M/s. Bucher Hydraulics Pvt. Ltd., Gurgaon V. DCIT, New Delhi

ITA 5690/DEL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7693 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I2
• Next Hearing Date: 19-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 08-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAMITA
• Keywords: Depreciation; Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 10B; 15; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I - 2 , NEW DELHI BEFORE S H. R. K. PANDA , ACCOUNTANT MEMBER AND S H . KULDIP SINGH , JUDICIAL MEMBER ITA NO. 4237 /DEL/201 1 ASSESSMENT YEAR: 2007 - 08 M/S. BUCHER HYDRAULICS PVT. LTD.35, PACE CI TY - I, SECTOR - 37, GURGAON PAN NO. AAECS5991H VS ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3 (1), NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. PRADIP DINODIA, ADVOCATE RESPONDENT BY SMT. NAMITA PANDEY, CIT DR ITA NO.5690/DEL/2012 ASSESSMENT YEAR: 2008 - 09 M/S. BUCHER HYDRAULICS PVT. LTD.35, PACE CITY - I, SECTOR - 37, GURGAON PAN NO. AAECS5991H VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 3 (1), NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. PRADIP DINODIA, ADVOCATE RESPONDENT BY SMT. NAMITA PANDEY, CIT DR DATE OF HEARING: 03 / 07 / 2018 DATE OF PRONOUNCEMENT: 06 / 0 7 /2018 2 ORDER PER R.K. PANDA, AM: THE ABOVE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSED U/S 143 (3) R/W 144 C OF THE IT ACT FOR A. Y. 2007 - 08 AND 2008 - 09 RESP E CTIVELY. SINCE IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE IN BOTH THE APPEALS, THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVEN IENCE . ITA NO. 4237/DEL/2011 ( A. Y. 2007 - 08) 2 . FACTS OF THE CASE , IN BRIEF , ARE THAT THE ASSESSEE COMPANY IS A WHOLLY OWNED SUBSIDIARY OF BUCHER INDUSTRIES AG. THE ASSESSEE COMPANY IS ENGAGED IN HYDRAULIC AND CONTROL SYSTEMS . IT FILE D ITS RETURN OF INCOME ON 06.11 .2007 DE CLARING LOSS OF RS.97,93,643/ - . SINCE THE ASSESSEE COMPANY HAD ENTERED INTO INTERNATIONAL TRANSACTION S WITH ITS AE, THE ASSESSING OFFICER REFERRED THE CA SE TO THE TPO FOR DETERMINATION OF THE ALP OF THE INTERNATIONAL TRANSACTION ENTE RED INTO BY IT U/S 92 CA (1) OF THE I. T. ACT, 1961. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE , T HE TPO PROPOSED UPWARD ADJUSTMENT OF RS.55,42,782/ - BEING THE DIFFERENCE IN THE ALP OF THE INTERNATIONAL TRANSACTION. THEREAFTER THE ASSESSING OFFICER MADE THE ADDITION OF RS.55,42,782/ - TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF THE ALP OF THE INTERNATIONAL TRANSACTION ENTERED INTO BY IT WITH ITS AE. THE ASSESSING OFFICER IN THE DRAFT A SSESS MENT ORDER ALSO MADE ADDITION OF RS.39,010,/ - B Y RESTRICTING THE DEPRECIATION TO 15% ON COMPUTER ACCESSORIES AND PERIPHERAL AS AGAINST 60% CLAIMED BY THE ASSESSEE. 