TaxTMI 
TaxTMI 
2020 (12) TMI 169
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....2010-2011. The assessee has raised the following grounds of appeal and additional ground of appeal as under: (1) Erred in making an addition to the total income of the Appellant on transfer pricing adjustment aggregating to INR 22,23,78,359 in respect of its international transactions pertaining to Pune unit of Inteva India. (2) Erred in non-allowance of capacity utilisation adjustment Erred in law and facts by ignoring the submissions of the Appellant for providing the capacity utilisation adjustment to account for differences in the capacity utilized by the Appellant in view of its initial year of the manufacturing operations and the capacity utilized by the comparable companies and thereby not complying with the IT AT order. (3) Erred in non- exclusion of abnormal expenditure from the cost base of Inteva India Erred in law and facts by ignoring the submissions of the Appellant with respect to exclusion of abnormal expenses while computing the margins of Inteva India Pune unit. (4) Initiation of penalty proceedings under section 274 read with section 271(1)(c) of the Act Erred in initiating the penalty proceedings und....
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....e Act was issued. Further, the assessing officer has passed final order without passing draft assessment order, hence the entire assessment proceedings are bad in law and relied on catena of judicial decisions and supported his arguments with the Paper Book. Contra, the learned Departmental Representative supported the orders of lower authorities and filed written submissions. 5. We heard the rival submissions and perused the material on record. The learned Authorized Representative has restricted his arguments to the extent of additional ground of appeal and emphasized that the order giving effect (OGE) passed by the assessing officer on 8.8.2017 is bad in law, as the assessee was not provided with draft assessment order to file objections with the DRP and relied on the decision of Hon'ble Delhi High Court in the case of Control Rigs India Pvt. Ltd. Vs. DCIT in W.P.C. 5722/2017 and C.M. No. 23860/2017 Dt. 27.07.2017 at page 237 to 239 read as under: ORDER 27.07.2017 1. The challenge in this writ petition is to an order dated 11th May, 2017 passed by the Respondent, Deputy Commissioner of Income Tax, Circle 6 (2) (hereafter the Assessing Officer - 'AO'....
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.... above legal position and proceeded to pass a final assessment order, thereby depriving the Assessee of an opportunity of questioning the draft assessment order under Section 144C of the Act before the DRP. 8. Consequently, the Court has no hesitation in hereby setting aside the impugned assessment order dated 11th May, 2017 passed by the AO. The consequential notice of demand of the same date under Section 156 of the Act issued to the Petitioner is also hereby quashed. 9. The writ petition is accordingly allowed with no order as to costs. The application is disposed of. 6. Further, Hon'ble Madras High Court in the case of ACIT Vs. Vijay Television (P) Ltd. in W.A. Nos. 1327 to 1329 of 2014 (2018) 95 Taxman.com 101 held as under: Section 144C, read with Section 292B of the Income-tax Act, 1961 - Dispute resolution panel (General) - Assessment year 2009-10 - Whether Assessing Officer is duty bound to adhere to mandatory requirement mandated under section 144C(1) by first passing a draft assessment order, failure of which would invalidate final assessment order and consequent demand notices and penalty proceedings - Held, yes - Assessee filed its ret....
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.... facts been passed before 31st March, 2014 in terms of 4 of 6 S.R. JOSHI itxa-622-2016.odt Section 153A(2A) of the Act. In this case, undisputedly, a final order was passed on 12th March, 2014 and is being sought to be corrected by issue of corrigendum on 16th April, 2014 i.e. after the time to pass the Draft Assessment Order has expired. In fact, the Tribunal placed reliance upon the decision of a single judge of the Madras High Court in Vijay Television (P) Ltd., (supra). This, decision has now been upheld by the Division Bench of the Madras High Court in Assistant Commissioner of Income Tax v/s. Vijay Television (P) Ltd., 407 ITR 642. In the above case, non issue of Draft Assessment Order could not be corrected by issuing a corrigendum to a final Assessment Order. Just as in the facts before the Madras High Court, here also the demand notice and institution of pending proceedings were not withdrawn by the corrigendum. Besides, in International Air Transport Association v/s. Deputy Commissioner of Income Tax 68 taxmann.com 246 - this Court has held that the Draft Assessment Order is necessary in terms of Section 144C(1) of the Act before the Assessing Officer can proceed to pass ....
