TaxTMI 
TaxTMI 
2016 (4) TMI 45
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....ion (Civil) No. 2384 of 2015, the Petitioner, M/s. ESPN Star Sports Mauritius S.N.C. ET Compagnie (now known as ESS Advertising (Mauritius) S.N.C et Compagnie) (hereinafter referred to as 'ESPN Star Sports') is a partnership firm established under the laws of Mauritius. It was established by ESPN Mauritius Limited (now known as Worldwide Wickets, Mauritius) having 99.9% share in profit and ESS Asian Network Pvt. Limited (incorporated in Singapore) having 0.1% share. ESPN Star Sports is engaged in the business of allotting advertising time and programme sponsorship ('Ad time') in connection with television programming. It is further stated that ESPN Star Sports has entered into agreements with ESPN Software India Private Limited (now known as Star Sports India Private Limited) for allotting advertisement time to various advertisers and advertising agencies in India. 3. In Writ Petition (Civil) No. 2397 of 2015, the Petitioner, M/s. ESS Distribution (Mauritius) (hereinafter referred to 'ESS Distribution'), is also a partnership firm established under the laws of Mauritius. It was also established by ESPN Mauritius Limited (now known as Worldwide Wickets, Mauritius and also incorpo....
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.... it was not a body corporate in terms of Section 2 (17) of Act. 8. At this stage reference may be made to the applicable provisions. In terms of the mechanism provided under Section 144C of the Act, where an AO proposes to make, on or after the 1st October 2009, any variation in the income or loss returned which is prejudicial to the interest of an 'eligible assessee', the AO shall, in the first instance, forward a draft of the proposed order of assessment to such 'eligible assessee'. 9. Section 144C (15) (b) defines 'eligible assessee' as: "(i) any person in whose case the variation referred to in sub-Section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-Section (3) of Section 92CA; and (ii) any foreign company." 10. The proceedings envisaged under Section 144C (2) is that the 'eligible assessee' shall, within 30 days of the receipt of the draft order, either file his acceptance of the variations to the AO or file his objections to such variation with the DRP as well as the AO. 11. Under Section 144C (15) (a) the DRP has been defined as a "collegium comprising of three Principal Commissioners or Commissioners of Income ....
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....f ESS Distribution and Rs. 94,93,95,777 in the case of ESPN Star Sports. In the above draft assessment orders, each of the Petitioners was informed that if it intends to file objections with the DRP, it should do so within 30 days of the receipt of the order or file an acceptance of the order within the same period. If no objections are received during that period, the assessment would be completed on the basis of the draft assessment order itself. 15. Aggrieved by the above draft order, both the Petitioners filed their respective objections before the DRP on 9th May 2014. One of the grounds in the objection was that the AO erred in passing a draft assessment order under Section 144C (1) of the Act notwithstanding that neither of the Petitioners was an 'eligible assessee'. 16. The DRP issued notices dated 16th October 2014 under Section 144C (11) of the Act calling upon the Petitioners to represent their case and file their respective submissions. A copy of the notices were also sent to the AO, i.e, ADIT to represent his case. 17. Pursuant to the above notices, the Petitioners filed their respective written submissions. In each of the case, the DRP passed a separat....
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....on in income/loss proposed by the AO, the above objection relating to the action of AO passing the Draft Assessment Order treating it as 'eligible assessee' is outside the mandate of the DRP." 20. The AO, i.e., ACIT thereafter proceeded to pass the final assessment order confirming the transfer pricing adjustment to the income in the case of each of the Petitioners. 21. In these circumstances, the Petitioners have approached this Court under Article 226 of the Constitution of India challenging the final assessment order passed by the AO, i.e., ACIT. 22. At the first hearing of the writ petitions, i.e., on 11th March 2015 this Court, while directing notice to issue in these writ petitions, stayed the operation of the final assessment order dated 28th January 2015 issued by the AO. 23. At the subsequent hearing on 15th July 2015, this Court also stayed the penalty proceedings initiated by virtue of the notice dated 7th July 2015. 24. In response to the notice, the Respondent has filed its counter affidavit. 25. Mr. Porus Kaka, learned Senior counsel appearing for the Petitioners, contended that the final assessment order passed by the AO in each case on 28th January....
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....3) of the Act against the Petitioners and the appeal could have been filed by the Petitioners before the Commissioner of Income Tax (Appeals) ['CIT (A)']. While he was not aware that the Petitioners have been issued notice under Section 147 of the Act, Mr. Manchanda submitted that directions similar to one have been issued in the case of Honda Cars India Limited v. Deputy Commissioner of Income Tax (supra) giving liberty to the Revenue to take recourse of such remedy, as may be available to it, in accordance with law. 29. The above submissions have been considered. In the first place the Court would like to observe that this is an instance of blatant disregard by the AO of the order of the DRP notwithstanding that the DRP had categorically held that the two Petitioners do not satisfy the conditions of an 'eligible assessee' in terms of Section 144 (15) (b) (ii) of the Act. As already noticed under Section 144C (10) of the Act the AO had no option but to comply with the order of the DRP. Even if no direction was issued by the DRP under Section 144C (5) of the Act, the fact that the DRP held that both the Petitioners were not 'eligible Assessees' could not have been ignored by the....
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....d to pass the final assessment order under Section 143(3) of the Act. 34. In Vijay Television (P) Ltd v. Dispute Resolution Panel, Chennai (2014) 369 ITR 113 (Mad) where again the AO passed the final assessment order under Section 143 (3) of the Act instead of passing a draft assessment order under Section 144C (1) of the Act and then sought to issue a Corrigendum modifying the final order of the assessment to be read as a draft assessment order but beyond the period prescribed for limitation for passing such order. The High Court held the entire exercise to be without jurisdiction. 35. In Pankaj Extrusion Limited v. Assistant Commissioner of Income Tax (2011) 241 CTR (Guj) 390 the Division Bench of Gujarat High Court, in interpreting Section 144C of the Act held that where an Assessee was not an 'eligible assessee', the question of passing the draft assessment order under Section 144C of the Act did not arise. 36. As far as the decision of this Court in Honda Cars India Limited v. Deputy Commissioner of Income Tax (supra) is concerned, the question that arose is whether the AO could have passed the draft assessment order when the Assessee did not satisfy the condition 'el....
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....of these officers to give effect to the orders of authorities higher to them in the appellant hierarchy. It cannot be too vehemently emphasised that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities. The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not 'acceptable' to the department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result would only be undue harassment to Assessees and chaos in administration of tax laws." 39. In Nav Bharat Impex v . Union of India (supra) t....