ACIT, CIRCLE- 14(2), NEW DELHI V. KNOWLEDGE INFRASTRUCTURE SYSTEMS PVT. LTD., NEW DELHI

ITA 6950/DEL/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 9817 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2014-2015
• Appeal Filed On: 31-10-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: STAYAJEET GOEL
• Keywords: Transfer pricing
• Section: 143(3); 143(1); 251; 143(2); 92CA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘I’ : NEW DELHI) BEFORE SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SH. ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.6950/Del/2018, A.Y. 2014-15 ACIT, Circle-14(2), New Delhi Vs. Knowledge Infrastructure Systems Pvt. Ltd. G-02, Salcon Aurum Complex, 4, Commercial Centre, Jasola, Delhi-25 (APPELLANT) (RESPONDENT) Assessee by Sh. R.S.Singhvi & Stayajeet Goel, CA Revenue by Shri Mrinal Kumar, Sr. DR Date of hearing: 29.08.2022 Date of Pronouncement: 06.09.2022 ORDER PER ANUBHAV SHARMA, JM: The revenue has filed the present appeal against the order dated 29.08.2018 in appeal no. 48/2018-19 / CIT(A)-44 passed u/s 250(6) of the Income Tax Act, 1961 (hereinafter referred to as the Act) by Commissioner ITA No. 6950/Del/2018 Knowledge Infrastructure Systems Pvt. Ltd. 2 of Income Tax (Appeals)-44, New Delhi (hereinafter referred to as the Ld. First Appellate Authority or ld. F.A.A.) in an appeal before it against assessment order dated 19.01.2018 passed u/s 143(3) read with section 92CA(3) of the Act by Assistant Commissioner of Income Tax, Circle 14(2), New Delhi (hereinafter referred to as the ld. Assessing Officer or in short Ld. AO). 2. The facts in brief are Assessee is a company engaged in business of import and delivery of coal to various PSUs, private sector/steel/cement and other utilities. Coal is being imported mainly from Indonesia/South Africa and small quantity of imported coal is procured locally in accordance with the requirements of customers and Power trading division is involved in scanning the power market on continuous basis and obtaining surplus power and selling the same in deficit area by settling commercial terms on both buyers and sellers side and organizing and ensuring the physical delivery of the contracted power. Power trading in India is regulated by CERC (Central Electricity Regulatory Commission) and trading is being carried out in accordance with the stipulated regulations. Assessee filed return of income declaring income at Rs. 21,79,41,180/- on 29.11.2014 which was processed u/s 143(1) and the case was selected for complete scrutiny through CASS. Notice u/s 143(2) of the Act was issued. The ld. AO referred the case to Transfer Pricing Officer (hereinafter referred to as the TPO) for determination of Arm’s Length Price’ u/s 92CA(3) in respect of ‘International Transaction’ entered into by the assessee with its Associated Enterprises during the F.Y.2013-14. The TPO vide its order dated 17.10.2017 has determined the difference of purchase price and ALP amounting to Rs.12,73,39,106/-, adjustment proposed on account of ITA No. 6950/Del/2018 Knowledge Infrastructure Systems Pvt. Ltd. 3 Corporate Guarantee commission amounting to Rs. 3,22,15,920/-, adjustment proposed on account of Remuneration paid to key management personnel amounting to Rs. 6,33,01,989/- and adjustment proposed on account of Interest on trade receivables amounting to Rs. 3,22,05,748/- 3. The controversy in the present appeal is regard to transfer pricing adjustment on account of trade receivables for which the ld. TPO had made following observations :- “8. Transfer Pricing Adjustment on account of trade receivables :- Para 8.3.23. The details of invoices raised and payment received there upon and the resulting interest chargeable is given below :- S.N o. Date of invoice Amount in USD Equivalen t Amount Date of receipt Differenc e of days Difference of days- 30 Interest @ 12.83% 1. Tuesday, December 31,2013 150217 9028012 Monday , June 30,2014 181.00 151.00 479184.6 2. Tuesday, December 31,2013 305430 18356282 Monday , June 30,2014 181 151.00 974306.2 3. Monday, March 31, 2014 907087 2 54515759 3 Tuesday , July 15, 2014 106 76.00 14563624 4. Monday, March 31, 2014 907087 2 34642990 0 Friday, July 25, 2014 116 86.00 10472434 5. Monday, March 31, 2014 293871 4 17661612 Monday , June 30, 2014 91 61.00 3786988 6. Monday, March 31, 115645 2.76 69502580 Tuesday , July 106 76.00 1856728 ITA No. 6950/Del/2018 Knowledge Infrastructure Systems Pvt. Ltd. 4 2014 15, 2014 7. Monday, March 31,2014 41872 2516499 Tuesday , July 15, 2014 106 76.00 67227.06 8. Monday, March 31,2014 3274.18 196778 Tuesday , July 15, 2014 106 76.00 5256818 Total 32205748 4. The Ld. First Appellate Authority had directed AO/ TPO to verify the claim of the appellant that interest is not charged on outstanding receivables either from AEs or Non AEs and accordingly give relief to the appellant. The same has been challenged by the Revenue before this Tribunal raising following grounds of appeal :- (i) “In the facts and circumstances of the case, the order of the Ld. CIT(A) is perverse in directing TPO to verify the claim of the appellant that interest is not charged or outstanding receivables either from AEs or Non- AEs and accordingly give relief to the appellant without appreciating the fact that the taxpayer was completely failed to furnish the breakup- wise details of amount realized during the F.Y. 2013-14 from the both areas [AEs & Non- AEs). (ii) Whether in the facts and circumstances of the case, Ld. CIT(A) was justified in relying upon the judgment of Hon'ble Bombay High Court in the case of Indo American Jewelry Ltd. in ITA No. 1053 of 2012, ignoring the fact that Hon’ble Court has also stated therein its order that the delay in realization of export proceeds in both the cases is the same and on the other hand, in the instant case the taxpayer did not submit such details of breakup-wise amount realized during the F.Y. 2013-14 from the both areas (AEs & Non- AEs). (iii) Whether in the facts and circumstances of the case, Ld. CIT(A] was justified in relying upon the judgment of Hon'ble Bombay High Court in the case of Indo American jewelry ITA No. 6950/Del/2018 Knowledge Infrastructure Systems Pvt. Ltd. 5 Ltd. in ITA No. 1053 of 2012,ignoring the fact that this judgment is quite contra with the facts of present case of the taxpayer. (iv) That the appellant are craves to add, alter, amend or forego any ground(s} of the appeal raised above at the time of hearing. (v) That the grounds of appeal are without prejudice to each other.” 