2023 (8) TMI 291 - AT - Income Tax

CIT (A) passing ex-parte order without providing adequate opportunity of being heard to the Appellant - Denial of principles of natural justice - TP Adjustment - HELD THAT - It is obvious that the Ld. CIT(A) has not passed ex-parte order on merits of the case. An affidavit sworn by the authorised signatory of the company has been brought on record by the assessee deposing therein that notice(s) sent to the email of the employee who left the company did not reach the concerned officials of the assessee and that non-compliance was not deliberate. We are therefore of the view that in the interest of justice and fair play, it would be expedient to restore the matter back to the file of the CIT(A) for denovo adjudication on merits after allowing reasonable opportunity of hearing to both the parties - Appeal of the assessee is treated as allowed for statistical purposes.

Summary

Issues Involved:
The issues involved in this case are related to transfer pricing adjustments, interest on receivables, penalty proceedings u/s 271(1)(c) of the Act, and levying of interest under section 234B and 234C of the Act.

Transfer Pricing Grounds:
The appellant challenged the addition of INR 2,28,49,247 to the returned income, arguing that the authorities erred in modifying the quantitative filter and rejecting comparable companies without proper justification. They contended that the conditions of section 92C(3) were not met, and the adjustment made was unwarranted. The exclusion of certain companies as comparables was also disputed, highlighting the functional and risk profile similarities. Additionally, the appellant raised concerns about the computation of transfer pricing addition and the treatment of associated enterprises as Special Purpose Vehicles. The failure to allow risk and working capital adjustments was also contested, along with the assertion that all associated enterprises filed their tax returns in India.

Interest on Receivables:
Regarding interest on outstanding receivables, the appellant argued against imputing interest, stating that it was not a separate international transaction and that the outstanding receivables were not akin to a loan. They emphasized being a debt-free entity and questioned the application of the SBI rate for imputing interest. The appellant also criticized the lack of consideration for working capital adjustments and the failure to apply the Comparable Uncontrolled Price Method.

Consequential Grounds:
The appellant contested the initiation of penalty proceedings u/s 271(1)(c) of the Act and the levying of interest under sections 234B and 234C of the Act, claiming errors in the actions taken by the assessing and transfer pricing officers.

Summary of Judgment:
The Appellate Tribunal ITAT Delhi considered the appeal challenging transfer pricing adjustments, interest on receivables, penalty proceedings, and interest levies under the Income Tax Act. The appellant raised various grounds related to transfer pricing, disputing the addition to the returned income and the exclusion of certain companies as comparables. Concerns were also raised about the treatment of associated enterprises and the failure to allow risk and working capital adjustments. Regarding interest on receivables, the appellant argued against imputing interest, highlighting their debt-free status and questioning the application of the SBI rate. The Tribunal ordered the matter to be sent back to the Commissioner for reevaluation, emphasizing the importance of fair play and justice in the adjudication process. The appeal was treated as allowed for statistical purposes.