2011 (2) TMI 1285 - AT - Income Tax

Tribunal criticizes Dispute Resolution Panel for lack of reasoning, orders fresh adjudication.

Cincom Systems India (P.) Ltd. Versus Deputy Commissioner of Income-tax, Circle 3(1)

The Tribunal found that the Dispute Resolution Panel (DRP) failed to adequately consider the assessee's submissions and issued a non-speaking direction, ... Dispute resolution panel Issues:1. Dispute regarding the order of the Assessing Officer dated 21-9-2010 for assessment year 2006-07.2. Validity of the directions given by the Dispute Resolution Panel (DRP) under section 144C of the IT Act.3. Adjudication on Arm's Length Price under section 92C(3) by the DRP.4. Consideration of objections raised by the assessee regarding Transfer Pricing related issues.5. Compliance of the DRP with the provisions of section 144C of the IT Act.6. Legal principles governing administrative orders and quasi-judicial authorities.7. Precedents related to the obligation of quasi-judicial authorities to provide cogent and germane reasons for their decisions.Analysis:1. The appeal and Stay Application were directed towards the order of the Assessing Officer dated 21-9-2010 for the assessment year 2006-07. The draft order was passed based on the direction under section 144C by the Dispute Resolution Panel dated 30-8-2010.2. The counsel of the assessee contended that the DRP did not consider the assessee's submissions adequately and passed a non-speaking direction. The objections raised included the failure to consider arguments, evidence, and factual errors pointed out by the assessee without providing reasons for not accepting them.3. The DRP's adjudication on Arm's Length Price under section 92C(3) involved various objections raised by the assessee, such as the failure to discharge the statutory onus, improper application of comparability criterion, lack of adjustments for risk profiles and working capital differences, and disregarding transfer pricing regulations and judicial precedence.4. The DRP considered the objections raised by the assessee and the submissions filed. It was noted that the DRP found no merit in the objections regarding the initial reference to the TPO by the Assessing Officer. The DRP also addressed issues related to choosing comparables and the use of current year data as mandated by law.5. Section 144C outlines the obligations of the DRP, including issuing directions after considering the draft order, objections filed by the assessee, evidence, reports, and records. The DRP's directions are binding on the Assessing Officer and must be issued after giving an opportunity to be heard.6. The Tribunal found that the DRP's order was too laconic and failed to address the voluminous submissions made by the assessee. Citing legal principles, the Tribunal emphasized the need for administrative orders to adhere to the rules of natural justice.7. Referring to precedents, the Tribunal highlighted the obligation of quasi-judicial authorities to provide cogent and germane reasons for their decisions. The Tribunal remitted the issue back to the DRP for proper consideration and emphasized the importance of giving the assessee a fair opportunity to be heard.8. The Tribunal's decision allowed the appeal for statistical purposes and dismissed the Stay Application as infructuous due to remitting the matter back to the DRP for fresh adjudication, emphasizing the need for proper consideration and a speaking direction under section 144C of the IT Act.