2023 (12) TMI 1263 - AT - Income Tax

Power of CIT(A) to dismiss the appeal in limine ex-parte - violation of principles of natural justice, on the alleged ground that the appellant was not inclined to prosecute the appeal - TP adjustment - difference in arm's length price of the international transaction of availing testing services entered into by the appellant with the associated enterprises - CIT (A) noted that despite notices, nobody has attended, so he summarily referred to the TPO s order and dismissed the assessee s appeal - assessee submitted that assessee has sought adjournment before ld. CIT (A) who has ignored the same and passed the order dismissing the assessee s appeal for non-prosecution. HELD THAT - Upon careful consideration, we find that section 251 does not give any power to the ld. CIT (A) dismissing the appeal for non-prosecution. Hence, in the interest of justice, we remit the issue to the file of ld. CIT (A). Ld. CIT(A) shall pass a speaking order on merits after giving the assessee adequate opportunity of being heard. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
The issues involved in the judgment are dismissal of appeal by CIT (A) without adjudicating on merits and confirming transfer pricing adjustment.

Issue 1: Dismissal of Appeal by CIT (A) without Adjudicating on Merits:
The appeal was filed against the order of CIT (A) dismissing the appeal in limine without adjudicating on the merits of grounds of appeal raised by the appellant. The appellant contended that the CIT (A) erred in passing an ex-parte order in violation of principles of natural justice by not providing an opportunity to prosecute the appeal. The Tribunal found that the CIT (A) did not have the power to dismiss the appeal for non-prosecution under section 251 of the Income-tax Act, 1961. Therefore, the Tribunal remitted the issue back to the CIT (A) to pass a speaking order on merits after providing the appellant with adequate opportunity of being heard.

Issue 2: Confirmation of Transfer Pricing Adjustment:
The Transfer Pricing Officer (TPO) made an adjustment amounting to Rs 17,76,746 on account of the difference in arm's length price of international transactions of availing testing services entered into by the appellant with associated enterprises. The CIT (A) confirmed the transfer pricing adjustment, stating that the TPO's approach was reasonable and in accordance with relevant guidelines and international practices. The appellant argued that the companies selected as comparable by the CIT (A)/TPO did not meet the test of functional comparability as per Rule 10B(2) of the Rules. Additionally, the appellant contended that the services provided by the associated enterprise were at arm's length applying the CUP method and that no profit was retained by the associated enterprise. The Tribunal found merit in the appellant's arguments and allowed the appeal for statistical purposes, directing a reevaluation of the transfer pricing adjustment.

This summary provides a detailed overview of the issues involved in the legal judgment, highlighting the key arguments and decisions made by the Tribunal regarding the dismissal of the appeal and the confirmation of the transfer pricing adjustment.