M/S CONERGY ENERGY SYSTEMS PRIVATE LIMITED,BANGALORE vs. ASST.C.I.T., BANGALORE

The ld. AR has drawn our attention to the application filed by the assessee for taking the additional evidence on record. It was contented by the ld. AR that before the TPO Shri Seshadri Nimmala, Company Secretary was appealing on behalf of the company and the said company secretary has resigned on 30.08.2013, therefore the company was not in a position to file the TP study in terms of the mandatory provision of law. For that purposes the ld. AR has drawn our attention to para 5.4 of the TPO at page 3 to the following effect.

It was pointed out by the ld. AR that the assessee company was taken over by another group called Canara Power Projects Promoters In., and a share transfer agreement was also executed on 17.01.2014 and as a result thereof the entire managing team has quit the office, the new management team are to be in place, therefore also the document which are required to be filed were neither filed before the AO nor the TPO nor before the DRP. It was submitted that the assessee has disclosed the just and reasonable cause which prevented the assessee from not complying the provisions of the Act by not filing the TP study even after the notice was received by the office of the assessee on 15.07.2013.

On the other hand, the ld. DR, has drawn our attention to paragraph 3.2 of the DRP proceedings wherein it is elaborately mentioned that despite the obligation and mandatory requirement

We have heard the rival parties and gone through the records. The application for submissions of additional documents was filed under rule 29 of the ITAT Rules, 1963. Along with the application the assessee has filed the letter resignation of company secretary and documents evidencing. On the basis of which it is submitted that these documents, if examined by the TPO, then no TP adjustment is called for. In our view it is the statutory and legal duty of the assessee to maintain the record as per the Rule 10D r.w.s. 92D of the IT Act and on receipt of the notice from the TPO, the assessee should have filed a TP study with the TPO to justify that the international transaction were at arm length price. In the present case neither the records were maintained by the assessee nor it was file before the TPO or before the DRP. Even no application for additional evidence was filed before the DRP by the assessee. For the first time, the application was made before the IT(TP)A No. 584/Bang/2015 Page 8 of 10 Tribunal for admitting the additional evidence, mentioned hereinabove.

In our view, the entire purpose of exercising the TP study is to tax the taxable income and for that purposes the exercising is being undertaken by the TPO to find out whether the international transaction transacted by the assesse with its AE was at arm length price or not. In our view, even if the assessee has not filed the TP study, or the TP study filed by the assessee is being rejected by the TPO, the TPO selects its own comparable and thereafter apply the most appropriate method for determining the ALP. For that purposes, the show cause notice, after rejecting the TP study is contemplated. In the present case, the TPO has not issued any show cause notice after giving the list of comparable, rather TPO has resorted to the application of CUP method for determining the ALP of international transaction. In our view, the action of the TPO to apply the CUP method however was not warranted in given set of facts. In our view, the show cause notice was given by the TPO on 15.07.2013 and however the entire management team along with the Company Secretary have left the office and new management had taken over the assessee and in view of that the necessary documents / sources were IT(TP)A No. 584/Bang/2015 Page 9 of 10 not furnished before the TPO. Therfore there was no occasion for the assessee to file reply to the show cause and submit documents. This is clear from the letter dated 20.11.2013 were by it was explained before us, that the entire management team along with the Company Secretary have left the office and new management had taken over the assessee and in view of that the necessary documents / sources were not furnished before the TPO. In our view, the assessee was able to make out the case for accepting the additional evidence filed before us and accordingly we allow the same.

Since we have allowed the additional evidence, therefore in the light of that it become necessary to remand back the matter to the file of the TPO for examining the additional evidence filed before us and decide the matter in accordance with law. Further the TPO is directed to consider the evidence filed before us only for the purposes of arriving at the ALP and the international transactions entered between the assessee as well as its aid. Needless to say the TPO shall issue the appropriate notice and shall grant personal hearing in the matter before taking any final decision.

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