2012 (3) TMI 510 - AT - Income Tax

Summary

Issues involved: Appeal against the order of DCIT u/s 143(3)/r.w.s. 144C of the I.T. Act, 1961 for A.Y. 2007-08 regarding TP adjustments.

Issue 1: Addition to total income on account of adjustment in arm's length price of international transaction.
The AO/DRP made an addition to the total income of the appellant. The appellant challenged this addition due to adjustment in the arm's length price of the international transaction with associated enterprises.

Issue 2: Rejection of comparables selected by the appellant.
The TPO/AO rejected the comparables selected by the appellant and conducted a fresh search for new comparables. The appellant argued that the TPO erred in this process.

Issue 3: Use of data and multiple year data for comparability.
The TPO/AO rejected the data used by the appellant and used data available only at the time of TP audit for a single year instead of multiple year data. The appellant contended that this approach was incorrect.

Issue 4: Rejection of comparable companies for various grounds.
The TPO/AO rejected certain comparable companies identified by the appellant for grounds such as turnover, accounting year difference, and economic performance difference.

Issue 5: Use of powers u/s 133(6) for obtaining information.
The TPO/AO used powers u/s 133(6) to obtain information not available in the public domain for comparability purposes. The appellant argued that this was erroneous.

Issue 6: Selection of companies for comparability.
The TPO/AO selected companies earning super normal profits as comparable to the appellant and added companies in the final set of comparables on an ad hoc basis.

Issue 7: Failure to make suitable adjustments for risk profile differences.
The TPO/AO did not make suitable adjustments for differences in the risk profile of the appellant compared to the comparables.

The ITAT set aside the matter back to the file of AO/TPO to make a proper TP report and decide the issues after giving the assessee an opportunity of being heard in accordance with law. The appeal was allowed for statistical purposes only.