HITACHI HI REL POWER ELECTRONICS PVT. LTD.,AHMEDABAD vs. THE ACIT/DCIT, CIRCLE-2(1)(1), AHMEDABAD

The above appeal has been filed by the Assessee against order passed by the Assessing Officer under section 143(3) r.w.s. 144C(13) read with section 144B of the Income Tax Act, 1961 ("the Act" for short) pertaining to Assessment Year 2020-21.

Ground No 2 - Initiation of penalty under section 270A of the Act/”

Briefly explaining the facts of the case before us, Ld.Counsel for the assessee pointed out that the assessee company is a manufacturer of UPS, Drive and automation and solution provider for these products in local as well as overseas market. The assessee , he pointed out, had reported international transactions with associate enterprises in its report filed in Form 3CEB ,reporting both purchases of material and sale of finished goods totalling in all To Rs.49,41,05,222/-.The details of the same were pointed out to be listed at page 2-4 of the TPO’s order. He pointed out that the assessee had benchmarked the transactions using TNMM as the Most Appropriate Method and using Operating Profit/ Operating Cost as the Profit Level Indicator. The PLI of the assessee was 3.10% that of the comparables selected by the assessee in its TP report was shown to be in the range of 1.77% to 4.30%. Ld.Counsel for the assessee pointed out that the assessee had selected 9 comparables for the purpose. That the TPO while examining the ALP determination by the assessee rejected two comparables selected by the assessee thus resulting in the PLI of the comparables arriving at 5.24%.Applying this PLI he determined the adjustment to be made to the international transaction of the assessee at Rs.7,37,64,846/-.The calculation of the same is reproduced at para 4.9 of the TPO’s order as under:

Ld.Counsel for the assessee stated that the assessee objected to this adjustment to the DRP raising several grounds, one of which was in respect of the TPO not granting the benefit of second proviso to section 92C(1) of the Act as per which no adjustment was to be made to the international transaction if the variance between the ALP determined and the actual price of the transaction did not exceed 3%. He drew our attention to ground No.1.4 wherein this objection was raised by the assessee before the DRP as under:

Ld.Counsel for the assessee pointed out that the DRP in turn directed the TPO to provide the necessary adjustment at para 6.3.4 of its order as under:

Ld.Counsel for the assessee stated that despite the specific direction of the DRP, the AO failed to do so in the final order passed by him.

The ld.DR when confronted with this fact, during the course of hearing on 12.12.2024 sought some time to go through the facts of the case. Accordingly, the case was adjourned for hearing to 26.12.2024, noting the pleading of the ld.counsel for the assessee vide order sheet entry as under:

The appeal of the assessee is accordingly allowed in above terms for statistical purposes. Order pronounced in the Court on 10th January, 2025 at Ahmedabad.