3 . THE ASSESSEE APPROACHED THE DRP WHO DELETED THE DISALLOWANCE ON ACCOUNT OF DEPRECIATION. HOWEVER, SO FAR AS THE ADDITION ON ACCOUNT O F ALP OF THE INTERNATIONAL TRANSACTION IS CONCERNED THEY UPHELD THE ACTION OF THE ASSESSING OFFICER/ TPO. 3 4 . AGGRIEVED WITH SUCH ORDER OF THE ASSESSING OFFICER/ TPO/ DRP, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING FOLLOWING GROUNDS OF APPE AL : - 1 . THAT THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW AND ON FACTS IN CONVERTING THE RETURNED LOSS OF RS.97,93,643/ - INTO ASSESSED LOSS OF RS.42,11,851/ - THEREBY MAKING NET ADDITION OF RS.55,81,782/ - ON WHOLLY ILLEGAL, ERRONEOUS AND UNTENABLE GROUNDS . 2 . THE ORDER OF ASSESSMENT IS BAD IN LAW. 3 . THAT THE LEARNED AO HAS ERRED IN LAW, ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN MAKING ADDITION ON ACCOUNT OF ARMS LENGTH PRICE UNDER SECTION 92CA(3) OF THE INCOME - TAX ACT AMOUNTING TO RS.55,42,782/ - ON WHO LLY ILLEGAL, ERRONEOUS AND UNTENABLE GROUNDS. 4 . THE LEARNED AO S ORDER BASED ON THE FINDINGS OF THE LEARNED TRANSFER PRICING OFFICER AND THE DIRECTIONS OF THE LEARNED DISPUTE RESOLUTION PANEL U / S .144C(5) OF THE INCOME - TAX, IS ERRONEOUS, UNTENABLE IN LAW AND ON FACTS FOR THE VARIOUS REASONS AND NOT LIMITED TO THE FOLLOWING: - A ) THE TPO AS WELL AS THE DRP AND CONSEQUENTLY THE AO HAS ERRED IN LAW AND ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN ERRONEOUSLY REJECTING THE COMPARABLE COMPANIES SELECTED UNDER THE SE SEARCH DRIVEN PROCESS FOLLOWED BY A DETAILED FAR ANALYSIS (FUNCTIONS PERFORMED, ASSETS UTILIZED AND RISK ASSUMED) UNDERTAKEN BY THE ASSESSEE. B ) THE TPO AS WELL AS THE DRP AND CONSEQUENTLY THE AO HAS ERRED IN LAW AND ON FACTS AND IN THE CIRCUMSTANCES OF T HE CASE IN ERRONEOUSLY APPLYING A DEFECTIVE FAR ANALYSIS AND SELECTING AND RETAINING NON - COMPARABLE COMPANIES WITH OBVIOUSLY DIFFERENT CUSTOMERS/PRODUCTS AND THEREBY ARRIVING AT AN INCORRECT ARMS LENGTH PRICE. C ) THE TPO AS WELL AS THE DRP AN D CONSEQUENTLY T HE AO HAS ERRED IN LAW AND ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN ERRONEOUSLY REJECTING THE PROFIT 4 LEVEL INDICATOR (PLI) OF OPERATING LOSS/ TOTAL ASSETS IGNORING THE FACT THAT THE ASSESSEE IS A START - UP IN THE FINANCIAL YEAR OF BUSINESS AND THERE FORE, SELECTING ERRONEOUSLY THE PLI OF OPERATING PROFIT/TOTAL SALES AS THE APPROPRIATE PLI. D ) THE TPO AS WELL AS THE DRP AND CONSEQUENTLY THE AO HAS ERRED IN LAW AND ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN ERRONEOUSLY REJECTING THE ASSESSEE'S CLAIM OF ADJUSTMENT ON ACCOUNT OF UNDERUTILIZATION OF INSTALLED CAPACITY WHILE ANALYZING