M/s Conergy Energy Systems Private Limited, Bangalore V. Asst.C.I.T., Bangalore

ITA 584/BANG/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8460 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 07-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: H C KHINCHA
• Keywords: Transfer pricing; International transaction; Additional evidence; Reasonable cause; Arm length price
• Section: 92D

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. 584/BANG/2015 ASSESSMENT YEAR : 2010-11 M/S. CONERGY ENERGY SYSTEMS PRIVATE LIMITED, (FORMERLY KNOWN AS SUN TECHNICS ENERGY SYSTEMS PVT LTD) NO. 660/1, 100 FEET ROAD, INDIRANAGAR, BANGALORE 560 038. PAN: AAJCS 2898A VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI H.C. KHINCHA, CA RESPONDENT BY : SHRI G. KAMALADAR, STANDING COUNSEL DATE OF HEARING : 14.03.2017 DATE OF PRONOUNCEMENT : 22.03.2017 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER THE PRESENT APPEAL IS ARISING OUT OF THE ASSESSMENT ORDER DATED 29.01.2015 PASSED BY THE AO PURSUANT TO THE ORDER P ASSED BY THE DRP ON 26.12.2014 ON THE FOLLOWING GROUNDS. IT(TP)A NO. 584/BANG/2015 PAGE 2 OF 10 IT(TP)A NO. 584/BANG/2015 PAGE 3 OF 10 2. THE LD. AR HAS DRAWN OUR ATTENTION TO THE APPLICATI ON FILED BY THE ASSESSEE FOR TAKING THE ADDITIONAL EVIDENCE ON RECO RD. IT WAS CONTENTED BY THE LD. AR THAT BEFORE THE TPO SHRI SE SHADRI NIMMALA, COMPANY SECRETARY WAS APPEALING ON BEHALF OF THE COMPANY AND THE SAID COMPANY SECRETARY HAS RESIGNED ON 30.08.2013, THEREFORE THE COMPANY WAS NOT IN A POSI TION TO FILE THE TP STUDY IN TERMS OF THE MANDATORY PROVISION OF LAW . FOR THAT PURPOSES THE LD. AR HAS DRAWN OUR ATTENTION TO PARA 5.4 OF THE TPO AT PAGE 3 TO THE FOLLOWING EFFECT. IT(TP)A NO. 584/BANG/2015 PAGE 4 OF 10 IT(TP)A NO. 584/BANG/2015 PAGE 5 OF 10 IT(TP)A NO. 584/BANG/2015 PAGE 6 OF 10 3. IT WAS POINTED OUT BY THE LD. AR THAT THE ASSESSEE COMPANY WAS TAKEN OVER BY ANOTHER GROUP CALLED CANARA POWER PRO JECTS PROMOTERS IN., AND A SHARE TRANSFER AGREEMENT WAS A LSO EXECUTED ON 17.01.2014 AND AS A RESULT THEREOF THE ENTIRE MANAG ING TEAM HAS QUIT THE OFFICE, THE NEW MANAGEMENT TEAM ARE TO BE IN PLACE, THEREFORE ALSO THE DOCUMENT WHICH ARE REQUIRED TO B E FILED WERE NEITHER FILED BEFORE THE AO NOR THE TPO NOR BEFORE THE DRP. IT WAS SUBMITTED THAT THE ASSESSEE HAS DISCLOSED THE J UST AND REASONABLE CAUSE WHICH PREVENTED THE ASSESSEE FROM NOT COMPLYING THE PROVISIONS OF THE ACT BY NOT FILING THE TP STU DY EVEN AFTER THE NOTICE WAS RECEIVED BY THE OFFICE OF THE ASSESSEE O N 15.07.2013. SINCE THE ASSESSEE MANAGEMENT OF THE ASSESSEE IS NO W BEING TAKEN BY THE NEW MANAGEMENT AND IS KEEPING THE ENTIRE REC ORD, THEREFORE IT WAS SUBMITTED THAT THE ADDITIONAL EVIDENCE BE PE RMITTED TO BE PLACED ON RECORD AND ACCORDINGLY THE MATTER BE REMA NDED BACK TO THE FILE OF TPO FOR ADJUDICATION. 4. ON THE OTHER HAND, THE LD. DR, HAS DRAWN OUR ATTEN TION TO PARAGRAPH 3.2 OF THE DRP PROCEEDINGS WHEREIN IT IS ELABORATELY MENTIONED THAT DESPITE THE OBLIGATION AND MANDATORY REQUIREMENT IT(TP)A NO. 584/BANG/2015 PAGE 7 OF 10 TO MAINTAIN THE RECORD U/S. 92D OF THE IT ACT READ WITH RULE 10D, THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS TO PR OVE THAT THE INTERNATIONAL TRANSACTION WERE ON ITS ARM LENGTH . IT WAS SUBMITTED THAT NO REASONS HAVE BEEN FILED FOR NOT SUBMITTING THE DOCUMENT BEFORE THE DRP. 5. WE HAVE HEARD THE RIVAL PARTIES AND GONE THROUGH TH E RECORDS. THE APPLICATION FOR SUBMISSIONS OF ADDITIONAL DOCUMENTS WAS FILED UNDER RULE 29 OF THE ITAT RULES, 1963. ALONG WITH T HE APPLICATION THE ASSESSEE HAS FILED THE LETTER RESIGNATION OF CO MPANY SECRETARY AND DOCUMENTS EVIDENCING. ON THE BASIS OF WHICH IT IS SUBMITTED THAT THESE DOCUMENTS, IF EXAMINED BY THE TPO, THEN NO TP ADJUSTMENT IS CALLED FOR. IN OUR VIEW IT IS THE ST ATUTORY AND LEGAL DUTY OF THE ASSESSEE TO MAINTAIN THE RECORD AS PER THE RULE 10D R.W.S. 92D OF THE IT ACT AND ON RECEIPT OF THE NOTI CE FROM THE TPO, THE ASSESSEE SHOULD HAVE FILED A TP STUDY WITH THE TPO TO JUSTIFY THAT THE INTERNATIONAL TRANSACTION WERE AT ARM LENG TH PRICE. IN THE PRESENT CASE NEITHER THE RECORDS WERE MAINTAINED BY THE ASSESSEE NOR IT WAS FILE BEFORE THE TPO OR BEFORE THE DRP. EVEN NO APPLICATION FOR ADDITIONAL EVIDENCE WAS FILED BEFOR E THE DRP BY THE ASSESSEE. FOR THE FIRST TIME, THE APPLICATION WAS MADE BEFORE THE IT(TP)A NO. 584/BANG/2015 PAGE 8 OF 10 TRIBUNAL FOR ADMITTING THE ADDITIONAL EVIDENCE, MEN TIONED HEREINABOVE. 6. IN OUR VIEW, THE ENTIRE PURPOSE OF EXERCISING THE T P STUDY IS TO TAX THE TAXABLE INCOME AND FOR THAT PURPOSES THE EXERCISING IS BEING UNDERTAKEN BY THE TPO TO FIND OUT WHETHER THE INTER NATIONAL TRANSACTION TRANSACTED BY THE ASSESSE WITH ITS AE WAS AT ARM LENGTH PRICE OR NOT. IN OUR VIEW, EVEN IF THE ASSESSEE HA S NOT FILED THE TP STUDY, OR THE TP STUDY FILED BY THE ASSESSEE IS BEI NG REJECTED BY THE TPO, THE TPO SELECTS ITS OWN COMPARABLE AND THEREAF TER APPLY THE MOST APPROPRIATE METHOD FOR DETERMINING THE ALP. F OR THAT PURPOSES, THE SHOW CAUSE NOTICE, AFTER REJECTING THE TP STUDY IS CONTEMPLATED. IN THE PRESENT CASE, THE TPO HAS NOT ISSUED ANY SHOW C AUSE NOTICE AFTER GIVING THE LIST OF COMPARABLE, RATHER TPO HAS RESOR TED TO THE APPLICATION OF CUP METHOD FOR DETERMINING THE ALP O F INTERNATIONAL TRANSACTION. IN OUR VIEW, THE ACTION OF THE TPO TO APPLY THE CUP METHOD HOWEVER WAS NOT WARRANTED IN GIVEN SET OF FA CTS. IN OUR VIEW, THE SHOW CAUSE NOTICE WAS GIVEN BY THE TPO ON 15.07 .2013 AND HOWEVER THE ENTIRE MANAGEMENT TEAM ALONG WITH THE C OMPANY SECRETARY HAVE LEFT THE OFFICE AND NEW MANAGEMENT H AD TAKEN OVER THE ASSESSEE AND IN VIEW OF THAT THE NECESSARY DOCUMENT S / SOURCES WERE IT(TP)A NO. 584/BANG/2015 PAGE 9 OF 10 NOT FURNISHED BEFORE THE TPO. THERFORE THERE WAS N O OCCASION FOR THE ASSESSEE TO FILE REPLY TO THE SHOW CAUSE AND SUBMIT DOCUMENTS. THIS IS CLEAR FROM THE LETTER DATED 20.11.2013 WERE BY IT W AS EXPLAINED BEFORE US, THAT THE ENTIRE MANAGEMENT TEAM ALONG WITH THE COMPANY SECRETARY HAVE LEFT THE OFFICE AND NEW MANAGEMENT H AD TAKEN OVER THE ASSESSEE AND IN VIEW OF THAT THE NECESSARY DOCUMENT S / SOURCES WERE NOT FURNISHED BEFORE THE TPO. IN OUR VIEW, THE A SSESSEE WAS ABLE TO MAKE OUT THE CASE FOR ACCEPTING THE ADDITIONAL EVID ENCE FILED BEFORE US AND ACCORDINGLY WE ALLOW THE SAME. 7. SINCE WE HAVE ALLOWED THE ADDITIONAL EVIDENCE, THER EFORE IN THE LIGHT OF THAT IT BECOME NECESSARY TO REMAND BACK THE MATT ER TO THE FILE OF THE TPO FOR EXAMINING THE ADDITIONAL EVIDENCE FILED BEF ORE US AND DECIDE THE MATTER IN ACCORDANCE WITH LAW. FURTHER THE TPO IS DIRECTED TO CONSIDER THE EVIDENCE FILED BEFORE US ONLY FOR THE PURPOSES OF ARRIVING AT THE ALP AND THE INTERNATIONAL TRANSACTIONS ENTER ED BETWEEN THE ASSESSEE AS WELL AS ITS AID. NEEDLESS TO SAY THE T PO SHALL ISSUE THE APPROPRIATE NOTICE AND SHALL GRANT PERSONAL HEARING IN THE MATTER BEFORE TAKING ANY FINAL DECISION. IT(TP)A NO. 584/BANG/2015 PAGE 10 OF 10 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF MARCH, 2017. SD/- SD/- (INTURI RAMA RAO) (LALI ET KUMAR) ACCOUNTANT MEMBER JUD ICIAL MEMBER BANGALORE, DATED, THE 22 ND MARCH, 2017. / MS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.