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TMI Blog2014 (5) TMI 772X X X X Extracts X X X X X X X X Extracts X X X X ..... account before making any addition for deficiency. Addition on account of transaction with M/s N Links – Held that:- The assessment order does not reveal the mode and manner of sending the notice to the vendor - After the notice stood returned, the AO did not confront the assessee about this fact nor required him to give his address or call for the requisite information and furnish it to the AO for carrying out the directions given by DRP - the assessee could not be expected to have reconciled the difference nor assessing officer can be said to have made bona fide effort to carry out the exercise as directed by the DRP- thus, the addition is set aside and the matter is remitted back to the AO so that requisite inquiries are made and assessee is confronted with the results. The transactions with M/s Thinkpot, the assessee has pointed out that difference in accounts of the vendor with that of assessee is due to the fact that different method of accounting have been adopted by them - The assessee claims to have furnished copies of invoices issued by M/s Thinkpot and has also furnished bank statement for evidencing the payment made to the vendor through a/c payee cheuqes - The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e details related to vendor payments submitted by the Appellant which included copy of ledger accounts of vendors incorporating the details of invoices received and payments made to the vendors, copy of invoices issued by vendors and extracts of bank statements evidencing the payment to the vendors. 1.2. The learned AO has grossly erred both on facts and in law in not completely following DRP directions wherein learned AO was directed to pursue the matter vigorously and to take action depending upon the outcome of the confirmation and verification/reconciliation thereof 1.3. The learned AO has grossly erred both on facts and in law in holding a huge disallowance which is based on presumptions, assumptions, conjecture and surmises without giving adequate opportunity to Appellant to support its claim and such an assessment violates the principles of natural justice and deserves to be annulled. 2. That the learned AO has grossly erred in disallowing the amount of difference in billing amount confirmed by vender named Thinkpot and the amount claimed by Cheil India without appreciating the fact that such amount could not be reconciled due to difference in accounting policies ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in the same field as an agent and derives income as commission on fixed percentage. The assessee filed its return declaring income of Rs. 10,69,50,200/-. During the year under consideration the assessee has also entered into international transactions with its associated enterprises ( AEs in short). Accordingly, the assessee s case was referred to Transfer Pricing Officer ( TPO in short) for determination of arm s length price ( ALP in short) u/s 92CA(1) of the Income-tax Act, 1961 ( Act for short) in respect of international transactions entered into by the assessee during the year under consideration. 2.1. During the course of assessment proceedings, the assessing officer issued notices u/s 133(6) of the Act to 27 vendors to verify the pass through cost. On the basis of response received to such notices, the assessing officer proposed disallowance of Rs. 264,30,92,022/- for the reason that third party vendors to whom said amounts have been paid or payable remained unverified. The assessee made objections before the Dispute Resolution Panel ( DRP in short ), who considering assessee s submissions sought remand report from the assessing authority. The assessing officer su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipts. The aggregate addition thus stood made at Rs. 9,85,34,910/- in the order dated 8-2-2014 passed u/s 143(3)/144C of the Act. 3. In respect of ground nos. 1 to 1.13, 2 and 3 in appeal, it is contended that the assessing officer has erred in making the addition by disregarding the directions given by the ld. DRP and did not provide reasonable opportunity to the assessee to reconcile the difference. The assessing officer also did not make honest effort to procure requisite details of transactions from the vendors on whom the assessee had no control. 3.1. M/s Thinkpot was maintaining its accounts on cash basis whereas the appellant maintained its accounts on mercantile basis. In the absence of availability of third party s accounts, the assessee was not able to reconcile the transactions. Merely because the reconciliation has not been carried by the assessee, the same cannot be a reason alone to challenge the genuineness of the transactopms carried out and recorded in the books of a/cs of the assessee. 3.2. In so far as the disallowance in respect of transitions with M/s Magnum Interior P. Ltd. is concerned, the appellant had submitted various details. The parties are g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not made genuine efforts to obtain the details and reconcile the difference. The addition so made, therefore, appears to be a result of lack opportunity to the assessee. We, therefore, set aside the said addition and remit the matter back to the assessing officer for procuring requisite details by exercise of his powers under the Act and make reconciliation thereof with the transactions recorded in assessee s books of account before making any addition for deficiency or otherwise, in accordance with law. 5.1. In so far as the addition of Rs. 2,05,57,559/- on account of transaction with M/s N Links is concerned it is evident hat the assessing authority rested the addition merely because the notice issued on 28-1-2014 u/s 133(6) of the Act stood returned from the given address with the postal remarks Left. Address not known . The assessment order does not reveal the mode and manner of sending the notice to the vendor. After the notice stood returned, the assessing officer did not confront the assessee about this fact nor required him to give his present address or call for the requisite information and furnish the same to the assessing officer for carrying out the directions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest rate of 17.22% to be at arm s length and accordingly made adjustment of Rs. 1,01,281/- in the proposed order. 6.1. The DRP considered assessee s submissions and held a period of 30 days to be allowed for payment of receivables and any delay beyond the said period held to be benchmarked for charging of interest. Since normal business practice required payment of dues beyond a reasonable period, the TPO was found justified to charge interest beyond the arm s length period. Any delay beyond a period of 30 days was held to be subject matter of adjustment. DRP also found that tax payer is operating and raising finance from Indian market, It therefore, found no justification in tax payer s argument that LIBOR rate should be adopted to determine the ALP with regard to loans and advances given to AE without interest. Since it was a commercial transaction it held TPO s action in using the lending rates to benchmark this transaction on the basis of risk assumed by the taxpayer. However, taking strength from the Safe Harbur Rule it directed the AO/TPO that the interest should be computed on the basis of SBI base rate as on 30th June of the relevant previous year plus 150 basis points ..... X X X X Extracts X X X X X X X X Extracts X X X X
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