL HIS JURISDICTION IN THE MATTER WAS OVER. HIS JURISD ICTION IN THE MATTER WAS NOT OVER MERELY ON THE PASSING OF THE AS SESSMENT ORDER BUT IT CONTINUED IN TERMS OF SECTION 220(6) O F THE ACT IN DEALING WITH THE PETITION FOR STAY. WHAT HAS HAPPEN ED IN THE PRESENT CASE IS THAT AFTER HAVING PASSED THE ASSESS MENT ORDER, THE ADDITIONAL COMMIS- SIONER SEEMS TO HAVE WASHED HIS HANDS OF THE MATTER AND LEFT IT TO THE DEPUTY C OMMISSIONER TO DECIDE THE STAY PETITION FILED UNDER SECTION 220 (6) OF THE ACT. WE ARE OF THE OPINION THAT THIS WAS NOT PERMISSIBLE IN LAW. 8. ON THE BASIS OF THE ABOVE SAID JUDGMENT IT WAS CONT ENTED THAT THE INITIAL REFERENCE WAS MADE TO ACIT TRANSFER PRICING (2)(2), BANGALORE. HOWEVER THE ORDER HAS BEEN PASSED BY TH E DCIT TRANSFER PRICING (2)(2) U/S. 92CA. IT WAS SUBMITTE D THAT DCIT, HAS SUBSEQUENTLY ASSUMED THE OFFICE, THEREFORE THE ORDE R PASSED BY THE DCIT WAS NOT IN ACCORDANCE WITH LAW. ON THIS ISSUE THE LD. DR HAS SUBMITTED THAT THE ORDER PASSED BY THE DCIT IS IN A CCORDANCE WITH LAW AND THERE IS NO ERROR IN PASSING THE ORDER. 9. WE HAVE HEARD THE RIVAL CONTENTION OF THE PARTIES A ND PERUSED THE RECORD. IT IS NOT DISPUTED THAT THE ACIT TRANSFER PRICING (2)(2) AS WELL AS THE DCIT TRANSFER PRICING (2)(2) HAVE CONCU RRENT JURISDICTION TO DECIDE THE ISSUE AFTER RECEIVING THE REFERENCE I SSUED BY THE AO. IT(TP)A NO. 1747/BANG/2016 PAGE 8 OF 21 IN THE CASE REFERRED BY THE ASSESSEE THE FACTS WERE DIFFERENT IN THE SAID CASE I.E. VALVOLINE CUMMINS LTD. VS DCIT (SUPR A). THE ASSESSMENT ORDER WAS PASSED BY THE ADDITIONAL COMMI SSIONER AND THEREAFTER HE WASHED HIS HAND AND LEFT THE MATTER T O THE DEPUTY COMMISSIONER TO DECIDE THE ISSUE. IN THE PRESENT C ASE THE SHOW CAUSE NOTICE DATED 06.11.2015 WAS ISSUED BY DCIT TR ANSFER PRICING (2)(2) MR. SMARAK SWAIN AND THE SAID OFFICER, AFTER ISSUING THE SHOW CAUSE NOTICE HAD GIVEN THE HEARING TO THE ASSESSEE AND THE SAID OFFICER THEREAFTER PASSED THE ORDER U/S. 92CA OF TH E IT ACT, 1961, THEREFORE TO SAY THAT THE PERSON WHO HAD INITIATED THE PROCEEDINGS OR THE PERSON TO WHOM THE REFERENCE WAS MADE, SHOULD O NLY DECIDE THE MATTER IN OUR VIEW IS FACTUALLY INCORRECT AS IN THE PRESENT CASE THOUGH INITIAL REFERENCE WAS MADE TO THE ADDITIONAL COMMISSIONER TRANSFER PRICING (2)(2). HOWEVER, THE DCIT IS HAVI NG THE CURRENT POWERS AND THEREFORE HAD ISSUED THE SHOW CAUSE NOTI CE AND THEREAFTER PASSED ORDER U/S. 92CA OF THE ACT. THE PRESENT CASE IS NOT OF DELEGATION OF AUTHORITY BY ADDITIONAL COMMIS SIONER TO DCIT RATHER THE PRESENT CASE IS OF CONCURRENT JURISDICTI ON AND THEREFORE IN VIEW OF THE ABOVE DISCUSSION WE DO NOT FIND ANY MER IT IN THE IT(TP)A NO. 1747/BANG/2016 PAGE 9 OF 21 GROUNDS RAISED BY THE ASSESSEE IN RESPECT OF GROUND NO. 4 AND THEREFORE WE DISMISS THE SAME. 10. THE NEXT GROUND WHICH THE PRELIMINARY GROUND IS TA KEN BY THE ASSESSEE WITH RESPECT TO REJECTION OF THE TP STUDY BY THE TRANSFER PRICING OFFICER. 