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....26-03-2013 should be construed as final assessment order passed in violation of the statutory provisions of the Act. The High Court further held that such a defect or failure on the part of the AO to adhere to the statutory provisions is not a curable defect by virtue of corrigendum dated 15.04.2013. 17. In the instant case also, it is not the case of the department that the demand raised in the assessment order dated 12-03-2014 was withdrawn by the AO at the time of issuing Corrigendum dated 16-04- 2015. Further, the Corrigendum itself was issued by the AO after the expiry of time limit prescribed under third proviso to sec. 153(2A) of the Act. As per the decision of Hon'ble Madras High Court rendered in the case of Vijay Television Private Ltd. (supra), the said defect cannot be cured by the Corrigendum issued subsequently after the expiry of limitation period. Hence the assessment order dated 12-03-2014 passed by the AO should be construed as final assessment order passed in violation of the statutory provisions of the Act. Since the AO has failed to comply with the time limit prescribed by sec. 153(2A) of the Act and further failed to follow the mandate of the prov....
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....o the aforesaid order of the Tribunal, the assessee vide its letter dated 12.08.2014 addressed to the A.O, had submitted a fresh TP study report in respect of payment of commission to its AE. The A.O. had thereafter referred the matter to the TPO under Sec. 92CA(1) on 13.11.2014. As observed by us hereinabove, the TPO once again worked out the transfer pricing adjustment with respect to commission paid by the assessee to its AE at Rs. 63,60,732/-. On receipt of the aforesaid order passed by the TPO under Sec. 92CA(3), dated 18.01.2016, the A.O. passed the assessment order under Sec. 143(3) r.w.s. 92CA r.w.s. 254, dated 23.03.2016. It is the case of the assessee before us, that as the A.O. had exceeded his jurisdiction and therein framed the assessment without forwarding a draft of a proposed order of assessment as envisaged under Sec. 144C(1), therefore, the assessment so framed by him is unsustainable in the eyes of law and is liable to be vacated on the said count itself. On the contrary, it is the claim of the revenue that as there was a limited direction by the Tribunal for re-determining the ALP of the commission payment by the assessee to its AE, therefore, it was not obligat....
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....ls that forwarding of a draft of the proposed order of assessment to an assessee in whose case variation in the income or loss returned as a consequence of the order of the TPO passed under sub-section (3) of Sec. 92CA is proposed, is not merely an idle formality, but in fact, the same is a statutory requirement which cannot be dispensed with. As a matter of fact, it is only after receipt of such draft order that the assessee is able to exercise his statutory right of filing his objections, if any, to the proposed variations to his returned income or loss with the DRP. The fact that a statutory obligation is cast upon the A.O. to forward a draft of the proposed order of assessment, can be appreciated from the fact that the time limit for framing an assessment by the A.O. under sub-section (3) of Sec. 143 r.w. sub-section (4) of Sec. 144C, has to be done within a period of one month from the end of the month in which viz. (i) the acceptance to the variations is received from the assessee; or (ii) the period of filing of objections by the assessee as envisaged in sub-section (2) of Sec. 144C expires. In our considered view, in the absence of a draft of the proposed order of assessmen....
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....here was no obligation cast on the A.O. to have passed a draft order before framing the assessment. In fact, we are of a strong conviction, that the A.O. in the course of the 'set aside' proceedings on receiving the order passed by the TPO u/s. 92CA(3), had triggered Sec. 144C(1) r.w.s. 144C(15), which obligated him to forward a draft of the proposed assessment to the assessee, if he proposed to make any variation in the income returned by the assessee, as a consequence of the aforesaid order passed by the TPO under sub-sec. (3) of Sec. 92CA. According to us, there can be no escape for the A.O. from compliance of the aforesaid statutory requirement. We are of the considered view, that the AO by dispensing with the statutory obligation of forwarding a draft of the proposed assessment to the assessee had, as a matter of fact divested the assessee of its statutory right of filing objections against the proposed variations to its returned income before the DRP. Our aforesaid view is fortified by the judgment of the Hon'ble High Court of Delhi in the case of Nokia India Pvt. Ltd. Vs. Additional CIT [W.P (C) No. 36929/2017, dated 07.09.2017]. The Hon'ble High Court in the....
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.... considered not by the A.O, but by the DRP. The Hon'ble High Court after extensive deliberations observed, that it was not discernible from the scheme of Sec. 144C that if the proceedings were started a fresh on remand, there would be no requirement of passing a draft assessment order. In the backdrop of the aforesaid observations, the Hon'ble High Court had observed that non-issuance of the draft assessment order vitiated the final assessment order passed by the A.O. Also, the Hon'ble High Court of Bombay in the case of Dimension Data Asia Pacific Pte. Ltd. Vs. DCIT [W.P No. 921 of 2018, dated 06.07.2018] (Bom) had rejected the view of the revenue that the requirement of passing a draft assessment order under Sec. 144C would only extend to the orders passed in the first round of proceedings, or in respect of an order passed by the A.O. in remand proceedings by the Tribunal in a case where the entire original assessment order had been set aside. It was observed by the Hon'ble High Court, that the aforesaid distinction which was sought by the revenue was not borne out by Sec. 144C of the Act. In fact, it was observed by the Hon'ble High Court that even in partial....