Sum Total Systems (India) P. Ltd, Hyderabad V. The ITO Ward - 3(2), Hyderabad

ITA 473/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66285 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 22-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: PANKAJ JAIN
• Keywords: Initiation of penalty proceedings
• Section: 234B; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER I.T.A. NO. 473/HYD/2011 ASSESSMENT YEAR 2005-06 M/S. SUM TOTAL SYSTEMS (INDIA) PVT. LTD., HYDERABAD PAN: AABCC9379C VS. THE INCOME TAX OFFICER WARD-3(2) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI PANKAJ JAIN RESPONDENT BY: SRI V. SRINIVAS DATE OF HEARING: 26 .0 9 .2012 DATE OF PRONOUNCEMENT: 26 .0 9 .2012 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-III, HYDERABAD DATED 31.1.2011 FOR ASSESSMEN T YEAR 2005-06. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. REJECTION OF USE OF CONTEMPORANEOUS DATA AND CONDUC TING FRESH SEARCH DURING ASSESSMENT PROCEEDINGS. 2. REJECTION OF USE OF MULTIPLE YEAR DATA. 3. USE OF INFORMATION OBTAINED U/S. 133(6). 4. ELIGIBILITY U/S. 10A NO INCENTIVE TO SHIFT PROFIT S OUTSIDE INDIA. 5. USE OF ADDITIONAL FILTERS VIZ., DIFFERENT FINANCIAL YEAR-END, DIMINISHING REVENUE, LOSS MAKING COMPANIES, ETC. 6. REJECTION OF COMPARABLES. 7. SELECTION OF UN-COMPARABLES. 8. SELECTION OF HIGH MARGIN COMPANIES. 9. EXCLUSION OF DEFERRED REVENUE EXPENSES IN COMPUTING PLI UNDER TNMM. 10. RISK ADJUSTMENTS. 11. APPLICABILITY OF PROVISO TO SECTION 92C(2) 12. IMPOSITION OF INTEREST U/S. 234B 13. INITIATION OF PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. 3. AT THE OUTSET THE LEARNED AR CONTENDED THAT THE TRA NSFER PRICING OFFICER (TPO) OBTAINED CERTAIN INFORMATION ON COMPA RABILITY ANALYSIS I.T.A. NO. 473/HYD/2011 M/S. SUM TOTAL SYSTEMS INDIA PVT. LTD. ============================== 2 OF CERTAIN COMPANIES U/S. 133(6) OF INCOME-TAX ACT, 1961. WHILE RELYING ON THIS INFORMATION, THE LOWER AUTHORITIES HAVE NOT PROVIDED ANY OPPORTUNITY FOR CROSS-EXAMINATION OF SUCH INFORMATI ON THE ASSESSEE. HE PRAYED THAT AN OPPORTUNITY FOR CROSS-EXAMINATION MAY BE PROVIDED ON THE COMPARATIVE ANALYSIS IN THE FOLLOWING COMPAN IES: A) BIRLA TECHNOLOGIES LTD. B) VJIL CONSULTING LTD. C) BODHTREE CONSULTING LTD. D) EXENSYS SOFTWARE SOLUTIONS LTD. E) FOUR SOFT LTD. F) SANKHYA INFOTECH LTD. G) THIRDWARE SOLUTION LTD. 4. FURTHER, HE SUBMITTED THAT IN THE CASE OF FOLLOWING DECISIONS, THE TRIBUNAL HELD THAT WHILE DETERMINING THE ALP IF LOW ER AUTHORITIES INTEND TO USE INFORMATION OBTAINED U/S. 133(6) OF T HE ACT, AN OPPORTUNITY TO CROSS-EXAMINE HAS TO BE PROVIDED: A) FIRST ADVANTAGE OFFSHORE SERVICES PVT. LTD. (ITA NO . 1252 (BANG.)/2010 (PAGE 680-693 OF PB-3). B) GENISYS INTEGRATING SYSTEMS P. LTD. (2011-TII-96-IT AT- BANG-TP); (PAGE 780-785 OF PB-3). C) KODIAK NETWORKS INDIA PVT. LTD. VS. ACIT (ITA NO. 1 413/ BANG/2011). D) HEAD STRONG SERVICES DELHI ITAT RULING (ITA NO. 546 6/DEL/ 2011). E) AGILENT TECHNOLOGIES DELHI ITAT RULING (ITA 5352/DE L/ 2011). F) COLT TECHNOLOGY SERVICES (ITA 4597/DEL/2011) 5. THE DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF T HE LOWER AUTHORITIES. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. AS SEEN FROM THE RECORD, IT APPEARS THAT T HE TPO HAS UTILISED INFORMATION FOR COMPARABILITY WHICH WAS NOT IN PUBL IC DOMAIN. HE HAS OBTAINED THE INFORMATION BY ISSUING NOTICE U/S. 133 (6) OF THE ACT AND THE ASSESSEE HAS NOT GOT AN OPPORTUNITY TO REBUT TH E INFORMATION COLLECTED FROM CERTAIN PARTIES. IN THE INTEREST OF JUSTICE, WE ARE OF THE OPINION THAT IT IS APPROPRIATE TO GIVE AN OPPORTUNI TY TO THE ASSESSEE TO REBUT THE INFORMATION RELIED ON BY THE TPO BY ISSUI NG NOTICE U/S. 133(6) I.T.A. NO. 473/HYD/2011 M/S. SUM TOTAL SYSTEMS INDIA PVT. LTD. ============================== 3 OF THE ACT. BEING SO, WE DIRECT THE TPO TO GIVE AN OPPORTUNITY OF CROSS- EXAMINE THE PARTIES IN THE EVENT IF THE TPO/AO NOT GIVEN AN OPPORTUNITY ON EARLIER OCCASION. CONSEQUENTLY, WE REMIT THE ISSUE BACK TO THE FILE OF THE TPO FOR THE LIMITED PURPOSE AND AT THIS STAGE WE REFRAIN OURSELVES FROM GOING INTO THE OTHER GROUNDS RAISED BY THE ASSESSEE. 7. IN THE RESULT, ASSESSEE'S APPEAL IS ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH SEPTEMBER, 2012. SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 26 TH SEPTEMBER, 2012 TPRAO COPY FORWARDED TO: 1. M/S. SUM TOTAL SYSTEMS (INDIA) PVT. LTD., 7 TH FLOOR, MAXIMUM TOWERS, BUILDING 2B, MINDSPACE, RAHEJA IT PARK, MAD HAPUR, HYDERABAD-500 081. 2. THE INCOME TAX OFFICER, WARD - 3(2), IT TOWERS, AC GUARDS, MASAB TANK, HYDERABAD. 3 . THE CIT(A) - III, HYDERABAD. 4 . THE CIT - III, HYDERABAD. 5 . THE DR A BENCH, ITAT, HYDERABAD