Equant Solutions India (Pvt.) Ltd., Gurgaon V. ACIT, Gurgaon

ITA 4823/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3884 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 03-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A D MEHROTRA
• Assessee Lawyers: TARUN ARORA
• Keywords: Transfer pricing; Opportunity of being heard; Principle of natural justice

Judgement Text

ITA NO. 4823/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 4823/DEL/2010 A.Y. : 2006-07 EQUANT SOLUTIONS INDIA PRIVATE LIMITED, INFINITY TOWER, TOWER-B, 8 TH FLOOR, DLF PHASE-II, GURGAON, HARYANA (PAN/GIR: AABCE4540P) VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, GURGAON, HARYANA (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. TARUN ARORA DEPARTMENT BY : SH. A.D. MEHROTRA, C.I.T.(D.R.) ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED WITH RESP ECT TO THE ORDER OF THE ASSESSING OFFICER DATED 07.10.2010 AND PERT AINS TO ASSESSMENT YEAR 2006-07. 2. DRAFT ORDER OF THE ASSESSING OFFICER WAS PASSED PURSUANT TO DIRECTION U/S 144C BY THE DISPUTE RESOLUTION PANEL D ATED 22.9.2010. 3. AT THE OUTSET, IT IS NOTED THAT THE DISPUTE RESOL UTION PANEL (DRP) HAS NOT AT ALL CONSIDERED THE ASSESSEES SUBMISSIONS AND PASSED A VERY LACONIC AND NON-SPEAKING DIRECTION. IT HAS BEEN URGED THAT DRP ERRED IN LAW AND FACTS IN NOT PASSING SPEAKING ORDER A ND ERRED IN NOT STATING ANY JUSTIFICATION FOR THE REJECTION OF ASS ESSEES OBJECTION. ITA NO. 4823/DEL/2010 2 4. IN THIS CASE, THE DRPS ADJUDICATION IS AS UNDER :- THE FINDINGS OF THE TPO AND THE SUBMISSIONS MADE BY THE ASSESSEE HAVE BEEN TAKEN INTO CONSIDERATION. IN TH E BODY OF TRANSFER PRICING ORDER THE TPO HAS DISCUSSED IN DETAIL THE ISSUE OF REJECTION OF COMPARABLES AS TAKEN BY THE AS SESSEE AND SELECTING ONLY THOSE COMPARABLES AS ARE FULFILLI NG THE REQUISITE PARAMETERS. THE TPO HAS MADE DETAILED DISCUSSION IN THE MATTER OF APPLICATION OF FILTERS T O ARRIVE AT RIGHT COMPARABLES. THE REASONINGS GIVEN BY THE TPO ARE SCIENTIFIC HENCE THE OBJECTIONS RAISED BY THE ASSESS EE ARE NOT TENABLE. IN THE MATER OF USING MULTIPLE YEAR DA TA FOR THE COMPARABLES, THE STAND OF THE ASSESSEE IS NOT JU STIFIED AT ALL. IN THIS ISSUE, NOW IT IS WELL SETTLED THAT ONLY CURRENT YEARS DATA MAY BE TAKEN FOR COMPARABLES. IN THE MATT ER OF WORKING CAPITAL ADJUSTMENT AND RISK ADJUSTMENT ALSO, T HE TPO HAS MADE DETAILED ANALYSIS IN THE BODY OF ORDER AND THE OBSERVATIONS OF THE TPO ARE VERY LOGICAL, HENCE THE CONTENTION OF THE ASSESSEE IS NOT CORRECT. THUS, W E FIND NO COMPELLING REASONS TO INTERFERE WITH THE ORDER OF T PO AND THE ASSESSING OFFICER AND HENCE THE SAME ARE CONFIR MED. 5. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT SECTION 144C ENVISAGES FOLLOWING ON THE P ART OF THE DRP:- (5) THE DISPUTES RESOLUTION PANEL SHALL, IN CASE W HERE ANY OBJECTION IS RECEIVED UNDER SUB-SECTION (2), IS SUE SUCH DIRECTIONS, AS IT THINKS FIT, FOR THE GUIDANCE OF THE ASSESSING OFFICER TO ENABLE HIM TO COMPLETE THE ASSESSMENT. ITA NO. 4823/DEL/2010 3 (6) THE DISPUTE RESOLUTION PANEL SHALL ISSUE THE DIR ECTIONS REFERRED TO IN SUB-SECTION (5), AFTER CONSIDERING T HE FOLLOWING, NAMELY :- (A) DRAFT ORDER; (B) OBJECTIONS FILED BY THE ASSESSEE; (C) EVIDENCE FURNISHED BY THE ASSESSEE; (D) REPORT, IF ANY, OF THE ASSESSING OFFICER, VALUA TION OFFICER OR TRANSFER PRICING OFFICER OR ANY OTHER AUTHORITY; (E) RECORDS RELATING TO THE DRAFT ORDER; (F) EVIDENCE COLLECTED BY, OR CAUSED TO BE COLLECTE D BY, IT; AND (G) RESULT OF ANY ENQUIRY MADE BY, OR CAUSED TO BE MADE BY, IT. (7) THE DISPUTE RESOLUTION PANEL MAY, BEFORE ISSUING ANY DIRECTIONS REFERRED TO IN SUB-SECTION (5), - (A) MAKE SUCH FURTHER ENQUIRY, AS IT THINKS FIT; OR (B) CAUSE ANY FURTHER ENQUIRY TO BE MADE BY ANY INCOME TAX AUTHORITY AND REPORT THE RESULT OF THE SAME TO IT. (8) THE DISPUTE RESOLUTION PANEL MAY CONFIRM, REDUCE OR ENHANCE THE VARIATIONS