AO cannot apply Wrong Method to Determine Profit in the Absence of Audited Financials of AE: ITAT [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that the AO cannot give benefit to the assessee for non-cooperation in providing audited financials of associated enterprises (AE).

The appellant/assessee company, Olympus India, incorporated on October 20, 2009, is a wholly owned subsidiary of Olympus Corp. The company is engaged in the import and resale of medical equipment like gastrointestinal endoscopes, surgical endoscopes, endotherapy devices, endoscopic ultrasound systems, and medical information systems. In addition, the assessee is also engaged in the installation, repair, and maintenance of this equipment in India.

The Tribunal bench consisting of Yogesh Kumar (Judicial Member) and Dr. B.R.R. Kumar (Accountant Member) observed that the documents or information specified in Sub Rule 1 & 2A of Rule 10D not only includes official publication reports, studies and data base from Government of the country of the residence of the associated enterprises but also includes of any other country.

“In our opinion, the Assessee who is entering into the International transaction is duty bound to maintain and produce the same before the Department when it is asked to produce as per Section 92D of Income Tax Act R/w. Rule 10D and 92D of Income Tax Rules, 1962. If the assessee doesn’t provide the financials of its AE’s, the TPO/AO/DRP can very well invoke the provisions of Income tax Provisions of Income-Tax Act and the Rules framed there under to call for such records not only from the country of residence but also from any other country in cases of AE’s and decide the issue,” the Tribunal said.

Concluding the order, the Tribunal held that “In our opinion the TPO/Assessing Officer cannot apply wrong method in the absence of material ie: audited financials of AE. On the other hand, TPO/AO cannot even give the benefit as well to the Assessee for non cooperation for providing the audited financials of AE.”

The assessee was represented by Advocates Sh. Nageshwar Rao, Adv & Ms. Deepika Aggarwal.

To Read the full text of the Order CLICK HERE

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