Assessment order invalidated due to procedural errors. Appeal allowed, order quashed. Revenue urged to rectify software issues.

The Tribunal found in favor of the Assessee, ruling that the procedural errors and failure of the Assessing Officer (AO) to comply with mandatory provisions invalidated the assessment order. The appeal was allowed, and the entire assessment order was quashed. The Tribunal highlighted the need for the revenue to rectify software issues and issue a final assessment order in compliance with the law.

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Issues Involved:
1. Validity of the order passed by the Dispute Resolution Panel (DRP).
2. Consideration of excess credit period allowed to the Associate Enterprise (AE).
3. Justification for charging notional interest on delayed realization of receivables.
4. Application of the Transactional Net Margin Method (TNMM).
5. Requirement for separate benchmarking for export dues realized beyond 60 days.
6. Association of interest income with the lending or borrowing of money.
7. Non-passing of the final order by the Assessing Officer (AO) after DRP's directions.
8. Procedural errors in passing the draft assessment order as a final assessment order.

Detailed Analysis:

1. Validity of the order passed by the DRP:
The Assessee contended that the DRP dismissed their objection against the draft assessment order without considering the jurisdictional tribunal decision and other judicial precedents. The Tribunal found that the DRP failed to appreciate the facts and judicial pronouncements cited by the Assessee, leading to a flawed decision.

2. Consideration of excess credit period allowed to the AE:
The Assessee argued that the delay in realization of invoices was due to technical reasons or clarifications sought by the AE, and not because of any excess credit period allowed. The Tribunal noted that out of 3,910 invoices, only 335 were delayed, which is less than 10% and cannot be considered as extending an interest-free loan to the AE.

3. Justification for charging notional interest on delayed realization of receivables:
The Assessee claimed that it is a debt-free company and has not incurred interest expenses, thus there is no justification for charging notional interest. The Tribunal referenced decisions from other cases, including Mis Value Labs Technologies and Optum Global Solutions, which supported the Assessee's position that notional interest should not be charged.

4. Application of the TNMM:
The Assessee argued that the TNMM method, being the most appropriate method, takes care of all notional interest costs, and there should be no separate upward adjustment for delayed realization of export receivables. The Tribunal agreed, citing the decision in Mis Gimpex Pvt Ltd, which supports the Assessee's claim.

5. Requirement for separate benchmarking for export dues realized beyond 60 days:
The Assessee contended that no separate benchmarking is required for export dues realized beyond 60 days as receivables are ingrained in the sale. The Tribunal found merit in this argument, referencing the Hon'ble Income Tax Appellate Tribunal's decision in similar cases.

6. Association of interest income with the lending or borrowing of money:
The Assessee argued that interest income is associated only with lending or borrowing of money, not with sales, as concluded by the Hon'ble Delhi Tribunal in M/s Corbus India Pvt Ltd and Hon'ble Mumbai Tribunal in Mis Indo American Jewellery Limited. The Tribunal upheld this view, stating that early or late realization of sales proceeds is incidental to the sale transaction.

7. Non-passing of the final order by the AO after DRP's directions:
The Assessee raised additional grounds stating that the AO failed to pass a final order after receiving directions from the DRP, which is mandatory under subsection 13 of Section 144C of the Income Tax Act, 1961. The Tribunal noted that the AO's failure to pass the final order within the stipulated time frame invalidated the assessment proceedings.

8. Procedural errors in passing the draft assessment order as a final assessment order:
The Tribunal observed that the AO passed the draft assessment order as a final assessment order, which included a demand notice and initiated penalty proceedings. This procedural error was admitted by the AO in an email communication, acknowledging that the assessment window was closed due to technical difficulties on the ITBA portal. The Tribunal cited multiple judicial precedents, including the Hon'ble ITAT Delhi in Perfetti Van Melle India Pvt Ltd and the Hon'ble Madras High Court in Vijay Television Pvt Ltd, which held that such procedural errors render the assessment order null and void.

Conclusion:
The Tribunal concluded that the AO's procedural errors and failure to follow the mandatory provisions of the law rendered the assessment order invalid. The appeal filed by the Assessee was allowed, and the entire assessment order was quashed. The Tribunal emphasized that the revenue must correct its software and pass the final assessment order in accordance with the law.

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