TaxTMI 
TaxTMI 
2022 (12) TMI 501
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.... and void ab initio as the same has been passed in violation of section 144C(1) of the Income-Tax Act, 1961 ("Act"). 3. Since, in the aforesaid additional ground assessee has raised a purely legal and jurisdictional issue going to the root of the matter and which can be decided without making investigation into fresh facts, we admit the additional ground for adjudication. For deciding the aforesaid additional, only few relevant facts need to be discussed. 4. Briefly stated, assessee is a resident corporate entity and stated to be engaged in providing advisory services to its Overseas Associated Enterprises (AE). For the assessment year 2009-10, assessee filed its return of income on 29.09.2009 declaring income of Rs.1,97,36,630. In course of the original assessment proceedings, the Assessing Officer, having noticed that assessee had entered into international transactions with its AE had made a reference to the Transfer Pricing Officer (TPO) to determine the Arms Length Price (ALP) of the international transactions. On 24.09.2014, the TPO passed an order under Section 92CA(3) of the Act, suggesting transfer pricing adjustment of Rs.1,11,62,277 to the ALP of the international tra....
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....bmitted, the Central Board of Direct Taxes (CBDT) had issued an explanatory Circular, vide Circular No. 5 of 2010 dated 03.06.2010, explaining that, since, the amendment brought to the Statute by Section 144C of the Act has been made applicable with effect from Ist October 2009, the said provision will apply in relation to assessment year 2010-11 and subsequent assessment years. Thus, he submitted, when the circular issued by the Board explained that the provisions contained under Section 144C of the Act would apply from assessment year 2010-11, the Assessing Officer has not committed any jurisdictional error in framing assessment under Section 153A of the Act. In support of such contention, learned CIT(DR) relied upon a decision of the Hon'ble Madras High Court in case of M/s. Vedanta Ltd. vs. ACIT Writ Petition No. 1729 of 2011, judgment dated 22.10.2019. 8. We have considered rival submissions in the light of the decisions relied upon and perused the material on record. In so far as the factual aspect of the issue is concerned, there is no dispute that assessee had filed the return of income for the impugned assessment year on 29.09.2009. Whereas, thereafter, the Assessing ....
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....jections filed by the assessee; (c ) evidence furnished by the assessee; (d ) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority; (e ) records relating to the draft order; (f ) evidence collected by, or caused to be collected by, it; and (g ) result of any enquiry made by, or caused to be made by, it. (7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5),- (a ) make such further enquiry, as it thinks fit; or (b ) cause any further enquiry to be made by any income-tax authority and report the result of the same to it. (8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order. (9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members. (10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Offic....
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....after the notification is issued , be laid before each House of Parliament.] (15) For the purposes of this section,- (a ) "Dispute Resolution Panel" means a collegium comprising of three Commissioners of Income-tax constituted by the Board for this purpose; (b ) "eligible assessee" means,- (i) any person in whose case the variation referred to in subsection (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) any non-resident not being a company, or any foreign company." 10. On a reading of sub-section(1) of Section 144C, it becomes very much clear that it incorporates a non-obstante clause, hence, overrides all other provisions in the Act, in so far as, they are contrary to section 144C of the Act. Further, the provision mandates that after Ist October 2009, if, the Assessing Officer proposes to make any variation in the income or loss returned by an eligible assessee, which is prejudicial to the interest of the said eligible assessee, in the first instance, he has to forward a draft of the proposed order of assessment to the concerned assessee for enabling him to either object to the draft....
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....is prejudicial to the interest of such assessee. Thereafter, the procedure laid down in the other provisions of section 144C would follow. Thus, in sum and substance, section 144C is a complete code by itself and lays down the mechanism of assessment in respect of an eligible assessee. To our mind, the entire controversy regarding applicability of section 144C to assessment years prior to assessment year 2010-11 was triggered by CBDT Circular No. 5/2010 dated 03.06.2010. While interpreting provisions contained under Section 144C of the Act, vis-à-vis, the clarificatory circular issued vide CBDT by Circular No. 5/2010 dated 03.06.2010, Hon'ble Andhara Pradesh High Court, in case of Zuari Cement Ltd. Vs. ACIT (supra) has held as under: "We have noted the contentions of the respective parties. S. 144C of the Act was introduced by the Finance (No.2) Act, 2009 and sub-sections (1) to (8) thereof states: "144C. Reference to dispute resolution panel.-(1) The Assessing Officer shall, notwithstanding anything 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....
