DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(1) ,PUNE, SWARGATE vs. GRUPO ANTOLIN INDIA PRIVATE LIMITED, PUNE

Tersely stated facts of the case are that; 2.1 The assessee company is a subsidiary of Grupo Antolin Irausa SA, Spain, engaged in manufacturing of car-interiors such as headliners, door panel and parcel trays etc. and also engaged in providing engineering, drawings and designing services relating thereto. 2.2 The original ‘NIL’ return of income [in short ‘ITR’] filed by the assessee was subsequently revised declaring total loss of ₹2,07,67,090/-. The case of the assessee was selected for scrutiny by service of notice u/s 143(2) of the Act. In assessment proceedings upon coming to notice that, the assessee had undertaken certain international transactions, the Ld. AO on approval made a reference to Transfer Pricing Officer [in short ‘TPO’] u/s 92CA(1) of the Act for computing/determining Arm’s Length Price [in short ‘ALP] in relation to such international transactions entered/undertaken by the assessee company. 2.3 On a reference, the Ld. TPO passed an order u/s 92CA(3) of the Act wherein an upward Transfer Price [in short ‘TP’] adjustment for ₹5,68,19,782/- was made in relation to consideration against ‘receipt of advisory services’. The Ld. AO accordingly incorporated the TP adjustment and framed an assessment u/s 143(3) r.w.s. 144C(3) r.w.s. 92CA(4) of the Act and assessed the taxable income at ₹3,60,52,690/- as against retuned loss reported through revised ITR. 2.4 Aggrieved assessee carried the matter in an appeal u/s 246A(1) of the Act, wherein the Ld. CIT(A) following the Co-ordinate bench’s decision in assessee’s own case for earlier years allowed the appeal and deleted the TP adjustments. In effect the revised returned loss been reinstated.

During the course of hearing, the Ld. DR Mr Srivastava without touching merits of the case, adverting to para 3.3 placed at Pg5/12 of impugned order averred that, the impugned adjudication is suffered from provisions of s/s (6) of section 250 of the Act. In the present case the Ld. CIT(A) culminated the appellate proceedings merely by placing reliance on earlier years orders of this Tribunal. The impugned adjudication neither identified issue under challenge nor provided any independent findings as to whether any advisory services were actually received by the assessee against which payment of consideration claimed. The Ld. DR further submitted that, the first appellate authority while dealing with the appeal under challenge was duty bound to conduct independent enquiries in relation to issues before him and was then to arrive at logical decision thereon after elaborating independent findings therefore, however same is sidestepped. Au contraire, the Ld. AR Mr Dangi solidifying former facts argued that, the issue on merits has already been settled by the Tribunal in AY 2009-10 and same was followed by it in subsequent AY 2011-12 & 2013-14. The Ld. CIT(A) maintaining judicial discipline relied the same and adjudicated the issue in favour of assessee. Since there has been no change in facts, circumstance & nature of international transactions undertaken by assessee in the instant year, therefore the Revenue’s challenge on settled issue is pointless.

We have heard rival contentions, subject to rule 18 of ITAT-Rules 1963 perused material placed on record and considered the facts in light of settled legal position which are also forewarned to rival parties for their rebuttal.

We observed that, on a reference from Ld. AO, the Ld. TPO after his elaborate discussion concluded that, in relation to payment consideration of ₹5,68,19,782/- towards ‘Receipt of Advisory Services’ involving M/s Grupo Antolin Irausa, the appellant did fail to demonstrate & establish on record that it actually had received any advisory services in the year under consideration. This conclusion led to determination of ALP for advisory services at ‘NIL’ by the Ld. TOP as against the sum claimed by the appellant. In consequence an upward TP adjustment was proposed and since the assessee did not dispute it before Dispute Resolution Panel [in short ‘DRP’] the assessment was framed incorporating such upward TP adjustment & assessed total income accordingly. The appellant later assailed the upward TP adjustment in an appeal wherein the Ld. CIT(A) allowed one by placing reliance on the order of Co-ordinate bench in appellant’s own case for earlier years. We observed that, while adjudicating the issue in favour of the appellant, the impugned adjudication did fail to (i) identify the issue under challenge, (ii) conduct necessary enquiries, (iii) give independent findings thereon and (iv) substantiate the decision with valid reasons. In the event the Ld. TPO’s findings that the payment consideration by the appellant was without any receipt of advisory services from its AE’s i.e. absence of quid-pro-quo remained un-disproved on records. The appellant could hardly dismantle this factual finding from the impugned order under challenge.

We are heedful to the restriction placed by clause (a) of sub-section (1) of section 251 of the Act which obligates the Ld. CIT(A) to adjudicate the issue either by confirming or annulling the addition or reducing or enhancing the addition made by the assessing officer without the right to remand the matter back. However while exercising the jurisdiction u/s 251(1)(a) of the Act, the Ld. CIT(A) is required to state point of determination, its decision thereon and clear reasons therefore in terms of section 250(6) of the Act. This exercise by the Ld. CIT(A) is a pre-requisite and invariably necessary for each assessment year in each case irrespective repetition. This is because in taxation each assessment year per-se is a separate unit which is governed by its own peculiar facts and as such principle of res-judicata is inapplicable in fiscal laws. Therefore any adjudication in taxation is final utterly for the year of adjudication only and it does not govern any later or subsequent year. This finds fortified in ‘Radhasoami Satsang Vs CIT’ [1992, 193 ITR 321 (SC)], ‘Akzonobel India Pvt. Ltd. Vs Addl CIT’ [2022, in ITA 370/2022, (Del)].

In the instant case, we find no whisper in the impugned order about (i) the verification as to actual receipt of advisory service by the appellant from its AE against which payment consideration claimed (ii) analysis of quid-pro-quo from the evidences brought on records & independent findings thereon and (iii) reasoning in accepting the claim of appellant in support of decision arrived. In view of this uncontroverted facts, the impugned adjudication in our considered view is prejudiced by earlier years decision and not based on the evidences produced (if any) to establish the claim of receipt of services from AE.

It is a trite law as laid down by Hon’ble Supreme Court in case ‘Chandra Kishore Jha Vs Mahavir Prasad’ reported in 8 SCC 266 (SC), that ‘if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner’. In view hereof, we hold that, the impugned adjudication by the first appellate authority sidestepping the dictate is not in consonance with the provision of sub-section (6) of section 250 of the Act. For the reasons we set-aside the impugned order and without commenting on merits of the case, we deem it proper to remand the file to first appellate authority (faceless regime) with a directions to deal with the issue of upward TP adjustment on the basis of material already brought on record and held as on the date of impugned order, without burdening the appellant to reproduce/resubmit evidences on the subject matter and pass a speaking order in terms of section 250(6) of the Act. Ordered accordingly.

In result, the appeal of the Revenue is allowed for statistical purposes in above terms. u/r 34 of ITAT Rules, this order pronounced in open court on this Thursday, 18th day of April, 2024.