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Income Tax Appellate Tribunal, DELHI BENCH ‘1-2’: NEW DELHI
ORDER PER SUDHANSHU SRIVASTAVA, JM: This appeal is preferred by the assessee against order dated 26.10.2016 passed by the Learned Commissioner of Income Tax (Appeals)-38, Delhi {CIT(A)} and pertains to Assessment Year 2010- 11.
Xavient Information Systems (I) Pvt. Ltd. vs. DCIT
The brief facts of the case are that the assessee company, during the captioned year, was engaged in the business of Software Development and Information Technology (I.T.) related services dealing with only one buyer in the United States i.e. M/s Xavient Information Systems Inc. USA, which was an Associated Enterprise in terms of section 92A(2)(b) of the Income Tax Act, 1961 (in short 'the Act'). The return of income for the year under consideration was filed declaring a total income of Rs. 51,58,328/- after taking benefit of set off of unabsorbed depreciation amounting to Rs. 3,10,184/-.
The case was selected for scrutiny. During the course of assessment proceedings, the Assessing officer noticed that the assessee had made total sales of Rs. 4,19,66,360/- to its Associated Enterprise in USA. The assessee was asked to file a copy of the Transfer Pricing Study report to justify the Arms’ Length Price of the assessee’s international transaction, in response to which, the assessee submitted that for the year under consideration, no transfer pricing study had been conducted. Subsequently, the assessment was Xavient Information Systems (I) Pvt. Ltd. vs. DCIT completed at an income of Rs. 1,08,39,000/- after making a transfer pricing adjustment of Rs. 53,60,362/-.
2.1 Aggrieved, the assessee contested the Transfer Price Adjustment before the Ld. First Appellate Authority. In addition, the assessee also challenged the assumption of jurisdiction by the Assessing officer on the ground that the assessee was having its Registered office in Mumbai and that, therefore, the assessee fell within the jurisdiction of DC/ACIT, Circle 8(3),Mumbai and that further the return filed by the assessee was processed u/s 143(1) of the Act by DC/ACIT Mumbai, whereas, the assessment had been completed by DCIT, Ward 18(4), New Delhi. However, the Ld. First Appellate Authority dismissed the assessee’s challenge to the assumption of jurisdiction by the Assessing officer (DCIT), Ward 18(4), New Delhi. The Ld. CIT(A) also upheld the transfer pricing adjustment on merits.
2.2 Now, the assessee has approached this Tribunal challenging the order of the Ld. First Appellate Authority by raising the following grounds of appeal:-
Xavient Information Systems (I) Pvt. Ltd. vs. DCIT
That on the facts and circumstances of the case and in law, the Ld. CIT (A) has failed toappreciate that the Deputy Commissioner of Income-tax, New Delhi (Ld. AO) was in grave error in assuming jurisdiction over appellant and in passing the impugned assessment order for assessment year (AY) 2010-11 u/s 143(3) of the Act.
2. That on the facts and circumstances of the case and in law, the Ld. CIT (A) has failed toappreciate that assessment order passed by the Ld. AO, for AY 2010-11 is without jurisdiction; void ab initio, nullity and non est in law and deserves to be annulled.
That on the facts and circumstances of the case and in law, for AY 2010-11, theappellant having its registered office in Mumbai falls under the jurisdiction of DC/ACIT Circle 8(3), Mumbai and e-filed its return of income for AY 2010-11 electronically which was processed u/s 143(1) by DC/ACIT, Mumbai. The appellant has been regularly assessed for earlier years by the jurisdictional AO i.e. AC/DCIT Mumbai. These facts were clearly available in the Department records, online on income-tax website, online PAN record available with Department and were also specifically informed to the Ld. AO repeatedly, and hence the impugned assessment order passed by the Ld. AO completely lacks jurisdiction and perverse and is vitiated in law.
Xavient Information Systems (I) Pvt. Ltd. vs. DCIT
That on the facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that the action of the Ld. AO in rejecting the objections of appellant to his wrongful assumption of jurisdiction, on irrelevant, self- contradictory grounds is perverse and against the provisions of Section 120 laying down the jurisdiction and the provisions of Section 127 which only authorizes chief commissioner/ commissioner to pass the order for change in jurisdiction and the order passed with lack of jurisdiction is not sustainable in law.
That on the facts and circumstances of the case and in law, the CIT (A) has failed to appreciate that that appellant’s authorized representative in the personal hearing and also in letters has specifically informed the ITO/DCIT, New Delhi that the appellant’s registered office was at Mumbai which was transferred to Noida in August 2011 and all the assessments were carried out by the DCIT, Mumbai and therefore by no stretch of imagination DCIT, New Delhi could have jurisdiction over the appellant. The shifting of registered office from Mumbai to Noida in August 2011 can be no ground for DCIT, New Delhi to assume jurisdiction for AY 2010-11 and also even for subsequent assessment years the jurisdiction can only be transferred to AO, Noida by specific order u/s 127 of the Act for transfer of case from DCIT, Mumbai to the AO, Noida.
