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2010 (12) TMI 224 - AT - Income TaxArm Length Price - Reference to TPO - Benefit of +/- 5% - Scrutiny - CUP or weighted average method - Held that: - The first issue is that the AO did not grant opportunity of being heard to the assessee and made the addition on the basis of Agriwatch data base - The correct position is that the assessment order has merged with the order of the ld. CIT(Appeals) and, therefore, it ceases to have any force to the extent it is contrary to the order of the ld. CIT(Appeals). - There is no submission that the ld. CIT(Appeals) has not granted proper opportunity to the assessee. In this situation, the irregularity, if any, committed by the AO stands cured. Report of TPO and jurisdiction of AO - Held that: - Although the TPO is expected to make a report on arm's length price on receipt of a reference, his failure to do so does not bar the jurisdiction of the AO to determine the arm's length price as in any case the final determination has to be made by the AO only. Thus, failure to act on the part of the TPO cannot lead to the presumption that the order has become time barred. - The cases decided under this chapter and discussed above show that the AO can refer the matter to the TPO for determining arm's length price of an international transaction or he may determine it on his own. Therefore, it is held that the AO was within his jurisdiction when he determined the price of six items of imports made by the assessee. Variation in price - allowance of 5% of arm's length price - the words in the first and second limbs will have to be read to have the same meaning, i.e., the assessee has determined the arm's length price and thereafter declared such price for the purpose of transfer pricing adjustment. Neither such a price is determined nor declared as the transaction has been shown in the books and the return at the purchase price. Therefore, we are of the view that the aforesaid circular is not applicable on the facts and in the circumstances of the case - deciding in favor of assessee Addition on account of difference in value of closing stock - Held that: - AO valued the stock on the basis of inventory and valuation furnished by the assessee in the course of hearing. However, the assessee took up a plea before the ld. CIT(Appeals) that the assessee has been using weighted average value method. This method has been used in this year, being the first year, and in all subsequent years. - CIT(Appeals) has not examined whether the assessee has followed weighted average value method and whether such method is an accepted method of valuation mandated by AS-2. - matter remanded back for statistical purpose.
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