2022 (7) TMI 1388 - AT - Income Tax

TP Adjustment - Validity of DPR orders - Admmision of additional grounds - as contended that the DRP has not considered the objections of the assessee and there was no discussion/finding given in respect of the objections raised by the assessee qua 'distribution segment', 'light processing segment', 'provision of research and engineering', 'provision of administrative services' and 'import of Rynaxpyr Technical' - HELD THAT - We find merit in the contention of the assessee that before DRP the assessee had raised various objections, regarding 'light processing segment', 'distribution segment', 'provision of research and engineering', 'provision of administrative services' and 'import of Rynaxpyr Technical'. The assessee also filed additional evidences in support of its contention. There is no discussion by the learned DRP in respect of additional evidences and the objections raised by the assessee before the DRP. DR could not point out from the direction of learned DRP about the disposal of the additional grounds and submissions of the assessee company. During the course of hearing learned representatives of the parties stated that the matter may be remanded to the learned DRP for deciding the additional grounds. Therefore,we hereby set aside the impugned order and restore the issues to the learned DRP to decide the additional grounds raised by the assessee company and pass direction afresh in accordance with law. Grounds of appeal allowed for statistical purposes.

Summary

Issues:
Stay application for outstanding demand of INR 60,58,17,089 due to transfer pricing adjustments. Violation of principles of natural justice by DRP. Non-adjudication of objections and additional grounds raised by the assessee.

Analysis:
The assessee filed a stay application seeking relief from an outstanding demand resulting from transfer pricing adjustments. The TPO proposed a significant adjustment to the total income, leading to a draft assessment order assessing the income higher than the returned amount. The DRP rejected the objections without considering the submissions and additional grounds by the assessee, prompting a writ petition to the High Court. However, the High Court directed the assessee to follow the appellate remedy available under the law. The assessee contended that the DRP's directions and the final assessment order by the Assessing Officer violated principles of natural justice as they did not consider the objections and grounds submitted by the assessee.

The counsel for the assessee argued that the DRP's directions lacked discussion and findings on various objections raised by the assessee regarding different segments and additional evidence submitted. The DRP's alleged non-application of mind and failure to address specific objections rendered the directions invalid in the eyes of the law. The DRP's silence on crucial aspects indicated a lack of due consideration, necessitating the quashing of the directions for re-adjudication.

Upon hearing both sides, the tribunal found merit in the assessee's contentions regarding the objections raised before the DRP. The tribunal noted that the DRP failed to discuss the additional evidence and objections raised by the assessee, leading to a lack of adjudication on crucial matters. Consequently, the tribunal set aside the impugned order and remanded the issues to the DRP for a fresh decision on the additional grounds raised by the assessee, emphasizing the importance of upholding principles of natural justice.

The tribunal, considering the totality of facts and in the interest of natural justice, set aside the impugned order and directed the DRP to decide on the additional grounds raised by the assessee. As a result, the stay application became infructuous and was dismissed, while the appeal was allowed for statistical purposes. The tribunal's decision aimed to ensure a fair and thorough consideration of the objections and additional grounds raised by the assessee, emphasizing the importance of due process and adherence to legal principles in tax assessments.