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2021 (2) TMI 1320 - AT - Income TaxTP Addition - Admissibility of additional evidences by CIT-A - HELD THAT:- On perusal of the order sheet of transfer pricing proceedings, it is undisputed that query regarding the comparable M/s Alta Moda was made only one day prior to the passing of the order by the TPO and thus it is evident that no sufficient opportunity was provided to the assessee to adduce evidence in support to challenge of the comparable, namely, M/s Alta Moda. Thus, we do not find any error in the finding of the Ld. CIT(A) that the assessee is eligible for filing additional evidences under Rule 46A(1)(d) of the Rules. In view of the decision of the Hon’ble Delhi High Court in the case of Manish Buldwell Private Limited 2010 (12) TMI 760 - ITAT - DELHI (E) the Ld. CIT(A) was required to forward the additional evidences for the comment of the Learned AO/TPO on merit. The assessee has produced additional evidence before the Ld. CIT(A), which were forwarded to the Learned TPO. The Ld. CIT(A) in the impugned order has reproduced the comment of the TPO on the issue of selection of comparable M/s Alta Moda and reimbursement of expenses. On perusal of the above comments of the Learned TPO, we find that that there is no violation on the part of Ld CIT(A). He had duly forwarded all evidences for the comment of the Ld. TPO, but the Ld. TPO consciously did not give any comment on the evidences related to reimbursement of expenses. The Ld. CIT(A) can’t be faulted in such circumstances for the inaction of the Ld TPO. In view of above facts and circumstances, we don’t find any violation on the part of Ld. CIT(A) in admitting additional evidences under Rule 46A of the Rules. The ground no. 1 of the appeal is accordingly dismissed. Exclusion of comparable M/s Alta Moda -. As far as contention of the learned Counsel that the company, M/s Alta Moda is engaged in construction, we find that under the clause of general information (schedule -13) to the significant accounting policies and notes of account. The remark of business of construction may be with reference to construction of the store, however, for verifying this fact beyond doubt, we feel it appropriate to set aside the finding of the Learned CIT(A) on the issue in dispute and restore the matter back to the AO/TPO for ascertaining the functions of the company during relevant year from the company itself using authority under section 133(6) of the Act. As to whether the company is in retailing through its own shop or though ‘Franchise’ model is concerned, on perusal of chart of financial statement of the company for financial year 2008-09 (i.e. assessment year under consideration) available in impugned order, we find that in financial year 2008-09, no franchise commission has been shown as received. As far as the ground that while computing margin of the Company, the custom duty paid on import of products has been excluded, is concerned, we are of the opinion that for comparability gross profit margin of both the company and the assessee has to be computed in similar manner. Both in the case of assessee as well as in the comparable company treatment of the custom duty has to be given in the similar manner. If the custom duty is part of the trading account then same is to be treated in identical manner while computing the gross profit margin of the company as well as the assessee. Since we have already rendered the issue of verifying the function of the company to the Ld AO/TPO, so if the company is found to functionally similar to the assessee, the Ld AO/TPO, shall compute the margin of the company in view of our direction above. Appeal of the Revenue is accordingly allowed for the statistical purposes Adjustment to the international transaction of reimbursement of expenses to Associated Enterprises (AEs) - HELD THAT:- There is no dispute on the fact that only sample bills of expenses reimbursed to the AEs were produced before the learned TPO during original transfer pricing proceedings and therefore the learned TPO proposed adjustment in respect of the expenses for which bills/invoices were not produced before her. During appellate proceedings before the CIT(A), the assessee has produced entire details of expenses reimbursed along with bills/invoices as additional evidence, which were forwarded by the Learned CIT(A), to the learned TPO for his comments. TPO objected to the admission of the additional evidences and abstained from giving his comments on the evidences of expenses, which shows that he was unable to point out any defect in the evidences of the assessee. Before us, the Ld DR has also not pointed out any defect or irregularity in analysis of the CIT(A) on the issue of expenses reimbursed. In such circumstances, no useful purpose will be served by sending the matter back to Ld. TPO. We, accordingly reject the arguments of the Ld. DR and dismiss the ground No. 3 of the appeal.
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