Imperial Jewels Vs Assessment Unit (ITAT Mumbai)
The appeal arose from the final assessment order dated 27 September 2024 passed under Sections 143(3) read with 144C(13) for Assessment Year 2021-22. The assessee, engaged in the manufacture and export of studded jewellery through its SEEPZ-SEZ unit, challenged a transfer pricing adjustment of ₹38,49,450 and the consequential computation of deduction under Section 10AA. The assessee contended that it had neither entered into any international transaction with an Associated Enterprise under Section 92A nor any specified domestic transaction under Section 92BA, and that reporting transactions in Form 3CEB was done only as a matter of abundant caution.
During scrutiny, the Assessing Officer referred the matter to the Transfer Pricing Officer (TPO). The assessee benchmarked the transactions under the Transactional Net Margin Method (TNMM), showing an operating margin of 6.31% against the comparable mean of 3.05%. The TPO rejected certain comparables, introduced Neysa Jewellery Ltd. as a new comparable, recomputed the margin at 2.94%, and proposed a downward adjustment of ₹4,97,58,208. After the Dispute Resolution Panel (DRP) upheld the TPO’s action, the Assessing Officer ultimately made an addition of ₹38,49,450 in the final assessment order.
Before the Tribunal, the assessee argued that Chapter X was inapplicable because there were no transactions with Associated Enterprises or specified domestic transactions. Alternatively, it challenged the benchmarking exercise, contending that valid comparables had been wrongly excluded while Neysa Jewellery Ltd. had been incorrectly included despite its abnormal financial position. The Revenue maintained that the assessee itself had reported the transactions in Form 3CEB and that the TPO had correctly applied the prescribed filters and selected appropriate comparables.
