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TMI Blog2021 (3) TMI 1082X X X X Extracts X X X X X X X X Extracts X X X X ..... demonstrates that they rightly understood the legal position and the present attempt of the assessee to question the jurisdiction of the Assessing Officer deserves to be rejected. Even before CIT(A), no where the jurisdiction of the Assessing Officer has been questioned. - CIT(A) proceeded to decide the matter on merits and passed orders dated 30.09.2016. The assessee carried the matter on appeal to the Tribunal and once again, the assessee never raised any contention with regard to the validity of the notice dated 28.03.2006. Thus, considering this factual situation, we are of the clear view that the present attempt of the assessee is not tenable and accordingly rejected. The assessment order dated 28.02.2006 is an order under Section 143(3) and not an order under Section 92C(3) of the Act. - The argument of the assessee before us is that the Assessing Officer has exercised jurisdiction under Section 92C(3) and the TPO parallely cannot exercise his power under Section 92CA. On facts, the assessee is wrong. Thus, the assessee having been fully aware of the factual position, the faint attempt made before us alleging the question to be a substantial question of law is not sustainable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to state that the assessee has been shut out on the ground of estoppel, we are fully convinced that the assessee s case was dealt with on merits at every stage from the stage of the order passed by the CIT(A) as well as the remand report and the CIT(A) has recorded reasons as to why he is convinced on facts that the findings recorded by the TPO is an answer to the assessee s arguments. Assessee has not been non-suited on the ground of estoppel, but the entire matter has been analysed on facts and a finding has been rendered. This finding has been reappreciated by the Tribunal, which can be seen from paragraph 8.0 of the order. No doubt, in paragraph 11.0, the Tribunal made an observation that the reopening of assessment is possible as per the provisions of Section 147 of the Act. In our view, such issue will not raise in the present case. In the preceding paragraphs while answering the substantial question of law No.1, have assigned reasons as to why the assessee is precluded from raising any contention with regard to the jurisdiction of the officer to issue notice dated 28.03.2006 apart from rendering a finding as to the purport and scope of the notice qua the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , J. This appeal, filed by the assessee under Section 260A of the Income Tax Act, 1961 (for short, the Act), is directed against the order dated 26.04.2017 in I.T.A.No.30/Mds/2017 passed by the Income Tax Appellate Tribunal, Chennai 'D' Bench ('the Tribunal' for brevity) for the assessment year 2003-04. 2. The appeal was admitted on 23.01.2019 to decide the following substantial questions of law: "1. Whether on the facts and circumstances of the case, the revised order passed by the Assessing Officer u/s 154 is without jurisdiction and is liable to be quashed? 2. Whether on the facts and circumstances of the case, the Tribunal was right in summarily rejecting the TNMM Method adopted by the Appellant, without appreciating the limitations in applying the CUP Method? 3. Whether on the facts and circumstances of the case, the Tribunal was right in holding that the Appellant is estopped from changing the most appropriate method during the assessment proceedings/appellate proceedings without appreciating the need and merit of the new method for determination of arm's length price? 4. Whether on the facts and in the circumstances of the case, the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006, rejected the assessee's comparison by weighted average method and the claim of volume discount, and proposed an adjustment of ₹ 58,07,322.24/- in the manufacturing segment. The TPO compared the steel coil grades purchased in the trading segment with the purchases made in the manufacturing segment and proposed an adjustment of ₹ 2,69,34,151.10/-. By doing so, the TPO rejected the assessee's claim that there are differences in quality of steel grades purchased in the trading segment and these coils are not identical to the steel purchased in the manufacturing segment. The Assessing Officer, after considering the adjustment made by TPO, rectified the assessment order dated 28.02.2006 by exercising his powers under Section 154 of the Act read with Section 92CA(4) by order dated 30.05.2006 confirming the additions made by the TPO. 7. The assessee would state that though they did not challenge the jurisdiction of the Assessing Officer to exercise powers under Section 154, this being a jurisdictional issue, the assessee is not precluded from raising such a contention for the first time before this Court. It is submitted that the order of rectification passed und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. Further, the Tribunal held that the assessee is a Joint Venture Company of Hyundai Corporation and expects more concessions than unrelated companies and the assessee neither demonstrated with bills that it did not get volume discount nor did it produce any agreement between AE and Non-AE companies for such volume discounts. Therefore, the claim of adjustment on account of volume discount was rejected. With regard to the claim of noncomparability of steel purchased in the trading segment, the Tribunal remanded the matter back to the file of the CIT(A) for adjudication. 