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2023 (3) TMI 389 - AT - Income TaxAssessment u/s 144C - TP adjustment on the ground that modified return was not filed by the assessee - transfer pricing adjustment for the covered transaction - assessee filed an application before the DRP stating that it has entered into unilateral Advance Pricing Agreement (APA) with CBDT and that the assessment year 2018-19 is also covered under the APA - AO passed final assessment order retaining the TP adjustment on the same amount in the draft assessment order on the ground that as per the information available on the system till date the assessee has not filed any modified return of income u/s 92CD and therefore he is retaining the TP adjustment as in the draft assessment order - HELD THAT - We notice that the assessee has filed a modified return on 28.03.2022 - We also notice that the assessee ha paid the tax due on 15.02.2022 - AO in his order dated 31.05.2022 has stated that the TP additions are retained on the ground that there is no information available on the system that the assessee has filed the modified return. On perusal of the facts and evidences as mentioned herein above with regard to the modified return having been filed along with the payment of tax, we hold that the statement of the AO is not factually correct. We therefore direct the AO to consider the modified return filed by the assessee giving effect to the APA entered into with the CBDT which covers the TPA adjustment for AY 2018-19. The AO is directed to pass the final assessment order accordingly after giving reasonable opportunity of being heard to the assessee. Appeal filed by the assessee is allowed.
Issues:
- Transfer pricing adjustment under Section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 - Violation of principles of natural justice - Non-compliance with directions issued by the Dispute Resolution Panel (DRP) - Consideration of modified tax return under section 92CD of the Act - Violation of terms of Advance Pricing Agreement (APA) Transfer Pricing Adjustment: The appeal was filed against the order of the Assistant Commissioner of Income Tax regarding a transfer pricing adjustment of Rs 17,80,71,602. The Transfer Pricing Officer (TPO) determined this adjustment during proceedings related to international transactions. The assessee, engaged in software business, filed objections before the Dispute Resolution Panel (DRP) against the draft assessment order. The DRP issued directions, but the final assessment order retained the same adjustment amount. However, the Tribunal directed the Assessing Officer (AO) to consider the modified return filed by the assessee, which reflected the terms of the Advance Pricing Agreement (APA) entered into with the CBDT. Violation of Principles of Natural Justice: The appeal contended that the order was prejudicial and bad in law due to a violation of principles of natural justice. The Tribunal found that the AO's decision to retain the transfer pricing adjustment without considering the modified return filed by the assessee was not factually correct. The AO was directed to pass the final assessment order after considering the modified return and giving a reasonable opportunity of being heard to the assessee. Non-Compliance with DRP Directions: The appeal raised concerns about the AO not following the directions issued by the DRP, which stated that the AO should not make any transfer pricing adjustment except in accordance with the APA entered into by the appellant with the CBDT. The Tribunal's decision to direct the AO to consider the modified return in line with the APA effectively addressed this issue. Consideration of Modified Tax Return: The assessee had filed a modified tax return under section 92CD of the Act, offering additional income and paying the consequent tax and interest. The AO, however, did not consider this modified return initially. The Tribunal, upon reviewing the evidence of the modified return filing and tax payment, directed the AO to consider the modified return and pass the final assessment order accordingly. Violation of Terms of APA: The order was challenged for violating the terms of the APA, which was considered a binding agreement under the Income-tax Act. The Tribunal's decision to uphold the appeal and direct the AO to consider the modified return in line with the APA addressed this issue, ensuring compliance with the terms of the agreement. In conclusion, the Tribunal allowed the appeal, emphasizing the importance of considering the modified return filed by the assessee in accordance with the terms of the APA, and directing the AO to pass the final assessment order after due consideration and providing a reasonable opportunity for the assessee to be heard.
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