Xavient Information Systems (I) Pvt. Ltd. vs. DCIT
Transfer Pricing Adjustment 6. Without prejudice to the above grounds of appeal no. 1 to 5, that on the facts and circumstances of the case and in law the CIT (A) has erred in upholding the assessment order making addition of Rs.5,360,362 as Transfer Pricing adjustment.
7. That on the facts and circumstances of the case and in law the CIT (A) has failed to appreciate that the DCIT, New Delhi has erred in making an addition of Rs. 5,360,362 to the returned income as transfer pricing adjustment based on the provisions of Section 92(1) of the Act.
8. That on the facts and circumstances of the case and in law, the DCIT, New Delhi had erred in selection of companies which are either not comparable or are having controlled transactions.
9. That on the facts and circumstances of the case and in law the DCIT, New Delhi erred in disregarding the comparability factors specified 10B(2) and 10B(3) of Income-tax Rules, 1962 which specifically provides that an adjustment should be made to account for differences between transactions that may materially affect the price of such transactions. That DCIT, New Delhi erred in failing to take cognizance of the differences in risk profile of the appellant (being a captive service provider to its AE) and the alleged comparable companies selected by him by not allowing the risk adjustment made by the appellant.
Xavient Information Systems (I) Pvt. Ltd. vs. DCIT
10. That on the facts and circumstances of the case and in law DCIT, New Delhi erred in not allowing an adjustment on account of difference in working capital position of the appellant and the alleged comparable companies.
That on the facts and circumstances of the case and in law that DCIT, New Delhi has erred in computing the margin of the alleged comparable companies and the margin of the appellant company and consequently the computation of amount added to income and transfer price adjustment in the ALP is wrong and erroneous.
12. That on the facts and circumstances of the case and in law that DCIT, New Delhi erred in rejecting the multiyear data of the alleged comparable companies.
13.That on the facts and circumstances of the case and in law that DCIT, New Delhi has erred in not providing the benefit of the variation or reduction of 5 percent from the arithmetic mean as provided in proviso to Section 92C(2) of the Act while determining the ALP and making the consequence adjustment.
That on the facts and circumstances of the case and in law that the charge of interest u/s 234B, 234C and 234D of the Act is wrong and bad in law.
Xavient Information Systems (I) Pvt. Ltd. vs. DCIT
That the above grounds of appeal are without prejudice to each other.
That the appellant craves leave to add, amend, delete, rectify, substitute and modify any of the aforesaid grounds of appeal or add a new ground of appeal at any time before or at the time of hearing of appeal.”
3.0 None was present on behalf of the assessee-appellant when the appeal was not called for hearing. However, an application seeking adjournment was placed before the Bench stating that due to unavoidable circumstances, it was not possible for the Ld. Authorised Representative to attend the hearing either physically or virtually. However, no reason behind the inability to attend was specified in this application. A perusal of the order sheet entries show that the appeal was first fixed for hearing on 22.07.2019 and the assessee had sought as many as six adjournments viz. on 22.07.2019, 03.09.2019, 10.10.2019, 20.11.2019, 09.01.2020 and 27.02.2020. Thereafter, nobody was present on behalf of the assessee on 29.04.2021, 08.06.2021, 09.08.2021, 23.09.2021 and today i.e. 28.10.2021 also, an adjournment has been sought
Xavient Information Systems (I) Pvt. Ltd. vs. DCIT without specifying any reason. Thus, it is very much apparent that the assessee does not have any interest in pursuing this appeal and, therefore, we have no option but to proceed with the hearing ex-parte qua the assessee-appellant based on the facts available on record.
4.0 A perusal of the record shows that the assessee earlier had its Registered Office in Mumbai and, therefore, as per record the assessee’s case fell under jurisdiction of DC/ACIT, Circle 8(3), Mumbai. However, it is also a fact on record that the registered office of the company was shifted from Mumbai to Noida in August, 2011. The copy of return for the year under consideration shows the assessee’s address at Noida and the Assessing officer is shown as Delhi Ward18(4).Similarly, the Audit Report in Form 3-CEB shows that the assessee’sRegistered office was situated in Mumbai, whereas, the Corporate Office was situated at Noida. This audit report was also filed with the office of DCIT Ward 18(4), Delhi. In one of the communications to the Assessing officer at Ward 18(4)
New Delhi, the Ld. Authorised Representative (AR) himself has Xavient Information Systems (I) Pvt. Ltd. vs. DCIT accepted that the Form 3-CEB had been filed with Assessing officer in Delhi. It is the assessee’s plea in the grounds of appeal that no notice for scrutiny assessment was received from the Assessing officer at Mumbai and, therefore, the assessment proceedings which were completed by the Assessing officer at Delhi were void ab initio being devoid of jurisdiction. This issue was also vehemently argued by the assessee before the Ld. CIT(A) that the assessee’s Registered office was in Mumbai and that, although, the Registered office was shifted from Mumbai to Noida in August 2011, DCIT, New Delhi could not have any jurisdiction over the assessee for the purpose of assessment as no order u/s 127 of the Act for the transfer of case from Mumbai to Noida was passed.
