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Income Tax Appellate Tribunal, ‘A’ BENCH : BANGALORE
Before: SMT. P. MADHAVI DEVI & SHRI JASON P.BOAZ
This appeal by the assessee is against the order of the CIT(A)-IV, Bangalore, dated 14/02/2012 for the assessment year 2005-06.
Brief facts of the case are that the assessee-company, which is engaged in development and export of computer software, had filed its return of income for the assessment year
IT(TP)A No.515/Bang/2012 M/s.SiNett Semiconductors India Pvt. Ltd. Page 2 of 5 2005-06 on 31/10/2005 returning a total income of Rs.8,350- after claiming exemption of Rs.57,58,534/- u/s 10A of the Income-tax Act, 1961 ['Act']. The return was selected for scrutiny and notices u/s 143(2) and 142(2) were issued and served within the time allowed under the relevant provisions of the Act. Further notice u/s 142(1) was also issued on 26/8/2008 calling for details which were returned un-served by the postal authorities. Meanwhile, transfer pricing order dated 29/10/2008 was received from the transfer pricing authority determining adjustment to the arms’ length price (ALP). From the order of the TPO, the Assessing Officer (AO) noticed that one Shri Venkatesh Subramanian appeared before the TPO representing the assessee-company. Therefore, notice u/s 142(1) was sent to the address of Shri Venkatesh Subramanian but the same was also returned un-served. On a telephonic enquiry by the AO, Shri Venkatesh Subramanian stated that he had nothing to do with the company except that he was complying with certain statutory and legal obligations when the company was in the pink of its health. It was also stated that the whereabouts of the directors of the company are also not known. The AO, therefore, directed affixation of notices at the last known address of the assessee. Since there was no response from the assessee even thereafter, the AO completed the assessment u/s 144 of the Act bringing the adjustment of the ALP and the returned income of the assessee to tax.
IT(TP)A No.515/Bang/2012 M/s.SiNett Semiconductors India Pvt. Ltd. Page 3 of 5 3. Aggrieved by the order of the AO, the assessee filed an appeal before the CIT(A) stating that the assessee-company was incorporated in 2003 as a subsidiary of its parent company SiNett Corporation with the primary purpose of carrying out software development activity for its parent company and that the investors of the company was a Venture Capital Investor and since the parent company was not able to successfully commercialize and come out with its technical product, it had to be wound up in 2007 and accordingly, the Indian company of the assessee-company were also shut down. It is also mentioned that the parent company did not earn any profit from any substantial commercial operations and the operations were restricted only to product development which did not succeed and hence it had to be shut down. The learned counsel for the assessee submitted that the assessee had thus, submitted before the CIT(A) the reasons for non appearance before the AO. But, the CIT(A), without considering any of these submissions of the assessee, has proceeded to uphold the findings of the AO while completing the assessment u/s 144 of the Act. He submitted that the assessee had filed detailed submissions against the adjustment to the ALP proposed by the TPO but none of the submissions have been considered by the CIT(A). He submitted that comparability of all the companies adopted by the TPO has been considered by this Tribunal in various decisions and therefore they have to be excluded from the list of final
IT(TP)A No.515/Bang/2012 M/s.SiNett Semiconductors India Pvt. Ltd. Page 4 of 5 comparables consequent to which the addition of the transfer pricing adjustment would has to be deleted. The learned Departmental Representative, however, supported the orders of the authorities below.
Having regard to the rival contentions and the material on record, we find that the assessee had appeared before the TPO but did not appear and file any details before the assessing authority due to which the assessing authority was constrained to complete the assessment u/s 144 of the Act. The assessee, however, had filed an appeal before the CIT(A) giving detailed objections to the TP adjustment made by the TPO/AO. We find that the CIT(A) has failed to consider the detailed objections raised by the assessee against the comparables adopted by the TPO, but has dismissed the appeal by holding that the assessee did not avail the opportunities allowed by the TPO and also by the AO. In our opinion, this is not sustainable. The CIT(A) ought to have considered the assessee’s objections before confirming the additions made by the AO. In view of the same, we deem it fit and proper to remit the issue to the file of the CIT(A) with a direction to reconsider the assessee’s objections to the TP adjustment in accordance with law and judicial precedents on the issue. Needless to mention, the assessee shall be given a fair opportunity of hearing.
IT(TP)A No.515/Bang/2012 M/s.SiNett Semiconductors India Pvt. Ltd. Page 5 of 5 5. In the result, the assessee’s appeal is treated as allowed for statistical purposes.