2025 (9) TMI 445 - AT - Income Tax

Upward s.92CA adjustment upheld for partner-to-firm land revaluation; comparable rejected for date, Rs.9,659/sq.m applied to 4,522 sq.m confirming Rs.8,320,480 addition

ITAT (Ahmedabad) upheld AO/TPO and CIT(A) findings, sustaining an upward adjustment under s.92CA for a specified domestic transaction in which land ... Addition on account of upward adjustment as per TPOs order under section 92CA - specified domestic transaction entered into by the appellant firm with Partner of the firm in respect of non. agricultural land HELD THAT:- AO rejected both the contention of the assessee noting that the land originally acquired was 7537 Sq. mtrs. by the partner and the contention therefore that only 4522sq.mt land was acquired was incorrect. He held that the assessee, therefore, was not justified in stating that the cost of acquisition of land mentioned in the sale deed of Rs.5,20,00,000/- pertained to cost of acquisition 4522 Sq.meters of land transferred to the assessee firm. Comparable transaction furnished by the assessee pertained to A.Y. 2016-17, since the date of transaction was 15.10.2015 and the impugned year being A.Y. 2015-16, he accordingly held that the transaction was not comparable for the purpose of CUP method prescribed in Rule10B(1)(a) of the IT Rules. He accordingly recomputed ALP of the impugned transaction applying rate of Rs.9659/- per Sq.meters to the land, 4522 Sq. meters, transferred to the assessee by the AE and made an upward adjustment to the impugned specified domestic transaction of Rs.83,20,480/-. Before us, in the absence of any representation on behalf of the assessee, the findings of the AO/TPO upheld by the Ld.CIT(A) remain uncontroverted. We see no reason therefore to interfere in the order of the CIT(A) confirming the addition made to the income of the assessee. Decided against assessee. ISSUES PRESENTED AND CONSIDERED 1. Whether the Appellate Tribunal should entertain an appeal delayed by 23 days where no condonation application or explanation for delay is filed and no authorised representative appears for the assessee. 2. Whether the upward adjustment of Rs.83,20,480 to the value of a specified domestic transaction (transfer of land by a partner to the firm) under the transfer pricing provisions (including s. 92CA and Rule 10B CUP method) was correctly made by the AO/TPO and confirmed by the first appellate authority. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Entertainability of delayed appeal and non-appearance Legal framework: Procedural principles governing entertainability of appeals require filing within prescribed time and, where delay occurs, an application for condonation with sufficient cause. Representation at hearings must be by an authorised person; absence of authority and repeated non-appearance are material. Precedent Treatment: No specific precedents were cited in the judgment; the Tribunal applied settled procedural norms relating to delay and representation. Interpretation and reasoning: The Tribunal noted a 23-day delay in filing the appeal and absence of any condonation application or explanation. It further observed that on earlier occasions an application for adjournment was filed by a chartered accountant without production of a letter of authority. Given the lack of explanation for the delay and no authorised representative appearing before the Tribunal, the appeal was held not fit for adjudication on merits. The Tribunal emphasised that procedural non-compliance (delay plus failure to demonstrate sufficient cause or proper representation) justified dismissal. Ratio vs. Obiter: Ratio - where an appeal is delayed and no condonation application or sufficient cause is furnished, and no authorised representative appears, the Tribunal may dismiss the appeal for non-entertainment. Obiter - procedural details regarding previous adjournment requests and unauthorised representation are explanatory. Conclusion: The appeal is dismissed for non-entertainment due to unexplained delay and lack of authorised representation; the Tribunal declines to admit the appeal for adjudication. Issue 2 - Validity of upward adjustment under transfer pricing provisions for land transfer by partner to firm Legal framework: Transfer pricing provisions (including s. 92CA and Rule 10B CUP method) permit the TPO/AO to determine Arms' Length Price (ALP) for specified domestic transactions with an Associate Enterprise (AE) and to make upward adjustments where the transaction price is not at ALP. The CUP method compares the price in the international/AE transaction with comparable uncontrolled transactions contemporaneous and comparable in material respects. Precedent Treatment: The Tribunal did not rely on external judicial precedents; it assessed factual and documentary record and applied statutory transfer pricing methodologies and requirements for comparability. Interpretation and reasoning: Facts found and applied by the authorities - the partner had acquired 7,537 sq. mtrs for Rs.7,28,01,200 (per sq. mtrs Rs.9,659) but transferred only 4,522 sq. mtrs to the firm, with the firm recording the transfer at Rs.5,20,03,000 (per sq. mtrs Rs.11,499). The TPO/AO called for justification and comparable benchmarking; the assessee relied on the sale deed and argued that the effective cost pertained only to the 4,522 sq. mtrs (post-conversion to non-agricultural land) and placed reliance on a comparable sale dated 15.10.2015. The AO rejected the contention that the sale deed cost related solely to 4,522 sq. mtrs because the original acquisition was for 7,537 sq. mtrs; he further held the submitted comparable fell in A.Y. 2016-17 and was not contemporaneous for A.Y.2015-16 under CUP Rule 10B(1)(a). In absence of acceptable comparables or benchmarking, the AO/TPO applied the per sq. mtr cost of acquisition (Rs.9,659) to the 4,522 sq. mtrs transferred and computed an upward adjustment of Rs.83,20,480. The Tribunal noted that these findings by AO/TPO were upheld by the CIT(A) as speaking and judicious orders and, in the absence of any contest or representation by the assessee before the Tribunal, remained uncontroverted. Ratio vs. Obiter: Ratio - where a taxpayer fails to furnish acceptable contemporaneous comparables or to substantiate that the consideration recorded in the deed represents the actual cost attributable to the specific portion transferred, the AO/TPO may determine ALP by reference to the per-unit cost of acquisition and make an upward adjustment. Obiter - discussion pertaining to the sale deed language on conversion to NA land and the assessee's interpretive claim are factual observations supporting the AO's rejection. Conclusions: The AO/TPO's upward adjustment to determine ALP was reasonable on the facts: the recorded sale deed did not convincingly attribute the stated cost to the transferred area, and the claimed comparable was not contemporaneous; therefore the AO's application of per unit acquisition cost and resulting adjustment of Rs.83,20,480 was sustained and rightly confirmed by the CIT(A). In absence of any challenge or evidence before the Tribunal, there was no basis to interfere with that determination.