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2015 (9) TMI 1744 - AT - Income TaxTP Adjustment - non considering assessee s contentions - Denial of natural justice - as argued TPO as well as the DRP have not considered the elaborate contentions raised by the assessee before them and therefore, there is violation of principles of natural justice - HELD THAT - We find that even during the relevant assessment year, the assessee had made elaborate submissions and both the TPO as well as the DRP have failed to consider the said objections objectively - we deem it fit and proper to remit this issue to the file of the A.O./TPO for reconsideration of the issue in accordance with law. A.O./TPO is directed to give fair opportunity of hearing to the assessee and also consider judicial precedents on the issue including the orders of the Tribunal in assessee s own case while determining the ALP. Appeal of the assessee is treated as allowed for statistical purposes.
Issues:
1. Violation of principles of natural justice by TPO and DRP. 2. Failure to consider objections raised by the assessee. 3. Incorrect consideration of transactions by TPO and DRP. 4. Remittance of the issue for reconsideration by A.O./TPO. Issue 1: Violation of principles of natural justice by TPO and DRP The appeal was against the final assessment order under section 143(3) read with section 144C(13) of the I.T. Act, 1961. The assessee contended that both the Transfer Pricing Officer (TPO) and the Dispute Resolution Panel (DRP) did not consider the detailed contentions raised by the assessee, leading to a violation of principles of natural justice. The assessee highlighted that similar circumstances occurred in the previous assessment year, where the Tribunal remitted the issue back to the TPO for reconsideration. The Tribunal noted the failure of the TPO and DRP to objectively consider the objections raised by the assessee, leading to a violation of natural justice principles. Issue 2: Failure to consider objections raised by the assessee The TPO issued show cause notices, and the assessee provided detailed explanations and submissions. However, the TPO considered the total sales of both related party (A.E.) and non-related party transactions to propose the Transfer Pricing adjustment, contrary to the assessee's contention that adjustments should only apply to international transactions with A.E. The DRP also failed to address the objections raised by the assessee on various issues. The Tribunal emphasized that the authorities did not judiciously consider the objections raised by the assessee, indicating a lack of proper evaluation of the contentions presented. Issue 3: Incorrect consideration of transactions by TPO and DRP The TPO's approach of considering total sales, including non-related party transactions, for Transfer Pricing adjustments was deemed incorrect by the Tribunal. The assessee had clearly specified the segment for which adjustments were applicable, but the TPO did not adhere to this distinction. Despite the assessee's objections and detailed submissions, both the TPO and DRP failed to address the issues raised effectively, leading to an erroneous conclusion in the final assessment order. The Tribunal highlighted the need for a thorough and objective consideration of the objections raised by the assessee to ensure a fair assessment process. Issue 4: Remittance of the issue for reconsideration by A.O./TPO Considering the failure of the TPO and DRP to address the objections raised by the assessee and the violation of principles of natural justice, the Tribunal decided to remit the issue back to the Assessing Officer (A.O.)/TPO for reconsideration in accordance with the law. The A.O./TPO was directed to provide a fair opportunity of hearing to the assessee and consider judicial precedents, including previous Tribunal orders related to the assessee's case. The Tribunal allowed the appeal of the assessee for statistical purposes, emphasizing the importance of a fair and objective assessment process in line with legal requirements. In conclusion, the judgment highlighted the significance of adhering to principles of natural justice, considering objections raised by the assessee, ensuring correct evaluation of transactions, and remitting issues for reconsideration when necessary to maintain a fair and lawful assessment process.
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