Income Tax Appellate Tribunal - Mumbai
Siddh Exports Llp ,Mumbai vs Income Tax Officer Ward 14(1)(1), ... on 21 April, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
"K" BENCH MUMBAI
BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER &
SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER
ITA No. 453/Mum/2026
(Assessment Year: 2022-23)
Siddh Exports LLP ITO Ward - 14(1)(1),
Unit No. 7, CTS No. 97, Mumbai
Lajja Silk Mill Vs. Aayakar Bhavan, M.
Compound, Village K. Road, Mumbai -
Mogra, Andheri (E), 400 020
Mumbai-400 069
PAN/GIR No. ADRFS2375Q
(Applicant) (Respondent)
Assessee by Shri Nilesh Kariya, Ld. AR
Revenue by Shri Bhagirath Ramawat, Ld. DR
Date of Hearing 16.03.2026
Date of Pronouncement 21.04.2026
आदे श / ORDER
PER MAKARAND VASANT MAHADEOKAR, AM:
This appeal by the assessee is directed against the final assessment order passed by the Assessing Officer pursuant to the directions of the Dispute Resolution Panel(hereinafter referred to as "DRP") under section 144C of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2022-
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2. Brief background and chronology of events is such that the assessee is engaged in the business of trading, wholesale and export of mobile phones and accessories. The assessee filed its return of income for the Assessment Year 2022-23 on 05.10.2022 declaring total income at Rs. 49,05,690/-. The return was processed under section 143(1) of the Act on 20.10.2022. The case was selected for scrutiny under CASS on account of the issues relating to large specified domestic transactions (Transfer Pricing risk parameter) and large squared up loans during the year. Notice under section 143(2) of the Act was issued on 02.06.2023 and subsequently notices under section 142(1) were issued from time to time. The assessment proceedings were carried out under the faceless assessment scheme in terms of section 144B of the Act.
3. During the year under consideration, the assessee entered into specified domestic transactions with related parties, the details of which were reported in Form No. 3CEB. The Assessing Officer, referring the matter to the TPO, noted that the arm's length price of such transactions required determination under Chapter X of the Act. The TPO, in his order under section 92CA(3), rejected the benchmarking adopted by the assessee and proposed an adjustment of Rs. 7,27,84,187/- in respect of trading transactions. Further, the Assessing Officer observed that the assessee had claimed freight expenses amounting to Rs. 32,19,560/- in its Profit and Loss account without deduction of tax at source under section 194C of the Act. Accordingly, a 3 IT A No . 4 5 3 / M u m / 2 0 2 6 Si d dh E x por t s LL P disallowance of Rs. 9,65,868/- being 30% of such expenditure was proposed under section 40(a)(ia) of the Act.
4. Based on the TPO's order and other issues, the Assessing Officer passed a draft assessment order under section 144C(1) of the Act on 12.03.2025, proposing the following variations:
i. Transfer pricing adjustment: Rs. 7,27,84,187/- ii. Disallowance under section 40(a)(ia): Rs. 9,65,868/-
5. Aggrieved by the draft order, the assessee filed objections before the DRP under section 144C(2) of the Act on 09.04.2025.The objections raised by the assessee before the DRP primarily challenged the transfer pricing adjustment of Rs. 7,27,84,187/- made pursuant to the order of the TPO under section 92CA(3) and the disallowance of Rs. 9,65,868/- under section 40(a)(ia) on account of alleged non-deduction of tax at source on freight expenses. In support of its objections, the assessee reiterated that the impugned transactions were not covered within the scope of "Specified Domestic Transactions"
under section 92BA of the Act and that the benchmarking carried out by the Transfer Pricing Officer was erroneous both on facts and in law. It was further contended that the CUP method adopted by the assessee was the most appropriate method and that the application of TNMM by the TPO was unjustified. With regard to the disallowance under section 40(a)(ia), the assessee submitted that the freight payments were either in the nature of 4 IT A No . 4 5 3 / M u m / 2 0 2 6 Si d dh E x por t s LL P reimbursements or covered by the exemption under section 194C(6), and therefore, no tax was deductible at source.