12. Mr.R.Sandeep Bagmar, learned counsel for the appellant made his submissions on the substantial questions of law, which have been framed for consideration. 13. With regard to substantial question of law No.1, it was submitted that the TPO does not have jurisdiction to conduct a transfer pricing adjustment once the assessment has been completed by the Assessing Officer under Section 143(3) of the Act. The Assessing Officer, in the order dated 28.02.2006, has accepted the ALP, as computed by the assessee, and exercised his jurisdiction under Section 92C(3) and completed the assessment. The TPO has no jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one of the prescribed methods, other than chosen earlier, the most appropriate ALP can be determined. It is submitted that in the assessee's case, TNMM is the MAM over CUP method. Further, the learned counsel referred to the subsequent assessment order where the assessee has adopted the TNMM as the MAM and the same was accepted by the Assessing Officer/TPO. 15. With regard to the substantial question of law No.4, the learned counsel submitted that in the CUP method, necessary adjustments are required to be made in order to arrive at the ALP. By referring to Rule 10B(1)(a)(ii), it is submitted that the price can be adjusted to account for any differences between the international transaction and in the assessee's case, on the basis of the letter issued by one of its AE, who supplied to the third party comparable, had stated that it had offered volume discount based on the quantity purchased. Further, it is submitted that under Rule 10B(3), if accurate adjustments are not made to a comparable to eliminate effects of material evidences, then such comparable ceases to be an uncontrolled transaction and consequently, no ALP can be determined on the basis of that comparable. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of transaction and their activity and the product which they deal with the available data, the assessee had adopted the most appropriate method of CUP method. Further, the assessee stated that the data required for external comparables may be difficult to obtain and interpret or it may be incomplete. Therefore, they have chosen the internal comparables of comparable uncontrolled transaction price method. 19. The assessee produced a letter from Hyundai Corporation addressing to the TPO dated 10.02.2006 with regard to offering of volume discount to overseas customers. It is further submitted that the TPO issued show cause notice dated 03.03.2006 with regard to three issues, namely non-maintenance of transfer pricing documentation; SPCD and SPCEN grade steel and SPCEN-HMIT and SPCD-HMI grade steel. 20. On the first issue, the TPO stated that the assessee failed to keep, maintain and produce the TP documentation for international transactions representing purchase of 12751.31 MT of steel to initiate penalty proceedings under Section 271AA of the Act. With regard to the second issue, the TPO proposed to make adjustments to the import price of SPCD and SPCEN grade steel. On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UP method is the suitable method. The CIT(A) passed order dated 30.09.2016 and after referring to the remand report, observed that the assessee is resorting to approbate and reprobate and this is one of the species of estoppel. Further, the CIT(A) agreed with the Assessing Officer that CUP method is the MAM. Thus, the CIT(A) held that the TPO's order has answered the assessee's arguments and in view of the findings given by the Assessing Officer in his remand report and the speaking order passed by the TPO, the addition was confirmed and the appeal was dismissed. 24. Aggrieved by the same, the assessee went on appeal before the Tribunal and expect for the issue raising the substantial question of law No.5, all other issues were decided against the assessee and the issue arising in question No.5 was remanded to the CIT(A) for adjudication based on the request made by the assessee, for which the Revenue did not object. 25. It is submitted that the issue relating to the jurisdiction of the Assessing Officer to invoke Section 154 of the Act was never raised before the Assessing Officer or the CIT(A) or the Tribunal and such being the case, the assessee is not the person aggri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk Ltd. Vs. CIT [(2012) 343 ITR 0270]. Therefore, it submitted that substantial question of law No.1 may be answered against the assessee. 31. With regard to substantial question of law Nos.2 and 3, the learned Senior Standing Counsel had elaborately referred to the factual matrix as to how the TPO has assigned reasons to sustain his conclusion that CUP method is the MAM and as to how the CIT(A) confirmed the orders passed by the TPO as well as observations and findings recorded in the remand report. Therefore, it is submitted that it is not a case of change of the most appropriate method nor it would be a case of estoppel, but it is a confirmation done by the authority considering the facts and figures. Therefore, the learned counsel prayed for answering substantial question Nos.2 and 3 against the assessee. 32. With regard to substantial question of law No.4, the learned Senior Standing Counsel referred to the relevant portion of the findings recorded by the Assessing Officer, the TPO, the remand report and the order of the CIT(A) as confirmed by the Tribunal and submitted that the reasoning is fully justified, more particularly when the appropriate method was held to be the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- to the total income Therefore, it is submitted that the Assessing Officer has become functus officio and cannot rectify or revise his order, after completing his assessment vide order dated 28.02.2006. The TPO, after hearing the assessee on various dates, passed an order dated 16.03.2006 under Section 92CA(3). 40. In the later part of this judgment, we shall go into the findings rendered by the TPO. The TPO directed the Assessing Officer to compute the total income of the assessee in accordance with Section Sub-Section (4) of Section 92C of the Act, after giving an opportunity to the assessee and simultaneously clarified that the findings and discussions are applicable only in respect of the reference received for the assessment year 2003-04 and not for subsequent assessment years. 41. Pursuant to such order, the Assessing Officer issued notice under Section 154 of the Act. In the notice, the Assessing Officer stated that she proposed to rectify the defect with regard to ALP, which is less than the actual import price of particular grade and hence, there will be an addition to the total income taken for tax purposes. 42. The assessee submitted their reply dated 29.05.2006 ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the jurisdiction but complied with the demand in the notice dated 28.11.2005 and submitted the details called for in the questionnaire on 13.01.2006. 46. The order passed by the TPO shows that the assessee had cooperated in the proceedings and their authorized representative, i.e. AGM (Finance) of the company, has attended the hearings on various dates. Therefore, it will not lie in the mouth of the assessee to now state that the entire proceedings are vitiated and that the order passed by the TPO under Section 92CA(3) of the Act would be a paper order. The TPO issued directions to the Assessing Officer to compute the total income of the assessee in accordance with Section Sub-Section (4) of Section 92C of the Act. This is a mandate prescribed in the statute. The TPO also directed the Assessing Officer to afford an opportunity to the assessee. 47. Precisely, the Assessing Officer has complied with the directions of the TPO in its letter and spirit. The notice clearly states that the ALP being less than the actual price of a particular grade, there has to be an addition to the total income taken for tax purposes. The assessee clearly understood the implication as they were a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y set out the facts in the preceding paragraph to demonstrate that the argument before us is not on the question of jurisdiction, but it is entirely couched on facts qua the conduct of the assessee, which would clearly preclude the assessee from raising such a question alleging the same to be a substantial question of law. 50. Though the Revenue had placed reliance on the decision of the Hon'ble Supreme Court in the case of Samtel India Ltd. Vs. CIT, Delhi [(2012) 25 taxmann.com 535], the learned counsel for the appellant would submit that looking into the facts, this decision will support the assessee. However, what is required to be seen in the said decision is the ratio laid down with regard to Section 154, which falls under Chapter XIV of the Act. It is pointed out by the Revenue that Section 154 finds place in Chapter XIV which deals with Procedure for Assessment. Section 154 deals with rectification of mistake apparent from the record. Chapter XIV not only deals with assessment and re-assessment and it also deals with re-computation and the object of re-computation is to assess (quantify) the correct taxable income and such re-computation of a correct taxable income is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial questions of law 2 and 3 are taken up together as requested by the learned counsel for the appellant. 59. The assessee would submit that the authorities and the Tribunal was of the view that the assessee is estopped from contending that the TNMM is the MAM after having adopted the CUP method in their TP study at the first instance. There can be no quarrel about the legal position which has been laid down in Matrix Cellular International Services P. Ltd. and M/s.Quark Systems India Pvt. Ltd. (supra), wherein it has been held that use of one method in a transfer pricing report does not estoppe the assessee from later claiming that another method is the most appropriate one, provided that it is the correct position. 60. But, in the case on hand, we find that the TPO, at the first instance, did not foreclose the assessee solely on the ground of estoppel. To explain this position, we may refer to the order passed by the TPO dated 16.03.2006 under Section 92CA(3) of the Act. In paragraph 6 of the order, the TPO referred to the method adopted by the assessee, namely the CUP method, as the MAM to arrive at the ALP. The reason for adoption of CUP method and the step involved in arrivi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance for volume discount is not called for. Therefore the claim of volume discount is not allowed." 62. Next, the discussion was about the SPCEN-HMI and SPCDHMI and the following finding has been given: "The assessee company has submitted the invoice copies of transactions made in India, with TISCO, and claims that the purchase price SPCEN-HMI and SPCD-HMI is comparatively low. This claim cannot be accepted as the company has the obligation with the Government to purchase 30% of their requirements from local markets, which becomes a controlled transaction, and further it is not possible to compare an international transaction with a national transaction. Hence the choice of comparing the price with TISCO invoices is not considered. Therefore, the sale transactions of a company made with Non-Associate enterprises with regard to material SPCEN and SPCD are taken as comparables to be compared with the sale price of SPCEN-HMI and SPCD-HMI made to AE. On a transaction to transaction based comparison of prices as given in Ann III for SPCEN and Ann IV of SPCD, it works out to a difference in prices to the tune of ₹ 2,69,34,151.10 which is to be adjusted to the purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted. It is relevant to extract the following paragraph of the said report: "Accordingly the case was studied and it was noticed that the assessee adopted Comparable Uncontrolled Price Method (CUP) as the most appropriate method to arrive at Arm's Length Price. The company's activity was to import steel mother coils from its Shareholder company M/s.Hyundai Corporation Korea. The assessee company adopted weighted average method for comparison of the transactions. While calculating the ALP, the assessee company had made an adjustment of 5% towards volume discount. The assessee company had claimed 5%-10% volume discount on the prices of Non-AE. On perusal it was noticed that the prices of Non-AE was much less than the prices of the assessee company. Hence, as the prices of Non-AE and AE is after volume discount, further allowance for volume discount was not called for and therefore, the claim of volume discount was not allowed. Accordingly, based on transaction to transaction analysis, the difference in the purchase prices a downward adjustment to the tune of ₹ 2,99,05,100/- was made. The assessee company had failed to provide comparable information dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 67. The matter went before the CIT(A), who took note of the report and then additional submissions were made by the assessee. No doubt, in one sentence, in the order passed by the CIT(A), there is an observation that the authorized representative of the assessee is resorting to approbate and reprobate and that is a species of estoppel and that substituting TNMM method for CUP method is an after thought. 68. If one reads these two sentences dis-juncted from the other portion of the order of the CIT(A), one may get an impression that the CIT(A) concluded that the assessee is estopped from raising a contention that they seek for adopting a different MAM. However, the order of the CIT(A) has to be read as a whole and in doing so, we have to read the order in its entirety, wherein the CIT(A) has referred to the earlier transactions, the grounds of appeal, the additional grounds of objections and then proceeded to adjudicate the matter. The CIT(A) referred to the remand report in extenso and held that the order passed by the TPO has answered the assessee's arguments and he has accepted the findings recorded by the Assessing Officer in the remand report and the speaking order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparable to eliminate effects of material differences, then such comparable ceases to be an uncontrolled transaction and consequently, no ALP can be determined based on that comparable. 75. We find that this issue has been elaborately dealt with by the TPO as well as examined for its correctness by the CIT(A) and the Tribunal. We remind ourselves that we are exercising jurisdiction under Section 260A of the Act and required to answer a substantial question of law and not reappreciate the factual position. 76. Therefore, we find that there is no substantial question of law arising for consideration on this issue. Accordingly, the same stands rejected. 77. With regard to substantial question of law No.5, the assessee would contend that the Tribunal fell in error in remanding the issue of trading segment to the CIT(A) when all the facts to adjudicate the issue were before it and applicability of CUP method itself was in question. 78. In the preceding paragraph, with regard to the most appropriate method, we have affirmed the finding of the authorities as confirmed by the Tribunal. While considering this question of law, we need to take note of the conduct of the assessee, which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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