PROPOSED IN THE DRAFT ORDER SO, HOWEVER, THAT IT SHALL NOT SET ASIDE ANY PROPOSED V ARIATION OR ISSUE ANY DIRECTION UNDER SUB-SECTION (5) FUR FU RTHER ENQUIRY AND PASSING OF THE ASSESSMENT ORDER. ITA NO. 4823/DEL/2010 4 (9) IF THE MEMBERS OF THE DISPUTE RESOLUTION PANEL DIF FER IN OPINION ON ANY POINT, THE POINT SHALL BE DECIDE D ACCORDING TO THE OPINION OF THE MAJORITY OF THE MEMBER S. (10) EVERY DIRECTION ISSUED BY THE DISPUTE RESOLUTIO N PANEL SHALL BE BINDING ON THE ASSESSING OFFICER. (11) NO DIRECTION UNDER SUB-SECTION (5) SHALL BE IS SUED UNLESS AN OPPORTUNITY OF BEING HEARD IS GIVEN TO TH E ASSESSEE AND THE ASSESSING OFFICER ON SUCH DIRECTI ONS WHICH ARE PREJUDICIAL TO THE INTEREST OF THE ASSESS EE OR THE INTEREST OF THE REVENUE, RESPECTIVELY. (12) NO DIRECTION UNDER SUB-SECTION (5) SHALL BE IS SUED AFTER NINE MONTHS FROM THE END OF THE MONTH IN WHICH THE DRAFT ORDER IS FORWARDED TO THE ELIGIBLE ASSESSEE. (13) UPON RECEIPT OF THE DIRECTIONS ISSUED UNDER SU B- SECTION (5), THE ASSESSING OFFICER SHALL, IN CONFO RMITY WITH THE DIRECTIONS, COMPLETE, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 153, THE ASSESSMENT W ITHOUT PROVIDING ANY FURTHER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, WITHIN ONE MONTH FROM THE END OF THE MONT H IN WHICH SUCH DIRECTION IS RECEIVED. 6. AS AGAINST THE ABOVE PROVISIONS OF THE ACT HERE THE DRP HAS PASSED A VERY LACONIC ORDER. LD. COUNSEL OF THE AS SESSEE CONTENDED THAT VOLUMINOUS SUBMISSIONS HAVE BEEN MADE BEFORE THE DRP AGAINST THE DRAFT ASSESSMENT ORDER. BUT THE DRP HAS BRUSHED ASIDE EVERYTHING WITHOUT PROPERLY CONSIDERING THE ASSESSEES OBJECTI ONS AND THE SUBMISSIONS OF THE ASSESSEE. UNDER THE CIRCUMSTAN CES, IN OUR ITA NO. 4823/DEL/2010 5 OPINION, THE DIRECTIONS OF THE DRP ARE TOO LACONIC T O BE LEFT UNCOMMENTED. THE DIRECTIONS GIVEN BY THE DRP ALMOST T ANTAMOUNT TO SUPERVISING THE ASSESSING OFFICERS DRAFT ORDER AN D IN THAT SENSE IT CAN BE EQUATED THAT APPELLATE JURISDICTION BEING EXERCI SED. WE FIND THAT H ONBLE APEX COURT IN THE CASE M/S SAHARA INDIA (FARMS) VS. C IT & ANR. IN [2008] 300 ITR 403 HAS HELD THAT EVEN AN ADMINI STRATIVE ORDER HAS TO BE CONSISTENT WITH THE RULES OF NATURAL JUSTICE . 7. IN THIS REGARD, WE ALSO NOTE THAT HONBLE JURISD ICTIONAL HIGH COURT IN THE CASE OF VODAFONE ESSAR LTD. VS. DISPUTES RESO LUTION PANEL VIDE ORDER DATED 2.12.2010 THE HONBLE COURT HAS HELD TH AT WHEN A QUASI JUDICIAL AUTHORITY DEALS WITH THE LIS, IT IS OBLIGA TORY ON ITS PART TO ASCRIBE COGENT AND GERMANE REASON AS THE SAME IS A HEART AND SOUL OF THE MATTER AND FURTHER THE SAME ALSO FACILITATES APP RECIATION WHEN THE ORDER IS CALLED IN QUESTION BEFORE THE SUPERIOR FOR UM. ACCORDINGLY, THE HONBLE COURT HAS REMANDED THE MATTER FOR FRESH ADJUD ICATION. 8. UNDER THE CIRCUMSTANCES, IN THE BACKGROUND OF TH E AFORESAID DISCUSSION AND PRECEDENT ABOVE, WE FIND CONSIDERAB LE COGENCY IN THE ASSESSEES COUNSEL SUBMISSION THAT THE ASSESSEES SU BMISSION HAS BEEN BRUSHED ASIDE WITHOUT GIVING PROPER CONSIDERAT ION BY THE DRP. 9. LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROV ERT THIS PROPOSITION. ITA NO. 4823/DEL/2010 6 10. UNDER THE CIRCUMSTANCES, IN OUR CONSIDERED OPI NION, THE ISSUE IS REMITTED TO THE FILES OF THE DRP TO CONSIDER THE ISSU E ONCE AGAIN TO PASS A PROPER AND SPEAKING DIRECTION U/S 144C OF TH E IT ACT WITHIN A REASONABLE TIME. SINCE WE ARE REMITTING THE MATTER TO THE FILES OF THE DRP FOR PASSING A FRESH DIRECTION, MERITS OF THE CASE ARE NOT BEING ADJUDICATED. NEEDLESS TO ADD THAT THE ASSESSEE SHOU LD BE GIVEN ADEQUATE OPPORTUNITY OF BEING HEARD. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27/5/2011 UPO N CONCLUSION OF HEARING. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [ [[ [A.D. JAIN A.D. JAIN A.D. JAIN A.D. JAIN] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 27/5/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES