TaxTMI 
TaxTMI 
2024 (1) TMI 23
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....s a consequence of the order of the Transfer Pricing Officer passed under subsection (3) of section 92CA: and (ii) any non-resident not being a company, or any foreign company." Therefore, the variation referred in subsection (1) of 144C should arises as a consequences of the order passed by the Transfer Pricing Officer under section 92CA (3) and the assessee should be a non-resident. Therefore, both the conditions are cumulative and are mandatory to be covered under the term "eligible assessee". In our case, there was no order of the TPO in terms of section 92CA(3). The Ld. AO neither referred the matter to the TPO nor made any adverse comment on the benchmarking of the international transaction with the AE on cost plus 15% as submitted by the appellant assessee through TP report and other various submissions. 2. Because the impugned assessment order passed by the Ld. AO time barred and beyond the limitation as per section 153(1). This provision 153(1) mandates that the assessment order under section 143 should be passed within 18 months from the end of the assessment year. Since this matter was not referred to the TPO in of section 92CA, therefore the e....
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....further addition /attribution can be made to the assessee income. 6. Because the Ld. AO and subsequently Ld. DRP both erred in not appreciating the real income theory. Once the assessee has entered an arrangement with the AE under cost plus 15% benchmarking and that has not been disputed, the AO attempted to tax the hypothetical income of Rs 94,00,617 which never accrued to the assessee. 7. Because the Ld. AO and subsequently Ld. DRP both erred in not appreciating that the credit note adjustment was for the purpose of benchmarking of the international transaction with the AE under the Income Tax laws and has nothing so do with the GST. The basis of GST returns is as per the GST law and not as per the Transfer pricing provisions of Income tax. Once the assessee has complied the TP provisions for the purpose of benchmarking the international transaction and recognized the revenue accordingly, there was no occasion for the Ld AO to rely on the GST return figure without appreciating the different basis of reporting under different law. 8. Because the Ld. AO and subsequently Ld. DRP both, has erred in not appreciating that the all the inward and outward entry ....
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....ce Rs. 1,38,893/- 7. The assessee objected to the above addition and furnished additional evidences before the ld. DRP. The ld. DRP obtained a remand report on all the above issues including additional document submitted from the AO. The AO submitted as under: * During the course of assessment proceedings, discrepancy amounting to Rs. 94,00,617/- was noticed between the export sales declared by the assessee-firm in its profit and loss account and in its sales ledger. In order to explain the discrepancy, the assessee had submitted a debit note amounting to Rs. 94,00,617/-. Having realized its mistake, the assessee later submitted a credit note of the same amount issued on the same date. The selfcontradiction in the replies of the assessee makes it evident that the assertions of the assessee are not genuine and it has deliberately attempted to misguide the tax authorities to suppress its sales and evade its taxes in India. The actual sales of the assessee are Rs. 10,36,95,673/- and not Rs. 9,42,95,056/- as declared by the assessee in its return. Further, it is emphasized that the assessee has reported the correct figure of sales revenue i.e. Rs. 10,36,95,673/-in its GS....
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....ces submitted by the assessee are handwritten (kutcha) and the visual examination shows that the handwriting on the invoices and pen used on them are identical indicating that they may have been forged. The genuineness of these invoices needs further verification. * The expenses amounting to Rs. 1,38,893/- claimed as advertisement and publicity were proposed to be disallowed as the assessee had itself agreed that the same has been wrongly booked. 8. The assessee has filed its rejoinder to the remand report before the ld. DRP, the salient points are as under: * The details of such credit or debit which are as under: AY Sales as per Export Invoice Debit Note Credit Note Sales Turnover as book Corresponding Sales reported in ITR 2015-16 8,40,98,173 18,59,2757 10,26,90,930 10,26,90,930 2016-17 10,15,89,776 74,47,605 10,90,37,381 10,90,37,381 2018-19 9,78,41,160 1,16,47,255 8,61,93,905 8,61,93,905 2019-20 10,08,77,863 1,53,78,981 8,54,98,882 8,54,98,882 2020-21 10,36,95,673 94,00,617 9,42,95,056 9,42,95,056 2020-21 8,38....
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....re, the allegation of the AO that it is an afterthought is without any basis. * It is well settled that once the transaction between the two AE's is at Arm Length and here is no dispute on this part nothing further can be attributed on the AE. The Supreme Court Has propounded this principle in the case of in the case of Morgan Stanley as reported in the 210 CTR 419 (SC). * Therefore once the transaction is at Arm Length between the assessee and the AE and there is no dispute on that part, the credit note which has been issued to achieve such benchmark only and not be rejected on the basis mere clerical error or not matching with any other law which is not consistent with the TP provisions. 9. Disallowance of Purchase amounting to Rs. 4,38,039/- on the allegation that such a purchase is a bogus purchase. * The AO has alleged that the purchase to the tune of 4,38,039/- is bogus purchase and the list of such purchase are as under: S.No. Vendor Name Amount Remarks 1 HK International 13,542/- Supplier of glass accessories 2 Rajveer Singh 37,792/- Supplier of Glass. 3 Manvi Food 50,657/- Supplier of food fo....
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....o 348 It has been entered in the store through entry no-651 and 652 which has not been denied by the AO. 4. Inox Air Products Ltd. AAACI5569D Page no- 360 to 371 It has been entered in the store through entry no-748, 743, 731, 709 720, 696 673 which has not been denied by the AO. 5. Vikram Paints & Sanitary Store AVAPS1345D Page no- 387 to 389 * These expenses are fully supported by the invoices with proper stamping and payment through NEFT. Disallowance of advertisement and publicity expenses amounting to Rs. 1,38,893/-. 12. These expenses are Business promotion expenses mainly incurred by the assessee for the refreshment of the office guest and vendors. The ledger of the said expenses is enclosed in the Page 450 to 479 of the Volume-2 of the document submitted and the supporting documents are enclosed. From the analysis of the ledger, it comes out that these expenses are petty expenses incurred for the purpose of Business only. Merely some of the vouchers are handwritten does not make such entry as false as all these expenses are supported by evidence and for the business purpose only. 13. After going through the remand report and the reb....
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....ailable on record. 17. We find that the allegation of the revenue that the credit note was afterthought is baseless as the credit note was duly accounted in the sales for the purpose of benchmarking, the corresponding adjustment was made by the AE, and furthermore benchmarking was duly accepted by the Assessing Officer. Once the transaction has been benchmarked at the arm length and no adverse finding was there, then no further addition can be done, and no further attribution can be made. The AO and subsequently ld. DRP both erred in not appreciating the judgment of Hon'ble Supreme Court in the case of DIT (International Taxation) Vs. Morgan Stanley as reported in 292ITR 416(SC). We find that the assessee has consistently benchmarked its international transaction with the cost plus @ 15% markup and it has been consistently accepted by the department during the assessment procedure and has passed the assessment order u/s 143(3). The AO erred in not appreciating that issuance of credit note / debit note was a regular year end feature of the assessee to achieve such benchmarking of mark -up. Once such transaction is held to be at ALP, no further addition /attribution can be made to....