ACIT Vs Essar Power Gujarat Limited (ITAT Mumbai)
TP Adjustment Based on DRI Allegations Cannot Survive After Exoneration: ITAT Mumbai Dismisses Revenue Appeals in Essar Power Case
The Mumbai ITAT (K-Bench) dismissed the Revenue’s appeals for AYs 2009-10 and 2012-13 and upheld deletion of transfer pricing (TP) adjustments reducing CWIP by ₹73.74 crore, which were made on the basis of alleged over-invoicing of imports through Global Supplies FZE (UAE). The Tribunal held that the sole foundation of the reopening and TP adjustment was information from the Directorate of Revenue Intelligence (DRI), which stood completely negated after the Principal Commissioner of Customs (Adjudication) exonerated the assessee and the CESTAT upheld the exoneration.
The ITAT observed that once the show-cause notice forming the basis of the reassessment and TP proceedings is set aside, the consequential income-tax additions cannot survive. Relying on the Punjab & Haryana High Court in CIT v. Sachdeva & Sons, the Tribunal reiterated that when proceedings by the originating investigative authority fail, the very foundation of income-tax additions is wiped out. The Tribunal also condoned delay in filing the assessee’s cross-objections but treated them as infructuous, since the Revenue’s appeals failed on merits.
Accordingly, the Revenue’s appeals were dismissed, and the assessee’s cross-objections were dismissed as academic, with the CIT(A)’s order deleting the TP adjustment affirmed in full.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
