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2018 (6) TMI 146
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....n the unrelated parties whereas on the other hand it has been claimed that the AE is given bulk discount for which no evidence was produced whatsoever. 3. Whether on the facts and circumstances of the case & in law, ld. CIT(A) was justified in not appreciating the fact that the second proviso to section 92C(2) is not applicable in the instance case, as the AO has applied CUP method for determining ALP." ITA. No. 46/JP/2017: "1. In the facts and circumstances of the case and in law the ld. CIT has erred in not appreciating the fact that ld. AO/TPO has not provided the draft of the proposed order of assessment in terms of the provisions of section 144C of the Income tax Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire assessment order. 2. In the facts and circumstances of the case in law the ld. CIT(A) has erred in confirming the action of ld. AO/ ld. TPO in making an addition of Rs. 31,84,607/- on account of alleged notional interest on outstanding receivables in respect of transactions with AE. The action of the ld. CIT(A) is illegal, unjustified, arbitrary a....
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....hat the the AO has erred in not providing a draft of the proposed order of assessment in terms of the provisions of section 144C of the Act which is prejudicial to the interest of the appellant and therefore, the order of the AO is invalid and void ab initio. The said ground, being a legal ground was admitted for adjudication by the ld. CIT(A) and a remand report on the matter was called for from the Assessing Officer. 5. In its remand report, the Assessing Officer submitted that the TPO had issued a specific show cause notice stating the intended adjustments under the transfer pricing mechanism, and afforded ample opportunity to the assessee to put forth its objections. Further, the assessee duly availed of this opportunity, and submitted its detailed reply on 30.12.2014, which has been incorporated and discussed/ rebutted in the order dated 08.01.2015. It was further submitted by the AO that after the receipt of the TPO's order, another show cause notice was issued to the assessee and in response, the assessee filed its reply which was identical to the reply/objections filed before the TPO. It was submitted by the AO that the assessee while filing its reply against the said sh....
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....on the assessee before passing the final assessment order. It was submitted that the term "shall" has been used which means that the AO/TPO are bound to follow this provision of section 144(C). The term "Notwithstanding..... in this Act" has been used which means this is a superseding section and empowers the assessee to receive a draft order before the final order is served upon him. The phrase "In the first instance" has been used which means before making the final order, the AO first of all shall sent the draft order to the assessee so as to have his acceptance or objection if any. The terms "eligible assessee" has been used which means the assessee company. The phrase "any variation in the income or loss return which is prejudicial to the interest of the assessee" has been used which means that if an addition is made in the ALP, consequently, income of the assessee is increased against the interest of the assessee. It was accordingly submitted that the AO/TPO have not uphold the intention of law as it is clear from language of section 144C(1) whereby no draft order was served upon the assessee before passing and issuing the final order. It was further submitted that the lower ....
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.... to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. (2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order,- (a) file his acceptance of the variations to the Assessing Officer; or (b) file his objections, if any, to such variation with,- (i) the Dispute Resolution Panel; and (ii) the Assessing Officer. (3) The Assessing Officer shall complete the assessment on the basis of the draft order, if- (a) the assessee intimates to the Assessing Officer the acceptance of the variation; or (b) no objections are received within the period specified in sub-section (2). (4) The Assessing Officer shall, notwithstanding anything contained in section 153 or section 153B, pass the assessment order under subsection (3) within one month from the end of the month in which,- (a) the acceptance is r....
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....e months from the end of the month in which the draft order is forwarded to the eligible assessee. (13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 or section 153B, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received. (14) The Board may make rules for the purposes of the efficient functioning of the Dispute Resolution Panel and expeditious disposal of the objections filed under sub-section (2) by the eligible assessee. (14A) The provisions of this section shall not apply to any assessment or reassessment order passed by the Assessing Officer with the prior approval of the Principal Commissioner or Commissioner as provided in sub-section (12) of section 144BA. (15) For the purposes of this section,- (a) "Dispute Resolution Panel" means a collegiums comprising of three Principal Commissioners or] Commissioners of Income-tax constituted by the Board for this purpose; (b) "eligible assess....
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....uld not have been done if the assessment order was indeed a draft assessment order. Undoubtedly, if draft of assessment order is wrongly titled an assessment order, section 292B should have come to the rescue of the Assessing Officer. However given the fact that resultant tax demand and penalty proceedings have been initiated, it is a final assessment order which has been passed by the Assessing Officer in substance and in effect. 18. Now, coming to the contention of the ld DR that adequate opportunity has been provided to assessee to submit objections against the ALP adjustments by the TPO as well as by the Assessing Officer. Accordingly, it is not a case where the rights of the assessee have been prejudiced in any manner. In other words, the contentions of the ld DR is that where show-cause notice towards proposed ALP adjustment has been issued to the assessee, the same is a sufficient compliance and in such a scenario, there is no necessity to furnish the draft assessment order. We are however unable to accede to the said contentions raised by the ld DR as the same is not what has been contemplated by the legislature under section 144C(1) of the Act. And if we were to accept ....