6. The DRP, Mumbai, issued directions under section 144C(5) of the Act vide order dated 05.12.2025. The DRP confirmed the transfer pricing adjustment of Rs. 7,27,84,187/- and the disallowance of Rs. 9,65,868/- under section 40(a)(ia). The objections raised by the assessee were thus rejected, and the Assessing Officer was directed to pass the final assessment order in conformity with the said directions under section 144C(13) of the Act. Consequently, the Assessing Officer passed the final assessment order under section 143(3) r.w.s. 144C(13) r.w.s. 144B of the Act on 17.12.2025, determining the total income at Rs. 7,86,55,745/-. Penalty proceedings under section 270A of the Act were also initiated.
7. Aggrieved by the final order of the Assessing Officer the assessee is in appeal before us raising following grounds of appeal:
1. The Learned Assessing Officer (Ld. AO) and Learned Commissioner of Income Tax (Dispute Resolution Panel-2), Mumbai (Ld. CIT(DRP)) erred in ignoring the fact that the transaction treated as Specified Domestic Transaction is not covered under the provisions of section 92BA of the Income Tax Act, 1961 (the „Act‟) as Specified Domestic Transaction.
2. The Ld. CIT (DRP) erred in upholding the adjustments proposed by the Transfer Pricing Officer (TPO) merely because the Appellant did not provided the cogent or logical explanation for the voluntary disclosure of these transaction as Specified Domestic Transaction in Form 3CEB, however, this does not change the colour of the transaction being not covered under the definition of the Specified 5 IT A No . 4 5 3 / M u m / 2 0 2 6 Si d dh E x por t s LL P Domestic transaction thereby the decision made by Ld. CIT(DRP) is against the spirit of the law.
3. The Ld. CIT(DRP) erred in upholding the adjustments proposed by the TPO despite there being the factual report from TPO admitting that "the transaction is between related party and covered under the provisions of section 40A(2)(b) of the Act and also the Appellant and the Cellever Trading Pvt. Ltd. have not claimed any deduction under section 80A, 80IA or 10AA of the Act during the year under consideration", thereby completely ignoring the factual report of TPO.
4. Without prejudice to the above grounds taken, the Ld. TPO erred in selection of comparable companies which are not comparable to the Assessee on Quantitative/Qualitative filters.
5. Without prejudice to the above grounds taken, the Ld. CIT(DRP) erred in upholding the rejection of CUP method as most appropriate method for determination of Arm‟s length price of the transaction without appreciating the fact that the TNMM is not suitable for the business of the Appellant.
6. The Ld. AO erred in making addition u/s 40(a)(ia) of the Act for non-
deduction of TDS on Freight Charges paid to the contractor u/s 194C of the Act despite being explained that the Freight charges paid to contractor is covered under section 194C(6) of the Act and the declaration to that effect from contractor is submitted to the Ld. AO and thereby the addition made is invalid.
7. The Appellant prays to allow it to add, alter, amend, modify and/or delete any or all of the above grounds of appeal.
8. During the course of hearing before us, the Ld. Authorised Representative of the assessee reiterated the facts as emanating from the orders of the lower authorities. With regard to Ground Nos. 1 to 5 relating to the transfer pricing adjustment, it was submitted that though no specific objection was raised before the TPO regarding the non-applicability of section 92BA of the Act, the said legal contention was duly raised before the DRP. It was further submitted that the DRP, however, failed to properly adjudicate the said legal issue and proceeded to uphold the adjustment primarily on the basis that the assessee itself had 6 IT A No . 4 5 3 / M u m / 2 0 2 6 Si d dh E x por t s LL P reported the transactions as specified domestic transactions in Form No. 3CEB. The Ld. AR contended that mere reporting of a transaction in Form No. 3CEB does not confer jurisdiction upon the TPO if, in law, the transaction does not fall within the ambit of section 92BA of the Act.
