TaxTMI 
TaxTMI 
2026 (2) TMI 812
X X X X Extracts X X X X
X X X X Extracts X X X X
....d.CIT(A) is erred by relying on the stand of the transfer pricing officer in assessee's own case in AY 2022-23, without appreciating the fact that each year's transfer pricing proceeding is distinct and based on the facts and circumstances on that year only. 3. Whether on the fact and circumstances of the case and in law, the Ld.CITT(A) is erred by relying on the stand of the transfer pricing officer in assessee's own case in AY 2022-23, without appreciating the fact that transfer pricing officer had specifically mentioned in his order that findings and discussions made here applicable only for this assessment year being referred, i.e.. for AY 2017-18 and also the fact that documentation, benchmarking and profit margins earned by the assessee during AY 2022-23 differed from preceding years. 4. The appellant craves, leave to amend or alter any grounds or add a new ground which may be necessary." 2. On receipt of memorandum of appeal of Revenue, the assessee has filed its C.O. raising following grounds: "1. The Hon'ble CIT(A) erred in not adjudicating on the issue of upward adjustment made in the assessment order u/s 143(3), where the all....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eceived to assessee on 15.07.2025 and the present C.O. was filed only on 03.10.2025, thus, there is delay of 50 days. The delay in filing C.O. is neither intentional nor deliberate but due to the reasons that instructing counsel was facing heart related ailment. In the month of September, the said person was hospitalised. In the meantime, his sister, Jyotsna Kothari was also hospitalised. Further, in last week of September, his sister in law was died. Thus, due to such circumstances, he could not take necessary step for preparation and filing the cross-objection. The ld. AR of the assessee prayed for condoning the delay in filing his CO. 4. On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the Revenue after going through the contents of affidavit and various medical prescriptions attached thereto, would submit that bench may take appropriate decision on the plea of assessee. 5. Considering the submissions of both the parties and material placed before us, we find that delay in filing C.O. is not intentional or deliberate. Thus, delay in filing such C.O. is condoned. Now, adverting to merits of the case in accordance with various grounds of app....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee's cross objection and thoroughly calculation of TP adjustment, which is subject matter of ground No. 2 to 5 of assessee's cross objection. 7. Against the ground No. 1 to 3 of reminder grounds of appeal, the assessee submitted that jewellery manufacturing unit situated in special economic zone, which is eligible unit, has purchased cut and polished diamond from the diamond division of assessee. Dispute in respect of specified domestic transaction of purchase of cut and polished diamonds by you jewellery manufacturing division from diamond division. The Department seeks to treat the jewellery manufacturing division as a tested party is whereas assessee maintained that diamond division is the appropriate tested party. The ld. A.R. of the assessee fairly submits that if assessee succeeded on this ground that is if domestic diamond trading unit is accepted as a tested party, there would not be any transfer pricing adjustment and all other grounds of appeal and the Department grounds of appeal would become academic. The working of arm's length price considering diamond division as a tested party is provided as per the detailed working on factual paper book at page No. 137-139, w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nverted into precise 3D digital model using auto CAD software. Thereafter, a resin piece is generated from the digital design. Finally, a master model usually in silver or copper is created from the design. After the design is created, complex process of mould making follows. Thereafter a complicated jewellery manufacturing process follows in the SEEPZ manufacturing unit of the assessee. The jewellery division utilises Auto CAD software, 3D resin printers (CAM) and metallurgical casting equipment. It also uses heavy machinery like Ledger machines casting machine and XRF testers and specialised labour. At the end the jewellery is checked for quality and thereafter exported after packing.The whole process require experienced and technical persons. This division's profit is driven by intangible heavy design and precision metallurgy, making it inherently more complex and difficult to benchmark reliably. So far as legal justification for least complex entity rule is concerned, transfer pricing principal mandate that tested party be the entity with the simplest functional profile. Comparison between the two divisions is stock: the diamond division is a procurement and sorting hub whereas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the year under consideration, the predecessor prepared its own separate financial, and filed return of income for the period from 1stApril 2016 to 27th September 2016 and its own PAN declaring income of Rs.53,14,440/-. In similar manner, assessee prepared separate financials and filed return of income for the period 28thSeptember 2016 to 31stMarch 2017 under its own PAN declaring income at Rs. 1,59,21,340/-. Both the entities filed their own separate TP report and forms 3CEB. The respective assessing officer selected the cases for scrutiny by issuing notice under section 143(2) and subsequently also made their separate TP references. Thereafter, TPO also passed separate TP orders, copy both the TP orders is placed on record. However, the TPO of the assessee considered the transaction of private limited company also filed the computing TP adjustment in the hands of assessee. Thereafter, a separate assessment order under section 143(3) of the Act was passed for Private Limited Company on 31stMarch 2021 accepting the return income with Nil addition, assessment order is placed on record. Separate assessment order was passed for the assessee LLP on 14.06.2021 making addition on acco....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Vs DCIT (ITA No. 1699/Mum/2023), * Manish Tyagi Vs ITO,( ITA No. 5548/Del/2015), * Kalptaru Project International Limited Vs DCIT (ITA No. 5961/Mum/2025. 9. In support of ground No. 2 to 5 of CO, the landed A.R. of the assessee submits that in case the assessee succeeds on the issue of domestic diamond trading unit to be taken as tested party, there would not be any transfer pricing adjustment and all other grounds of assessee's including other submission would become academic. The ld A.R. of the assessee further submitted that TPO/AO erred in applying the differential margin of 8.76% (difference between assessee is 11.70% and TPOs 2.94%) on the entire operating revenue of jewellery division. The transfer pricing provisions under Chapter X apply only to specified domestic transaction. The TPO has no jurisdiction to proposed as adjustment on transactions with unrelated third party. To support such submission, the ld A.R. of the assessee relied upon the following decisions; * CIT versus Alston Project India Ltd (394 ITR 141 ), * CIT versus Bhansali & CO. (94 taxmann.com552) (Bombay), * DCIT versus Spicer India Ltd (458 ITR 40)(Bombay) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assesses own case for AY 2022-23, without appreciating the fact each year transfer pricing proceeding is distinct and based on the facts and circumstances of that year only. On various grounds of appeal raised by assessee in its CO, the ld Sr-DR for the revenue supported the order of TPO /AO. The ld CIT-DR for the revenue also relied on the decision of Mumbai Tribunal in DCIT Vs Dharmanandan Diamonds Pvt Ltd ( in ITA No. 4232/Mum/2019 dated 19.05.2022. 12. We have considered the rival submissions of the parties and have gone through the order of lower authorities. We find that before us, the landed A.R. of the assessee, though vehemently argued various points on different issues, however he fairly submits that in case Diamond division that is DTA unit is considered/ accepted as a tested party,all other issues will become academic. We find that in subsequent assessment year, the TPO himself accepted the DTA unit as tested party in his order dated 27.01.2025, copy of which is already placed on record at page no. 229-230 of paper book. Otherwise, such facts are not in dispute. We further find that, during TP proceedings, the assessee rectified its error and made a prayer to treat ....