4.1 Ground Nos. 1 to 5 of the grounds of appeal, reproduced above, challenge the assumption of jurisdiction by the Assessing officer. However, a perusal of the record shows that, as per the return of income (acknowledgment), the designation of the Assessing officer has been filled up as ‘Delhi-W(18)(4)’, and therefore, the assessee’s claim that the jurisdiction of the assessee
Xavient Information Systems (I) Pvt. Ltd. vs. DCIT was that DCIT, Circle 8(3) Mumbai is self-contradictory as the assessee has itself accepted in the return of income that the jurisdiction was with the Assessing officer at Delhi. It is also a fact on record that the Ld. AR of the assessee has himself accepted before the Assessing officer that the Registered Office of the company was shifted from Mumbai to Noida in August, 2011. The assessment order was passed on 30.3.2013, a date which is much beyond August, 2011. Also, it is a case in point that the assessee had regularly complied with all the notices issued by the Assessing officer from time to time during the course of assessment proceedings and no objections were raised before the Assessing officer challenging the jurisdiction of Assessing officer at Delhi except vide letter dated 18.03.2013, which was almost at the time when the assessment proceedings were drawing to a close.
4.2 We also note that Form 3-CEB (Audit Report) for the year under consideration, which has been signed by M/s Indra D Narayan & Co., Chartered Accountants, situated at 165, Vinoba Puri, Lajpat Nagar-II, New Delhi, which has been signed on Xavient Information Systems (I) Pvt. Ltd. vs. DCIT 23.9.2010 and has been filed with Assessing officer Ward 18(4),New Delhi also mentions that the assessee’s Corporate office was situated at C-124, Ground Floor, Hosiery Complex, Phase-2, Noida.
Therefore, by conduct of the assessee, it is very much apparent that the assessee itself was agreeable to the jurisdiction being assumed by DCIT, New Delhi. It is settled law that once the assessee has submitted to the jurisdiction of a particular Assessing officer by complying with the notices from time to time and has also accepted the fact of the change in the Registered office of the company from one city to another, the assessee cannot be permitted to do a complete ‘U’ turn and challenge the jurisdiction of the Assessing officer specifically when all the documents have been filed before the Assessing officer at Delhi and where the assessee has not challenged the lack of jurisdiction and at any point of time during the entire course of assessment proceedings. In fact, the assessee raised the issue of lack of jurisdiction for the first time vide letter dated 18.3.2013, whereas, the assessment proceedings were getting time barred on 31.3.2013 and, therefore, it is our considered opinion that the assessee’s belated claim of lack of jurisdiction will
Xavient Information Systems (I) Pvt. Ltd. vs. DCIT not be of any help in, as much as, the assessee has, apparently, and with full awareness duly cooperated in the assessment proceedings and has also shown its registered office to be situated in Noida falling under the jurisdiction of Assessing officer situated at New Delhi, Ward 18(4). Therefore, the assessee cannot be allowed to change its stand at the fag end of assessment proceedings just to escape the rigours of Income Taxon an excuse which is contrary to its conduct. We, strongly deprecate this conduct of the assessee and dismiss ground Nos.1 to 5 of the captioned appeal for reasons which have been discussed in the earlier part of this order.
5.0 Ground Nos. 6 to 13 challenge the Transfer Pricing Adjustment of Rs. 53,60,362/- on merits. A perusal of the impugned order shows that these grounds were also raised before the Ld. First Appellate Authority and were numbered as ground Nos. 6 to 12. The same are being reproduced as under for a ready reference:-
Without prejudice to the above grounds of appeal no. 1 to 5, that on the facts and circumstances of the case and in law the CIT (A)
Xavient Information Systems (I) Pvt. Ltd. vs. DCIT has erred in upholding the assessment order making addition of Rs.5,360,362to the returned income as Transfer Pricing adjustment based on the provisions of section 92(1) of the Act.
That on the facts and circumstances of the case and in law the DCIT, New Delhi had erred in selection of companies which are either not comparable or are having controlled transactions.
