We have heard both the parties and gone through the facts of the case. Indisputably, the ld. CIT(A) considered additional material in relation to two com parables and that of the assessee, which was not available before the TPO/ AO. Apparently, the ld. CIT(A) did not follow the procedure laid down under Rule 46A of the IT Rules,1962 nor allowed any opportunity to the AO. The powers of the CIT(A) to admit additional evidence are not only in situations where the evidence could not be produced before lower authorities owing to lack of adequate opportunity but also in situations where the fresh evidence would enable the CIT(A) to dispose of the appeal or for any other substantial cause. Of course, the power is to be exercised judiciously and for reasons to be recorded. Moreover, the rules of natural justice are not codified nor are they unvarying in all situations, rather they are flexible. They may, however, be summarized in one word: fairness. In other words, what they require is fairness by the authority concerned. Of course, what is fair would depend on the situation and the context. Lord Esher M.R. in Voinet vs. Barrett (1885) 55 L.J. QB 39, observed:
“Natural justice is the natural sense of what is right and wrong.”
In view of the foregoing and in the interest of natural justice, especially when the ld. CIT(A) have not confronted the additional material placed before him by the assessee, to the AO nor allowed any opportunity to the TPO , we have no alternative but to vacate the findings of the ld. CIT(A) and restore the matter to his file with the directions to re adjudicate the issues in accordance with law after allowing sufficient opportunity to both the parties. Subject to these directions, ground nos. 2 to 6 in the appeal are disposed of.
INCOME TAX APPELLATE TRIBUNAL. DELHI
ITA No. 31/Del/2011 – Assessment year: 2005- 06
A.C. I .T. V/s. M/s Dentsply India Pvt. Ltd.
Date of pronouncement: 02-03-2012
O R D E R
A.N.Pahuja:-
This appeal filed on 04.01.2011 by the Revenue against an order dated 29.10.2010 of the learned CIT(A)-XX, New Delhi, raises the following ground:-
1.“On the facts and circumstances of the case and in law, the order of the CIT (A) is wrong, perverse, illegal and against the provisions of law which is liable to be set aside.
2. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition on a/c of difference of Arm’s Length Price.
3. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in not affording any opportunity to the TPO before proceeding to compute the margins of the com parables and the assessee.
4. On the facts and circumstances of the case and in law, the Ld.CIT (A) has erred in not considering service income & commission income as operating income specially when entity level margins of the comparable companies are being considered.
5. On the facts and circumstances of the case and in law, the Ld.CIT (A) has erred in not considering segmental accounts of healthcare division in Advanced Micronics Device Ltd., more so when the margin were recomputed afresh.
6. On the facts and circumstances of the case and in law, the order of the CIT (A) has erred in quashing the applicability of penalty u/s 271(1)(c)/271G of the Act.
7. The appellant craves to leave, to add, alter or amend any ground of appeal raised above at the time of the hearing.”
2. Adverting first to ground no.3 in the appeal, facts, in brief, as per relevant orders are that return declaring loss of Rs.28,17,554/- filed on 31.10.2005 by the assessee, trading in dental material & equipments, after being processed on 30.08.2006 u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the Act), was selected for scrutiny with the service of notice u/s 143(2) of the Act. Subsequently, the Assessing Officer (A.O. in short) noticed that the assessee company, a wholly owned subsidiary of Dents ply Industries, USA, entered into following international transactions with its AE:-
