TaxTMI 
TaxTMI 
2017 (2) TMI 1001
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....y 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 erred in not considering PBDIT (Profit before depreciation, Interest, Tax) to be an appropriate Profit Level Indicator (PLI) ....
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....gth 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 him as prior period item, which has been invoiced in the current year so it cannot be termed as prior period item for income tax computation. d) e) Short Provision of Bonus of Rs. 1,46,836/- considered by him as prior period item and also erred in disregarding the fact that t....
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.... 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 1527/2014 and M.P Nos.1 and 1/2014. 5. The learned Departmental Representative for the Revenue strongly opposed the propositions of the learned Authorized Representative for the assessee. 6. We have heard the rival contentions and perused the record. Briefly, in the facts of the case, the Assessing Off....
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.... 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 period specified in sub-section (2) of section 144C of the Act. Thereafter, the Assessing Officer is empowered to pass the assessment order within one month from the end of month, in which the acceptance is received or the period of filing objections under sub-section (2) of section 144C of the Act expires. Un....
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....ly 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 a corrigendum on 15.04.2014 to rectify the mistake committed in passing the final order of assessment inter alia to treat it as a draft assessment order. This course of action adopted by the second respondent is contrary to the mandatory provisions contained in the Act and the corrigendum issued by the AO could not cur....
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....ete 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 issued by the CBDT stating that section 144C(1) of the Act would apply only from assessment year 2010-11 and subsequent years and not from assessment year 2008-09 was contrary to the expressed language of the section and the said view of the Revenue was held to be not acceptable. The Hon'ble High Court of A.P thereafter held t....
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....e 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 before a final assessment order is passed and appellate proceedings invoked by it. However, these special rights made available to eligible assessee under Section 144C of the Act are rendered futile, if directly a final order under Section 143(3) of the Act is passed without being preceded by draft assessment order. 6. In the above view, the assessment order dated 23....