TaxTMI 
TaxTMI 
2017 (2) TMI 1001
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....the order passed on 28.02.2014 was a final order. So, I don't have any jurisdiction over the case". 2) The learned DRP erred in treating the order dated 28-2-2014 to be final assessment order when the AO passing the said order has clearly stated in the covering letter that the said order is draft assessment order. 3) The orders passed by the AO be declared to be NULL in view of the fact that order have not been passed in accordance with specified provisions of the Income Tax Act, 1961 and the Losses of the year and to be carried forward be restored as returned by the assessee. Without prejudice to the above, the following grounds be considered on merit: B) Grounds related to Transfer Pricing Issue - 3) The learned AO/TPO has erred in making the adjustment of Rs. 5,52,83,918/-. 3.1 The Ld. AO erred in not considering the Lower capacity utilization adjustment, more so, this being the first full year of operation. The Lower capacity utilization, which happens because of teething trouble, did affect the profitability of the company in comparison with comparable who are fully established manufacturers. 3.2 The Ld. AO err....
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....nt of Rs. 4,20,50,616/- by applying modified PBIT method. While the Ld. TPO should have taken PBDIT method only for arriving at ALP. 10) The Ld. AO/TPO be directed to allow the adjustment of +/- 5% while arriving at arm's length price, if there remains TP difference between the average price of comparables and the price at which the assessee has transacted with the AE. This should be reconsidered and recomputed after giving effect to the directions as regards all other objections. 11) ) The Ld. AO/TPO erred in not considering the lower TP adjustment of Rs. 4,20,50,616/- which is arrived at by him applying another methodology. C) RELATING TO OTHER CORPORATE TAX ISSU ES :- 12) The Ld. AO erred in disallowing - a) Exchange fluctuation gain on IFC loan reinstatement of Rs. 4,40,61,081/- which is fully covered by the provision of section 43A. b) Bank Guarantee Charges of Rs. 10,99,210/- considered by him as prior period item which have been charged by the bank due to revision in Bank Charges in the current year. c) The payment for professional/legal services to M/S DSK legal to the extent of Rs. 7,61,369/- considered by ....
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....g Officer had passed the assessment order under section 143(3) of the Act dated 28.02.2014 which was the final assessment order and not the draft assessment order, hence the DRP did not have any jurisdiction to issue any directions. After receipt of the said order, the Assessing Officer vide letter dated 30.01.2015 in response to letter of the assessee dated 09.12.2014 regarding order disposing objections filed before the DRP observed that the DRP had clearly mentioned that the order passed on 28.02.2014 was final order and not draft order. So, he says that he has no jurisdiction to pass any order. The learned Authorized Representative for the assessee pointed out that earlier order passed by the Assessing Officer was a draft assessment order, against which objections were filed before the DRP, who had not disposed of the same and hence, the draft assessment order cannot be upheld being invalid in law. Reliance was placed on the ratio laid down by the Hon'ble Bombay High Court in International Air Transport Association Vs. DCIT in WP (L) No.351 of 2016, vide judgment dated 18.02.2016 and the Hon'ble Madras High Court in Vijay Television Pvt. Ltd. Vs. DRP & Others in WP Nos1526 and ....
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.... mentioned that the order passed on 28.02.2014 was final order and not draft order, so the Assessing Officer does not have any jurisdiction over the case. 7. In order to adjudicate the issue, reference needs to be made to the provisions of section 144C of the Act. Under the provisions of section 144C of the Act, it is provided that where the Assessing Officer proposes to make, on or after 01.10.2009, any variation in the income or loss returned, which is prejudicial to the interest of assessee, then the Assessing Officer shall in the first instance forward the draft of the proposed order of assessment to the eligible assessee. Under sub-section (2) of section 144C of the Act on receipt of the draft order, the eligible assessee shall within 30 days of the receipt, file his acceptance of the variation to the Assessing Officer or file his objections, if any, to such variation with the Dispute Resolution Panel and the Assessing Officer. Under sub-section (3) of section 144C of the Act, the Assessing Officer shall complete the assessment on the basis of draft order if the assessee intimates to the Assessing Officer the acceptance of the variation or no objections are received within ....
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....tion Nos.1526 and 1527 of 2014 & M.P. Nos.1 and 1 of 2014, it was held that non-passing of draft assessment order after adjustment made by the TPO renders proceedings null & void by observing as under:- "Under Section 144C(1) of the Act, with effect from 1st October 2009, the Assessing Officer has to mandatorily issue a draft assessment order if there is a proposed variation to the return which are prejudicial to the eligible assessee. The fact that the petitioner is an eligible assessee is not in dispute. While so, under section 144C(2) of the Act, the eligible assessee has the option, either to accept the variation or to file their objections before the DRP and such option has to be exercised within 30 days. On such objections filed by the assessee, the DRP shall issue appropriate direction for the guidance of the Assessing Officer under section 144C(5) of the Act. It is only thereafter, the AO is bound to pass a final order of assessment in compliance with the directions issued by the DRP under section 144C(3) of the Act. In the present case, without following the above mandatory procedure, the AO has passed the order of assessment on 26.03.2013 and subsequently issued ....
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...., the Assessing Officer shall complete the assessment within one month, in view of the provisions of section 144C of the Act. It was further observed that the assessee is also given an option to file an objection before the DRP, in whichthe latter can issue directions for the guidance of Assessing Officer to enable him to complete assessment. Where the Assessing Officer accepted the variation submitted by the TPO without giving the petitioner any opportunity to object to it and pass the assessment order, it was held by the Hon'ble High Court of A.P that the impugned order of assessment was clearly contrary to section 144C of the Act and was without jurisdiction, null and void. The objection of the Revenue that the Circular No.5/2010 of the CBDT which laid down that the provisions of section 144C of the Act shall not apply for the assessment year 2008-09 and would only apply from assessment year 2010- 11 and later years was held to be not tenable where the language of sub- section (1) of section 144C of the Act referred to the cutoff date of 01.10.2009 indicates the intention of Legislature to make it applicable. The Hon'ble High Court of A.P further held that the Circular No.5/2010....
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....of a final order under Section 143(3) of the Act and not in respect of the draft assessment order passed under Section 144C(1) of the Act. The order dated 7th October, 2015 of the DRP holds that its jurisdiction is only to entertain objections with regard to draft assessment order passed under Section 144C(1) of the Act. 5. However, it is pertinent to note that the order dated 7th October, 2015 of the DRP in paragraph (3) thereof records that "There is no dispute that the assessee is a foreign company". This position is undisputed even before us. Therefore, in view of Section 144C(15) of the Act which defines eligible assessee to whom Section 144C(1) of the Act applies to inter alia mean any foreign company. Therefore, a draft assessment order under Section 144C(1) of the Act is mandated before the Assessing Officer passes a final order under Section 143(3) of the Act in case of eligible assessee. An draft assessment order passed under Section 144C(1) of the Act bestows certain rights upon an eligible assessee such as to approach the DRP with its objections to such a draft assessment order. This is for the reason that an eligible assessee's grievance can be addressed befor....