9. The Ld. AR further submitted that the transactions in question were admittedly covered under the provisions of section 40A(2)(b) of the Act and no deduction under sections 80A, 80IA or 10AA had been claimed by the assessee during the year under consideration. Therefore, in the absence of satisfaction of the statutory conditions prescribed under section 92BA, the reference made to the TPO itself was invalid and the consequent adjustment under section 92CA(3) could not be sustained.
10. It was thus contended that the entire transfer pricing adjustment of Rs. 7,27,84,187/- deserved to be deleted on the ground of lack of jurisdiction, without prejudice to the merits of the benchmarking carried out by the TPO.
11. The Ld. Departmental Representative, in rebuttal, strongly relied upon the orders of the lower authorities and in particular the findings recorded by the DRP. Referring to the para 6.3.4 of the DRP's order, it was submitted that the Panel has categorically examined the contention of the assessee regarding non- applicability of section 92BA of the Act. The Ld. DR drew our attention to the findings of the DRP wherein it has been observed, in substance, that the assessee itself had reported the impugned 7 IT A No . 4 5 3 / M u m / 2 0 2 6 Si d dh E x por t s LL P transactions as specified domestic transactions in Form No. 3CEB for the year under consideration. The DRP further noted that despite raising the contention, the assessee failed to furnish any cogent or logical explanation to demonstrate as to why such transactions should not be treated as specified domestic transactions within the meaning of section 92BA of the Act. It was further pointed out that the DRP has recorded a clear finding that, in the absence of any satisfactory justification from the assessee, there was no infirmity in the action of the TPO in undertaking benchmarking of such transactions. Accordingly, the DRP upheld the approach adopted by the TPO and confirmed the transfer pricing adjustment made in respect of the impugned transactions.
12. In rejoinder, the Ld. AR invited our attention to para 6.3.2 of the order of the DRP, wherein the factual report submitted by the TPO has been reproduced. Referring to the said portion, the Ld. AR submitted that the TPO himself has examined the scope of section 92BA of the Act and has reproduced the statutory provisions defining "specified domestic transactions", including the conditions relating to threshold limit and specified categories of transactions. It was pointed out that the TPO has acknowledged that for applicability of section 92BA, the transaction must fall within the specified categories such as those covered under sections 80A, 80-IA, 10AA, etc., and must also satisfy the prescribed threshold. The Ld. AR further drew our attention to the factual findings recorded in the remand report, 8 IT A No . 4 5 3 / M u m / 2 0 2 6 Si d dh E x por t s LL P wherein it is noted that although the assessee and Cellever Trading Pvt. Ltd. are related parties, both entities have not claimed any deduction under sections 80A, 80-IA or 10AA of the Act during the year under consideration. It was thus contended that one of the essential conditions for invoking section 92BA was admittedly absent on facts, which has been clearly recorded in the TPO's own report. It was further submitted that despite such categorical factual position emerging from the remand report, the DRP failed to adjudicate the legal implication thereof and proceeded to uphold the adjustment without addressing whether the provisions of section 92BA were at all applicable. According to the Ld. AR, once it is an admitted position that no deduction under the relevant provisions has been claimed, the impugned transactions fall outside the ambit of "specified domestic transactions" and consequently, the entire transfer pricing exercise undertaken by the TPO is without jurisdiction.
13. We have carefully considered the rival submissions, perused the orders of the lower authorities, including the draft assessment order, the directions of the DRP, and the factual report of the TPO placed on record.
14. The core issue arising for our adjudication in Ground Nos. 1 to 5 is whether the impugned transactions undertaken by the assessee fall within the ambit of "specified domestic transactions"
as defined under section 92BA of the Act and, consequently, whether the reference made to the Transfer Pricing Officer under 9 IT A No . 4 5 3 / M u m / 2 0 2 6 Si d dh E x por t s LL P section 92CA(1) and the adjustment made under section 92CA(3) are legally sustainable.
15. At the outset, we find merit in the contention of the assessee that the issue raised goes to the root of jurisdiction and is purely a legal issue. It is well settled that a jurisdictional issue can be raised at any stage of the proceedings, and merely because the assessee did not raise such objection before the TPO would not preclude it from raising the same before the DRP or before us. Therefore, the objection of the Revenue on this count is rejected.
