TMI Blog2016 (5) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... has not charged any interest to AE as well as non-AE entities. Moreover, the TPO has considered only the account receivable of AE without considering the account payable to AEs. It is pertinent to note that account payable to AE and its affiliates are ₹ 28,58,98,204 compared to account receivables from AE and its affiliates of ₹ 26,88,97,856. We find that the account payables are more than the account receivables from AE. Hence, charging of notional interest does not arise. Therefore, we are inclined to remit the issue back to the file of DRP to give their findings clearly in this matter after going through the material available on record and give their findings according to the provisions of the Income-tax Act. - ITA Nos. 431 & 432/Hyd/2015 - - - Dated:- 30-11-2015 - SHRI P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER For The Assessee : Shri C.S. Subramanyam and Shri V. Siva Kumar For The Revenue : Shri Mohan Singh Singhania Both these appeals are preferred by the Assessee against the orders of ACIT, central circle 3(2), Hyderabad, both dated 27/02/2015 for assessment years 2005-06 and 2010-11. The same were clubbed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 8,55,14,091 2.3 Before finalizing the above order, AO forwarded the draft assessment order to Assessee on 28.03.2014. Aggrieved with the draft order, assessee filed its objection before Dispute Resolution Panel (DRP). DRP allowed some relief to the Assessee and rejected the pleas of Assessee on the reopening of the assessment u/s 147. The DRP confirmed the reopening of the assessment u/s 147 and other disallowances made by the TPO and AO and accordingly AO passed the final assessment order. 3. Aggrieved with the above order, Assessee raised the following grounds of appeal before us: 1. The order of the learned Assessing Officer is erroneous in law and on the facts of the case. 2. On the facts and in the circumstances of the case, the learned Assessing Officer erred in reopening the assessment uls.l47 of the Act. after having completed the assessment originally u/s 143(3). 3. On the facts and in the circumstances the reopening of assessment O/s. 147 is not correct as the reassessment resulted in additions exactly as in original assessment. 4. The reference to Transfer Pricing officer under Sec.147 proceedings in incorrect as su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after making adjustment as suggested by the TPO u/s 92CA in respect of income from export of engineering services and commission payment to one of the AE i.e. Venture Global (USA), after excluding telecommunication charges from export turnover to arrive the deduction u/s 10A and addition on account of capital investment subsidy. Subsequently, on appeal CIT(A) dismissed the assessee's appeal and now the assessee's appeal is pending before the Hon'ble ITAT. 2. During the year 2004-05, assessee claimed ₹ 4,64,47,567 as sales commission to Venture Global, USA - one of the parent company. On many occasions during the proceeding before the TPO, CIT(A) and DRP, the assessee failed to establish the genuineness of the payment of sales commission to Venture Global before the department, even not produced the original agreements for verification. No evidence was produced to ascertain the nature of services rendered by the payee i.e. the Venture Global during the course of assessment and other proceedings. Thus, there is no necessity for the assessee company to make the payment to Venture Global and accordingly the arm's length price on the commission payment is to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pened applying the above reasons were cancelled by the co ordinate bench of this Tribunal in orders vide ITA 1904/Hyd/2011 relating to AY 2002-03, ITA 492, 196, 783, 924/Hyd/2008, 1136/Hyd/2013 relating to AY 2003-04 and ITA 1137/Hyd/2013 relating to AY 2004-05. 5.2 Ld AR further submitted that the AO reopened the assessment and completed the reassessment without any new findings contrary to the reasons recorded by him. Merely enhanced some additions, which were already assessed in the original assessment. They are highlighted by the Ld AR in the below chart, which he submitted during the appellate proceedings: S. No. Reason for reopening Adjustment/addition in reassessment Remarks 1 ALP for the commission paid to Venture should be assessed at Rs. NIL ALP was taken at ₹ 1,43,55,375 as was originally assessed The reason did not survive. 2 Dispute between Satyam Computer Services Ltd. and Venture as to administrative charges No addition was made on this count The reason did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holders had impact on the revenue of the Assessee business. It is the failure of the assessee, who had not brought the above revenue to the books. 7. In Rejoinder, Ld AR submitted that the department had recorded the reasons but not the belief. They were in wrong belief after the Satyam episode. Still he insisted that the reference to the TPO in the reassessment proceedings is bad in law. 8. Heard arguments of both the sides and based on the information and submissions made by the counsels, we are of the view that the series of reassessment proceedings were initiated by the AO on the back drop of Satyam episode without applying mind or without cogent evidence on record. It was done mechanically, as it is evident from the fact that the earlier years reopening assessments were dismissed by the coordinate bench of this Tribunal. 8.1 Moreover, the findings and conclusion drawn in the final assessment orders are nothing but same findings of the AO in the original assessment order. Merely certain enhancement were made on the same findings gives the impression that this is only change of opinion rather than escapement of income, which warranted AO to reopen the assessment. We obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The order of the learned Assessing Officer is erroneous in law and on the facts of the case. Transfer Pricing Adjustment 2. The learned Assessing Officer ( AO ) / Transfer Pricing Officer ( TPO ) / Dispute Resolution Panel (DRP) erred in making the transfer pricing adjustment ofRs.65,40,787. 2.1 The learned Assessing Officer ( AO ) / Transfer Pricing Officer ( TPO ) / Dispute Resolution Panel ( DRP ) erred in making the transfer pricing adjustment of ₹ 65,40,787 towards notional interest on receivables from AEs ignoring the fact that out of the said receivables, a sum of ₹ 6.60 crores was receivable from an Indian party which needed to be excluded from reckoning and also omitting to considering that an amount of ₹ 2.88 crores represented unbilled revenue and further, that the amounts payable to all AEs were ₹ 30.1l crores. 2.2 The learned Assessing Officer ( AO ) ought to have appreciated that there were no specific instructions from the DRP confirming the TPO's order to charge notional interest of ₹ 65,40,787 and hence the Assessing Officer is not justified in making the adjustment of ₹ 65,40,787 while computing tota ..... 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