2012 (7) TMI 1077 - AT - Income Tax

Summary

Issues involved: Appeal against transfer pricing adjustment for assessment year 2006-07.

i) Explanation for impugned addition to Arms Length Price (ALP): The appellant contended that the assessing authority should have accepted the explanation and refrained from making the addition to ALP as determined by the Transfer Pricing Officer (TPO) and approved by the Dispute Resolution Panel (DRP) under section 92CA of the Act.

ii) Jurisdiction of TPO and principles of natural justice: The appellant argued that the reference to TPO was without jurisdiction and against principles of natural justice as no opportunity was given prior to the reference, which was a violation of law, facts, and circumstances.

iii) Error in upholding reference to TPO: The appellant claimed that the DRP erred in upholding the reference to TPO, indicating a procedural flaw in the assessment process.

iv) Comparable cases and determination of ALP: The appellant contended that the comparable cases cited by the TPO were uncomparable, leading to contradictory reasoning and an unreasonable difference in ALP, which should have been deleted.

v) Method for determination of ALP: The assessing authority and DRP were criticized for not following the method for determining ALP as adopted by the appellant and approved by the statute.

vi) Consideration of objections and comparable cases: The TPO and DRP were urged to consider the objections raised by the appellant, along with the comparable cases and case law provided, before determining the difference in ALP for making additions to the declared income.

vii) Excessive, arbitrary additions: The appellant argued that the additions were excessive, arbitrary, and unreasonable, requesting a substantial reduction in the same.

The Tribunal admitted additional evidences crucial for determining ALP and remitted the matter back to the Assessing Officer for a fresh decision, ensuring natural justice. The Assessing Officer was directed to redecide the issue of interest u/s 234D of the IT Act in conjunction with the transfer pricing issue. The appeal was allowed for statistical purposes, emphasizing the importance of fair assessment procedures and compliance with legal principles.