2023 (9) TMI 479 - ITAT MUMBAI

TP Adjustment - Adjustment to Arm Length Price (ALP) u/s 92C - MAM - Import of men's wear for resale made by the Appellant from its Associated Enterprises (AE) - HELD THAT:- We find that the coordinate bench of the Tribunal in assessee’s own case in M/s.Celio Future Fashion Private Limited v/s ACIT [2019 (3) TMI 1696 - ITAT MUMBAI] while deciding a similar issue held that RPM is the most appropriate method for benchmarking the international transaction of “import of men’s wear for resale”.

Thus the contention of the assessee in applying RPM as the most appropriate method is upheld. Accordingly, the order passed by the TPO/AO on this issue is set aside and the TPO/AO is directed to de novo benchmark the international transaction pertaining to “import of men’s wear for resale” by applying RPM as the most appropriate method. As a result, ground no.1, raised in assessee’s appeal is allowed for statistical purposes.

Addition u/s 69C - treating loans and advances as “unexplained’ - DRP held that the proposed addition is not called for, however, directed the AO to make certain verifications, such as advances have been made through banking channels, advances are recorded in the books of accounts and the details are reconciled with the increasing advances during the year - HELD THAT:- As per section 144C(8) of the Act, the DRP can confirm, reduce, or enhance the variation(s) proposed in the draft assessment order, while issuing the directions under section 144C(5) - DRP is not empowered to set aside any proposed variation or issue any direction for further enquiry and passing the assessment order, as was done in the present case.

Therefore, we are of the considered view that the various directions issued by the learned DRP in respect of verification on various aspects are completely contrary to the provisions of section 144C(8) of the Act and the final assessment order passed by the AO in conformity with these directions on this issue are not legally sustainable. Accordingly, the addition made by the AO pursuant to the directions of the learned DRP on this issue is deleted.

Treating the outstanding balance of sundry creditors as “unexplained’ and taxing the same as income u/s 115BBE - DRP held that the addition proposed by the AO is not justified, however, directed the AO to verify that the addition to creditors is on account of trade creditors and the character of royalty - HELD THAT:- As we find that in respect of this issue also the learned DRP issued directions to the AO to verify certain aspects as noted in directions, which are contrary to the provisions of section 144C(8) of the Act as the same specifically prohibits issuing any direction for further enquiry. Therefore, we are of the considered view that these directions and the final assessment order passed by the AO in conformity with the same on this issue are not legally sustainable. Accordingly, the addition made by the AO pursuant to the directions of the learned DRP on this issue is deleted.