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TMI Blog2012 (3) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) has erred in deleting the addition on a/c of difference of Arm's Length Price. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not affording any opportunity to the TPO before proceeding to compute the margins of the comparables and the assessee. 4. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in not considering service income & commission income as operating income specially when entity level margins of the comparable companies are being considered. 5. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in not considering segmental accounts of healthcare division in Advanced Micronics Device Ltd., more so when the margin were r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s calculated as under from the audited financials. As the assessee could not justify its operating profits deduced in Appendix B of the Transfer Pricing Report, figures from audited financials have been taken and other income has been considered as non- operating income. [In Rs.] Total Op. Income. 18,67,82,237 Materials and related expenses 14,23,21,068 Personnel expenses 1,65,98,619 Selling & Distribution expenses 1,12,58,859 Administration & other expenses 2,43,85,453 Depreciation 11,26,404 Total Operating expenses 19,56,90,403 Operating profit - 89,09,166 OP/TC percentage - 4.55% 2.2 In order to arrive at arm's length price of International Transactions the assessee must earn an operating margin of 7.11% of its total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee merely submitted a letter dated 8th September, 2008 filed before the TPO. Since the said reply had already been considered by the TPO, the AO added an amount of ₹ 2,28,21,754/- in terms of order dated 25th September, 2008 u/s 92CA(3) of the Act of the TPO. 3. On appeal, the ld. CIT(A) adjudicated the issues in the following terms:- "7. From the above grounds following issues emerges which require adjudication: i) Whether TPO was justified in considering the current year data for the purposes of determining Arm's Length Price of International Transaction. ii) Whether TPO's action of excluding comparable selected by appellant was justified and whether any adjustment is to be made for computing operating margins. iii) Whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price in regards to international transactions undertaken by the assessee for the assessment year 2005-06. During the course of appellate proceedings, it was also found that, the TPO has calculated the net profit margin by taking OP/TC as the profit level indicator by accepting TNMM as the most appropriate method. Since neither TPO nor the appellant had any grounds of disputes, regarding PLI for the trading function and the use of the appellant as the tested party, therefore, I hold that, OP/TC should be used as the appropriate PLI and TNMM as the most appropriate method. 12. Accordingly the appellant was called to provide the OP/TC reliable figures for the current year of the comparables accepted by the TPO, to determining the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and information's of its expenditures and as well as income in its return, and in form number 3CEB, and further transfer price study report which details and information's in themselves, were not found to be inaccurate nor could be viewed by the Assessing Officer as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee has claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, on account of difference in opinion, that by itself would not, attract the penalty u/s 271(1)(c) and 271G, hence, the question of mens rea does not arises. The Assessing Officer has mechanically applied the penalty proceedings with any reasoning. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follow the procedure laid down under Rule 46A of the IT Rules,1962 nor allowed any opportunity to the AO. The powers of the CIT(A) to admit additional evidence are not only in situations where the evidence could not be produced before lower authorities owing to lack of adequate opportunity but also in situations where the fresh evidence would enable the CIT(A) to dispose of the appeal or for any other substantial cause. Of course, the power is to be exercised judiciously and for reasons to be recorded. Moreover, the rules of natural justice are not codified nor are they unvarying in all situations, rather they are flexible. They may, however, be summarized in one word : fairness. In other words, what they require is fairness by the authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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