11. THE GROUND NOS. 5 AND 6 WHICH DEALS WITH THIS ISSUE ARE REPRODUCED HEREIN BELOW FOR THE SAKE OF BREVITY. IT(TP)A NO. 1747/BANG/2016 PAGE 10 OF 21 12. IT WAS SUBMITTED THAT THE LD. DCIT(A) IN THE SHOW C AUSE NOTICE HAS MENTIONED AS UNDER. 13. 4.SOFTWARE SEGMENT: YOU HAVE SELECTED 11 COMPANIES AS COMPARABLES ON THE BASIS OF THE SEARCH CONDUCTED IN THE PUBLIC DATA BASES. PROWESS & CAPITALINE. 14. THE SEARCH CRITERIA AND THE ACCEPTANCE / REJECT ION MATRIX APPLIED BY THE COMPANY FOR SCREENING THE INITIALLY IDENTIFIED CASE S FOR ARRIVING AT A FINAL COMPARABLE SET ARE AS UNDER: SL.NO PARTICULARS REMARK OF THE TPO 1 COMPANIES FOR WHICH SUFFICIENT FINANCIAL OR DESCRIPTIVE INFORMATION IS NOT AVAILABLE TO UNDERTAKE ANALYSIS. ONLY CURRENT YEAR DATA HAS BEEN USED AS MANDATED UNDER 10(B)(4) OF THE INCOME TAX RULES AND AS HELD BY VARIOUS COURTS. 2 COMPANIES THAT HAVE BEEN DECLARED SICK OR HAVE PERSISTENT NEGATIVE NET WORTH THE TPO HAS USED THE FILTER OF PERSISTENT LOSSES FOR THE LAST THREE YEARS INCLUDING THE CURRENT YEAR. THE TPO HAS ALSO NOT CONSIDERED COMPANIES WHICH HAVE BEEN DECLA RED SICK. THIS IS BECAUSE; NO COMPANY WOULD LIKE TO SUSTAIN LOSSES BEYOND REASONABLE PERIOD. A COMPANY WHOSE PERFORMANCE IS EXTREMELY DIVERGENT FROM THE NORMAL INDUSTRY TREND CANNOT BE CONSIDERED AS A NORMAL COMPARABLE. 3 COMPANIES THAT HAVE CEASED BUSINESS OPERATIONS OR ARE CURRENTLY INACTIVE THE TPO HAS ALSO NOT CONSIDERED SUCH COMPANIES. 4 COMPANIES UNDERTAKING SIGNIFICANTLY DIFFERENT FUNCTIONS COMPARED TO TAXPAYER. THE TPO HAS ALSO NOT CONSIDERED SUCH COMPANIES. 5 COMPANIES THAT DO NOT HAVE SIGNIFICANT (LESS THAN 25%) FOREIGN EXCHANGE EARNINGS. THE TPO HAS MODIFIED THIS FILTER AND APPLIED EXPORT EARNINGS OF MORE THAN 75% ON TOTAL REVENUES SINCE THE TAXPAYER IS A HUNDRED PERCENT EXPORT IT(TP)A NO. 1747/BANG/2016 PAGE 11 OF 21 ORIENTED COMPANY. 6 COMPANIES THAT HAVE SUBSTANTIAL (EXCESS OF 25%) TRANSACTIONS WITH RELATED PARTIES APPROPRIATE FILTER. TPO APPLIED 25% AS THE THRESHOLD LIMIT FOLLOWING THE PROVISIONS OF SECTION 92A (2)(A) WHICH PROVIDES A LIMIT OF 26% OF THE EQUITY CAPITAL CARRYING VOTING RIGHTS FOR TREATING AN ENTERPRISE AS ASSOCIATED ENTERPRISE. 7 COMPANIES WHICH HAVE BEEN INCURRING PERSISTENT OPERATING LOSSES THE TPO HAS ALSO APPLIED THIS FILTER TO ELIMINATE COMPANIES WITH LOSSES FOR CONTINUOUS 3 YEARS TO GIVE IT SUFFICIENT TIME TO REVERSE THE TREND AND SHOW GROWTH. 8 COMPANIES THAT HAVE EXCEPTIONAL YEAR(S) OF OPERATION THE TPO HAS APPLIED A MORE APPROPRIATE FILTER OF REJECTING COMPANIES WHICH HAVE HAD EXCEPTIONAL ECONOMIC ACTIVITY THAT HAS A BEARING ON THE PROFITS. 9 COMPANIES THAT ARE DUPLICATED IN THE DATABASES WITH DIFFERENT NAMES OR MERGED TO FORM ANOTHER COMPANY THIS IS AN APPROPRIATE FILTER. 