AVO CARBON INDIA PRIVATE LIMITED,CHENNAI vs. DC IT, CHENNAI

आदेश / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER

ITA No.537/Mds./16 :- 2 -:

2.1. The assessee also raised inter alia grounds that the DRP erred in not considering the additional evidence filed in relation to receipt of general administration and purchase related management services in the proper perspective.

2.2. In addition to this, the assessee also raised various grounds challenging which are mainly focused TP adjustments, made by the AO.

In this case Transfer Pricing Adjustments of `90,56,929/- has been made in respect of payment made by it to the AE for Management services provided to it and all the objections raised relate to downward adjustments to Management Service Charges as done by the TPO. The assessee had entered into international transactions amounting to `33,60,38,729/- during the assessment year 2011-12. This included payment of `4,04,89,580/- on account of Management Services

ITA No.537/Mds./16 :- 3 -: provided by the AE. The assessee furnished following breakup of these payments on account of Management Services:-

Nature of Service Value of service in ` General Management/Administration 47,81,715 Marketing 1,22,23,710 Manufacturing 69,21,332 Purchase 42,75,214 Research & Development 1,02,24,500 Total 4,04,89,581 (include TDS `20,63,110)

The above details show that the assessee claimed that an amount of `47,81,715/- was paid by it to AE for General Management/ Administration Service and another amount of `42,75,214/- was paid for purchase related services. The assessee was thus confronted by the TPO to prove that the above two services had actually been rendered by the AE to the assessee. In response to the same various details were produced by the assessee before TPO but it could not satisfy the TPO and so it was held by him that no such special services had been provided by AE to the assessee and at the most such services were ‘incidental benefits’ requiring no payments.

same before the TPO. Accordingly, additional evidence was rejected by the DRP.

Further, it was the submission of the ld.A.R is that additional evidence was rejected by the DRP in a summary manner, which is improper.

“(5) The DRP shall, in case where any objection is received under sub-s.(2), issue such directions, as it thinks fit, for the guidance of the AO to enable him to complete the assessment. (6) The DRP shall issue the directions referred to insub-s. (5), after considering the following, namely-

(a) draft order; (b) objections filed by the assessee; (c) evidence furnished by the assessee; (d) report, if any, of the AO, Valuation Officer or TPO or any other authority; (e) records relating to the draft order; (f) evidence collected by, or caused to be collected by, it; and (g) result of any enquiry made by, or caused to be made by, it. (7) The DRP may, before issuing any directions referred to in sub-s. (5),-

ITA No.537/Mds./16 :- 5 -:

(a) make such further enquiry, as it thinks fit; or (b) cause any further enquiry to be made by any IT authority and report the result of the same to it.

(8) The DRP may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-s.(5) for further enquiry and passing of the assessment order. (9) If the members of the DRP differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members. (10) Every direction issued by the DRP shall be binding on the AO.

(11) No direction under sub-s. (5) shall be issued unless an opportunity of being heard is given to the assessee and the AO on such directions which are prejudicial to the interest of the assessee or the interest of the Revenue, respectively. (12) No direction under sub-s. (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee. (13) Upon receipt of the directions issued under subs. (5), the AO shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in s. 153, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received.”

We find that the DRP in this case, against the above provisions 8. of the Act, passed a very non-speaking order, though the assessee’s counsel made a voluminous submission before the DRP against the draft assessment order dated 25.02.2015. It is to be noted that the DRP that it has to be considered every point of dispute and pass a speaking order. Contrary to this, the order passed by the DRP very critic and there is no addressing any issued raised by the assessee and it was not properly adjudicated. Being of, we are not in a position to uphold the order of the DRP as it is not consistent with the provisions of sec.194 C of the Act. We find that the Supreme Court in the case of ITA No.537/Mds./16 :- 6 -:

Sahara India vs. CIT & Anr. (300 ITR 403) has held that even “an administrative order has to be consistent with the rules of natural justice”. The same view has been taken by the Delhi Bench of the Tribunal in the case of GAP International Sourcing India (P) Ltd. vs. DCIT (8 ITR 0177). Further, in the case of M/s. Adobe Systems India Private Ltd. v. AddI. CIT in dated 21.01.2011, the Delhi Bench of the Tribunal held that when the DRP passed the order in cursory and laconic order without going into the details of the submissions, it should be decided afresh. Considering all these facts and circumstances, we are inclined to the remit the issues back to the DRP to pass a speaking order on the disputed issues. Since, we have adjudicated the primary ground, we refrain from going to other issues raised by the assessee.

At this stage, we are of the opinion that it is proper to remit the entire issue to the file of the DRP with the direction to examine whether there any reasonable cause not furnishing additional evidence by assessee before the TPO. If the assessee is able to explain with good

ITA No.537/Mds./16 :- 7 -: and sufficient reasons, the same to be considered by the DRP for examination. With this observation, we remit the entire issue to the file of DRP for their fresh consideration.