AND COMPARING THE NET MARGIN OF THE ASSESSEE COMPANY WITH THAT OF THE COMPARABLES TO ELIMINATE MATERIAL DIFFERENCE IN CONSONANCE WITH THE PROVISIONS OF RULE 10B(3) OF THE I NCOME - TAX RULES. E ) THE TPO AS WELL AS THE DRP AND CONSEQUENTLY THE AO HAS ERRED IN LAW AND ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN ERRONEOUSLY REJECTING THE ASSESSEE S CLAIM OF ADJUSTMENT IN THE COMPARABLES ON ACCOUNT OF EXCISE AND CUSTOM DUTY WHIL E ANALYZING AND COMPARING NET MARGIN OF THE ASSESSEE AND THAT OF THE COMPARABLE COMPANIES TO ELIMINATE MATERIAL DIFFERENCE IN CONSONANCE WITH THE PROVISIONS OF RULE 10B(3) OF THE INCOME - TAX RULES. F ) THE TPO AS WELL AS THE DRP AND CONSEQUENTLY THE AO HAS ERR ED IN LAW AND ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN ERRONEOUSLY HOLDING THAT NO ACCURATE ADJUSTMENTS CAN BE MADE INSPITE OF RELEVANT DATA AND INFORMATION BEING MADE AVAILABLE TO THEM. G ) THE TPO AS WELL AS THE DRP AND CONSEQUENTLY THE AO HAS ERRED IN LAW AND ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN CONSIDERING IN THE RATIO ANALYSIS AS ACCEPTABLE COMPARABLE COMPANIES EVEN THOSE PREVIOUSLY REJECTED BY THE TPO I.E. JAYA HIND INDUSTRIES AND INSTRUMENTATION LTD. WHILE ADJUDICATING UPON THE ISSUE OF ALLOWING ADJUSTMENTS FOR THE UNDERUTILIZATION OF INSTALLED CAPACITY TO THE ASSESSEE. 5 ) THE LEARNED AO BASED ON THE RECOMMENDATION OF THE TPO/DRP HAS MADE AN ARMS LENGTH ADJUSTMENT, EVEN THOUGH, ADMITTEDLY THERE IS NO SHIFTING OF PROFITS FROM INDIA TO AN OTHER LOW TAX JURISDICTION, AS ADMITTEDLY EVEN AFTER ADJUSTMENT AS PROPOSED BY THE TPO/DRP/AO, IT STILL RESULTS IN COMPUTATION OF LOSS FOR THE YEAR 5 UNDER CONSIDERATION. 6 ) THAT THE ADJUSTMENT MADE BY THE AO TO THE TOTAL INCOME OF THE ASSESSEE ON THE GROUND OF DISALLOWANCE OF DEPRECIATION ON COMPUTER S PERIPHERALS @ 60% WERE ERRONEOUS, FACTUALLY INCORRECT, AND NOT MAINTAINABLE IN LAW AND IS PRAYED NOT TO BE CONFIRMED. 7 ) THAT EACH GROUND IS INDEPENDENT OF AND WITHOUT PREJUDICE TO THE OTHER GROUNDS RAISED HEREIN. 5 . THE ASSESSEE HA S ALSO RAISED THE FOLLOWING ADDITIONAL GROUND OF APPEAL : - THE REFERENCE TO THE TRANSFER PRICING OFFICER U/S 92 CA OF THE INCOME TAX ACT, 1961 BY THE ASSESSING OFFICER WAS ILLEGAL CONTRARY TO (I) THE BINDING INSTRUCTION NO.3/2003, (II) THE PROVISIONS OF SECTION 92CA AND THE BINDING DECISION OF THE SPECIAL BENCH IN THE CASE OF AZTEC SOFTWARE AND TECHNOLOGY SERVICES LTD. [107 ITD 141 (BANG) (S B) / 2007 TIOL - 210 - ITAT - BANG - SPECIAL BENCH] 6 . REFERRING TO THE DECISION OF THE HON BLE SUPREM E COURT IN THE CASE OF NTPC LIMITED VS. CIT REPORTED IN 229 ITR 383, THE LD. COUNSEL FOR THE AS S ESSEE SUBMITTED THAT SINCE ALL THE FACTS PERTAINING TO THE ABOVE GROUND ARE ALREADY ON RECORD AND THE ASSESSEE HAD IN ADVERTENTLY FAILED TO RAISE THE ABOVE GROUN D OF APPEAL DUE TO OVERSIGHT , THEREFORE, THE ADDITIONAL GROUND MAY BE ADMITTED FOR ADJUDICATION. 