15. IN THIS REGARD, THE LD. AR FOR THE ASSESSEE HAS SUB MITTED THAT THE ASSESSEE HAS IN FACT SUBMITTED THE TP STUDY AFTER U SING THE CONTEMPORARY CURRENT YEAR DATA AND HAS ALSO USED TH E FILTER OF MORE THAN 75% OF THE FOREIGN EXCHANGE AND ALSO HAVE USED THE TURNOVER FILTER OF EMPLOYEE COST WITH LESS THAN 25% OF THE T URNOVER EMPLOYEES IN SOFTWARE CASES WERE EXCLUDED. IT WAS SUBMITTED BY THE ASSESSEE THAT IN THE TP STUDY AT PAGE 220 THE A SSESSEE HAS USED THE CURRENT YEAR DATA AND HAVE ALSO USED THE FILTER OF FOREIGN IT(TP)A NO. 1747/BANG/2016 PAGE 12 OF 21 EXCHANGE EARNING TO TURNOVER RATIO LESS THAN 75% AN D EMPLOYEE COST TURNOVER LESS THAN 25%. ON THE BASIS OF THE ABOVE IT WAS SUBMITTED THAT AS PER PROVISIONS OF SECTION 92CA(3) THE TPO W AS ALSO REQUIRED TO FOLLOW THE SAME METHODOLOGY AND APPROAC H AS WAS INCUMBENT UPON THE AO U/S. 92C(3) OF THE ACT. IT WAS SUBMITTED THAT THE MATERIAL ON THE BASIS OF WHICH THE OPINION WAS FORMED BY THE TPO WAS INCORRECT AS THE BASIS OF REJECTING THE TPO STUDY OF THE ASSESSEE WAS THAT THE ASSESSEE IS NOT USING THE CUR RENT FINANCIAL YEAR DATA AND HAS RELIED UPON THE THREE YEAR AVERAGE OF THE DATA FOR THE LAST THREE YEARS AND HAS APPLIED QUALITATIVE FILTER OF COMPANIES THAT HAS SUBSTANTIAL TRANSACTION WITH EXCESS OF 75%. IN THIS REGARD, THE LD. AR HAS RELIED UPON THE JUDGMENT OF HONBLE DELH I HIGH COURT IN THE MATTER OF CIT VS. MENTOR GRAPHICS (NOIDA) (P .) LTD. (354 ITR 586) MORE PARTICULARLY PARAGRAPH 8 AND 9 OF THE SAID JUDGMENT HELD AS UNDER. 8. HAVING SAID SO, WE MAY NOW NOTICE THE PROVISIONS O F SUB- SECTION (3) OF SECTION 92C WHICH WE HAVE ALREADY EX TRACTED ABOVE. A READING OF THE SAID PROVISION MAKES IT CLE AR THAT IF THE ASSESSING OFFICER IN THE COURSE OF ANY PROCEEDING O F ASSESSMENT, ON THE BASIS OF MATERIAL OR INFORMATION OR DOCUMENT S IN HIS POSSESSION, IS OF THE OPINION THAT ANY OF THE 4 CON DITIONS (A) TO (D) STIPULATED IN SUB-SECTION (3) ARE SATISFIED THE N, THE ASSESSING OFFICER MAY PROCEED TO DETERMINE THE ARM'S LENGTH P RICE IN RELATION TO THE INTERNATIONAL TRANSACTION IN ACCORD ANCE WITH THE PROVISIONS OF SUB-SECTION (1) AND SUB-SECTION (2) O F SECTION 92C ON THE BASIS OF SUCH MATERIAL OR INFORMATION OR DOC UMENTS IT(TP)A NO. 1747/BANG/2016 PAGE 13 OF 21 AVAILABLE WITH HIM. PROVIDED, OF COURSE, THAT AN OP PORTUNITY IS GIVEN BY THE ASSESSING OFFICER TO THE ASSESSEE TO S HOW CAUSE AS TO WHY THE ARM'S LENGTH PRICE SHOULD NOT BE SO DETE RMINED ON THE BASIS OF MATERIAL OR INFORMATION OR DOCUMENT IN THE POSSESSION OF THE ASSESSING OFFICER. IN OTHER WORDS, IN THE AFORE SAID CIRCUMSTANCES THE ASSESSING OFFICER MAY HIMSELF EMB ARK UPON THE DETERMINATION OF THE ARM'S LENGTH PRICE. HOWEVE R, WHERE THE ASSESSING OFFICER CONSIDERS IT NECESSARY TO DO SO, HE MAY WITH THE PREVIOUS APPROVAL OF THE COMMISSIONER, REFER TH E COMPUTATION OF THE ARM'S LENGTH PRICE TO THE TRANSFER PRICING O FFICER. THIS IS PROVIDED IN SECTION 92CA OF THE SAID ACT WHICH, TO THE EXTENT RELEVANT, READS AS