M/s Stump Schuele and Somappa Springs Private Limited , Bangalore V. The Assistant Commissioner of Income Tax LTU Circle-2, Bangalore

ITA 3142/BANG/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3424 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-07-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 26-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNDAR RAO

Judgement Text

IT(TP)A.3142/BANG/2018 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'A', BENGALURU BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI. LALIET KUMAR, JUDICIAL MEMBER I.T(TP).A NO.3142/BANG/2018 (ASSESSMENT YEAR : 2014-15) M/S. STUMP SHUELE AND SOMAPPA SPRINGS P. LTD, 139/2, HOSUR ROAD, BENGALURU-560095 .. APPELLANT PAN : AALCS7347E V. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE -2, LTU, BENGALURU .. RESPONDENT ASSESSEE BY : SHRI. AJAY VOHRA, SENIOR ADVOCATE & SHRI. NEERAJ JAIN, ADVOCATE REVENUE BY : SHRI. SUNDAR RAO, CIT HEARD ON : 21.02.2019 PRONOUNCED ON : 25.02.2019 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER : THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGAINS T THE ORDER OF THE ACIT, CIRCLE -2, LTU, BENGALURU, PASSED U/S.143 (3) R.W.S. 144C OF THE ACT, DT.29.10,2018, IN PURSUANCE TO THE DIRE CTIONS OF THE DRP, DT.07.09.2018, FOR THE ASSESSMENT YEAR 2014-15. IT(TP)A.3142/BANG/2018 PAGE - 2 02. THE ASSESSEE HAS FILED AS MANY AS FOUR GROUNDS OF APPEAL, ALONGWITH VARIOUS SUB-GROUNDS. 03. AT THE OUTSET THE LD. AR HAS DRAWN OUR ATTENTIO N TO THE ORDER PASSED BY THE TPO, MORE PARTICULARLY TO PARAS 4.1, 5.1 AND 5.2 AND SUBMITTED THAT THE TPO ON THE BASIS OF THE KEY WORD SEARCH AND OTHER FILTERS HAD SELECTED 15 COMPARABLES AS MENTIO NED IN PARA 4.2. HOWEVER, THE ASSESSEE BEING AGGRIEVED BY THE ORDER OF THE TPO HAD FILED OBJECTIONS BEFORE THE DRP. 04. THE ASSESSEE HAD FILED A REPLY BEFORE THE DRP O N 15.08.2018 AND HAD SUBMITTED THAT THE TPO HAS FAILED TO ADJUDI CATE THE SUBMISSIONS OF THE ASSESSEE AND HAS FURTHER FAILED TO DISCLOSE AND INFORM THE ASSESSEE , THE BASIS OF THE SEARCH CRITE RIA PROVIDED IN THE SAID ORDER. IT WAS SUBMITTED THAT OUT OF THE 15 CO MPARABLES FOUND BY THE TPO AS MENTIONED IN PARA 4.2 ONLY ONE COMPAR ABLE, NAMELY RAJARATHNA METAL INDIA LTD (SL.NO.1) CAN BE CONSIDE RED ON THE BASIS OF THE FILTERS AND KEY-WORD SEARCH APPLIED BY THE T PO AND THE SAME WAS SUPPORTED BY THE SNAP-SHOT OF THE SEARCH DONE B Y THE ASSESSEE FROM THE PROWESS DATA BASE. ON THE BASIS OF THE AB OVE IT WAS SUBMITTED THAT DESPITE THE REQUEST BEING MADE TO TH E TPO AS WELL AS THE DRP, NEITHER THE BASIS OF THE SEARCH WAS PROVID ED NOR THE OBJECTIONS OF THE ASSESSEE WERE ADJUDICATED BY THE DRP. 05. ON THE CONTRARY THE DRP IN THE ORDER, IN A CRYP TIC MANNER HAS MENTIONED IN PARA 3.1.4, AS UNDER : 3.1.4 WE HAVE ALREADY UPHELD THE REJECTION OF TP DO CUMENT OF THE ASSESSEE WHICH IN TURN MEANS THAT A FRESH SE ARCH HAS IT(TP)A.3142/BANG/2018 PAGE - 3 TO BE CONDUCTED. NOW THE ASSESSEE HAS TO ONLY SEE T HAT WHETHER ANY COMPANY HAS BEEN WRONGLY REJECTED BY TH E TPO. IF YES, THEN IT CAN ASK FOR INCLUSION OF THE SAME W ITH NECESSARY ARGUMENTS IN SUPPORT OF THE SAME. BUT IT DOESN'T MEAN THAT IT CAN COME WITH ANY COMPANY THAT SATISFI ES THE SEARCH CRITERIA OF THE TPO AND IS FUNCTIONALLY COMP ARABLE TOO. THE TITTERS CHOSEN BY THE ASSESSEE AND THE TPO ARE DIFFERENT AND FURTHER, THE TPO CONSIDERED ONLY THE CURRENT YE AR DATA WHEREAS THE ASSESSEE HAS CONSIDERED THE DATA FOR TH E LAST 3 YEARS. THEREFORE, DIFFERENT COMPANIES ARE BOUND TO APPEAR IN THE SEARCH MATRIX OF THE TPO. THE COMPANY APPEARING IN THE SEARCH MATRIX OF THE ASSESSEE CARRIES NO MEANING AS THE