2023 (8) TMI 669 - AT - Income Tax

TP Adjustment - non-issuance of notice under proviso to section 92C(3) - grievance of the assessee is that DRP did not consider the plea of the assessee, but, upheld the action of the TPO, claiming that neither the TPO nor the learned DRP gave any opportunity to file the objections against the comparable adopted by the learned TPO - HELD THAT - It could be seen from the proviso to section 92C(3) or under sub-section (2) of section 92CA of the Act that issuance of notice to the assessee is mandatory. At the same time, it could be seen from the excerpts of the remand report culled out by the DRP of their direction, no such notice was admittedly issued to the assessee. Apart from this, there were 16 comparables as chosen by the assessee - Not even a single entity selected by the assessee is considered by the learned TPO. Without referring to the comparables selected by the assessee, the learned TPO recorded that the assessee is specialized in managed document review and contract management, it is, therefore, providing high end legal services and, therefore, the assessee is not comparable with high end ITeS and has to be benchmarked under ITeS. We are of the considered opinion that the learned TPO must be directed to issue notice contemplated under proviso to section 92C(3) or under sub-section (2) of section 92CA as the case may be and complete the assessment in accordance with law. At the same time, the learned TPO will also keep in view the assessment orders for the assessment year 2013-14 and 2014-15 passed pursuant to the set aside of the same by the ITAT. Interest charged on delayed payments on trade receivables - AR submitted that this issue is squarely covered by the order 2023 (3) TMI 1392 - ITAT HYDERABAD in assessee s own case for the assessment year 2014-15 wherein set aside the issue to the file of the AO/TPO. We set aside the issue to the file of AO/TPO with a direction to follow the same for this year also. Grounds are accordingly treated as allowed for statistical purposes.

Summary

Issues involved:
The issues involved in this case are related to transfer pricing adjustments and interest charged on delayed payments on trade receivables.

Transfer Pricing Adjustments:
The assessee, engaged in legal process outsourcing, filed an appeal against the final assessment order passed under sections 143(3), 144C(13), and 144B of the Income Tax Act for the assessment year 2018-19. The Transfer Pricing Officer (TPO) determined the total income of the assessee at Rs. 31,00,40,880/- by incorporating TP adjustment of Rs. 16,11,81,785/-. The assessee raised objections before the Dispute Resolution Panel (DRP) alleging that the TPO did not consider their TP study and did not provide an opportunity to file objections against the comparables chosen. The DRP upheld the TPO's action without considering the assessee's plea. The learned AR argued that the TPO's order violated the provisions of the Act by not giving an opportunity before rejecting the TP study and by considering comparables not chosen by the assessee. The Tribunal found that the notices to the assessee as required under the Act were not issued, and the comparables chosen by the assessee were not considered by the TPO. Therefore, the Tribunal directed the TPO to issue the necessary notices and complete the assessment in accordance with the law.

Interest on Delayed Payments:
Regarding the interest charged on delayed payments on trade receivables, the Tribunal noted that this issue was previously set aside to the file of the Assessing Officer/TPO in the assessee's own case for the assessment year 2014-15. Following the precedent set in the earlier case, the Tribunal set aside the issue to the file of the Assessing Officer/TPO for the current year as well. The grounds related to this issue were treated as allowed for statistical purposes. Consequently, the appeal of the assessee was treated as allowed for statistical purposes.

Conclusion:
The Appellate Tribunal directed the Transfer Pricing Officer to issue the necessary notices to the assessee as required by law and complete the assessment accordingly. Additionally, the issue of interest charged on delayed payments on trade receivables was set aside to the file of the Assessing Officer/TPO following the precedent set in the assessee's earlier case. The Tribunal allowed the appeal of the assessee for statistical purposes.