UNDER:- '92CA. (1) WHERE ANY PERSON, BEING THE ASSESSEE, HA S ENTERED INTO AN INTERNATIONAL TRANSACTION [OR SPECIFIED DOM ESTIC TRANSACTION] IN ANY PREVIOUS YEAR, AND THE ASSESSIN G OFFICER CONSIDERS IT NECESSARY OR EXPEDIENT SO TO DO, HE MA Y, WITH THE PREVIOUS APPROVAL OF THE COMMISSIONER, REFER THE CO MPUTATION OF THE ARM'S LENGTH PRICE IN RELATION TO THE SAID INTE RNATIONAL TRANSACTION [OR SPECIFIED DOMESTIC TRANSACTION] UND ER SECTION 92C TO THE TRANSFER PRICING OFFICER. ** ** ** (3) ON THE DATE SPECIFIED IN THE NOTICE UNDER SUB-S ECTION (2), OR AS SOON THEREAFTER AS MAY BE, AFTER HEARING SUCH EV IDENCE AS THE ASSESSEE MAY PRODUCE, INCLUDING ANY INFORMATION OR DOCUMENTS REFERRED TO IN SUB-SECTION (3) OF SECTION 92D AND A FTER CONSIDERING SUCH EVIDENCE AS THE TRANSFER PRICING OFFICER MAY R EQUIRE ON ANY SPECIFIED POINTS AND AFTER TAKING INTO ACCOUNT ALL RELEVANT MATERIALS WHICH HE HAS GATHERED, THE TRANSFER PRICI NG OFFICER SHALL, BY ORDER IN WRITING, DETERMINE THE ARM'S LEN GTH PRICE IN RELATION TO THE INTERNATIONAL TRANSACTION [OR SPECI FIED DOMESTIC TRANSACTION] IN ACCORDANCE WITH SUB-SECTION (3) OF SECTION 92C AND SEND A COPY OF HIS ORDER TO THE ASSESSING OFFIC ER AND TO THE ASSESSEE.' 9. COMING BACK TO THE FACTS OF THE PRESENT CASE, THE ASSESSING OFFICER WHILE CONSIDERING THE ASSESSMENT OF INCOME OF THE RESPONDENT/ASSESSEE HAD, IN TERMS OF SECTION 92CA(1 ) OF THE SAID ACT REFERRED THE COMPUTATION OF ARM'S LENGTH P RICE TO THE TRANSFER PRICING OFFICER. THAT BEING THE POSITION, IT IS CLEAR THAT THE TRANSFER PRICING OFFICER, IN VIEW OF THE PROVIS IONS OF SECTION 92CA(3), WAS ALSO REQUIRED TO FOLLOW THE SAME METHO DOLOGY AND APPROACH AS WAS INCUMBENT UPON THE ASSESSING OFFICE R UNDER SECTION 92C(3) OF THE SAID ACT. IN OTHER WORDS, THE TRANSFER PRICING OFFICER WOULD HAVE TO, FIRST, FORM AN OPINI ON THAT ANY OF THE FOUR CONDITIONS (A) TO (D) SET OUT IN SUB-SECTI ON (3) OF SECTION IT(TP)A NO. 1747/BANG/2016 PAGE 14 OF 21 92C EXISTED AND THEN HE COULD PROCEED TO DETERMINE THE ARM'S LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANS ACTIONS IN QUESTION IN ACCORDANCE WITH SUB-SECTIONS (1) AND (2 ) OF SECTION 92C ON THE BASIS OF SUCH MATERIAL OR INFORMATION OR DOCUMENT AVAILABLE WITH HIM. AFTER THE TRANSFER PRICING OFFI CER DETERMINES THE ARM'S LENGTH PRICE, IT IS INCUMBENT UPON HIM TO SEND A COPY OF THE ORDER TO THE ASSESSING OFFICER AND TO THE ASSES SEE. IN THE PRESENT CASE WHAT HAS HAPPENED IS THAT THE TRANSFER PRICING OFFICER HAS GENERALLY REJECTED THE COMPARABLES SUBM ITTED BY THE RESPONDENT/ASSESSEE IN HIS TRANSFER PRICING REPORT AND HAS REJECTED THE SUGGESTED ARM'S LENGTH PRICE BASED ON A PROFIT LEVEL INDICATOR OF 6.99% AS DETERMINED BY THE RESPONDENT/ ASSESSEE AND, IN PLACE THEREOF, THE TRANSFER PRICING OFFICER ADOPTED A PROFIT LEVEL INDICATOR OF 24.53% AND DETERMINED THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS AT RS. 10,34,40,1 77/- AS AGAINST RS.. 8,88,66,320/- RETURNED BY THE RESPONDENT/ASSES SEE. THIS RESULTED IN AN ADJUSTMENT OF RS. 1,45,73,857/- IN T HE INCOME OF THE ASSESSEE BEING THE DIFFERENCE BETWEEN THE ARM'S LENGTH PRICE AND THE PRICE CHARGED BY THE ASSESSEE FROM ITS ASSO CIATED ENTERPRISE (IKOS SYSTEM INC.) FOR RENDERING SERVICE S TO THEM. THEREAFTER, THE ASSESSING OFFICER PASSED THE ASSESS MENT ORDER ON 28.03.2005, INTER ALIA, AFTER MAKING THE AFORESA ID ADDITION. WE ARE NOT CONCERNED WITH THE OTHER ASPECTS OF THE ASS ESSMENT ORDER. 16. ON THE OTHER HAND, THE LD. DR HAS DRAWN OUR ATTENTI ON TO PARAGRAPH 6 OF THE TP ORDER TO THE FOLLOWING EFFECT. 6. REJECTIONOF THE TAXPAYER'S TP STUDY IN THE CASE OF TAX PAYER, THE TPO IS MAINLY CONCERN ED ABOUT WHETHER THE INFORMATION OR DATA USED IN THE COMPUTA TION OF THE ARM'S LENGTH PRICE IS RELIABLE AND CORRECT. IT IS CLEAR FROM THE PROVISIONS OF SEC. 92C(3)(C) READ WITH SEC. 92C A THAT ON THE BASIS OF MATERIAL OR INFORMATION OR DOCUMENTS I N THE POSSESSION OF TPO, IF HE IS OF THE OPINION THAT THE INFORMATION OR DATA USED IN COMPUTATION OF THE ARM' S LENGTH PRICE IS NOT RELIABLE OR CORRECT, THE TPO MAY PROCE ED TO DETERMINE THE ARM'S LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANSACTIONS IN ACCORDANCE WITH SEC. 92C(1) AND 92C(2) ON THE BASIS OF SUCH MATERIAL OR INFORMA TION OR DOCUMENT AVAILABLE WITH HIM. IT(TP)A NO. 1747/BANG/2016 PAGE 15 OF 21 THE FOLLOWING PERTINENT DEFECTS HAVE BEEN FOUND IN THE TP ANALYSIS CARRIED ON BY THE TAX PAYER. 1. AS PER RULE 10B (4), IT IS MANDATORY TO THE USE THE CURRENT FINANCIAL YEAR DATA I.E. THE FINANCIAL YEAR IN WHIC H THE INTERNATIONAL TRANSACTIONS TOOK PLACE (FY 2011-12) BUT THE TAXPAYER HAS COMPUTED THE 3-YEAR AVERAGE OF THE DAT A FOR THE LAST THREE YEARS. THE TAXPAYER HAS SELECTED CASES EVEN WHERE NO CURRENT YEAR DATA IS AVAILABLE AND HA S BASED ITS ANALYSIS ON EARLIER YEAR'S DATA. 2. THE TAXPAYER HAS USED THE EARLIER YEAR DATA PERT AINING TO THE FYS 2009-10,2010-11 BESIDES THE CURRENT YEAR EN DING 2012 WHEREVER AVAILABLE BUT NO REASONS ARE GIVEN AS TO HOW THE EARLIER YEAR DATA HAS INFLUENCE OVER THE PRICE EITHER OF THE TAXPAYER OR OF THE COMPARABLE SO TO ATTRACT THE PRO VISO TO RULE 10B (4). 3. THE ASSESSEE HAS NOT USED EXPORT REVENUE> 75% OF SALES AS A FILTER. THE ASSESSEE IS ENGAGED IN THE PROVISI ON OF SWD SERVICES TO ITS ASSOCIATED ENTERPRISES SITUATED OUT SIDE INDIA. SINCE, THE REVENUE IS ARISING OUT OF EXPORT SALES, COMPARING THE ASSESSEE COMPANY WITH A COMPANY PROVIDING SERVICES PRIMARILY WITHIN INDIA WILL NOT BE APPROPRIATE. THE PROFIT MARGINS OF COMPANIES ENGAGED IN DOMESTIC SALES AND THOSE ENGAGED IN EXPORT SALES WO ULD BE DIFFERENT. THE LEVEL OF COMPETITION WITHIN THE COUN TRY AND THOSE PREVAILING IN INTERNATIONAL MARKET ARE DIFFER ENT. THEREFORE, IT IS IMPORTANT TO HAVE A FILTER TO ELIM INATE COMPANIES WHICH ARE PREDOMINANTLY ENGAGED IN THE PROVISION OF SERVICES WITHIN INDIA. 