7 . AFTER HEARING BOTH THE SIDES AND CONSIDERING THE FACT THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS A LEGAL ONE AND ALL FACTS NECESSARY FOR ADJUD ICATION OF THE GROUND ARE ALREADY ON RECORD AND NO NEW FACTS ARE REQUIRED TO BE INVESTIGATED, THEREFORE, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ADMITTED FOR ADJUDICATION. 8 . THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT SINCE TH E TURNOVER OF THE ASSESSEE IS RS.3 CRORES FOR THE FINANCIAL YEAR 6 2006 - 07 AND THE AE TRANSACTION IS OF RS.1.90 CRORES WHICH IS BELOW THE LIMITS SET FOR REFERRING THE CASE TO THE TPO FOR TP AUDIT , THEREFORE, THE REFERENCE BY THE ASSESSING OFFICER TO THE TPO IS INVALID AS PER CBDT INSTRUCTION NO.3/2003 WHICH IS BINDING ON THE LD. AO. CONSEQUENTLY, THE ASSESSMENT ORDER PASSED BY THE A O IS BARRED BY LIMITATION SINCE IT SHOULD HAVE BEEN PASSED ON OR BEFORE 31 ST DECEMBER, 2009 . HOWEVER , EVEN THE DRAFT ASSESSMENT O RDER WAS P ASSED ON 29 TH OCTOBER, 2010. ACCORDINGLY, HE SUBMITTED THAT THE ORDERS OF THE LD. AO AND TPO SHOULD BE QUASHED ON THIS PRELIMINARY LEGAL GROUND ALONE . 9 . REFERRING TO THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN CASE OF CALANCE SOFTWARE PVT LT D VS. DCIT VIDE ORDER DATED 23.03.2 018 FOR A. Y. 2006 - 07 , H E SUBMITTED THAT THE TRIBUNAL UNDER IDENTICAL CIRCUMSTANCES HAS HELD THAT THE REFERENCE TO THE TPO IS NOT SUSTAINABLE S INCE THE QUANTUM OF INTERNATIONAL TRANSACTION IS BELOW THE MONETARY LIMIT OF R S.5 CRORES AND THE ASSESSING OFFICER SHOULD HAVE PASS ED THE ORDER WITHIN THE PRESCRIBED TIME PROVIDED UNDER THE STATUTE. SINCE THE ASSESSMENT HA S BECOME TIME BARRED THE ADDITIONAL GROUND RAISED BY THE ASSESSEE WAS DECIDED IN FAVOUR OF THE ASSESSEE. HE AC CORDINGLY SUBMITTED THAT SINCE THE REFERENCE IN THE INSTANT CASE TO THE TPO BY THE ASSESSING OFFICER IS INVALID AS THE INTERNATIONAL TRANSACTION IS BELOW THE MONIT ARY LIMIT OF RS.5 CRORES AND S INCE THE TIME LIMIT FOR THE ISSUE OF THE ORDER IN CASE OF NO TP O REFERENCE U/S 153 (1) OF THE IT ACT HAS GOT EXPIRED ON 31.12.2009, THEREFORE, THE ORDER OF THE ASSESSING OFFICER SH OU LD BE HELD AS VOID - AB - INITIO . HE ALSO INVITED THE ATTENTION OF THE BENCH TO THE CHRONOLOGICAL SEQUENCE OF ORDERS PASSED BY THE REVENUE D EPARTMENT WHICH IS AS UNDER : - 7 PARTICULARS DATE OF ORDER REFERENCE IN COVERING LETTER TO FORM NO.36B (APPEALS PAPERS) ORDER OF THE TRANSFER PRICING OFFICER ( TPO ) U/S 92CA (3) OF THE INCOME TAX ACT, 1961 ( THE ACT ) 04/10/2010 S. NO.7 (PAGES 52 - 63 ) DRAFT ORDER OF THE ASSESSING OFFICER U/S 143 (3) R.W.S. 144 C OF THE ACT 29/10/2010 S. NO.6 (PAGES 47 - 51) ORDER PASSED BY DISPUTE RESOLUTION PANEL ( DRP ) U/S 144 C (5) OF THE ACT 10/08/2011 S. NO.4 (PAGES 15 - 20) FINAL ORDER OF THE ASSESSING OFFICER U/S 143 (3) R.W.S. 144 C OF THE ACT 24/08/2011 S. NO.3 (PAGES 6 - 14) TIMELINE FOR ISSUE OF ORDER BY THE ASSESSING OFFICER IN CASE OF NO TPO REFERENCE U/S 153 (1) OF THE ACT I.E. 21 MONTHS FROM THE END OF RELEVANT ASSESSMENT YEAR 31/12/2009 1 0 . THE L D. DR ON THE OTHER HAND SUBMITTED THAT REFERENCE TO THE TPO BY THE ASSESSING OFFICER WILL NOT INVALIDATE THE ASSESSMENT AND THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE ISSUE AFRESH. 1 1 . WE HAVE CONSIDERED THE RIVAL AR GUMENTS MADE BY BOTH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS AN ADMITTED FACT THAT THE QUANTUM OF INTERNATIONAL TRANSACTION IN THE INSTANT CASE IS BELOW THE MONETARY LIMIT OF RS.5 CRORES . T HEREFORE, WE FIND MERIT IN THE ARGUMENTS O F 8 THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSING OFFICER INSTEAD OF REFERRING THE MATTER TO THE TPO FOR DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTION SHOULD HAVE DECIDED HIMSELF T HE ISSUE OF SUCH ALP OF THE INTERNATIONAL TRANSACTION. 1 2 . WE FIN D IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN THE CASE OF CALANCE SOFTWARE PRIVATE LIMITED (SUPRA) TO WHICH ONE OF US (AM) IS A PARTY. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL READ AS UNDER : - 13 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. AT THE TIME OF HEARING THE LD. AR HAS TAKEN A GROUND WHICH IS ON LEGAL POINT THAT AS PER THE INSTRUCTION NO. 3/2003 ISSUED BY THE CBDT, THE ASSESSING OFFICER SHOULD HAVE DECIDED THE ISSUE OF INTERNATIONAL TRANSACTION HIMSELF INSTEA D OF REFERRING IT TO TRANSFER PRICING OFFICER AS THE QUANTUM OF INTERNATIONAL TRANSACTION IS BELOW THE MONETARY LIMIT OF RS.5 CRORE. PRIMA FACIE, IT APPEARS THAT THE CONTENTION OF THE LD. AR IS SUPPORTED BY THE INSTRUCTION NO.3/2003. THEREFORE, WE HAVE TO VERIFY WHETHER THAT INSTRUCTION HAS A BINDING FORCE OR IT IS JUST AN ADMINISTRATIVE INSTRUCTION WITHIN THE DEPARTMENTS DAY TO DAY ACTIVITIES. THE CIRCULAR HAS BEEN CONSIDERED BY THE ANDHRA PRADESH HIGH COURT IN CASE OF CIT VS. NAYANA P DEDHIA 270 ITR 572 W HEREIN IT IS HELD THAT THE AUTHORITIES RESPONSIBLE FOR ADMINISTRATION OF THE ACT SHALL OBSERVE AND FOLLOW ANY SUCH ORDERS, INSTRUCTIONS AND DIRECTIONS OF THE BOARD. THIS IS ACTUALLY REITERATED FROM THE DECISION OF THE HON'BLE APEX COURT IN CASE OF UCO BANK VS. CIT 237 ITR 889 = 2002 - TIQL - 697 - SC - IT - LB . BUT AT THE SAME TIME THE HON'BLE SUPREME COURT ALSO HELD THAT THE CIRCULARS