2016 (5) TMI 1523 - HC - Income Tax

TP Adjustment - No opportunity of cross-examination was granted to the petitioner or not - HELD THAT - Petitioner would have had no opportunity of rebutting the data unless the persons who submitted the data were subjected to cross-examination. This is all the more so because the data that was submitted was not part of the audited accounts. In these circumstances we set aside the impugned order dated 29.03.2016 and remit the matter to the TPO for affording an opportunity to the petitioner to cross-examine the authorized personnel of the said companies who submitted the segmental data which has been utilized by the TPO. The TPO may thereafter pass a fresh order in accordance with law. The learned counsel for the petitioner states that the petitioner shall not take up the plea of limitation.

Summary

Issues: Opportunity of cross-examination denied to petitioner regarding segmental data used by TPO for arms’ length price determination.

In this judgment by the Delhi High Court, the issue pertains to the denial of an opportunity of cross-examination to the petitioner regarding the segmental data used by the Transfer Pricing Officer (TPO) for determining the arms’ length price for the Assessment Year 2008-09. The petitioner had requested to cross-examine the authorized personnel of the companies whose data was relied upon by the TPO, but this opportunity was not granted. The petitioner contended that not allowing cross-examination violated the principles of natural justice as reliance on data without the chance to rebut it is unfair.

The Court directed the respondents to confirm if the petitioner was given the opportunity of cross-examination. The respondents admitted that while documents were provided, no chance for cross-examination of the authorized personnel submitting the segmental data was given to the petitioner. The Court emphasized that when data from different parties is relied upon, the petitioner must have the opportunity to rebut it through cross-examination. Since the submitted data was not part of audited accounts, the Court held that the impugned order was set aside, and the matter was remitted to the TPO for providing the petitioner with the opportunity to cross-examine the authorized personnel of the companies whose data was used.

Furthermore, the Court noted that the petitioner waived the plea of limitation, and the writ petition was disposed of accordingly. The judgment highlights the significance of the right to cross-examination in ensuring fairness and adherence to the principles of natural justice in transfer pricing assessments. The decision underscores the importance of procedural safeguards to protect the interests of taxpayers and uphold the rule of law in such matters.