ITAT deletes section 69 addition due to oversight, remands TP adjustment and section 234A interest for recalculation

The ITAT Kolkata directed deletion of an addition under section 69 due to lack of discussion in the AO's order, accepting the DR's argument that it was made due to oversight. Regarding TP adjustment, the matter was remanded to the TPO to recalculate the Arm's Length PLI considering an agreement dated 24.03.2025 between the assessee and CBDT, despite the impugned order predating this agreement. The AO was directed to give effect to the TPO's subsequent working. For interest under section 234A, the issue was remanded to the AO to recalculate after considering the assessee's submissions regarding CBDT's extension of return filing date, as there was no proper discussion in the original order and interest appeared to be charged only in the computation part.

---

---

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.

---