INCOME TAX ACT, 1961

Section 254(1)

Appeal (Tribunal) - Additional evidence - Admissibility - Additional evidence if not admitted it would not be possible to determine correct tax liability

Assessee entered into transactions with its AE abroad during DRP proceedings assesse-company could not furnish data relating to working capital adjustments therefore, DRP could not direct TPO to consider working capital adjustments to determine ALP. Accordingly, assessee submitted relevant information/data for working capital adjustments, before ITAT by way additional evidences. Revenue's case was that additional evidences should not be accepted, as it was an after-thought to evade tax liability. Why these evidences were not submitted by assessee during DRP proceedings? Therefore, revenue opposed that these additional eviences should not be admitted. Assessee submitted before ITAT that assessee wanted to submit additional evidences before DRP but it was beyond his control, as information/data were not readily available with assessee and, therefore, the assessee was prevented by sufficient cause from producing these additional evidences during the DRP proceedings. Assessee also pointed out that omission of detailed computation of working capital before DRP was not willful or unreasonable. Assessee had kept summary of margin of tested party and comparables, detailed computation of the working capital and the arm's length range of working capital adjusted margin was ready and was of bona fide belief that factual verification of computations/workings would be done by TPO, as allowability of working capital adjustment was not in doubt. Held: Aim of transfer pricing law is to determine correct ALP of assessee's transactions with its AE. If these additional evidences were not admitted, then it would have not been possible to determine correct transfer pricing adjustments (ALP-adjustments) and as a result there would not be correct determination of tax liability of the assessee company. Therefore, in the interest of justice and fair play, additional evidences relating to working capital adjustments were admitted.

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