4. THE ASSESSEE COMPANY HAS NOT APPLIED EMPLOYEE CO ST FILTER (RATIO OF EMPLOYEE COST TO SALES >25%). SWD INDUSTRY IS PRIMARILY ENGAGED IN PROVISION OF SERVICES THROU GH PERSONNEL IMPLYING THAT THE INDUSTRY IS MANPOWER IN TENSIVE. THEREFORE, IT IS APPROPRIATE TO HAVE EMPLOYEE COST FILTER TO ELIMINATE THOSE COMPANIES WHICH ARE NOT DIRECTLY PR OVIDING SWD SERVICES BUT ARE OUTSOURCING THE SAME. DUE TO THE REJECTION OF CERTAIN FILTERS USED BY THE TAXPAYER AND INCLUSION OF CERTAIN OTHER APPROPRIATE FILTERS, THERE IS A CHANGE IN THE SET OF UNCONTROLLED COMPARABLES IDENT IFIED BY THE TAXPAYER. THE ALP AS PER THE TRANSFER PRICING REGULATIONS IN INDIA IS ARITHMETIC AVERAGE OF THE P RICES OF THE UNCONTROLLED COMPARABLES. IN VIEW OF THE SAME, DUE TO IT(TP)A NO. 1747/BANG/2016 PAGE 16 OF 21 REJECTION OF FILTERS, IF SOME OR ALL UNCONTROLLED C OMPARABLES ARE REJECTED, THE CONSEQUENT ARM'S LENGTH PRICE WOU LD ALSO STAND REJECTED. THEREFORE, IN VIEW OF SECTION 92C(3 )(C), IT IS RELEVANT TO HOLD THAT THE DATA USED IN COMPUTATION OF THE ARM'S LENGTH PRICE IS NOT RELIABLE OR CORRECT. THE TP DOCUMENT IS PROPOSED TO BE REJECTED AND THE TPO PRO CEEDS TO DETERMINE ARM'S LENGTH PRICE BY CONDUCTING AN INDEPENDENT SEARCH FOR COMPARABLES CONSIDERING THE FUNCTIONS OF THE TAXPAYER, THE ASSETS EMPLOYED AND THE RISKS TAKEN AND THE RESULTS OF THE SEARCH IS GIVEN IN THE FOLLOWING PARAS.: 17. IT WAS SUBMITTED BY THE LD. DR THAT THE TPO HAS COR RECTLY REJECTED THE TP STUDY OF THE ASSESSEE AND HAS RIGHTLY PROCEE DED IN DETERMINATION OF THE ALP IN ACCORDANCE WITH THE PRO CEDURE PROVIDED U/S. 92CA. IN THE ALTERNATE IT WAS SUBMIT TED IF THIS HONBLE TRIBUNAL COMES TO THE CONCLUSION THAT THE T PO HAS WRONGLY REJECTED THE STUDY, IN THAT EVENTUALITY THE MATTER SHOULD BE REMANDED BACK TO THE FILE OF THE TPO FOR THE PURPOS ES OF EXAMINING THE TP STUDY OF THE ASSESSEE AND THEREAFTER COMPUTI NG THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS OF T HE ASSESSEE. 18. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PARTIES AND PERUSED THE RECORD. THE TPO IN PARA 7 OF THE SHOW CAUSE NOTICE AT PAGE 337 HAS MENTIONED AS UNDER:- IT(TP)A NO. 1747/BANG/2016 PAGE 17 OF 21 7. COMPARABLES SELECTED BY TAXPAYER BEFORE PROCEEDING TO DISCUSS THE SEARCH STRATEGY AD OPTED BY THE TPO, THE COMPARABLES SELECTED BY THE TAXPAYER ARE D ISCUSSED AS UNDER. A. THE TAX PAYER HAS SELECTED 11 COMPARABLE COMPANIES IN RESPECT OF SOFTWARE DEVELOPMENT SERVICES THE DETAILS OF WHICH ARE AS UNDER: SL. NO. NAME OF THE COMPANY REMARKS 1 ACROPETAL TECHNOLOGIES LTD 6.13% QUALIFIES ALL THE FILTERS. HENCE ACCEPTED. 2 AKSHAY SOFTWARE TECHNOLOGIES LTD. 7.22% FUNCTIONALLY DIFFERENT. HENCE, REJECTED. 3 C G VAK SOFTWARE & EXPORTS LTD. - 15.21% EXCLUDED AS DIFFERENT FUNCTION. HENCE REJECTED. 4 R S SOFTWARE INDIA P. LTD. 15.30% QUALIFIES ALL F ILTERS. ACCEPTED. 