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....he assessment order. 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, forwarded 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 suggested an adjustment of Rs.52.14 crores u/s.92CA of the Act on 20.09.2011 and forwarded it to the Assessing Officer and to the assessee under sub-section (3) thereof. The Assessing Officer accepted the variation submitted by the TPO without giving the petitioner any opportunity to object to it and passed the impugned assessment order. As this has occurred after 01.10.2009, the cut off date prescribed in sub-section (1) of S. 144C, the Assessing Officer is mand....
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....e impugned order of assessment dt. 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." 13. Thus, the aforesaid observations of the Hon'ble Andhara Pradesh High Court very aptly clarifies the legal position regarding applicability of section 144C in case of an eligible assessee. It is worthwhile to mention, a Special Leave Petition filed by the Revenue against the aforesaid decision of the Hon'ble Andhara Pradesh High Court was dismissed by the Hon'ble Supreme Court vide order dated 27.09.2013. Thus, the decision of the Hon'ble Andhara Pradesh High Court in case of Zuari Cement Ltd. (supra) has attained finality. 14. As discussed earlier, Revenue's case rests on Circular No. 5/2010 dated 03.06.2010 issued by the CBDT, which states that section 144C of the Act would apply from assessment year 2010-11 and subsequent assessment years. However, it is worth mentioning, Circular No. 5 of 2010 dated 03.06.2010 was sub....
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....ion in income or loss returned by an eligible assessee, on or after 1st October, 2009 irrespective of the assessment year to which it pertains. Amendments to other sections of the Income-tax Act referred to in para 45.3 of the circular 5/2010 dated 3rd June, 2010 shall also apply from 1st October, 2009" -sd- [Ashis Mohanty] Under Secretary [Tax Policy & Legislation-IV]" 15. In the aforesaid circular, the Board has clarified that section 144C of the Act is applicable to any order which proposes to make variation in income or loss returned by an eligible assessee on or after Ist October 2009, irrespective of the assessment year to which it pertains. 16. Interestingly, on 30.03.2014, when the Assessing Officer passed the impugned assessment order under Section 153A of the Act, CBDT Circular No. 9/2013 dated 19th November 2013 was very much in existence. It is fairly well settled, circular/notifications issued by the Board are binding on the statutory authorities, such as, the Assessing Officer. Of course, we hasten to add, CBDT Circulars cannot override statutory provisions. Therefore, the Assessing Officer has not only failed to implement the mandatory provision of section 144C(....
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....e directions of the DRP under sub-section (5) of Section 144C would bind even the assessee. He may of course challenge the order of the Assessing Officer before the Tribunal and take up all contentions. Nevertheless at the stage of assessment, he has no remedy against the directions issued by the DRP under subsection (5). All these provisions amply demonstrate that the legislature desired to give an important opportunity to an assessee who is likely to be subjected to upward revision of income on the basis of transfer pricing mechanism. Such opportunity cannot be taken away by treating it as purely procedural in nature. 8. Reference by the Revenue to the circulars dated 03.06.2010 and 19.11.2013 in this regard would be of no avail. First of these circulars was an explanatory circular issued by the Finance Ministry in which it was provided that these amendments (which included Section 144C of the Act) are made applicable with effect from 01.10.2009 and will accordingly apply in relation to assessment year 2010-11 and subsequent assessment years. In the latter clarificatory circular dated 19.11.2013, it was provided that in the earlier circular there was an inadvertent error and S....
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....cision in case of Zuari Cement Ltd. (supra) was rendered by the Division Bench of a High Court, whereas, the decision in case of M/s. Vedanta Ltd. (supra) was rendered by a single Judge of a High Court. In our humble opinion, as per the Principles of Stare Decisis, a decision rendered by a Bench of superior strength would get precedence over a decision rendered by a Bench of lesser strength. Therefore, respectfully following the decision of the Hon'ble Andhara Pradesh High Court in case of Zuari Cement Ltd. (supra) and the other decisions cited by the learned counsel for the assessee, we hold that the Assessing Officer has committed a gross jurisdictional error in not following the mandatory provisions of section 144C of the Act. Therefore, the impugned assessment order passed under Section 153A of the Act, being wholly without jurisdiction, is void ab initio. Accordingly, the assessment order dated 30.03.2014 passed under Section 153A of the Act is hereby quashed. Resultantly, the impugned order of learned Commissioner (Appeals) is set aside. 20. In so far as assessee's appeal in ITA No.1377/Del/2016 relating to assessment year 2010-11 is concerned, facts are identical except....