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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI SUNIL KUMAR YADAV & SHRI INTURI RAMA RAO
O R D E R Per Sunil Kumar Yadav, Judicial Member
This appeal is preferred by the assessee against the order of the CIT(Appeals)-IV, Bangalore dated 29.10.2011 for the assessment year 2005-06 inter alia on the following revised and concise grounds:-
“NON TRANSFER PRICING RELATED None IT(TP)A No.1354/Bang/2011 Page 2 of 7 TRANSFER PRICING RELATED GENERAL:
1.
The Learned Commissioner of Income Tax Appeals {"CIT (A)"}/Transfer Pricing Officer ("TPO") erred in not appreciating that the TP documentation prepared by the Appellant were in compliance with the Income-tax Act ("Act") and the Income-tax Rules, 1962 ("the Rules') 2. The Learned CIT (A) erred in Law and on Facts in making addition of Rs. 34,17,771/- to the Total Income made on account of adjustment in the Arm's Length Price of the International Transaction with the Associated Enterprise by disregarding the economic analysis undertaken by the Appellant and by substitution by the Transfer Pricing Officer ("TPO") of his own economic analysis and ignoring the business and commercial realities of the Appellant; 3. The Learned CIT (A) erred in Law and on Facts by using Single Year Data pertaining to FY 2004-05 and in upholding the TPO's approach of using data as at the time of assessment proceedings, instead of the data that was available as on the date of preparing the Transfer Pricing ("TP") documentation.
4. The Learned CIT(A)/TPO erred in Law and on Facts by rejecting companies that are otherwise functionally comparable to the Appellant and considering comparable companies that otherwise fail the test of comparability; 5. The Learned CIT (A)/TPO erred in Law and on Facts by accepting some comparables on the basis of information obtained u/s 133(6) of the Income Tax Act ("Act"); 6. The Learned CIT(A)/TPO erred in Law and on Facts by not allowing adjustments on account of differences in the risk profile of the Appellant vis-a-vis the comparables;
IT(TP)A No.1354/Bang/2011 Page 3 of 7
SPECIFIC GROUNDS: (Comparables for EXCLUSION): 7. The Learned CIT(A) / TPO erred in Law and on Facts by upholding the inclusion of the following comparables for the stated reasons therein as part of the final list of comparables for the purposes of comparability analysis to determine the Arm's Length Price of the International Transaction and to determine the Arithmetic mean of mark up on cost of comparable companies vis-a-vis that of the Tested Party's Margin- i. Exensys Software Solutions Ltd - even though the same should have' been excluded as comparable on the ground of being functionally dissimilar having extra-ordinary event of amalgamation with M/s Halool India Limited and diversified business operations such as software products and services, consultancy and ERP implementation; ii. Sankhya Infotech Ltd - even though the same should have been excluded as comparable on the ground of being functionally dissimilar with diversified operations including development of software products for the transport and aviation industries; iii. Foursoft Ltd - even though the same should have been excluded as comparable on the ground of having related Party transactions ("RPT") more than 15% which implies a significant influence on the business of the comparable; iv. Thirdware Solutions Ltd - even though the same should have been excluded as comparable on the ground of being functionally dissimilar with diversified operations including development of software products, sale of software licenses etc.;
IT(TP)A No.1354/Bang/2011 Page 4 of 7 v. Geometric Software Solutions Co Ltd - even though the same should have been excluded as comparable on the ground of having related Party transactions ("RPT") more than 15% which implies a significant influence on the business of the comparable; vi. Tata Elxsi Limited (Software development segment) - even though the same should have been excluded as comparable on the ground of being functionally dissimilar with diversified activities in software development segment; vii. Flextronics Software Systems Ltd (Segment) - even though the same should have been excluded as comparable on the ground of being functionally dissimilar having hybrid model of supplying both products and services; viii. Satyam Computer Services Ltd. - even though the same should have been excluded as comparable on the ground of not having reliable financial results; and ix. Infosys Limited - even though the same should have been excluded as comparable on the ground of being functionally dissimilar owning brands & intangibles, diversified operations having its own products etc. COMMON GROUND 8. The CIT (A) / TPO erred in Levying Interest U/s 234B & 234C of the Act and in initiating Penalty Proceeding U/s 271 (1)(c) of the Act.
IT(TP)A No.1354/Bang/2011 Page 5 of 7
The assessee has also filed additional ground of appeal as under:-
“On the facts and in the circumstances of the case and in law: Transfer pricing related: Ground No. 4 The learned Assessing Officer / Transfer Pricing Officer / Commissioner of Income tax (Appeal) erred in considering Bodhtree Consulting Ltd. that fails the test of comparability, as comparable to the Appellant. The Appellant craves leave to add, alter, amend or withdraw all or any of the Grounds of Appeal and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing.”
During the course of hearing, our attention was invited to the fact that the CIT(Appeals) has decided the appeal ex parte without dealing the issues on merits. Therefore, the order of CIT(A) be set aside and the matter be restored to his file. The ld. counsel for the assessee insisted for the disposal of the appeal on merits. The ld. DR opposed the submission of the assessee on the ground that the Tribunal should have the benefit of the findings of the first appellate authority.
Having carefully examined the order of CIT(Appeals), we find that the CIT(A) has fixed this appeal for hearing on four dates. The ld. counsel for the assessee has appeared and sought time, but his appearance was not acknowledged by the CIT(Appeals) on the ground that there was no Power of Attorney in his favour. Though the CIT(A) has adjourned the IT(TP)A No.1354/Bang/2011 Page 6 of 7 hearings on account of non-appearance of the assessee’s counsel, but the CIT(Appeals) has dismissed the appeal summarily without dealing with the issues on merit. Under the Income-tax Act, the CIT(Appeals) is not competent to dismiss the appeal in limine. He is rather under obligation to dispose of the appeal on merits, even if nobody appears on behalf of the assessee. Since the appeal has not been disposed of on merits by the CIT(Appeals), we set aside his order and restore the appeal to his file to adjudicate the issues on merits, after affording opportunity of being heard to the assessee, within a period of six months from the date of receipt of this order. We also direct the assessee to extend all sorts of cooperation in disposal of the appeal within time specified.
In the result, the appeal of the assessee is allowed for statistical purposes.
Pronounced in the open court on this 12th day of August, 2016.