TP DOCUMENT HAS ALREADY BEEN REJECTED. THE SELECTION OF A COMPANY IS DONE BY FOLLOWING A V ERY ELABORATE PROCESS. SOME COMPANIES GET REJECTED AS T HE CURRENT YEAR DATA IS NOT AVAILABLE. NOW, IF THE ASS ESSEE BRINGS THE DATA OF SOME COMPANY ON A LATER DATE AND IT IS INCLUDED IN THE FINAL LIST OF COMPARABLES, IT WILL VITIATE THE ENTIRE SEARCH PROCESS. IT SHOULD BE REMEMBERED THAT SOME COMPANIES WHICH ARE COMPARABLE AND HAVE A HIGH PROF IT MARGIN, MAY ALSO GET REJECTED BECAUSE OF LACK OF CU RRENT YEAR DATA. IF THE ASSESSEE IS ASKING FOR INCLUSION OF ONE COMPANY BY SUBMITTING, THE ANNUAL REPORT, THEN THE TPO WILL HE BOUND TO CARRY A FRESH SEARCH AGAIN TO BE FAIR A ND THIS WILL BE AN ENDLESS PROCESS. THEREFORE. WE HAVE CONSISTENTLY FOLLOWED IN ALL THE CASES THAT THE COM PANY SHOULD BE AVAILABLE IN THE SEARCH MATRIX OF THE TPO ON THE DAY OF SEARCH AND IF IT IS NOT THERE, THEN THE CLAIM THAT IT IS FUNCTIONALLY COMPARABLE AND IS PASSING OF ALL THE F ILTERS, IS MEANINGLESS. THIS GROUND IS ACCORDINGLY REJECTED. 06. PER CONTRA THE LD. DR HAD RELIED UPON THE ORDER PASSED BY THE LOWER AUTHORITIES. 07. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. UNDOUBTEDLY NEITHER THE TPO NOR THE DRP HAD PROVID ED THE BASIS OF SEARCH CONDUCTED BY THE TPO FOR REJECTION OF THE TP STUDY OF THE ASSESSEE. WE ARE OF THE OPINION THAT WITH A VIEW T O CONDUCT THE TP IT(TP)A.3142/BANG/2018 PAGE - 4 ANALYSIS BY THE TPO, IT IS NECESSARY FOR THE TPO TO PROVIDE THE BASIS OF THE SEARCH, KEY WORD SEARCH FILTERS ALONG WITH S HOW CAUSE NOTICE ON THE BASIS OF WHICH THE TPO SOUGHT TO FINALISE TH E LIST OF COMPARABLES. NEEDFUL HAS NOT BEEN DONE BY THE TPO AND THE DRP IN ITS ORDER HAD VAGUELY MENTIONED THAT THE FILTER CHOSEN BY THE ASSESSEE AS WELL AS THE TPO WERE DIFFERENT AND FURT HER MENTIONED THAT THE ASSESSEE HAD CHOSEN THE THREE-YEAR DATA, W HEREAS THE TPO HAS TAKEN ONE YEAR DATA. IN THE LIGHT OF THE ABOVE, WE ARE OF THE OPINION T HAT THE ORDER PASSED BY THE TPO WAS VAGUE AND OBSCURE, AS IN PARA 4.1 THE TPO REFERS TO THE FILTERS AND KEY WORD FILTER APPLIED B Y THE ASSESSEE. HOWEVER IN PARA 5.1 THE TPO STATES HAVING REJECTED THE TAXPAYERS TP STUDY, THE TPO UNDERTOOK A SEARCH FOR SUITABLE C OMPARABLES USING THE PROWESS DATABASE BY APPLYING THE FILTERS MENTIONED ABOVE ., WHICH CLEARLY SHOWS THAT THE FILTERS INDICATED BY THE ASSESSEE AS MENTIONED IN PARA 4.1 AND THE FILTERS A ND KEY WORD MENTIONED AT PAGES 551 AND 552 OF THE PAPER BOOK FI LED BEFORE THE DRP WERE SAME AND COMMON AND IF IT WAS SO THEN DIFF ERENT RESULTS CANNOT BE ARRIVED BY THE TPO OTHER THAN THAT OF THE ASSESSEE. IN VIEW OF THE ABOVE, THE ASSESSEE APPEAL IS ALLOWED THE ORDER OF LOWER AUTHORITIES ARE SET ASIDE AND MATTER IS REMANDED B ACK TO THE FILE AO WITH THE FOLLOWING DIRECTIONS: I) THE TPO SHALL CONDUCT A DENOVO SEARCH OF THE COM PARABLES AFTER INFORMING THE LIST OF FILTERS APPLIED AND KEY -WORDS USED FOR CONDUCTING THE SEARCH . IT(TP)A.3142/BANG/2018 PAGE - 5 II) THE TPO SHALL TAKE THE ONE YEAR DATA FOR THE PU RPOSES OF CONDUCTING THE SEARCH FOR THE COMPARABLES. III) THE TPO SHALL FOLLOW THE PROCEDURE AS MENTIONE D IN CHAPTER X AND RULES FRAMED THERE UNDER FOR DETERMINING THE ALP IN ACCORDANCE WITH LAW AFTER AFFORDING THE OPPORTUNIT Y OF HEARING TO THE ASSESSEE AND SHALL ADJUDICATE THE OBJECTIONS, I F ANY RAISED BY THE ASSESSEE, IN RESPONSE TO THE SHOW CAUSE. 08. IN VIEW OF THE ABOVE, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH DAY OF FEBRUARY, 2019. SD/- SD/- (A. K. GARODIA) ( LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER BENGALURU DATED : 25.02.2019 MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.