5. Heard and perused the record. 6. Ld. DR submitted that there has been inconsistent approach of the assessee before the TPO and Ld. First Appellate Authority and the Ld. FAA has gone beyond it’s jurisdiction to restore the matter back to the AO as the same amounts to allowing the appeal in regard to issues which were not under examination before TP. 6.1 On the other hand, Ld. AR submitted that there is no flaw in the findings of ld. CIT(A). He submitted that as such the trade payables exceed the receivables so no question of Benchmarking on interest on trade receivables was necessary. It was also submitted that no order prejudicial to the Revenue is as such passed. 7. Appreciating the matter on record and the submissions as rested, it can be observed that in regard to the assessee’s claim that payables were exceeding receivables, so no case of benchmarking on interest on trade receivables existed, the Ld. CIT(A) observed in Para no. 5.7 of its order as below: “5.7 Perusal of the impugned order of the TPO shows that the TPO has not taken the net payables into account while making the transfer pricing adjustment under consideration. ITA No. 6950/Del/2018 Knowledge Infrastructure Systems Pvt. Ltd. 6 Payables and receivables are two sides of the same point and hence, both have to be taken together and only the net amount can be adjusted as a separate transaction. In the instant case, as the situation at the end of the year is one of net payable. However, the contention of the appellant is not accepted as each payable / receivable has to be taken separately and the delay in payment worked out accordingly.” 8. The aforesaid observations clearly indicate that the aforesaid contention of assessee was discarded and the assessee has not challenged the same in either ways. 9. Then with regard to the directions issued by the ld. CIT(A) to AO / TPO giving rise to the grounds of present appeal of revenue it can be observed that at no stage during the hearing before TPO or even before Ld. CIT(A) the assessee had submitted anything factual which required any verification or which could have been examined and a reasonable conclusion drawn by the TPO or by Ld. CIT(A) himself. It was very much in the knowledge and records of the assessee as to which all Non-AE’s the assessee had not charged any interest. So same should have been produced before Ld. CIT(A) at least in physical form than just a bald averment. 10. Thus, as such there was no disputed question of fact before the Ld. CIT(A) requiring intervention in the form of a direction to ld. AO / TPO to verify the claim of the assessee. In fact if these documents / statements or facts were before Ld. CIT(A) that would only have given jurisdiction u/s 250(4) of the Act for direction of verification by Ld. AO. ITA No. 6950/Del/2018 Knowledge Infrastructure Systems Pvt. Ltd. 7 11. In fact, it is also questionable if CIT(A) had powers to pass such directions . In context Section 250(4) of the Act prescribes; “The Commissioner (Appeals) may, before disposing of any appeal, make such further inquiry as he thinks fit, or may direct the Assessing Officer to make further inquiry and report the result of the same to the Commissioner (Appeals).” 11.1 Further Subsection (1) of Section 251 of the Act provides; “In disposing off an appeal, the Commissioner (Appeals), shall have the following powers: (1) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; or” 12. There is no reference to TPO in Section 254(4) of the Act and it merely mentions of Assessing officer. Thus as such when the appellate powers of Ld.CIT(A) are considered, within the ambit of Section 250(4) read with Section 251(1) of the Act, no such directions could have been issued by the CIT(A) to the TPO, who is exercising independent powers under Section 92CA of the Act. In the case in hand, the directions as issued by Ld CIT(A) to the TPO, would in fact would lead to the reopening of reference proceedings, before Ld. TPO, by allowing fresh piece of evidence. Specially, the one, which has not surfaced before any tax authority, so far. 13. Thus, the directions issued by the Ld. CIT(A) cannot be sustained. However, the end of justice will be served by directing Ld. CIT(A) to call for the evidence of assessee at its level and then proceed to decide the matter afresh as per powers u/s 250(4) r.w.s 251(1) of the Act. Consequently, the grounds are allowed and the appeal is allowed for statistical purposes. ITA No. 6950/Del/2018 Knowledge Infrastructure Systems Pvt. Ltd. 8 The issue is restored to the file of Ld. CIT(A) to pass afresh order, as per aforesaid observations and the directions. Order pronounced in the open court on 6 th September, 2022. Sd/- Sd/- (ANIL CHATURVEDI) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 06.09.2022 *Binita, SR.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI