QUISLEX LEGAL SERVICES PRIVATE LIMITED,HYDERABAD vs. DCIT CIRCLE -5(1), HYDERABAD

ITA-TP No. 416/Hyd/2022 2. Briefly stated relevant facts are that the assessee is engaged in the business of legal process outsourcing. It filed its return of income for the assessment year 2018-19 on 28/11/2018 declaring total income of Rs. 14,88,59,090/-. The assessee was found to have entered into international transactions for a sum of Rs. 106.16 crores with its Associated Enterprises (AE) for provision of ITE services and, therefore, determination of Arms’ Length Price (ALP) was referred to the Transfer Pricing Officer (TPO). After obtaining the order of the TPO under section 92CA(3) of the Act, draft assessment order was passed on 16/09/2021, determining the total income of the assessee at Rs. 31,00,40,880/- by incorporating TP adjustment of Rs. 16,11,81,785/- comprising a sum of Rs. 9,44,60,417/- on account of provision of ITeS and Rs. 6,67,21,368/- on account of interest on delayed receivables.

Assessee filed objections before the learned DRP and the grievance of the assessee is that learned DRP did not consider the plea of the assessee, but, upheld the action of the learned TPO, claiming that neither the learned TPO nor the learned DRP gave any opportunity to file the objections against the comparable adopted by the learned TPO. Hence, the assessee preferred this appeal.

learned AR submits that the order of the learned TPO is in violation of the provisions of section 92CA(3) and 92C(3) inasmuch as before rejecting the TP study of the assessee, no opportunity was given and also that the TPO culled out 17 comparables from the database and computed the ALP, without considering the TP study of the assessee. Further, the learned AR stresses on the fact that the learned TPO considered the comparables, which were not chosen by the assessee at all before rejecting the same and resorting to a fresh search.

He further submitted that though a remand report was sought by the learned DRP and the learned TPO submitted such report, the submissions of the assessee to such report were not considered by the ITA-TP No. 416/Hyd/2022 learned DRP, but on the other hand, learned DRP recorded certain factual mistakes. Learned AR further submitted that learned DRP, in the same breath, recorded that the assessee is a BPO and also engaged in high end ITE services vide paragraph Nos. 2.7.8 and 2.7.5 respectively, which shows that facts of some other case crept into the order of the assessee. According to the learned AR, for the assessment years 2013-14 and 2014- 15, after the assessments were set aside by the ITAT, the learned Assessing Officer accepted the assessee as BPO, rendering repetitive services and, therefore, the findings of the learned DRP cannot be sustained.

Per contra, learned DR submitted that the learned DRP properly considered the remand report and also the objections filed by the assessee and since the assessee at that time did not press all the arguments now taken, and, therefore, the authorities are justified in sustaining their view. He lastly contends that merely basing on technicalities, the assessee cannot seek quashing of the entire proceedings, and if for any reason, the Bench feels that there is non-issuance of notice under proviso to section 92C(3) or under sub-section (2) of section 92CA of the Act, the same can be rectified by giving an opportunity to both the parties, lest the judicial proceedings are likely to be treated as hide and seek game.

We have gone through the record in the light of the submissions made on either side. It could be seen from the proviso to section 92C(3) or under sub-section (2) of section 92CA of the Act that issuance of notice to the assessee is mandatory. At the same time, it could be seen from the excerpts of the remand report culled out by the learned DRP at paragraph No. 2.7.3 of their direction, no such notice was admittedly issued to the assessee.

Apart from this, the 16 comparables chosen by the assessee are - 1. Informed Technologies India Ltd., 2. Cosmic Global Limited, 3. Suprawin Technologies Ltd., 4. Sundaram Business Services Ltd., 5. Crystal Hues Limited, 6. Jindal Intellicom Ltd., 7. ISN Global Solutions Pvt. Ltd., 8. R

Assessee could have brought the fact to the notice of the learned TPO, had the learned TPO complied with the letter of law under proviso to section 92C(3) or under sub-section (2) of section 92CA of the Act. Even learned DRP also missed this vital issue which goes to the root of the problem. In these circumstances, we are of the considered opinion that the learned TPO must be directed to issue notice contemplated under proviso to section 92C(3) or under sub-section (2) of section 92CA of the Act, as the case may be and complete the assessment in accordance with law. At the same time, the learned TPO will also keep in view the assessment orders for the assessment year 2013-14 and 2014-15 passed pursuant to the set aside of the same by the ITAT.

Now coming to the aspect of interest charged on delayed payments on trade receivables, learned AR submitted that this issue is squarely

In the result, appeal of assessee is treated as allowed for statistical purposes.