CAN BE ADVERSE TO THE IT DEPARTMENT BUT STILL ARE BINDING ON THE AUTHORITIES OF THE INCOME TAX DEPARTMENTS BUT CANNOT BE BINDING ON THE ASSESSEE IF THEY ARE ADVERSE TO THE ASSESSEE. THESE RATIO LAID DOWN BY THE APEX COURT HAS AN IMPACT ON THE ARGUMENT OF THE LD. AR REGARDING THE BOARD'S INSTRUCTION TO BE FOLLOWED. THE SPECIAL BENCH OF THIS TRIBUNAL ALSO IN CASE OF AZTEC SOFTWARE & TECH NOLOGY SERVICES LTD. VS. ACIT HELD THAT CBDT DIRECTIONS ARE MANDATORY AND BINDING ON THE ASSESSING OFFICER AND CIT. FURTHER THE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS. SPL'S SIDDHARTHA LTD. (SUPRA) HELD THAT 'SECTION 116 OF THE ACT ALSO DEFINES THE IN COME - TAX AUTHORITIES AS DIFFERENT AND DISTINCT AUTHORITIES. SUCH DIFFERENT AND DISTINCT AUTHORITIES HAVE TO EXERCISE THEIR POWERS IN ACCORDANCE WITH LAW AS PER THE POWERS GIVEN TO THEM IN SPECIFIED CIRCUMSTANCES. IF POWERS 9 CONFERRED ON A PARTICULAR AUTHORI TY ARE ARROGATED BY OTHER AUTHORITY WITHOUT MANDATE OF LAW, IT WILL CREATE CHAOS IN THE ADMINISTRATION OF LAW AND HIERARCHY OF ADMINISTRATION WILL MEAN NOTHING. SATISFACTION OF ONE AUTHORITY CANNOT BE SUBSTITUTED BY THE SATISFACTION OF THE OTHER AUTHORITY. IT IS TRITE THAT WHEN A STATUE REQUIRES, A THING TO BE DONE IN A CERTAIN MANNER, IT SHALL BE DONE IN THAT MANNER ALONE AND THE COURT WOULD NOT EXPECT ITS BEING DONE IN SOME OTHER MANNER.' THEREFORE, THE ADDITIONAL GROUND OF THE ASSESSEE IS ALLOWED. AT THI S JUNCTURE, THE ASSESSMENT HAS BECOME TIME BARRED AS THE REFERENCE MADE TO TPO ITSELF IS NOT SUSTAINABLE AND THE ASSESSING OFFICER SHOULD HAVE PASSED ASSESSMENT ORDER AT THE PRESCRIBED TIME PROVIDED UNDER THE STATUTE. WE ARE NOT DECIDING ON THE MERIT OF TH E CASE AS THE ADDITIONAL GROUND IS DECIDED IN FAVOUR OF THE ASS E ESSE. 14 . IN RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 1 3 . SINCE THE FACTS OF THE INSTANT CASE ARE IDENTICAL TO THE FACTS OF THE CASE DECIDED BY THE TRIBUNAL IN THE CASE OF CALANCE SOFTWARE PVT . LTD. (SUPRA) AND SINCE T HE TIME LI MIT FOR ISSUE OF THE ORDER BY THE ASSESSING OFFICER IN CASE OF THE TPO REFERENCE U/S 153 (1) OF THE IT ACT EXPIRED ON 31.12.2009, THEREFORE, WE HOLD THAT IMPUGNED ASSESSMENT ORDER IS BAD IN LAW AND IS BARRED BY LIMITATIO N. THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. SINCE THE ASSESSEE SUCCEEDS ON THIS ADDITIONAL GROUND THE OTHER GROUNDS RAISED BY THE ASSESSEE BE COME ACADEMIC IN NATURE AND THEREFORE ARE NOT BEING ADJUDICATED. THE APPEAL FILED BY T HE ASSESSEE IS ACCORDINGLY ALLOWED. ITA NO. 5690/DEL/2012 (A. Y. 2008 - 09) 14. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : - 1 ) THAT THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW AND ON FACTS IN MAKING AN ASSESSMENT OF THE ASSESSEE S LOSS AT RS. 51,8 7,140/ - AGAINST THE LOSS AS RETURNED BY ASSESSEE AT RS. 1,44,16,476/ - AND THUS MAKING ADDITIONS OF RS. RS.92,29,336/ - ON WHOLLY ILLEGAL, ERRONEOUS AND UNTENABLE GROUNDS. 2 ) THE ORDER OF ASSESSMENT IS BAD IN LAW. 10 3 ) THAT THE LEARNED AO HAS ERRED IN LAW, ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN MAKING ADDITION ON ACCOUNT OF ARMS LENGTH PRICE UNDER SECTION 92CA(3) OF THE INCOME - TAX ACT AMOUNTING TO RS. 92,29,339/ - ON WHOLLY ILLEGAL, ERRONEOUS AND UNTENABLE GROUNDS. 4 ) THE LEARNED AO S ORDER BASED ON THE FINDIN GS OF THE LEARNED TRANSFER PRICING OFFICER AND THE DIRECTIONS OF THE LEARNED DISPUTE RESOLUTION PANEL U / S .144C(5) OF THE INCOME - TAX, IS ERRONEOUS, UNTENABLE IN LAW AND ON FACTS FOR THE VARIOUS REASONS AND NOT LIMITED TO THE FOLLOWING: - A ) THE TPO AS WELL AS THE DRP AND CONSEQUENTLY THE AO HAS ERRED IN LAW AND ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN ERRONEOUSLY REJECTING THE COMPARABLE COMPANY I.E. ADARSH PLANT PROTECT LIMITED SELECTED UNDER THE SEARCH DRIVEN PROCESS FOLLOWED BY A DETAILED FAR ANALYSI S (FUNCTIONS PERFORMED, ASSETS UTILIZED AND RISK ASSUMED) UNDERTAKEN BY THE ASSESSEE. B ) THE TPO AS WELL AS THE DRP AND CONSEQUENTLY THE AO HAS ERRED IN LAW AND ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN ERRONEOUSLY REJECTING THE ASSESSEE S CLAIM OF AD JUSTMENT ON ACCOUNT OF UNDERUTILIZATION OF INSTALLED CAPACITY WHILE ANALYZING AND COMPARING THE NET MARGIN OF THE ASSESSEE COMPANY WITH THAT OF THE COMPARABLES TO ELIMINATE MATERIAL DIFFERENCE IN CONSONANCE WITH THE PROVISIONS OF RULE 10B (3) OF THE INCOME - TAX RULES. C ) THE TPO AS WELL AS THE DRP AND CONSEQUENTLY THE AO HAS ERRED IN LAW AND ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN ERRONEOUSLY REJECTING THE ASSESSEE S CLAIM OF ADJUSTMENT IN THE COMPARABLES ON ACCOUNT OF EXCISE AND CUSTOM DUTY WHILE ANA LYZING AND COMPARING NET MARGIN OF THE ASSESSEE AND THAT OF THE COMPARABLE COMPANIES TO ELIMINATE MATERIAL DIFFERENCE IN CONSONANCE WITH THE PROVISIONS OF RULE 10B(3) OF THE INCOME - TAX RULES. D ) THE TPO AS WELL AS THE DRP AND CONSEQUENTLY THE AO HAS ERRED IN LAW AND ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN ERRONEOUSLY HOLDING THAT NO ACCURATE ADJUSTMENTS CAN BE MADE INSPITE OF RELEVANT DATA AND INFORMATION BEING MADE AVAILABLE TO THEM. 11 E ) THE TPO AS WELL AS THE DRP AND CONSEQUENTLY AO HAVE ERRED IN CALC ULATING THE PROFIT MARGINS OF FRESH COMPARABLES. F ) THE DRP AND CONSEQUENTLY AO HAVE ERRED IN CALCULATING THE WRONG PROFIT MARGINS OF ROTO PUMPS LIMITED (COMPARABLE AS SELECTED BY THE ASSESSEE). G ) THE TPO AS WELL AS DRP AND CONSEQUENTLY AO HAVE GROSSLY