That on the facts and circumstances of the case and in law, the PCIT, New Delhi erred in disregarding the comparability factors specified 108(2) and 108(3) of Income-tax Rules, 1962 which specifically provides that an adjustment should be made to account for differences between transactions that may materially affect the price of such transactions. That DCIT, New Delhi erred in failing to take cognizance of the differences in risk profile of the appellant (being a captive service provider to its AE) and the alleged comparable companies selected by him by not allowing the risk adjustment made by the appellant.
That on the facts and circumstances of the case and in law DCIT, New Delhi erred in not allowing an adjustment on account of difference in working capital position of the appellant and the alleged comparable companies.
That on the facts and circumstances of the case and in law that DCIT, New Delhi has erred in computing the margin of the alleged comparable companies and the margin of the appellant company and consequently the computation of Xavient Information Systems (I) Pvt. Ltd. vs. DCIT amount added to income and transfer price adjustment in the ALP is wrong and erroneous.
11. That on the facts and circumstances of the case and in law that DCIT, New Delhi erred in rejecting the multiyear data of the alleged comparable companies.
That on the facts and circumstances of the case and in law that DCIT, New Delhi has erred in not providing the benefit of the variation or reduction of 5 percent from the arithmetic mean as provided in proviso to Section 92C(2) of the Act while determining the ALP and making the consequence adjustment.
5.1 A further perusal of the impugned order passed by the Ld. CIT(A) shows that ground Nos. 6 to 18 have not been actively pressed by the assessee. The Ld. CIT(A) has mentioned the various dates on which the assessee was required to file submissions and relevant documents against the proposed Transfer Pricing Adjustment. It has been further noted by the Ld. CIT(A) that no submissions or compliances were made by the assessee and, therefore, the Ld.CIT(A) had no option but to proceed with the adjudication on merits of the case based on records. Thereafter, the Ld. CIT(A) upheld the Transfer Pricing Adjustment of Rs.
Xavient Information Systems (I) Pvt. Ltd. vs. DCIT 53,60,362/- as the assessee was not forthcoming in submitting any documents in this regard. Of course, the Ld. CIT(A) had no option, at this juncture, but to proceed with the adjudication based on the records before him. It is also a case in point to note that in spite of a specific direction of the Assessing officer / Ld. CIT(A), the assessee did not file the copy of the Transfer Pricing Report. In such a situation, the Ld. First Appellate Authority had no other option but to form an opinion based on the past assessments of the assessee. The relevant observations of the Ld. CIT(A) are being reproduced herein under for a ready reference.
Xavient Information Systems (I) Pvt. Ltd. vs. DCIT Xavient Information Systems (I) Pvt. Ltd. vs. DCIT Xavient Information Systems (I) Pvt. Ltd. vs. DCIT Xavient Information Systems (I) Pvt. Ltd. vs. DCIT Xavient Information Systems (I) Pvt. Ltd. vs. DCIT Xavient Information Systems (I) Pvt. Ltd. vs. DCIT Xavient Information Systems (I) Pvt. Ltd. vs. DCIT Xavient Information Systems (I) Pvt. Ltd. vs. DCIT
Xavient Information Systems (I) Pvt. Ltd. vs. DCIT 5.2 A perusal of the above paragraphs extracted from the impugned order would show that the assessee has been very casual in its approach while pursing the appeal before the Ld. CIT(A). Also, it is very pertinent to note that the Ld. CIT(A) could not be expected to adjudicate the issue in a manner different from how he has done in absence of any compliance on the part of the assessee. Even in the appeal before us, there has been no compliance / co-operation
Xavient Information Systems (I) Pvt. Ltd. vs. DCIT by the assessee and the assessee has not even cared to file a paper- book which could have furthered its cause. As we have noted earlier, this appeal was fixed for hearing on 10 occasions earlier between 22.07.2019 and 23.09.2021 but the assessee has not bothered even once to let the hearing proceed. Therefore, in the absence of any support from the assessee or the Ld. AR, as an officer of Court, our hands are tied and we have no option but to confirm the view taken by the Ld. CIT(A) which is in complete conformity with past assessment history. Therefore, on an overall consideration of facts of the case and duly keeping in mind the non- cooperative attitude and conduct of the assessee, we have no option but to uphold the order of the Ld. CIT(A) on the merits of the case.
Accordingly, we dismiss ground Nos. 6 to 13 of the captioned appeal.
5.3 Ground Nos. 14, 15 and 16 do not require any separate adjudication and are not being dealt with.
Xavient Information Systems (I) Pvt. Ltd. vs. DCIT 6.0 In the final result, the appeal of the assessee stands dismissed.
Order pronounced on 25.01.2022