Final assessment order u/s 144C(13) quashed as barred by limitation beyond one month from end of month of DRP directions; comparables excluded for functional dissimilarity and filter failures in TP adjustment for back-office services.

ORDER 

PER MANISH AGARWAL, AM:

This appeal is filed by the Assessee against the final assessment order dated 17.05.2022 passed u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (‘the Act’ for short) by the DCIT, Central Circle-13(1), New Delhi for the Assessment Year 2018-19.

2. Brief facts of the case are that the assessee company was incorporated in December, 2006 as a subsidiary of Kronos Solutions Inc. and engaged in the business of providing software services/solutions and back office support services to its Associated Enterprises (“AEs”). The assess is 100% export-oriented unit and is on offshore development center for Kronos US. The return of income was filed on 30.11.2018 declaring total income at Rs.47,16,32,260/-. Since, the assessee is having international transactions with its AEs, therefore, a reference was made u/s 92CA(1) of the Act to the TPO. The TPO vide its order dated Nil has made adjustments to the international transactions with AEs wherein adjustment of Rs.10,79,15,788/- is made on the provisions of software development services and Rs.3,8253,681/- was made for provisions of ITeS segment. Accordingly, total enhancement of Rs.14,61,69,469/- is made by the TPO on the international transactions of the assessee. Thereafter, the AO has passed the draft assessment order on 27.09.2021 wherein the adjustment made by the TPO vide order on 31.07.2021 of Rs.14,61,69,469/- were proposed and total income of assessee was proposed at Rs.61,78,01,729/-.

3. Against the said order, the assesses filed objections before the DRP and vide its order dated 09.03.2022 has given certain directions to the TPO to exclude/include certain comparables proposed on the directions given by the TPO by the Ld. DRP. The AO/TPO has passed the order giving effect dated 18.04.2022 wherein the total adjustments were made at Rs.2,72,37,829/- with respect to the provisions of ITeS and accordingly, the total income of the assessee was assessed at Rs.49,88,70,090/- in terms of the order passed u/s 143(3) r.w.s 144C(13) of the Act.

4. Against the said order, the assessee is in appeal before the Tribunal by taking the following grounds of appeal:-

“1. That on the facts and circumstances of the case and in law, the order passed by the Ld. AO under Section 143(3) read with section 144C(13) of the Act is bad in law and liable to be quashed to the extent it confirms the additions/ disallowances made in the assessment order.

2. That the Ld. AO/Ld. TPO/Ld. DRP erred in enhancing the income of the Appellant by INR 2,72,37,829/- pertaining to back-office support service segment that do not satisfy the arm's length price ("ALP") envisaged under the Act and in doing so, have grossly erred in:

2.1 erroneously rejecting the economic analysis undertaken by the Appellant in the Transfer Pricing ("TP") documentation maintained by it in terms of section 92D of the Act read with Rule 100 of the Income-tax Rules, 1962 ("Rules");

2.2 erroneously including certain functionally dissimilar companies that are full-fledged risk-taking entrepreneurs, high profit-making companies and companies with high turnover,

2.3 erroneously excluding certain comparable companies selected by the Appellant in TP documentation on arbitrary/ frivolous grounds, 

2.4 erroneously including certain companies selected by the Appellant in the TP study which are either failing the filters applied by the Ld. TPO or are functionally dissimilar to the Appellant's back-office support segment; and

2.5 disregarding judicial pronouncements in India while undertaking TP adjustment.

3. That the Ld. AO has erred in charging interest under section 234B and 234C of