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2014 (1) TMI 69 - AT - Income TaxPower to modify TPO s order Objection taken against draft order u/s 144C(2) of the Act Held that - DRP is fully empowered to enhance the variations proposed in the draft order - The natural corollary which follows is that so long as there is some variation proposed in the draft order, it is open to the DRP to enhance the amount of such variation, apart from confirming or reducing such variation - There can be no embargo on the power of the DRP, on a reference made by the assessee seeking relief against the proposed adjustment, to enhance the transfer pricing adjustment made by the A.O. pursuant to the TPO s order. One more opportunity be granted to the assessee since the process of collection of all the necessary documents stood completed by the assessee as of now was prayed - No serious objection was taken by the Departmental Representative - thus, order set aside and the matter remitted back to the DRP for giving an effective opportunity to the assessee Decided in favour of Assessee.
Issues:
1. Power of the Dispute Resolution Panel (DRP) to modify Transfer Pricing Officer's (TPO) order. 2. DRP's authority to enhance variations proposed in the draft order. 3. Reasonable opportunity of being heard to the assessee before the DRP. --- Issue 1: Power of the Dispute Resolution Panel (DRP) to modify Transfer Pricing Officer's (TPO) order The case involved an appeal against an order by the Assessing Officer under the Income-tax Act, 1961 concerning international transactions. The Assessing Officer referred the case to the Transfer Pricing Officer (TPO) for determination of Arm's Length Price (ALP). The Dispute Resolution Panel (DRP) reviewed the TP adjustments made by the TPO and proposed an adjustment of Rs. 1.17 crore, which was added to the total income by the Assessing Officer. The question arose whether the DRP had the authority to modify the TPO's order to the detriment of the assessee. The Tribunal analyzed the relevant provisions of the Act and concluded that the DRP had the power to enhance variations proposed in the draft order, not limited to only granting relief but also enhancing adjustments, if deemed necessary. --- Issue 2: DRP's authority to enhance variations proposed in the draft order The Tribunal examined the provisions of section 144C of the Income-tax Act, which govern the reference to the DRP. It was established that the DRP had the authority to enhance variations proposed in the draft order, as explicitly stated in sub-section (8) of section 144C. The Tribunal emphasized that the DRP could enhance the amount of variation, apart from confirming or reducing it, based on the assessment proceedings. The insertion of an Explanation to sub-section (8) further widened the scope of the DRP's power to consider any matter arising from the assessment proceedings, even if not raised by the assessee. The Tribunal held that the DRP was justified in enhancing the TP adjustments made by the Assessing Officer, in line with the statutory provisions. --- Issue 3: Reasonable opportunity of being heard to the assessee before the DRP The Tribunal addressed the contention raised by the assessee regarding the DRP not providing a reasonable opportunity to be heard. It was noted that the DRP issued a show cause notice for enhancement of income, setting a hearing date. However, the assessee requested additional time to compile relevant details, which was partially granted. The DRP passed an order before the extended deadline, leading to the assessee claiming inadequate time to present its case effectively. Considering the circumstances, the Tribunal decided to set aside the order and remit the matter to the DRP for a fresh hearing, allowing the assessee a reasonable opportunity to present its case with any additional evidence. Consequently, the Tribunal did not delve into the merits of the separate additions made in the original order. --- In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the importance of providing a fair opportunity for the assessee to present their case before the Dispute Resolution Panel.
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