2025 (7) TMI 1032 - AT - Income Tax

Addition u/s 69 - HELD THAT - It is seen that there is no discussion whatsoever regarding this amount in the Ld. AO s order and hence we are inclined to be persuaded by the Ld. DR s argument that this addition has been made due to an oversight. We accordingly direct that this addition should be deleted altogether. TP Adjustment - We find that the aspect of estimated profitability would stand concluded at the level decided between the assessee and the CBDT. However we are conscious of the fact that this agreement itself is dated 24.03.2025 whereas the impugned order predates this agreement. Accordingly we remand this issue back to the file of Ld. TPO for carefully going through the terms of the agreement and working out the Arm s Length PLI in line with the terms of the said agreement. Needless to say the Ld. AO would thereafter give effect to the Ld. TPO s working in this regard. Interest u/s 234A - We find that there is no discussion in this regard and charging of interest appears to have been done in the computation part of the Ld. AO s order. We direct that the interest may be worked out after considering the submissions of the assessee in regard to the extension of date for filing of return by the CBDT. To this extent this issue is remanded back to the file of Ld. AO.

Summary

ISSUES:

• Whether the final assessment order passed u/s 143(3) r.w.s 144C(13) of the Income Tax Act, 1961 was barred by limitation as per the time limit under section 153 of the Act.
• Whether the addition of ? 8,04,08,359/- made u/s 69A of the Act, which was not part of the draft assessment order or directions of the DRP, is justified.
• Whether the transfer pricing adjustment of ? 6,12,63,123/- made by the Transfer Pricing Officer (TPO) is justified, including issues related to:
• Rejection of the assessee's economic and functional analysis and comparables.
• Inclusion of functionally different companies as comparables.
• Upholding erroneous operating margins and failure to adjust for risk profile differences.
• Rejection of the Profit Level Indicator (PLI) adopted by the assessee and acceptance of different PLIs by the TPO.
• Exclusion of certain items in PLI computation by the TPO.
• Failure to make suitable working capital adjustment as directed by the DRP.
• Disregard of the aggregation approach for benchmarking international transactions despite its alignment with a Unilateral Advance Pricing Agreement (UAPA) with the CBDT.
• Whether the DRP exceeded its jurisdiction by directing a fresh search for comparables.
• Whether new comparables introduced by the TPO pursuant to the DRP's direction should be excluded.
• Whether the interest levied u/s 234A of the Act is justified given the filing date of the return and extension notified by the CBDT.

RULINGS / HOLDINGS:

• The addition of ? 8,04,08,359/- u/s 69A of the Act was made due to an oversight and is deleted as there was "no discussion whatsoever regarding this amount" in the AO's order.
• The transfer pricing adjustment issue is remanded to the TPO to "carefully go through the terms of the agreement" dated 24.03.2025 and compute the Arm's Length PLI in line with the Advance Pricing Agreement (APA) entered into between the assessee and the CBDT, with the AO to give effect accordingly.
• The interest levied u/s 234A of the Act is remanded to the AO for recomputation considering the assessee's submission about the extended due date notified by the CBDT, as the charge was only reflected in the computation without discussion.
• The limitation issue under section 153 was raised but not specifically adjudicated in the order; the appeal was partly allowed without quashing the assessment on limitation grounds.

RATIONALE:

• The Court applied the provisions of the Income Tax Act, 1961, particularly sections 69A, 143(3), 144B, 144C, 153, and 234A.
• The addition u/s 69A was found to be a mistake apparent from the record due to lack of discussion or reasons in the draft or final orders, justifying its deletion.
• The transfer pricing issue was considered in light of the Advance Pricing Agreement (APA) between the assessee and the CBDT, which sets an agreed Arm's Length Price (ALP) at the entity level for relevant assessment years; since the APA postdates the impugned order, remand was necessary for reassessment consistent with the APA.
• The interest charge under section 234A required reassessment because the assessee filed the return within the extended due date notified by the CBDT, and the AO's order lacked discussion on this point.
• There was no explicit ruling on the limitation ground, indicating no conclusive finding on that issue in the impugned order.