2016 (10) TMI 539 - AT - Income Tax

Validity of order of the Commissioner of Income Tax (Appeals) passed after fourteen months of hearing - TPA - Held that - The ld. Commissioner of Income Tax (Appeals) has passed order overlooking voluminous information filed in the appellate proceedings against the order passed by the ld. Assessing Officer. The Commissioner of Income Tax (Appeals) has to consider every point of dispute of assessee and pass a speaking order. But the order passed by the Commissioner of Income Tax (Appeals) is cryptic and was not properly adjudicated. Therefore we are not in a position to uphold the order of the Commissioner of Income Tax (Appeals) being inconsistent with Transfer Pricing Provisions. We rely on the decision of Supreme Court in the case of Sahara India vs. CIT & Anr. (2008 (4) TMI 4 - Supreme Court ) were held that an administrative order has to be consistent with the rules of natural justice and similar view was considered by the Delhi Bench of the Tribunal in the case of GAP International Sourcing India (P) Ltd. vs. DCIT (2010 (12) TMI 94 - ITAT NEWDELHI ) and M/s. Adobe Systems India Private Ltd. v. Addl. CIT 2011 (1) TMI 933 - ITAT NEW DELHI the order passed by the Commissioner of Income Tax (Appeals) is without going into the details of the submissions and should be decided afresh. Considering apparent facts material evidence and judicial decisions we are inclined to the remit the disputed issues back to the file of Commissioner of Income Tax (Appeals) to pass a speaking order on merits and assessee shall be provided with adequate opportunity of being heard before passing the order. Since we remitted the disputed issue to the file of Commissioner of Income Tax (Appeals) we are not adjudicating ground nos. 3 to 11 of grounds of appeal filed by the assessee and the appeal of the assessee is allowed for statistical purpose.

Summary

Issues:
Transfer Pricing Addition
Disallowance under Sec. 40(a)(ia)
Deduction u/s. 10B
Disallowance u/s. 14A

Transfer Pricing Addition:
The appeal challenged the order of the Commissioner of Income Tax (Appeals) regarding Transfer Pricing Addition. The Assessing Officer found international transactions, leading to a Transfer Pricing Officer's involvement. The TPO determined Arms Length Price based on transactions reported in Audit form under 3CEB, with the assessee adopting TNMM and CUP method. The TPO questioned professional services paid to a UK-based company, Acuma Solutions, for training employees. The TPO found discrepancies in the profits gained compared to the expenses incurred for training, leading to an adjustment of professional fees. The Commissioner of Income Tax (Appeals) upheld the TPO's decision, citing shifting of profits and questioning the genuineness of payments. The Tribunal remitted the issue back to the Commissioner of Income Tax (Appeals) for a detailed adjudication, emphasizing the importance of a speaking order consistent with Transfer Pricing Provisions.

Disallowance under Sec. 40(a)(ia):
The appeal contested the disallowance under Sec. 40(a)(ia) for non-deduction of TDS on professional payments. The Commissioner of Income Tax (Appeals) confirmed the addition of ?50 lakhs, citing the Assessing Officer's action as appropriate. However, partial relief was granted regarding deduction u/s. 10B, following the assessee's case for previous assessment years. The Tribunal allowed the appeal for statistical purposes, emphasizing the need for proper adjudication and consideration of all points of dispute.

Deduction u/s. 10B:
The issue of deduction u/s. 10B was raised concerning the determination of export turnover. The Commissioner of Income Tax (Appeals) directed the Assessing Officer to recompute the deduction following the assessee's case for earlier years. The Tribunal allowed the appeal for statistical purposes, highlighting the importance of passing a speaking order considering all material evidence.

Disallowance u/s. 14A:
The final issue pertained to disallowance u/s. 14A of the Act. The Commissioner of Income Tax (Appeals) confirmed the disallowance despite no income received, citing the applicability of Rule 8D and judicial decisions. The Tribunal allowed the appeal for statistical purposes, emphasizing the need for a detailed adjudication and consideration of all submissions before passing an order.

In conclusion, the Tribunal remitted the disputed issues back to the Commissioner of Income Tax (Appeals) for a comprehensive and detailed adjudication, ensuring that the assessee is provided with adequate opportunity for a fair hearing before a decision is made. The appeal was allowed for statistical purposes, emphasizing the importance of passing speaking orders consistent with legal provisions and natural justice principles.