The order of the Bench was delivered by
1 VIKAS AWASTHY (Judicial Member).-The appeal has been filed by the assessee impugning the assessment order dated October 19, 2012, passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") relevant to the assessment year (AY) 2008-09.
2 The assessee is engaged in manufacture, trade and export of chemicals used in the oil and gas exploration industry. The assessee filed its return of income for the assessment years 2008-09 on September 27, 2008 declaring its total income as Rs. 4,56,64,700. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Act was issued to the assessee on September 11, 2008. Since the assessee had entered into certain international transactions, the case of the assessee was referred to the Transfer Pricing Officer (TPO) to determine the arm's length price (ALP). Before referring the matter to the Transfer Pricing Officer, the Assessing Officer on the basis of the information available on the website of MIs. Oren Hydro Carbon Middle East Incorporation held that, Mr. Rizwan Ahmed who is the managing director of the assessee-company is also the chairman and managing director of the overseas company with whom the assessee had transactions worth more than Rs. 34 crores, therefore, international transactions were with the associated enterprise (AE). The Transfer Pricing Officer vide order dated October 31, 2011, made adjustment of Rs. 3.24 crores in the arm's length price of the associated enterprise.
Aggrieved against the order of the Transfer Pricing Officer passed under section 92CA of the Act, the assessee filed objections before the Dispute Resolution Panel (DRP). Apart from other objections on merits, the assessee objected to the findings of the Assessing Officer on the issue of associated enterprise relationship by merely rel~g on the information available on the website on the overseas company. However, the Dispute Resolution Panel rejected the objection raised by the assessee on this ground. The Assessing Officer vide impugned order made the additions in the income returned by the assessee on the basis of the directions of the Dispute Resolution Panel dated August 31, 2012.
The assessee aggrieved against the assessment order, has come in appeal before the Tribunal.
Shri K. Ravi, advocate appearing on. behalf of the assessee submitted that the authorities below have erred in coming to the conclusion that the international transactions entered into by the assessee-company are with associated enterprise. The Assessing Officer without referring to any document or evidence on record formed an opinion that the international transactions were with associated enterprise. The Assessing Officer merely relied on the information available on the website of the overseas company to come to the conclusion that the overseas company is associated enterprise of the assessee-company. Learned counsel further submitted that Mr. Rizwan Ahmed, the managing director of the assessee was appointed as chairman and managing director of MIs. Oren Hydro Carbon Middle East Incorporation in the period relevant to the assessment year 2009-10. Therefore, in the assessment year under consideration, there was no relationship of associated enterprise with the overseas company. Learned counsel further contended the objection was raised before the Transfer Pricing Officer but the Transfer pricing Officer refused to consider the same on prima facie determination of existence of associated enterprise relationship comes within the purview of the jurisdiction of the Assessing Officer. The Transfer Pricing Officer without answering the question proceeded to determine the arm's length price of the associated enterprise exports. The Dispute Resolution Panel also brushed aside the evidence furnished by the assessee and dismissed the objection raised by the assessee on the issue. Learned counsel contended that before proceeding with the issues on merits, it is essential to determine whether the assessee had transactions with associated enterprise in the assessment year 2008-09 ?
6 On the other hand, Shri Anirudh Rai, appearing on behalf of the Revenue vehemently supported the orders of the authorities below and submitted that the issue with regard to the associated enterprise relationship was considered by the Dispute Resolution Panel and after considering the documents submitted by the assessee, the Dispute Resolution Panel came to the conclusion that there is no merit in the contentions of the assessee and confirmed the findings of the Assessing Officer.
7 We have heard the submissions made by the representatives of both sides and have examined the orders of the authorities below. The question "whether the assessee has international transactions with the associated enterprise ?" goes to the root before proceeding with determination of the arm's length price. A perusal of the draft assessment order dated December 5, 2011 shows that the Assessing Officer has mentioned that the assessee has entered into international transactions worth more than Rs. 35 crores with the associated enterprise and referred the case to the Transfer Pricing Officer to determine the arm's length price of the international transaction. The assessee objected to the findings of the Assessing Officer with regard to transaction with the associated enterprise. Before the Transfer Pricing Officer, the assessee vide letter dated March 21, 2011 categorically stated that the assessee does not have any associated enterprise relationship as defined under section 92A of the Act in the financial year 2007-08 with Mis. Oren Hydro Carbon Middle East Incorporation. The Transfer Pricing Officer proceeded with the determination of the arm's length price of the associated enterprise exports with the following observations :
"The existence of the associated enterprise relationship are not corning within the purview of the Assessing Officer's jurisdiction. Hence, as the Transfer Pricing Officer, as the case is referred to transfer pricing under section 92CA(1), I am proceeding further to determine the arm's length price of associated enterprise exports as follows."
8 This clearly shows that the Transfer Pricing Officer has not applied his mind to the objection raised by the assessee before proceeding with the determination of the arm's length price.
9 The assessee again raised objection before the Dispute Resolution Panel with regard to the associated enterprise relationship and placed on record letter dated May 9,2012, from M/s. Oren Hydro Carbon Middle East Incorporation in support of its claim. The Dispute Resolution Panel without examining the veracity of the claim of the assessee, rejected the objections of the assessee.
A perusal of the orders of the authorities below show that the Assessing Officer has formed his opinion that the assessee has international transactions with its associated enterprise on the basis of information available on the website of the assessee and the overseas company. The Assessing Officer has not ascertained from documents on record, whether the overseas enterprises is an associated enterprise of the assessee in the assessment year under consideration. Learned counsel for the assessee has admitted the fact that in the assessment year 2009-10, there is a relationship of the associated enterprise between the two entities. We are of the considered view that the question whether there is a relationship of associated enterprise or not in the assessment year 2008-09 needs re-determination on the basis of the documentary evidence. Accordingly, we deem it appropriate to remit the issue to the Assessing Officer to decide the issue afresh after affording an opportunity of hearing to the assessee in accordance with law.
The impugned order is set aside and the appeal of the assessee is allowed for statistical purpose.
The order pronounced in the open court at the time of hearing on Tuesday the March 25, 2014 at Chennai.