ERRED IN LAW IN CHOOSING A SET OF COMPARABLES ALTHOUGH NONE OF THESE COMPARABLES WERE TO BE SELECTED ON DETAILED FAR ANALYSIS. H ) WITHOUT PREJUDICE TO THE ABOVE, THE TPO AS WELL AS DRP AND CONSEQUENTLY AO GROSSLY ERRED IN REJECTING THE CORRECT PLI OF THE COMPARABL ES AS WAS CLARIFIES TO THE DRP/AO. I ) THE TPO AS WELL AS DRP AND CONSEQUENTLY AO FAILED TO ADJUDICATE ON THE VARIOUS DETAILED SUBMISSIONS MADE BY THE ASSESSEE DURING THE PROCEEDINGS BEFORE EACH ONE OF THEM AND TPO REJECTED THE SAME ON NON TP CONSIDERATIONS. 5) THAT EACH GROUND IS INDEPENDENT OF AND WITHOUT PREJUDICE TO THE OTHER GROUNDS RAISED HEREIN. 15. THE ASSESSEE HAS ALSO RAISED THE FOLLOWING ADDITIONAL GROUND OF APPEAL : - THE REFERENCE TO THE TRANSFER PRICING OFFICER U/S 92 CA OF THE INCOME TAX ACT, 1961 BY THE ASSESSING OFFICER WAS ILLEGAL CONTRARY TO (I) THE BINDING INSTRUCTION NO.3/2003, (II) THE PROVISIONS OF SECTION 92CA AND THE BINDING DECISION OF THE SPECIAL BENCH IN THE CASE OF AZTEC SOFTWARE AND TECHNOLOGY SERVICES LTD. [107 ITD 141 (BANG) ( S B) / 2007 TIOL - 210 - ITAT - BANG - SPECIAL BENCH] 16. AFTER HEARING BOTH THE SIDES AND FOLLOWING OUR OBSERVATION IN ITA NO.4237/DEL/2011 , T HE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ALLOWED. 12 17. AFTER HEARING BOTH THE SIDES , W E FIND THE TURNOVER OF TH E ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR IS RS.4.77 CRORES AND THE AE TRANSACTION BEING RS.3.80 CRORES IS BELOW THE LIMIT OF RS.5 CRORES PRESCRIBED FOR REFERRING THE CASE TO THE TPO. T HEREFORE, FOLLOWING OUR FINDING IN ITA NO.4237/DEL/2011, THE ASSESSME NT ORDER PASSED BY THE ASSESSING OFFICER IS HELD TO BE BAD IN LAW AND BARRED BY LIMITATION. THE ADDITIONAL GROUND IS ACCORDINGLY ALLOWED. SINCE THE ASSESSEE SUCCEEDS ON THIS ADDITIONAL GROUND , THE OTHER GROUND S BE COME ACADEMIC IN NATURE AND THEREFORE ARE N OT BEING ADJUDICATED. 1 8 . IN THE RESULT , BOTH THE APPEAL S FILED BY THE ASSESSEE ARE ALLOWED. ORDER P RONOUNCED IN THE OPEN COURT ON 06 .0 7 .2018. SD / - SD/ - ( KULDIP SINGH ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER *NEHA* DATE: - 06 .0 7 .2018 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 13 DAT E OF DICTATION 05.07.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 05.07.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 06.07.2018 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS 06.07.2018 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 06.07.2018 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 06.07.2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 06.07.2018 DATE ON WHICH T HE FILE GOES TO THE BENCH CLERK 06.07.2018 DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER 14