16. Coming to the statutory framework, section 92BA, as applicable to the year under consideration, defines "specified domestic transaction" to include certain categories of transactions, inter alia, transactions referred to under sections 80A, 80-IA(8), 80-IA(10), 10AA, etc., subject to the condition that the aggregate value of such transactions exceeds the prescribed threshold. Thus, two essential conditions are required to be cumulatively satisfied, namely:
i. the transaction must fall within the specified categories enumerated in section 92BA; and ii. the aggregate value of such transactions must exceed the prescribed monetary limit.
17. In the present case, we note from the record, and more particularly from the factual report of the TPO reproduced by the DRP in para 6.3.2 of its order, that although the assessee had reported the transactions in Form No. 3CEB and the threshold 10 IT A No . 4 5 3 / M u m / 2 0 2 6 Si d dh E x por t s LL P condition was satisfied, it has been specifically recorded that both the assessee and its related party, namely Cellever Trading Pvt. Ltd., have not claimed any deduction under sections 80A, 80-IA or 10AA of the Act during the year under consideration. This factual finding assumes critical significance because the inclusion of transactions within the scope of section 92BA is predicated upon the existence of transactions which have a bearing on profit-linked deductions under the specified provisions. In the absence of any such claim of deduction, the transaction cannot be brought within the fold of section 92BA merely because it is between related parties covered under section 40A(2)(b) of the Act.
18. We further find that the DRP, while upholding the adjustment, has primarily relied upon the fact that the assessee itself had reported the transactions as specified domestic transactions in Form No. 3CEB and that no cogent explanation was furnished for such reporting. In our considered view, such reasoning cannot be sustained in law. It is trite law that there is no estoppel against statute, and a mistaken or voluntary disclosure made by the assessee cannot confer jurisdiction upon the Revenue authorities where none exists under the Act.
19. The jurisdiction of the TPO to determine the arm's length price arises only upon a valid reference made under section 92CA(1), which in turn presupposes the existence of an international transaction or a specified domestic transaction as defined under the Act. If the foundational requirement itself is not 11 IT A No . 4 5 3 / M u m / 2 0 2 6 Si d dh E x por t s LL P satisfied, the entire exercise undertaken by the TPO becomes unsustainable in law.
20. In the present case, the admitted factual position, as emerging from the TPO's own report, is that no deduction under the relevant provisions has been claimed by the assessee or its related party. Once this condition is not fulfilled, the impugned transactions fall outside the ambit of section 92BA. Consequently, the reference made to the TPO and the adjustment determined under section 92CA(3) are without jurisdiction.
21. We also find that the DRP has failed to adjudicate this legal issue in its proper perspective. Despite the factual position being brought on record through the remand report, the DRP has not examined the legal consequence thereof and has instead proceeded to uphold the adjustment on an erroneous premise.
22. In view of the above discussion, we hold that the transfer pricing provisions contained in Chapter X of the Act were not applicable to the impugned transactions for the year under consideration. Accordingly, the transfer pricing adjustment of Rs. 7,27,84,187/- made by the Assessing Officer is liable to be deleted on the ground of lack of jurisdiction.
23. Since we have decided the issue on the legal ground itself, the adjudication on merits of benchmarking becomes academic and is, therefore, not being addressed. Thus, Ground Nos. 1 to 5 raised by the assessee are allowed.