5 SASKEN COMMUNICATION TECHNOLOGIES LTD. 7.31% QUALIFIES ALL FILTERS. ACCEPTED. 6 THINKSOFT GLOBAL SERVICES LTD. 6.43% FAILS THE FOREX FILTER. REJECTED. 7 SONATTA SOFTWARE LTD. - 9.54% CONSOLIDATED FINANCIALS ARE NOT AVAILABLE FOR THE A.Y 2012-13 8 ICRA TECHNO ANALYTICS LTD 17.21% QUALIFIES ALL THE FILTERS. HENCE ACCEPTED. 9 AJEL LTD 2.88% FOREX TO SALE < 75%, HENCE REJECTED. 10 GOLDSTONE TECHNOLOGIES LTD. 9.96% FAILS FOREX EARNING FILTER. HENCE, REJECTED. 11 KALS INFORMATION SYSTEMS LTD. 6.64% COMPANY IS FUNCTIONALLY DIFFERENT. HENCE REJECTED. AVERAGE 4.94% REJECTION OF TP DOCUMENT IN THE CASE OF TAX PAYER, THE TPO IS MAINLY CONCERN ED REGARDING WHETHER THE INFORMATION OR DATA USED IN THE COMPUTATION OF THE ARMS LENGTH PRICE IS RELIABLE OR CORRECT. IT IS CLEAR FROM THE PROVISIO NS OF SEC.92C(3)(C) READ WITH SEC. 92CA THAT ON THE BASIS OF MATERIAL OR INFORMAT ION OR DOCUMENTS IN THE POSSESSION OF TPO, IF HE IS OF THE OPINION THAT THE INFORMATION OR DATA USED IN COMPUTATION OF THE ARMS LENGTH PRICE IS NOT REL IABLE OR CORRECT, THE TPO MAY PROCEED TO DETERMINE THE ARMS LENGTH PRICE IN RELATION TO THE IT(TP)A NO. 1747/BANG/2016 PAGE 18 OF 21 INTERNATIONAL TRANSACTIONS IN ACCORDANCE WITH SEC.9 2C(1) AND 92C(2) ON THE BASIS OF SUCH MATERIAL OR INFORMATION OR DOCUMENT A VAILABLE WITH HIM. THE FOLLOWING PERTINENT DEFECTS HAVE BEEN FOUND IN TP ANALYSIS CARRIED ON BY THE TAX PAYER. 1. AS PER RULE 10B(4), IT IS MANDATORY TO USE THE C URRENT YEAR DATA I.E. THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTI ONS TOOK PLACE (FY 2011-12) BUT THE TAX PAYER HAS COMPUTED THE 3 YEAR AVERAGE OF THE DATA FOR THE LAST THREE YEARS. THE TAXPAYER HAS SELECTE D CASES EVEN WHERE NO CURRENT YEAR DATA IS AVAILABLE AND HAS BASED ITS ANALYSIS ON EARLIER YEARS DATA. 2. THE TAXPAYER HAS USED THE EARLIER YEAR DATA PERT AINING TO THE FYS 2008- 09, 2009-10 & 2010-11 BESIDES THE CURRENT YEAR ENDI NG 2012 WHEREVER AVAILABLE BUT NO REASONS ARE GIVEN AS TO HOW THE EA RLIER YEAR DATA HAS INFLUENCE OVER THE PRICE EITHER OF THE TAXPAYER OR OF THE COMPARABLES SO TO ATTRACT THE PROVISO TO RULE 10B(4). 3. THE TAXPAYER HAS APPLIED QUANTITATIVE FILTER OF COMPANIES THAT HAVE SUBSTANTIAL TRANSACTIONS WITH RELATED PARTIES EXCES S OF 25%. 4. THE TAXPAYER HAS ALSO APPLIED FILTER OF COMPANIE S UNDERTAKING SIGNIFICANTLY DIFFERENT FUNCTIONS COMPARED TO SSSDI . BECAUSE OF REJECTION OF FILTERS USED BY THE TAXPAYE R, THERE IS A CHANGE IN THE SET OF UNCONTROLLED COMPARABLES IDENTIFIED BY THE T AXPAYER. THE ALP AS PER THE TRANSFER PRICING REGULATIONS IN INDIA IS ARITHM ETIC AVERAGE OF THE PRICES OF THE UNCONTROLLED COMPARABLES. IN VIEW OF THE SAME, DUE TO REJECTION OF FILTERS, IF SOME OR ALL UNCONTROLLED COMPARABLES AR E REJECTED, THE CONSEQUENT ARMS LENGTH PRICE WOULD ALSO STAND REJECTED. THERE FORE, IN VIEW OF SECTION 92C(3)(C), IT IS RELEVANT TO HOLD THAT THE DATA