TaxTMI 
TaxTMI 
2015 (1) TMI 865
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....cising revisionary powers under section 263 holding that the assessment order dated December 18, 2009, passed under section 143(3) of the Act was erroneous and prejudicial to the interests of the Revenue without assuming proper jurisdiction and without satisfying the prerequisite conditions of that section. 3. That the CIT erred on facts and in law in not appreciating that the assessment order was passed after detailed examination/enquiries and proper application of mind by the assessing officer, thus the CIT exceeded his jurisdiction in revising the assessment order dated December 18, 2009. 4. That the CIT erred on facts and in law and exceeded his jurisdiction in cancelling the entire assessment order and directing the assessing officer to make de-novo assessment. The above grounds are independent and without prejudice to each other." 2. ITA NO. 52/PNJ/2012 has been filed against the order of CIT(A) dt. 30.3.2012 by taking the following effective grounds of appeal : "1. That the CIT(A) erred on facts and in law in dismissing the appeal filed by the appellant as infructuous, on the ground that the assessment under appeal has been set aside by the CIT under section 2....
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....Assessee has challenged the order on legality. The brief facts relating to this case are that the CIT noted after calling for the records that the AO made addition towards TPO adjustment u/s 92CA amounting to Rs. 7,30,40,428/- pursuant to the order passed u/s 92CA dt.29.10.2009 which was received by him on 30.11.2009. The AO after receipt of TPOs order has given opportunity to the Assessee vide letter dt. 10.12.2009 and after hearing and considering the submissions of the Assessee dt. 17.12.2009, the AO passed order u/s 143(3) on 18.12.2009. The CIT noted that the AO before passing the order u/s 143(3) has not sent any draft assessment order to the Assessee as is required u/s 144C of the Income Tax Act inserted by the Finance Act, 2009 w.e.f. 1.4.2009 so that the Assessee could have raised its objections before the Dispute Resolution Panel. The CIT was of the opinion that the order u/s 143(3) has not been passed in accordance with the provisions of Sec. 144C and accordingly invoked jurisdiction u/s 263 as he was of the opinion that the order was erroneous and prejudicial to the interest of the revenue. Accordingly, notice u/s 263(1) dt. 23.2.2012 has been issued to the Assess....
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....and therefore he was of the opinion that the order passed u/s 143(3) is not in accordance with the provisions of Sec. 144C and the AO violated the principles of natural justice which may affect the legality of the order. Since the AO has not given the draft assessment order to the Assessee, the Assessee has lost the opportunity to raise its objections against the draft assessment order before the Dispute Resolution Panel and therefore the assessment order u/s 143(3) is not only erroneous but is not likely to stand the test of appeal and in that sense the order is prejudicial to the interest of the revenue and accordingly, the CIT set aside the assessment order with the direction that the AO to pass a speaking draft assessment order and provide copy of the same to the Assessee. The Assessee should be given opportunity so as to enable it to approach the Dispute Resolution Panel relating to adjustment u/s 92CA. The Assessee has not come in appeal before us about the validity of the assessment. 4.2 The ld. AR has taken mainly 3 contentions before us; firstly, he submitted that the TPO passed order u/s 92CA on 29.10.2009 and determined the adjustment in respect of arm?s length ....
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....cision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (supra). It was also contended that since the order passed by the AO u/s 143(3) was itself void, therefore, CIT u/s 263 could have not exercised jurisdiction u/s 263 against an invalid order. Reliance was placed in this regard on the decision of the Lucknow Bench of this Tribunal in the case of Inder Kumar Bachani (HUF) vs. ITO, 99 ITD 621. Secondly, it was contended that the provisions of erstwhile Sec. 144B of the Act as it stood before being omitted by the Finance Act, 1989 were similar to the newly inserted provision u/s 144C. Both the sections require the AO to pass draft assessment order before passing the final assessment order. It was contended that in a case where the procedure laid down u/s 144B was not followed, it was held that CIT could not exercise the revisionary powers u/s 263. In this regard, reliance was placed on the following cases : i) Krishnamurthy (V.G.) vs. CIT, [1985] 152 ITR 683 (Kar) ii) Maharaja Raja PawerDewas (H.H.) vs. CIT, [1982] 138 ITR 518 (MP) iii) NandlalBhandari and Sons vs. CIT, [1983] 147 ITR 710 (MP) iv) CIT vs. Damoh Co-operativ....
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....ce with the provisions of Sec. 144C and accordingly he invoked the jurisdiction u/s 263 as, in his opinion, the order passed by the AO was erroneous as well as prejudicial to the interest of the revenue and accordingly notice u/s 263(1) dt. 23.2.2012 has been issued to the Assessee stating therein that since the AO has failed to provide the draft assessment order before passing the order u/s 143(3) of the Income Tax Act, the AO therefore violated the principles of natural justice and accordingly the order passed is erroneous. CIT, therefore, proposed to pass appropriate order u/s 263 after giving opportunity to the Assessee. After giving opportunity to the Assessee, the CIT set aside the assessment order with the direction to the AO to pass a speaking draft assessment order after providing opportunity to the Assessee so that he could approach the Dispute Resolution Panel relating to the adjustment made u/s 92CA. 4.4 Before deciding the issue whether the order passed u/s 263 is valid or not, it is essential to refer to the relevant provisions of Sec. 263. Section 263 lays down as under:- "263. (1) The Commissioner may call for and examine the record of any proceeding under thi....
