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TMI Blog2019 (5) TMI 951X X X X Extracts X X X X X X X X Extracts X X X X ..... soned conclusion. Its conclusion will depend upon independent application of mind to all relevant facts and circumstances but such an exercise has to be undertaken in a judicious manner, taking cognizance of all relevant factors. The fact that the DRP has, in the present case, accepted the request to admit additional documents and seek a remand report from the assessing officer can only mean that the panel was of the view that further examination of the issue by the Department was called for. Having done this, the purpose is lost if the exercise is not carried through to its logical conclusion. The remand report of the TPO states that the addition was unwarranted on facts but the DRP reasons that the aspect of cost being included in the sales was not examined by the officer. Certainly the DRP is not bound to accept the conclusions of the officer in the report, but the Panel could well have sought a clarification, or directed the officer to carry out further verification in this regard. Set-aside the order of the DRP dated 16.12.2016 and direct rehearing of the matter, in regard to the adjustment relating to ₹ 634,773,087/-. The DRP will decide the issue de novo, ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '5.11 The assessee's plea that ₹ 56.3 crores consisted of exports to AE cannot be accepted in the absence of a full proof verification with reference to export invoices. It was admitted by the assessee that there are as many as 1193 invoices, accounting for these transactions of export of thread to AEs amounting to ₹ 56.30 crores. It is humanly impossible to entertain the said plea in response to the show cause notice and with barely a week to go for completion of proceedings.' 5. Thus the TPO concludes the issue based on circumstantial evidence available, admittedly without proper verification of the export invoices, making an adjustment of a sum of ₹ 63,47,73,086/-. The relevant portion of his order is set out between paragraphs 5.12 and 5.15, extracted below for clarity:- '5.12 The assessee's claim has to be considered in the light of the following circumstantial evidences let in by the assessee itself on record: There is inconsistency in disclosing the segmental profits. It was claimed to be 17.68% as per Table 7 and as per Appendix C eventually reduced to 9.49% vide submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C=A + (A+B) 3,524,120,613 Revenue as recorded in P L D 2863861526 Difference E = C - D 660,259, Proportion of AE revenue to total revenue F 96.14% Adjustment G = E * F 634,773,087 6. A draft assessment was made by the AO on 16.03.2016 adopting the Arm's Length Price as determined by the TPO. The adjustment of ₹ 63,47,73,087/- was added back to the total income and as against the same, objections were filed before the Dispute Resolution Panel. Along with the objections, a petition was filed for admission of additional evidence. The petitioner explained that the TP adjustment arose from a difference in methodology of accounting followed by the petitioner viz-aviz that followed by the AE. The petitioner f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a cost accountant on 19-8-2016. it is relevant to note that the segmented financials filed during TP assessment proceedings was an uncertified one. But as admitted by the assessee in its letter dated 31st August 2016, the revised segmentation and certification was done after the completion of TP assessment proceedings. 4.4 Vide letter dated 10-11-2016 (copy enclosed) the assessee claimed that corresponding to the mistake in the sales figure for the quarter January-March 2011 being included in the saes for the F.Y. 2011-12, there is also mistake in the cost figures adopted in the uncertified segmental financials filed during T.P. assessment proceedings. During the hearing on 8-11-2016 the ARs filed an item-wise break-up for the cost figures adopted by it. 4.5. The assessee, vide its letter dated 10-11-2016 (copy enclosed) has claimed that once the audited segment is considered the AE segment of MCPL (10.1%) will be ALP viz-a-viz its non-AE export margins (3.21%) and external comparable margins (8.95%). 4.6 On facts, the claim of the assessee appears to be correct. Therefore DRP may decide whether the revised segmentation and the ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as complete. Therefore, the claim of the assessee that the difference amount of ₹ 56.30 crores is the domestic sales of the assessee is not possible to be accepted.' 11. The Dispute Resolution Panel was constituted as an Alternate Dispute Resolution mechanism in 2009 by insertion of section 144C in the Act. The Notes on clauses at the time of insertion of the provision states as follows: The subjects of transfer pricing audit and the taxation of foreign company are at nascent stage in India. Often the Assessing Officers and Transfer Pricing Officers tend to take a conservative view. The correction of such view takes very long time with the existing appellate structure. With a view to provide speedy disposal, it is proposed to amend the Income-tax Act so as to create an alternative dispute resolution mechanism within the income-tax department and accordingly, section 144C has been proposed to be inserted so as to provide inter alia the Dispute Resolution Panel as an alternative dispute resolution mechanism. 12. The intent and purpose of constituting the DRP, with three high ranking Commissioners that have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view, reduce the stature of the DRP to a departmental panel and the purpose of the exercise would be entirely lost. 15. The fact that the DRP has, in the present case, accepted the request to admit additional documents and seek a remand report from the assessing officer can only mean that the panel was of the view that further examination of the issue by the Department was called for. Having done this, the purpose is lost if the exercise is not carried through to its logical conclusion. The remand report of the TPO states that the addition was unwarranted on facts but the DRP reasons that the aspect of cost being included in the sales was not examined by the officer. Certainly the DRP is not bound to accept the conclusions of the officer in the report, but the Panel could well have sought a clarification, or directed the officer to carry out further verification in this regard. 16. In the light of the discussion above, I set-aside the order of the DRP dated 16.12.2016 and direct rehearing of the matter, in regard to the adjustment relating to ₹ 634,773,087/-. The DRP will decide the issue de novo, calling for such information as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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