2015 (4) TMI 500 - AT - Income Tax

Transfer pricing adjustment - Deduction u/s 10A - Held that - DRP in the case of the assessee has not decided this preliminary issue vide its order dated 21.11.2013 in spite of the fact that the same was specifically and separately raised by the assessee in the objections filed before the DRP. We therefore consider it fair and proper and in the interest of justice to set aside the impugned order passed by the A.O. under section 143(3) as per the directions issued by the DRP under section 144C(5) of the Act and restore the matter to the file of the DRP for the limited purpose of deciding the preliminary issue raised by the assessee company in its cross objections challenging the validity of the assessment. As this issue which is being restored to the file of DRP goes to the root of the matter we keep the other issue raised by the assessee challenging the addition made on account of T.P. adjustment open with a liberty to the assessee to raise the same again if it fails to succeed on the preliminary issue before the DRP. - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
1. Validity of assessment made by the Assessing Officer
2. Addition made on account of Transfer Pricing (T.P.) adjustment

Analysis:

Issue 1: Validity of assessment made by the Assessing Officer
The appeal challenged the assessment made by the Assessing Officer (A.O.) and the addition made on account of Transfer Pricing (T.P.) adjustment. The counsel for the assessee argued that the assessment was reopened by the A.O. based on the Transfer Pricing Officer's order proposing adjustments. It was contended that since no disallowance under section 10A was made in the final order and the original assessment proceedings were held void due to the absence of a notice under section 143(2) within the statutory time limit, the reopening of assessment was invalid. The counsel cited a decision of the Pune Bench of ITAT in support of this argument. Despite a similar issue being decided in favor of the assessee by the Tribunal, the Dispute Resolution Panel (DRP) did not address this preliminary issue in its order. Consequently, the Tribunal set aside the A.O.'s order and remanded the matter to the DRP to decide the preliminary issue raised by the assessee regarding the validity of the assessment.

Issue 2: Addition made on account of Transfer Pricing (T.P.) adjustment
The A.O. proposed an addition on account of T.P. adjustment, which was challenged by the assessee. The DRP upheld the addition, leading to the A.O. making the final order adding the amount on account of T.P. adjustment to the total income of the assessee. The assessee appealed this decision before the Tribunal. As the Tribunal remanded the matter to the DRP to decide the preliminary issue related to the validity of the assessment, the issue of the addition made on account of T.P. adjustment was kept open for further consideration. The Tribunal allowed the appeal of the assessee for statistical purposes, indicating that the matter was remanded for a specific purpose, and the decision did not imply a final judgment on the merits of the case.

In conclusion, the Tribunal's decision focused on the procedural validity of the assessment made by the Assessing Officer and the subsequent addition on account of Transfer Pricing adjustment. The matter was remanded to the Dispute Resolution Panel for a decision on the preliminary issue raised by the assessee, while keeping the issue of the T.P. adjustment open for further consideration.