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....in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." 4.5 From the perusal of the aforesaid section, it is apparent that there are four main features of the power of revision to be exercised u/s 263 by the Commissioner of Income-tax. Firstly, the Commissioner may call for and examine the records of any proceedings under the Act and for this purpose he need not to show any reason or record any reason to believe. It is a part of his administrative power to call for the record and examine them relating to any assessee. Secondly, he may consider any order passed by the Assessing Officer as erroneous as well as prejudicial to the interest of the Revenue. This is exercised by calling for and examining the record available at this stage. There is no question of the assessee to appear and make submission at this stage. Thirdly, if after calling for and examining the records the Commissioner considers that the order of the Assessing Officer is erroneous in so far it is prejudicial to the interest of the Revenue, he is b....
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....ution Panel. Since the AO has not followed the mandatory provisions, therefore, the Hon'ble High Courts quashed the assessment order. In the case before us we noted that the Assessee has not filed any Writ Petition before the High Court so that the assessment order passed by the AO u/s 143(3) could have been quashed. Even the Assessee has not filed any appeal before us in this regard so that the assessment order could have been quashed. As on today, the assessment order is very much in existence. Even the assessment order was in existence when the CIT invoked the jurisdiction u/s 263. When the assessment order is very much in existence and the Assessee has come in appeal against the order passed u/s 263, this Tribunal, in our opinion, does not have jurisdiction to examine and hold that the assessment order passed by the AO in violation of Sec. 144C(2) is illegal and void. The jurisdiction of this Tribunal u/s 254 is limited to the grounds of appeal before the Tribunal. The subject matter of the appeal before the Tribunal is whether the order passed by the CIT by invoking provisions of Sec. 263 is valid or not. Sec. 263, as we have already held in the preceding paragraphs,....
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..... Amin Chand Vir Chand, 179 ITR 51 (P&H) 4.8 We also noted that u/s 144B(2) it was not obligatory on the part of the Assessee to forward the objection within 7 days of receipt of the draft order to the IAC while u/s 144C(2) it is mandatory on the part of the Assessee to file the objection within 30 days of the receipt of the draft order by him as u/s 144C(2) the word used is "shall" while u/s 144B the word used is "may". The ld. AR at the last relied before us on the decision of the Chennai Bench (TM) in the case of V Narayanan vs. ACIT, 2 ITD 446 (supra) for the proposition of the law that by invoking provisions of Sec. 263 the CIT has extended the limitation as envisaged u/s 153. We have gone through the decision of the Chennai Bench (TM) in the above case. We noted that this decision will not be applicable in the instant case as in that case the return filed by the Assessee was processed u/s 143(1)(a), the AO could have issued notice within the limitation period as envisaged u/s 143(2) in case he wanted to complete the assessment u/s 143(3). Under these facts, the CIT invoked jurisdiction u/s 263 and therefore the Tribunal took the view that the direction of the CIT by passin....
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.... the provisions of Sec. 144C(2), it will tantamount that the revenue to be realized would not be lawful. We noted that somewhat similar issue has arisen in the case of Ranbaxy Laboratories Ltd. vs. CIT, 345 ITR 193 (Del) in which the Hon'ble High Court dismissed the appeal of the Assessee and took the view that the order of revision was valid. The facts of the case was as under : "Circular No. 3, dated May 20, 2003, lays down that wherever the aggregate value of an international transaction exceeds Rs. 5 crores, the case should be picked up for scrutiny and reference under section 92CA of the Income-tax Act, 1961, be made to the Transfer Pricing Officer. The validity of the circular was upheld in Sony India P. Ltd. v. CBDT [2007] 288 ITR 52 (Delhi). When a circular is issued under section 119 of the Act and its validity is upheld it is binding on the Assessing Officer. Not taking recourse thereto and passing order would amount to making assessment without conducting proper inquiry and investigation. The assessee was a company engaged in the manufacture and sale of pharmaceutical products. It entered into certain international transactions with its associated enterprises. ....
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....ch an order, on the face of it, was beyond the powers of the Income-tax Officer under section 143 read with section 144B of the Act and, hence, without jurisdiction. The Tribunal was, therefore, justified in its conclusion that the assessment was liable to be annulled. There was a time-limit for making the assessment. If the original time-limit was still available, the Income-tax Officer could proceed from the stage at which the illegality which resulted in the annulment of the assessment supervened and to make the assessment afresh." In Bhagwat Prasad vs. CIT, 232 ITR 480 the Hon'ble Allahabad High Court has held as under : "Held, (i) that, on the facts of the case, the Inspecting Assistant Commissioner had every jurisdiction to issue directions with regard to disallowance of "reduction for past savings" stated in the draft assessment order in exercise of his power under section 144A of the Act, notwithstanding that the said matter was not covered by the reference made under section 144B of the Act. (ii) that the Appellate Tribunal was correct in upholding the order of the Commissioner of Income-tax (Appeals) in not annulling the assessment framed against the rules of....
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....e erroneous and prejudicial to the interest of the revenue." "In the instant case, the Commissioner noted that the Income Tax Officer passed the order of nil assessment without application of mind. Indeed, the High Court recorded the finding that the Income Tax Officer failed to apply his mind to the case in all perspective and the order passed by him was erroneous. It appears that the resolution passed by the board of the appellant company was not placed before the Assessing Officer. Thus, there was no material to support the claim of the appellant that the said amount represented compensation for loss of agricultural income. He accepted the entry in the statement of the account filed by the appellant in the absence of any supporting material and without making any inquiry. On these facts the conclusion that the order of the Income Tax Officer was erroneous is irresistible. We, are, therefore of the opinion that the High Court has rightly held that the exercise of the jurisdiction by the Commissioner u/s 263(1) was justified." Non-compliance of the provisions of Sec. 144C i.e non complying with the natural justice of providing the opportunity to the assessee itself pro....