2012 (11) TMI 800 - AT - Income Tax

Matter referring to TPO u/s 92CA Opportunity to the assessee Whether opportunity to assessee has to be given before referring matter for computation of arm s length price to the TPO Held that - There is no specific provisions for giving any opportunity to the assessee before reference to the TPO. It is for the AO when he considers it necessary or expedient so to do, he may refer the computation of arm s length price in relation to the said international transaction u/s 92C to the Transfer Pricing Officer. Issue decides in favour of revenue Disallowance of foreign travel expenditure Held that - Since the AO has not given any reason for disallowance of such expenses. What has been done by the AO is that he made a disallowance in the computational part without assigning any reason. Therefore, in the facts and circumstances of the case, disallowance made by the AO is not justified. Issue decides in favour of assessee

Summary

Issues:
1. Limitation for assessment year 2005-06.
2. Alleged international transaction with associated enterprise.
3. Reference to Transfer Pricing Officer (TPO).
4. Addition of foreign traveling expenses.
5. Penalty under section 271(1)(c) for inaccurate particulars of income.

Analysis:
1. Limitation for assessment year 2005-06:
The appellant argued that the assessment framed on 31.12.2008 for the assessment year 2005-06 was barred by limitations as the limitation for deciding the case expired on 31.12.2007. The appellant contended that the assessment was void ab-initio due to lack of opportunity to be heard before concluding an international transaction. The Tribunal dismissed the grounds, stating that there was no specific provision for providing an opportunity to the assessee before referring the matter to the TPO, as per sections 92A and 92CA. Therefore, the Tribunal upheld the order of the CIT(A) in this regard.

2. Alleged international transaction with associated enterprise:
The appellant contested the conclusion that M/s. Global Hardware System USA was an associated enterprise of M/s. I.J. Tools and Castings (P) Ltd. without confronting the assessee. The Tribunal found that the appellant failed to justify the commercial expediency of foreign trips, leading to disallowance of expenses. However, the Tribunal noted that the agents had booked orders for the assessee, and their statements supported the expenditure. The Tribunal held that the disallowance was not justified as the agents had worked for the assessee and booked orders, citing relevant case laws.

3. Reference to Transfer Pricing Officer (TPO):
The appellant challenged the reference made to the TPO regarding the associated enterprise. The Tribunal upheld the reference, stating that there was no requirement to provide an opportunity to the assessee before such a reference, as per the provisions of the Income Tax Act. The Tribunal found no error in the CIT(A)'s order in this regard.

4. Addition of foreign traveling expenses:
The appellant contested the addition of foreign traveling expenses, arguing that the expenses were incurred for business expansion. The Tribunal examined the statements of the individuals involved and found that they had booked orders for the assessee, justifying the expenses. The Tribunal reversed the disallowance made by the AO, stating that the expenses were allowable for exploration of business opportunities.

5. Penalty under section 271(1)(c) for inaccurate particulars of income:
The appellant challenged the penalty imposed for furnishing inaccurate particulars of income related to disallowed expenses. Since the disallowance was deleted in the quantum appeal, the Tribunal held that no addition of income remained, and thus, the penalty could not be sustained. Consequently, the Tribunal allowed all grounds of the assessee's appeal.

In conclusion, the Tribunal partly allowed the assessee's appeal, dismissed the Revenue's appeal, and allowed the penalty appeal of the assessee.