2021 (6) TMI 616 - AT - Income Tax

TP Adjustment - assessee has earned management fees from two of its Associates Enterprises - HELD THAT - The said income has been credited in assessee s Profit Loss Account as other operating revenues under the head revenue from operations. The same is evident from Note-19 of assessee s financial statements. Similar figure has been reported as earnings in foreign exchange (rendering services) in schedule annexed to and forming part of the Balance Sheet. Similar figure was noted by Ld. TPO while re-working segmental results which has already been enumerated by us in preceding para-4.1 of this order. Quite clearly, the said income stood credited to assessee s Profit Loss Account and form part of the assessee s financial statements. The same has already been considered while computing assessee s income. The assessee has debited Selling Distribution Expenses forming part of the Balance Sheet. The break-up the same was already provided by the assessee in its submissions during appellate proceedings. This amount include inter-company service fees expense of ₹ 427.54 Lacs which after including foreign exchange difference of ₹ 56.20 Lacs comes to ₹ 483.74 Lacs. The assessee has remitted ₹ 483.74 Lacs after deduction of tax at source, the details of which have already been given by the assessee in the impugned order. The impugned amount as already forms part of assessee s income and there is no concealment of income as alleged by Ld. CIT(A) in the impugned order. The figures in Form No.3CEB has been reported on net basis which at the most, could be an inadvertent / bona-fide / oversight error. But on the given factual matrix, there would be no case to make impugned additions in the hands of the assessee. The Ld. CIT(A), without considering assessee s submissions, erred in making enhancement in the hands of the assessee. Thus we have no hesitation in deleting the same.

Summary

Issues:
Enhancement of income by Ld. CIT(A) based on alleged under-reporting in Form 3CEB.

Analysis:
The appeal for Assessment Year (AY) 2012-13 contested the order of Ld. Commissioner of Income-Tax (Appeals) regarding the addition of INR 14,89,54,216 to the income of the Appellant. The Appellant challenged the enhancement made by Ld. CIT(A) based on alleged under-reporting in Form 3CEB. The Ld. AR argued that the observations in the order were contrary to facts on record, while the Ld. DR suggested remitting the matter for verification. The material facts revealed that the adjustment was proposed by the Transfer Pricing Officer in international transactions carried out by the assessee in different segments. The Ld. CIT(A) noted discrepancies in the reported income in the financial statements and Form 3CEB, leading to the under-reporting of income. The assessee explained the discrepancy as an inadvertent error and provided detailed breakup of expenses to support their claim. Despite the explanations, Ld. CIT(A) chose to enhance the income, which the assessee challenged through a rectification application that was dismissed. The Appellate Tribunal found that the income in question was already part of the assessee's financial statements and had been considered while computing income. The Tribunal concluded that there was no concealment of income and the alleged under-reporting in Form 3CEB was a possible oversight error. Therefore, the Tribunal allowed the appeal, deleting the enhancement made by Ld. CIT(A) for AY 2012-13.