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....gh Court, in the case of Vijay Television (P.) Ltd v. Dispute Resolution Panel, wherein Hon'ble High Court has, inter alia, observed as follows: '20. Under Section 144 (C) of the Act, it is evident that the assessing officer is required to pass only a draft assessment order on the basis of the recommendations made by the TPO after giving an opportunity to the assessee to file their objections and then the assessing officer shall pass a final order. According to the learned senior counsel for the petitioners, this procedure has not been followed by the second respondent inasmuch as a final order has been straightaway passed without passing a draft assessment order. 21. As rightly pointed out by the learned senior counsel for the petitioners, in the order passed on 26.03.2013, the second respondent even raised a demand as also imposed penalty. Such demand has to be raised only after a final order has been passed determining the tax liability. The very fact that the taxable amount has been determined itself would show that it was passed as a final order. In fact, a notice for demand under Section 156 of the Act was issued pursuant to such order dated 26.03.2013 of the se....
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....ld be construed as a final order:- "10. Shri Rajiv Dutta, learned senior counsel appearing on behalf of the appellant, submitted that in the light of its afore-extracted observations and a clear finding that the assessment order for the assessment year 1995-96 had been anti-dated, the order was null and void. It was urged that assessment proceedings after the expiry of the period of limitation being a nullity in law, the High Court should have annulled the assessment and there was no question of a fresh assessment. Thus, the nub of the grievance of the appellant is that in remanding the matter back to the Assessing Officer, the High Court has not only extended the statutory period prescribed for completion of assessment, it has also conferred jurisdiction upon the Assessing Officer, which he otherwise lacked on the expiry of the said period." 23. It is evident from the above decision of the Honourable Supreme Court that if an order is passed beyond the statutory period prescribed, such order is a nullity and has no force of law. In that case before the Honourable Supreme Court, the period for assessment proceedings expired and thereafter, fresh assessment orders have be....
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....ilarly, the Division Bench of this Court in the decision in the case of V. Ramaiah (supra) Madras held that when an order is passed under Section 158BC of the Act instead of Section 158BD, it is not valid since it is not a defect curable under Section 292B of the Act. It was also held that an order passed after the period of limitation laid down in Section 158BC is not a valid order. It was further held that when there is a prescribed procedure contemplated under the Act or in a particular section and it is violated, then it cannot be cured. In the present case, certain procedure has been contemplated under Section 144C of the Act and they have been violated by the second respondent by passing final order of assessment and therefore such order passed by the second respondent has got no jurisdiction or it can be cured by virtue of issuing a corrigendum. 28. By referring to the decision of the Division Bench of this Court dated 10.02.2014 passed in Tax Case (Appeal) No. 2412 of 2006, the learned standing counsel for the respondents sought to make a distinction with the decision of the Division Bench of this Court mentioned in the preceding paragraph. That is a case where the facts....
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....ficer to follow the mandatory procedures prescribed in the Act, such an omission cannot be termed as a mere procedural irregularity and it cannot be cured. 31. In identical case as that of the case on hand, the Division Bench of the Andhra Pradesh High Court, in an unreported decision, had an occasion to consider the scope of the validity of the demand notice issued by the assessing officer in the case of Zuari Cement Ltd. (supra), wherein it was held as under:- "A reading of the above section shows that if the assessing officer proposes to make, on or after 01.10.2009, any variation in the income or loss returned by an assessee, then, notwithstanding anything to the contrary contained in the Act, he shall first pass a draft assessment order, forward it to the assessee and after the assessee files his objections, if any, the assessing officer shall complete assessment within one month. The assessee is also given an option to file objections before the Dispute Resolution Panel in which event the latter can issue directions for the guidance of the Assessing Officer to enable him to complete the assessment. In the case of the petitioner, admittedly the TPO suggest....
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.... provisions, but it will not bind this Court or the Supreme Court. It cannot interfere with the jurisdiction and power of this Court to declare what the legislature says and take a view contrary to that declared in the circular of the CBDT (Ratan Melting and Wire Industries Case (1 Supra), Indra Industries (2 supra). The Revenue has not been able to pursuade us to take a contra view by citing any authority. In this view of the matter, we are of the view that the impugned order of assessment dated 23.12.2011 passed by the respondent is contrary to the mandatory provisions of S.144C of the Act and is passed in violation thereof. Therefore, it is declared as one without jurisdiction, null and void and unenforceable. Consequently, the demand notice dated 23.12.2011 issued by the respondent is set aside." 32. As against this order of the Division Bench of the Andhra Pradesh High Court, the Revenue went on appeal before the Honourable Supreme Court. The record of proceedings of the Supreme Court indicate that the Special Leave Petition was dismissed on 27.09.2013. 33. The decision of the Division Bench of the Andhra Pradesh High Court deals with an identical issue as that ....