OUTOTEC INDIA PVT. LTD.,NEW DELHI vs. ADDL. CIT, SPECIAL RANGE -7, NEW DELHI

This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-38, Delhi dated 08.08.2017 for Assessment Years 2013-14.

The relevant facts as culled from the material on records are as under :

The Ld. AO/ Ld. TPO /Ld. CIT(A) erred in enhancing the income of the Appellant by Rs. 5,91,56,144/- holding that the international transaction of the Appellant pertaining to rendering of design engineering services does not satisfy the arm’s length principle envisaged under the Act and in doing so, have grossly erred in: 3.1 disregarding the Transfer Pricing analysis submitted by the Appellant thereby conducting a fresh search of comparables considering inappropriate filters, without providing any specific and cogent finding as required under Section 92C(3) of the Act; 3.2 disregarding the certified segmental accounts provided by the Appellant as well as the accompanying back-up workings and erroneously re-computing the operating profit mark-up considering both the associated enterprise and non- associated enterprise segment; 3.3 including certain companies in the final set of comparables in gross violation of Rule 10B of the Income Tax Rules, 1962 which specifically provides for comparability based on functions performed, assets employed and risk assumed in an uncontrolled transaction; 3.4 making computational errors in the operating profit mark-ups of the comparable companies; 3.5 not granting working capital adjustment to account for the difference between the level of working capital invested by the Appellant and the comparable companies. The above grounds are without prejudice to each other. The Appellant craves leave to alter, amend or withdraw all or any of the grounds herein or add any further grounds as may be considered necessary either before or during the hearing.”

Before us, Learned AR at the outset submitted that CIT(A) has passed an ex-parte order and has not decided the issue on merits. He submitted that if given a chance, assessee undertakes to appear before the lower authorities and furnish all the required details to substantiate its case. He therefore, submitted that in 4 the interest of justice, assessee be granted one more opportunity to explain its case.

Learned DR on the other hand supported the order of the lower authorities and further submitted that assessee has not appeared before the lower authorities and therefore the casual approach of the assessee does not deserve a second innings.

We have heard the rival submissions and perused the material on record. The perusal of CIT(A) order reveals that CIT(A) has passed an ex parte order without deciding the issue on merits. Sub Section (6) of Section 250 of I. T. Act mandate the CIT(A) to state the points in dispute and thereafter assign the reasons in support of his conclusion. We are of the view that by dismissing the appeal without considering the issue on merits, Learned CIT(A) has failed to follow the mandate required in Sub Section (6) of Section 250 of the Act. Further it is also a well settled principle of natural justice that sufficient opportunity of hearing should be offered to the parties and no parties should be condemned unheard. Further before us, Learned AR has given an undertaking that given a chance, assessee will appear before the lower authorities and file the required details called for by them. In view of these facts, we are of the view that in the interest of justice, the assessee be granted one more opportunity. We therefore set aside the impugned order of CIT(A) dated 08.08.2017 and restore the issue to the file of CIT(A) for re-adjudication of the issues after granting sufficient opportunity of hearing to both the parties. Assessee is also directed to appear before CIT(A) and 5 promptly furnish the details called for by the authorities. In view of our decision to restore the issue back to CIT(A), we are not adjudicating on merits, the grounds raised by the assessee. Thus the grounds of assessee are allowed for statistical purposes.