Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, BENGALURU BENCH A, BENGALURU
Before: SHRI. A. K. GARODIA
v. Asst. Commissioner of Income-tax, Circle -2, LTU, Bengaluru .. Respondent Assessee by : Shri. Ajay Vohra, Senior Advocate & Shri. Neeraj Jain, Advocate Revenue by : Shri. Sundar Rao, CIT Heard on : 21.02.2019 Pronounced on : 25.02.2019 O R D E R
PER LALIET KUMAR, JUDICIAL MEMBER :
The present appeal is filed by the assessee against the order of the ACIT, Circle -2, LTU, Bengaluru, passed u/s.143(3) r.w.s. 144C of the Act, dt.29.10,2018, in pursuance to the directions of the DRP, dt.07.09.2018, for the assessment year 2014-15.
IT(TP)A.3142/Bang/2018 Page - 2
The assessee has filed as many as four grounds of appeal, alongwith various sub-grounds.
At the outset the Ld. AR has drawn our attention to the order passed by the TPO, more particularly to paras 4.1, 5.1 and 5.2 and submitted that the TPO on the basis of the key word search and other filters had selected 15 comparables as mentioned in para 4.2. However, the assessee being aggrieved by the order of the TPO had filed objections before the DRP.
The assessee had filed a reply before the DRP on 15.08.2018 and had submitted that the TPO has failed to adjudicate the submissions of the assessee and has further failed to disclose and inform the assessee , the basis of the search criteria provided in the said order. It was submitted that out of the 15 comparables found by the TPO as mentioned in para 4.2 only one comparable, namely Rajarathna Metal India Ltd (sl.no.1) can be considered on the basis of the filters and key-word search applied by the TPO and the same was supported by the snap-shot of the search done by the assessee from the prowess data base. On the basis of the above it was submitted that despite the request being made to the TPO as well as the DRP, neither the basis of the search was provided nor the objections of the assessee were adjudicated by the DRP.
On the contrary the DRP in the order, in a cryptic manner has mentioned in para 3.1.4, as under : 3.1.4 We have already upheld the rejection of TP document of the assessee which in turn means that a fresh search has IT(TP)A.3142/Bang/2018 Page - 3
to be conducted. Now the assessee has to only see that whether any company has been wrongly rejected by the TPO. If yes, then it can ask for inclusion of the same with necessary arguments in support of the same. But it doesn't mean that it can come with any company that satisfies the search criteria of the TPO and is functionally comparable too. The titters chosen by the assessee and the TPO are different and further, the TPO considered only the current year data whereas the assessee has considered the data for the last 3 years. Therefore, different companies are bound to appear in the search matrix of the TPO. The company appearing in the search matrix of the assessee carries no meaning as the TP document has already been rejected. The selection of a company is done by following a very elaborate process. Some companies get rejected as the current year data is not available. Now, if the assessee brings the data of some company on a later date and it is included in the final list of comparables, it will vitiate the entire search process. It should be remembered that some companies which are comparable and have a high profit margin, may also get rejected because of lack of current year data. If the assessee is asking for inclusion of one company by submitting, the Annual Report, then the TPO will he bound to carry a fresh search again to be fair and this will be an endless process. Therefore. we have consistently followed in all the cases that the company should be available in the search matrix of the TPO on the day of search and if it is not there, then the claim that it is functionally comparable and is passing of all the filters, is meaningless. This ground is accordingly rejected.
Per contra the Ld. DR had relied upon the order passed by the lower authorities.
We have heard the rival contentions and perused the record. Undoubtedly neither the TPO nor the DRP had provided the basis of search conducted by the TPO for rejection of the TP study of the assessee. We are of the opinion that with a view to conduct the TP IT(TP)A.3142/Bang/2018 Page - 4 analysis by the TPO, it is necessary for the TPO to provide the basis of the search, key word search filters along with show cause notice on the basis of which the TPO sought to finalise the list of comparables. Needful has not been done by the TPO and the DRP in its order had vaguely mentioned that the filter chosen by the assessee as well as the TPO were different and further mentioned that the assessee had chosen the three-year data, whereas the TPO has taken one year data.
In the light of the above, we are of the opinion that the order passed by the TPO was vague and obscure, as in para 4.1 the TPO refers to the filters and key word filter applied by the assessee. However in para 5.1 the TPO states “Having rejected the taxpayer’s TP study, the TPO undertook a search for suitable comparables using the prowess database by applying the filters mentioned above.”, which clearly shows that the filters indicated by the assessee as mentioned in para 4.1 and the filters and key word mentioned at pages 551 and 552 of the paper book filed before the DRP were same and common and if it was so then different results cannot be arrived by the TPO other than that of the assessee. In view of the above, the assessee appeal is allowed the order of lower authorities are set aside and matter is remanded back to the file AO with the following directions: i) The TPO shall conduct a denovo search of the comparables after informing the list of filters applied and key-words used for conducting the search .
IT(TP)A.3142/Bang/2018 Page - 5 ii) The TPO shall take the one year data for the purposes of conducting the search for the comparables. iii) The TPO shall follow the procedure as mentioned in Chapter X and rules framed there under for determining the ALP in accordance with law after affording the opportunity of hearing to the assessee and shall adjudicate the objections, if any raised by the assessee, in response to the Show cause.
In view of the above, appeal of the assessee is allowed for statistical purpose.