Case Number: ITA 874/DEL/2021
Appellant: Aggressive Digital Systems Private Limited, Haryana
Respondent: ITO, Ward-1(1), Gurgaon
Assessment Year: 2016-17
Result: Appeal Allowed and Assessment Order Quashed
Case Filed on: 2021-07-19
Order Type: Final Tribunal Order
Date of Order: 2022-01-10
Pronounced on: 2022-01-10
Aggressive Digital Systems Private Limited, engaged in the business of manufacturing and assembling set-top boxes, filed its return of income for the assessment year 2016-17. The Assessing Officer (AO) framed the assessment under section 143(3) read with sections 144C(13) of the Income Tax Act, 1961, following the directions of the Transfer Pricing Officer (TPO) regarding transfer pricing adjustments. The case primarily involved adjustments related to comparability of selected companies and functional dissimilarities.
The AO made significant adjustments to Aggressive Digital Systems’ income, primarily focusing on the comparability of selected companies. The AO included companies that Aggressive Digital Systems contended were not functionally similar. The appellant also argued that the AO failed to apply appropriate turnover filters and did not provide necessary comparability adjustments.
Aggressive Digital Systems, represented by Mr. Siddhartha Sinha, argued that the AO and TPO selected inappropriate comparables and did not follow a scientific process for selection. They contended that the AO did not share the search methodology or the criteria for selecting or rejecting companies. They also argued that the AO did not provide comparability adjustments, especially given that Aggressive Digital Systems was in its initial year of operations.
The respondent, represented by Sh. Anand Kumar Kedia, CIT DR, supported the AO’s adjustments and argued that the AO followed correct procedures. They maintained that the comparables selected were appropriate and that the AO’s methodology was justified.
The Tribunal, presided over by Sh. Saktijit Dey, Judicial Member, and Dr. B. R. R. Kumar, Accountant Member, examined the submissions and the relevant facts of the case. The key observations are as follows:
Based on the above observations, the Tribunal quashed the final assessment order dated 25.06.2021. The Tribunal directed that the assessment be redone in accordance with proper functional and turnover filters and with necessary comparability adjustments.
In conclusion, ITA No. 874/DEL/2021 filed by Aggressive Digital Systems Private Limited was allowed, and the final assessment order was quashed. The case underscores the importance of adhering to procedural norms and the correct application of comparability and transfer pricing methodologies in tax assessments.
Order pronounced in the open court on 10.01.2022.
Sd/- (Saktijit Dey)
JUDICIAL MEMBER
Sd/- (Dr. B. R. R. Kumar)
ACCOUNTANT MEMBER
Date: 10.01.2022
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR: ITAT
Assistant Registrar, ITAT, New Delhi
Aggressive Digital Systems vs ITO: Dispute Over Transfer Pricing and Comparability Issues
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