TaxTMI 
TaxTMI 
2022 (6) TMI 1118
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....ransfer pricing adjustment under section 92CA (3) 1.1 The learned DCIT/ Dispute Resolution Panel ('DRP') has erred on facts and in law in completing assessment under section 144C/143(3) of the Income-tax Act, 1961 ('the Act') at an income of Rs.14,14,21,940 as against the income of Rs.7,20,05,269 returned by the appellant. 1.2 The learned DCIT / DRP has erred on facts and in law by rejecting the benchmarking approach adopted by the appellant and thereby making an addition of Rs.6,94,16,669 of the alleged difference in the arm's length price of the 'international transactions of provision of engineering design services on the basis of the order passed under section 92CA(3) of the Act by the TPO. 1.3 The learned DCIT/ DRP has erred on facts and in law by selecting only non-associated enterprise ('non- AE') export segment while applying internal transactional net margin method (TNMM') instead of non-AE segment as a whole for determining arm's length price of international transaction pertaining to provision of engineering design services entered into by the Appellant during FY 2012-13. 1.4 The learned DCIT/ DR....
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....the notice of demand dated 21 December 2016 u/s 156 of the act and a penalty notice dated 21 December 2016 u/s 274 read with Section 271 (1) (C) of the act along with the draft assessment order thereby not following the procedures laid down u/s 144C of the act. iii. The appellant submits that the draft assessment order passed u/s 143 (3) read with Section 144C (1) of the act be struck down as void ab initio and bad in law as such consequently the entire assessment proceedings ought to be quashed. 03. Assessee submitted that the above grounds are purely legal in nature and goes to the root of the matter and therefore they should be admitted. It was further stated that during the course of preparation of the appeal the appellant was advised to raise this additional ground of appeal. It was also claimed that it does not require production of any fresh facts for its adjudication. 04. The learned authorised representative vehemently supported and reiterated all the grounds mentioned in the application for additional ground and stated that same should be admitted. 05. The learned departmental representative vehemently objected to the additional ground raised by the asse....
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....d by the assessee on transactions with its associated enterprises is more than the margin earned from third parties the international transactions are at arm's-length. 011. The learned transfer pricing officer examined the transfer pricing study report of the assessee and found that assessee has adopted internal transactional net margin method as the most appropriate method. He found that revenue from engineering design services from associated enterprise segment is 57% whereas from non- AE segment is 43%. He accepted the internal transactional net margin method, however, he examined the profitability segment and found that assessee has applied internal transactional net margin method using the domestic segment also in comparison. According to him the domestic segment cannot be compared with export segment. Therefore he held that it is appropriate to compare the related party export as well as third-party exports Under the internal transactional net margin method analysis. According to that, he found that related party export transactions resulted into profit level of 21.88% compared to transactions with other parties of 27.62%. Therefore adjustment of Rs. 69,416,669/- was made ....
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....ia private limited versus ACIT (2017) 77 taxman.com 19 vi. Mavenir India private limited versus DCIT ITA number 203/del/2010 vii. Skoda auto India private limited versus ACIT 2344/PU and/2012 viii. Jazzy creations private limited versus ITO 83 taxmann.com 244 ix. PCIT versus Lion bridge technologies private limited 100 taxmann.com 413 017. He referred to all those decision to show that on identical facts and circumstances the assessment orders have been quashed where the learned assessing officer has failed to follow the procedures prescribed for passing a draft assessment order but instead of that passed draft assessment order along with the notice of demand and show cause notice for penalty. 018. The learned departmental representative vehemently stated that it is merely an irregularity and not an invalidity of the assessment order. He further stated that assessee has already taken the objection route before the learned dispute resolution panel and therefore assessee is not aggrieved with that and therefore the above additional ground raised by the assessee deserves to be dismissed on the merits. He further stated that the notice of deman....
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....r directing to `Issue notice u/s.274 r.w.s. 271(1)(c) of the I.T. Act, 1961". A demand notice dated 29-12- 2011 was also simultaneously issued, a copy of which has been placed on record by the ld. AR. Then, the AO issued penalty notice u/s.274 r.w.s. 271(1)(c) of the Act, again, on 29-12-2012, whose copy has also been placed on record. Thereafter, the AO passed the final assessment order dated 27-02-2012 u/s.143(3) r.w.s. 144C of the Act determining total income at Rs. 156.73 crore. 8. From the above factual matrix, it is seen that the AO passed the draft order by designating it as the "Assessment order" u/s 143(3) of the Act on 29-12- 2011 and also issued notice of demand u/s.156 along with initiation of the penalty proceedings. Thereafter, he passed the final assessment order again characterizing it as `Assessment order' on 27- 2-2012. Under such circumstances, the assessee has raised the issue that the final assessment order lacked validity and hence should be quashed as the AO/TPO failed to follow the statutorily prescribed procedure u/s.144C of the Act. 9. Section 144C of the Act with the marginal note "Reference to Dispute Resolution Panel" provides....
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....ility, pursuant to which a notice of demand is issued. Thus it follows that, irrespective of the course of action followed by the assessee, whether or not accepting the variation in the draft order or choosing the route of the DRP or the CIT(A), a draft order has to be necessarily followed by an assessment order on the basis of which a notice of demand is issued and it is then that the assessment is said to have come to an end. 11. The Hon'ble Apex Court in Kalyan Kumar Ray (1991) 191 ITR 634 (SC) has held that assessment order involves determination of income and tax. It laid down that: `'Assessment' is one integrated process involving not only the assessment of the total income but also the determination of the tax. The latter is as crucial for the assessee as the former.' Again the Hon'ble Summit Court in Auto and Metal Engineers vs. UOI (1998) 229 ITR 399 (SC) has held that the process of assessment involves (i) filing of the return of income under s. 139 or under s. 142 in response to a notice issued under s. 142(1) ; (ii) inquiry by the AO in accordance with the provisions of ss. 142 and 143 ; (iii) making of the order of assessment by the AO under s. 143(3) or s....
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....der u/s.143(3) r.w.s. 144C(13), which action came to be disapproved by the Hon'ble High Court. It, ergo, follows that the statutorily mandated procedure must be adhered to by the authorities, non-observance of which renders the assessment order null and void. 14. Similar issue came up for consideration before the Pune Benches of the Tribunal in Skoda Auto India Ltd. Vs. ACIT. In that case also the AO passed the draft order and simultaneously issued notice of demand and initiated penalty proceedings by issuing notice u/s 274 of the Act. It was thereafter that the final assessment order was passed. The assessee challenged the legality of the final assessment order. Vide its order dated 02-07-2019, the Tribunal in ITA No.714/PUN/2011 has held that the demand got crystallised on passing of the draft order pursuant to issue of demand notice which is contrary to the relevant provision of the Act. Ex Consequenti, the draft order was held to be invalid in law and the consequential assessment order void ab-initio. 15. The ld. DR buttressed his point of view by relying on an order passed by the Hyderabad Benches in BS Ltd. Vs. ACIT (2018) 94 taxmann.com 346 (Hyderabad-Trib.....