2022 (11) TMI 1480 - AT - Income Tax

TP Adjustment - Comparable selection - Cosmic Global Ltd. Informed Technologies India Ltd. and Infosys BPO Ltd.- HELD THAT - We observe from the submissions of the Ld.DR that the assessee itself has selected the above said three comparables. As a prudent way and accepted principal that each year the comparable has to be analysed and compared. Therefore the selection or rejection in the earlier or subsequent year cannot be a basis to consider in the present assessment year. Therefore we direct the Assessing Officer to exclude the three comparable and recompute the ALP for the present assessment year. Ground No. 2(d) raised by the assessee allowed. Rejecting of segmental data use of the assessee to compute the PLI and adopting the entity level PLI by the TPO - HELD THAT - Assessee has submitted separate operational results for twelve (12) months which is relevant for comparable purpose before the TPO. TPO has not considered this information and proceeded to use the financial results submitted by the assessee for fifteen (15) months and accordingly he rejected the same. Since assessee has preferred to accept the comparability study made by the TPO and finalized by the DRP and submitted objections only relating to three comparable which we have considered and adjudicated in our above discussion in this order. Therefore we do not find any reason to adjudicate this ground at this stage. Unexplained cash deposits u/s. 69 - HELD THAT - We observed from the record that DRP has accepted the submissions of the assessee and gave a clear direction that assessee has furnished statement of concerned bank account for the relevant period and AO was asked to obtain the clarification from the above bank regarding the error in reporting and take a necessary action. Since the AO issued the notice to the concerned bank and no clarification received from the bank he proceeded to sustain the addition as made in the draft assessment. This is clearly a violation of direction given by the DRP. We direct the AO to delete this addition considering the fact that assessee has filed all the bank statements in support of their claim that assessee has not made any cash deposits. It is the responsibility of the AO to substantiate the information reported in the AIR and reconcile with the relevant bank. This wrong reporting by the relevant bank cannot be a reason to punish the assessee without establishing a proper evidence. Accordingly Ground No. 3 raised by the assessee is allowed. Denial of TDS credit and short credit of self-assessment tax paid by the assessee - HELD THAT - Considering the overall merits on the submissions made by the assessee we are inclined to remit this issue back to the file of AO with a direction to verify the records submitted by the assessee on merit and as per law. It is needless to say that assessee may be given a proper opportunity of being heard. In the result the issue under consideration is remitted back to the file of AO for statistical purpose.

Summary

Issues Involved:

1. Transfer Pricing Adjustments
2. Rejection of Comparables
3. Cash Deposits Addition u/s 69
4. Short Credit of TDS
5. Short Credit of Self-Assessment Tax
6. Interest u/s 234B and 234C
7. Penalty Proceedings u/s 271(1)(c)

Summary:

Transfer Pricing Adjustments:
The appeal concerns the order of the Dispute Resolution Panel-II, Mumbai, dated 29.10.2014 for the A.Y. 2010-11 direction passed u/s 144C(5) of the Income-tax Act, 1961. The assessee selected 15 comparables with a mean operating profit to total cost (OP/OC) of 14.27%. The TPO rejected these and adopted the entity level PLI for determining the arm's length price, resulting in an adjustment of Rs. 1,73,52,363. The DRP excluded eight comparables, and the assessee appealed against the retention of three comparables: Cosmic Global Ltd., Informed Technologies India Ltd., and Infosys BPO Ltd.

Rejection of Comparables:
The Tribunal considered the functional disparity and high translation charges of Cosmic Global Ltd., low employee cost ratio of Informed Technologies India Ltd., and the high turnover and brand value of Infosys BPO Ltd., and directed the exclusion of these comparables. The Tribunal relied on precedents such as Aptara Technologies Pvt Ltd. v. ACIT, Eaton Technologies Private Limited v. ACIT, and Swiss Re Services India Private Ltd v. DCIT.

Cash Deposits Addition u/s 69:
The Assessing Officer added Rs. 65,85,700 based on AIR information, despite the assessee's claim of no cash deposits and maintaining a current account. The Tribunal directed the deletion of this addition, noting the DRP's direction to verify the bank's clarification, which the Assessing Officer failed to obtain.

Short Credit of TDS:
The assessee claimed short credit of TDS of Rs. 2,60,503. The Tribunal remitted this issue back to the Assessing Officer for verification and appropriate action as per law.

Short Credit of Self-Assessment Tax:
The assessee claimed short credit of self-assessment tax of Rs. 35,36,000. The Tribunal remitted this issue back to the Assessing Officer for verification and appropriate action as per law.

Interest u/s 234B and 234C:
The issue of interest u/s 234B and 234C was deemed consequential and dismissed.

Penalty Proceedings u/s 271(1)(c):
The issue of penalty proceedings u/s 271(1)(c) was deemed premature and dismissed.

Conclusion:
The appeal filed by the assessee was partly allowed, with directions to exclude certain comparables and to verify and grant appropriate credits for TDS and self-assessment tax. The addition u/s 69 was directed to be deleted.