USE D IN COMPUTATION OF THE ARMS LENGTH PRICE IS NOT RELIABLE OR CORRECT. THE TP DOCUMENT IS PROPOSED TO BE REJECTED AND THE TPO PROCEEDS TO DETERMINE THE A RMS LENGTH PRICE BY CONDUCTING AN INDEPENDENT SEARCH FOR COMPARABLES CO NSIDERING THE FUNCTIONS OF THE TAXPAYER, THE ASSETS EMPLOYED AND THE RISKS TAKEN AND THE RESULTS OF THE SEARCH IS GIVEN IN THE FOLLOWING PAR AS: 19. IF WE LOOK INTO THE TABLE REPRODUCED HEREINABOVE, I T IS CLEAR THAT THE ASSESSEE HAS SELECTED AKSHAY SOFTWARE TECHNOLOGIES LTD AND CG- VAK SOFTWARE & EXPORTS LTD AS COMPARABLE DESPITE TH ESE IT(TP)A NO. 1747/BANG/2016 PAGE 19 OF 21 COMPANIES WERE FUNCTIONALLY DIFFERENT. SIMILARLY A SSESSEE HAS SELECTED THINKSOFT GLOBAL SERVICES LTD., AJEL LTD. AND GOLDSTONE TECHNOLOGIES LTD AS COMPARABLE , DESPITE THESE COMP ANIES FAILS ON FOREX FILTER OR FOREX SALE LESS THAN 75%. AND SELEC TED SONATTA SOFTWARE LTD.AS COMPARABLE DESPITE IT FAILS AS T HE CONSOLIDATED FINANCIALS ARE NOT AVAILABLE FOR FY 2012-13. THE S UBMISSION OF THE LD. AR AT BAR WAS THAT THE ASSESSEE HAD ADOPTED THE FILTERS WHERE THE FOXEX SALE WAS MORE THAN 75% AND THE CONSOLIDATED F INANCIALS WERE USED FOR THE YEAR UNDER CONSIDERATION. IF WE EXAMI NE THE TABLE AND MORE PARTICULARLY THE REASON MENTIONED HEREINABOVE, WHILE REJECTING THE COMPARABLES BY THE TPO, WE NOTICE THE CONTRADICTIONS IN THE SUBMISSIONS MADE BY THE ASSESSEE, AS TWO COM PANIES WERE SELECTED WHICH WERE FUNCTIONALLY DISSIMILAR TO THE ASSESSEE, FURTHER THREE COMPANIES FAILED ON FOREX FILTER AND ONE COMP ANIES FAILED ON CONSOLIDATED FINANCIAL WERE NOT AVAILABLE. 20. IN OUR VIEW, THOUGH THE TPO HAS REJECTED THE TP STU DY ON THE FOUR GROUNDS STATED HEREINABOVE, BUT AS DISCERNIBLE FROM THE TABLE TABULATED HEREINABOVE, IT IS CLEAR THAT THE REJECTI ON OF TP STUDY WAS FOR A COGENT REASON FAILING WITHIN THE PARAMETERS L AID DOWN IN PARAGRAPH STATED HEREINABOVE MORE PARTICULARLY THE INFORMATION AND IT(TP)A NO. 1747/BANG/2016 PAGE 20 OF 21 DATA USED FOR COMPUTATION OF ALP WAS NOT RELIABLE A ND CORRECT. IN VIEW THEREOF, THE TPO HAS SATISFIED HIMSELF ABOUT T HE METHODOLOGY ADOPTED BY THE ASSESSEE VIS--VIS PARAMETER/FILTER APPLIED IN VIEW OF THE PROVISIONS AS MENTIONED HEREINABOVE, MORE PARTI CULARLY, SECTION 92C(3)(C) R.W.S. 92CA AND RULE 10B(4). ACCORDINGLY , THESE GROUNDS ARE DECIDED AGAINST THE ASSESSEE. 21. SINCE WE HAVE DECIDED THE PRELIMINARY GROUNDS RAISE D BEFORE US AGAINST THE ASSESSEE, THEREFORE, THE MATTER IS DIRE CTED TO BE LISTED BEFORE THE BENCH FOR DECIDING THIS ISSUE ON MERITS AND ACCORDINGLY THE CASE IS DIRECTED TO BE FIXED ON 06 TH JULY, 2017 . PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF APRIL, 2017. SD/- SD/- (INTURI RAMA RAO) (LALIET KUMAR ) ACCOUNTANT MEMBER JUDIC IAL MEMBER BANGALORE, DATED, THE 12 TH APRIL, 2017. VMS/MS/ IT(TP)A NO. 1747/BANG/2016 PAGE 21 OF 21 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.