Tax Appeal Outcome: Assessee partly wins, Revenue dismissed. Decision on ITA No.736/Del/2009 & No.1055/Del/2013.

The appeal of the assessee in ITA No.736/Del/2009 was partly allowed for statistical purposes, while the appeal of the Revenue in ITA No.1055/Del/2013 was dismissed. The decision was pronounced on 27th September 2013.

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Issues Involved:
1. Validity of the CIT(A) order.
2. Rejection of comparables by CIT(A).
3. Use of current year data versus multi-year data for Transfer Pricing (TP) study.
4. Determination of Arm's Length Price (ALP).
5. Disallowance of employee contributions to Provident Fund.
6. Imposition of penalty under Section 271(1)(c).

Issue-wise Detailed Analysis:

1. Validity of the CIT(A) Order:
The assessee challenged the order of the CIT(A)-XX, New Delhi, dated 26th December 2008, for the AY 2004-05, asserting that it was "bad in law and on the facts of the case."

2. Rejection of Comparables by CIT(A):
The CIT(A) rejected certain comparables used by the assessee on grounds that:
- Data was not available in the public domain for the AY 2004-05.
- Functions performed by the comparables and the appellant were different.
- The comparable was a continuous loss-making entity for the last four years.
The assessee contested the rejection of Hitkari China Ltd. and Innovative Tech Pack Ltd., arguing that they were in the same line of business. The CIT(A) upheld the TPO's rejection, noting that Hitkari China Ltd.'s data for FY 2003-04 was unavailable and that Innovative Tech Pack Ltd. was in a different business (manufacturing plastic bottles) and had a negative net worth.

3. Use of Current Year Data versus Multi-Year Data for TP Study:
The CIT(A) and the TPO rejected the use of multi-year data by the assessee, insisting on using current year data (FY 2003-04) for the TP study. The assessee argued that Rule 10B(4) of the Income-tax Rules allows for multi-year data if it influences the determination of transfer prices. The ITAT upheld the CIT(A)'s decision, noting that the assessee failed to demonstrate how prior years' data influenced the determination of transfer prices for FY 2003-04.

4. Determination of Arm's Length Price (ALP):
The TPO initially determined the PLI at 5.99%, which was modified by the CIT(A) to 1.24%. The assessee's declared value was Rs. 5,47,15,000/-, while the ALP was determined at Rs. 6,32,98,266/-. The ITAT upheld the CIT(A)'s determination, rejecting the assessee's arguments for using multi-year data and including certain comparables.

5. Disallowance of Employee Contributions to Provident Fund:
The assessee contested the disallowance of Rs. 1,12,064/- for late deposit of employee contributions to the Provident Fund. The CIT(A) sustained the disallowance due to the absence of details on late payments. The ITAT remanded the matter back to the Assessing Officer for fresh examination in light of relevant judicial pronouncements, including decisions from the Hon'ble Jurisdictional High Court and the Hon'ble Supreme Court.

6. Imposition of Penalty under Section 271(1)(c):
The Revenue appealed against the cancellation of a penalty of Rs. 31,19,450/- levied under Section 271(1)(c). The ITAT noted that the addition was due to TP adjustments and not due to concealment or furnishing of inaccurate particulars. Relying on the Supreme Court's decision in CIT Vs. Reliance Petroproducts Pvt. Ltd., the ITAT upheld the CIT(A)'s cancellation of the penalty, stating that the mere making of an unsustainable claim does not amount to furnishing inaccurate particulars.

Conclusion:
The appeal of the assessee in ITA No.736/Del/2009 was partly allowed for statistical purposes, and the appeal of the Revenue in ITA No.1055/Del/2013 was dismissed. The decision was pronounced in the open court on 27th September 2013.

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