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24. Regarding the ground relating to disallowance u/s 40(a)(ia) of the Act for alleged non-deduction of tax at source on freight expenses, the Ld. AR contended that the disallowance has been made without appreciating the true nature of the payments and the statutory exception provided under section 194C(6) of the Act. The Ld. AR drew our attention to the details of freight expenses and submitted that a part of the expenditure represents export air freight charges which are in the nature of reimbursement. It was argued that such reimbursement does not involve any element of income in the hands of the recipient and therefore the provisions of TDS are not attracted. In this regard, the Ld. AR referred to the invoices placed in the paper book, including the invoice issued by the freight forwarder, to demonstrate that no independent service element was embedded in such payments. With respect to the balance amount of freight expenses, it was submitted that the same pertains to local transport charges paid to transporters. The Ld. AR contended that the said payments are squarely covered by the provisions of section 194C(6) of the Act, as the transporters have furnished the requisite declarations confirming that they own not more than ten goods carriages and have also provided their PAN details. Attention was specifically invited to the declaration furnished by Yash Express & Logistics Pvt. Ltd., placed in the paper book, evidencing compliance with the statutory requirements. It was further submitted that once the conditions prescribed under section 194C(6) are fulfilled, the assessee is under no obligation to deduct tax at source and consequently, no disallowance under section 40(a)(ia) can be 13 IT A No . 4 5 3 / M u m / 2 0 2 6 Si d dh E x por t s LL P made. The Ld. AR thus prayed that the addition made by the Assessing Officer be deleted.
25. Per contra, the Ld. DR strongly relied upon the findings recorded by the Assessing Officer as well as the directions of the DRP.
26. We have heard the rival submissions and perused the material available on record. The Assessing Officer has proceeded on the premise that the assessee was liable to deduct tax at source under section 194C of the Act on the entire freight expenditure and, having failed to do so, invoked the provisions of section 40(a)(ia) of the Act. The contention of the assessee, on the other hand, is twofold: firstly, that part of the expenditure represents reimbursement of export air freight charges, and secondly, that the balance payments made to transporters are covered by the exception provided under section 194C(6) of the Act.
27. At the outset, it is relevant to note that section 194C(1) casts an obligation to deduct tax at source on payments made to a contractor for carrying out any work, which includes carriage of goods. However, sub-section (6) of section 194C carves out a specific exception in the case of payments made to a transporter, where such transporter furnishes a declaration to the effect that he owns not more than ten goods carriages and also provides his PAN. Once these statutory conditions are fulfilled, the payer is not required to deduct tax at source on such payments.
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28. In the present case, the assessee has placed on record declarations from transporters, including the declaration from Yash Express & Logistics Pvt. Ltd., wherein it has been categorically stated that the transporter owns not more than ten goods carriages and has furnished its PAN. The Assessing Officer has not brought any material on record to demonstrate that such declarations are either not genuine or do not satisfy the conditions prescribed under section 194C(6) of the Act. In the absence of any adverse finding on the veracity of such declarations, the statutory benefit provided under section 194C(6) cannot be denied.
29. Further, as regards the component of export air freight charges, the assessee has contended that the same is in the nature of reimbursement. The invoices placed on record indicate that such payments include pass-through charges. It is a settled principle that where the payment does not contain any element of income in the hands of the recipient, the provisions relating to deduction of tax at source are not attracted. The Assessing Officer has not carried out any examination to segregate the pure reimbursement component from service charges, if any, nor has he recorded any finding that the entire payment constitutes income in the hands of the recipient.
30. In view of the above, we are of the considered opinion that the Assessing Officer was not justified in invoking the provisions of section 40(a)(ia) of the Act without properly appreciating the statutory exception contained in section 194C(6) and without 15 IT A No . 4 5 3 / M u m / 2 0 2 6 Si d dh E x por t s LL P examining the true nature of the payments. Accordingly, the disallowance of Rs. 9,65,868/- made under section 40(a)(ia) of the Act is hereby deleted. Thus, Ground No. 6 raised by the assessee is allowed.
31. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 21.04.2026.
Sd/- Sd/-
(PAWAN SINGH) (MAKARAND VASANT MAHADEOKAR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated 21/04/2026
Dhananjay, Sr.PS
आदे श की प्रतितिति अग्रेतिि/Copy of the Order forwarded to :
1. अपीलाथी / The Appellant
2. प्रत्यथी / The Respondent.
3. सं बंधधत आयकर आयु क्त / The CIT(A)
4. आयकर आयु क्त(अपील) / Concerned CIT
5. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई / DR, ITAT, Mumbai
6. गार्ड फाईल / Guard file.
आदे शानुसार/ BY ORDER, सत्याधपत प्रधत //True Copy//
1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai