TaxTMI 
TaxTMI 
2022 (1) TMI 1363
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....anel ('DRP'), Bangalore dated December 29, 2016 & January 16. 2017 respectively, under section 253 of the Income-tax Act, 1961 ('Act) on the following grounds: That on the facts and in the circumstances of the case and in law and based on the directions of the DRP: A. Grounds of appeal relating to corporate tax matters 1. The learned AO has erred in law and in fact. by not considering the plea of the Appellant that foreign currency expenditure incurred in relation to recharge of international assignee costs constitute 'reimbursements' and are not in the nature of income chargeable to tax under the Act. B. Grounds of appeal relating to transfer pricing matters 3. The learned DRP/ learned TPO/ learned AO have erred in law and in fact by concluding that the technical services provided by the Appellant are a mix of high end & low end services. 4. The learned AO/TPO have erred, in law and in facts. by making negative working capital adjustment in relation to the services provided by the Appellant without appreciating the fact that the Appellant is a captive service provider and does not bear any working capital risk. ....
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....n facts, by determining the arm's length margin/price using only FY 2011-12 data, which was not available to the Appellant at the time of complying with the transfer pricing documentation requirements. 16. The learned TPO/ learned AO have erred, in law and in facts, by rejecting the filter of ratio of research and development expenses to sales less than 3% considered by the Appellant for the purpose of selecting the companies which do not own intangibles and are pure service providers: 17. The learned TPO/ learned AO have erred in law and in facts. by rejecting the filter adopted by the Appellant for selecting companies having a ratio of sum of advertising, marketing and distribution expenses to sales less than 3%; 18. The learned AO has erred in making a reference to the TPO without recording a finding that he considers it 'necessary or expedient' to do so as required under section 92CA(1) of the Act. hence the reference made by the learned AO to TPO suffers from jurisdictional error. 19. The learned TPO/ AO have erred, in law and in fact, by using the information by exercising powers under section 133(6) of the Act. C. Grou....
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....er and thereby making the same as final order and thus, not following the provisions of section 144C of the Act and hence, the order passed by the learned AO is bad in law and merits to be quashed. The Appellant craves leave to add, alter, amend, vary, omit or substitute the aforesaid ground of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon'ble Tribunal to decide on the appeal in accordance with the law. Further, it is respectfully submitted that no prejudice would be caused to the Respondent by reason of the above additional ground being admitted and adjudicated and accordingly the balance of convenience is in favour of such an order being passed by this Hon'ble Tribunal." 4. We have heard the rival submissions and perused the material on record. In our opinion, the issue raised by the assessee being a legal issue and does not require any investigation of facts which are already on record. Accordingly, these grounds are admitted for adjudication following the decision of Hon'ble Supreme Court judgment in the case of M/s National Thermal Power Co. Ltd. (supra) . 5. The Id. AR submitted that the draft as....
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....gainst that order. He further submitted that the various case laws relied on by the assessee are delivered on different set of facts and being so, it cannot be applied. 7. We have heard both the parties and perused the material on record. As per section 144C of the Act, it is mandatory for the Ld.AO to pass Draft Assessment Order in accordance with the procedure laid down therein. We have noticed that the coordinate Bench in the case of Suretex Prohphylactics (India) Ltd., 62 CCH 0002 Bang Trib., considered similar issue and given finding after following the decision of Hon'ble Madras High Court in case of Vijay Television (2014) 369 ITR 113 (Mad) observed as follows:- "11. ................. Various decisions relied by the Ld.AR reproduced hereinabove highlight that, it is mandatory for Ld.AO to follow the procedures laid down under section 144C of the Act in an assessment that involves assessment of international transaction. Hon'ble Madras High Court in case of Vijay Television (supra) observed as under: "Admittedly, the case of the petitioner company was taken up for scrutiny by the second respondent relating to the assessment years 2009-2010 inasmuc....
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.... (4C) of section 139, no order making an assessment of the total income or loss of such research association, news agency, association or institution or fund or trust or university or other educational institution or any hospital or other medical institution, shall be made by the Assessing Officer, without giving effect to the provisions of section 10, unless -- (i) the Assessing Officer has intimated the Central Government or the prescribed authority the contravention of the provisions of clause (21) or clause (22B) or clause (23A) or clause (23B) or sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, as the case may be, by such [research association], news agency, association or institution or fund or trust or university or other educational institution or any hospital or other medical institution, where in his view such contravention has taken place; and (ii) the approval granted to such research association or other association or fund or trust or institution or university or other educational institution or hospital or other medical institution has been withdrawn or notification issued in respect of such new....
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.... (b) no objections are received within the period specified in subsection (2). (4) The Assessing Officer shall, notwithstanding anything contained in section 153 or section 153B, pass the assessment order under sub section (3) within one month from the end of the month in which, -- (a) the acceptance is received; or (b) the period of filing of objections under sub-section (2) expires. (5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment. (6) The Dispute Resolution Panel shall issue the directions referred to in subsection (5), after considering the following, namely:-- (a) draft order; (b) objections 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 enqu....
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....inserted after subsection (14) of section 144C by the Finance Act, 2013, w.e.f. 1-4- 2016 : (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 Commissioner as provided in sub-section (12) of section 144BA. (15) For the purposes of this section, -- (a) "Dispute Resolution Panel" means a collegium comprising of three Commissioners of Income-tax constituted by the Board54 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 foreign company.' 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....
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....ioner company. 22. As mentioned supra, as per Section 144C (1) of the Act, the second respondent-assessing officer has no right to pass a final order pursuant to the recommendations made by the TPO. In fact, the second respondent-assessing officer himself has admitted by virtue of the corrigendum dated 15.04.2013, that the order dated 26.03.2013 is only a final order and it was directed to be treated as a draft assessment order. In this context, it is worthwhile to refer to the decision of the Honourable Supreme Court in the decision Deepak Agro Foods (supra) wherein in Para No.10, the Honourable Supreme Court discussed as to when an order could 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 aforeextracted 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 th....
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.... pass a draft assessment order is mandatory and it is prescribed by the statute. Therefore, this decision relied on by the learned standing counsel for the respondents cannot be made applicable to this case. 26. The learned senior counsel for the petitioners relied on the decision of the Allahabad High Court in the case of Shital Prasad Kharag Prasad (supra) wherein the Division Bench of the Allahabd High Court held that a notice contemplated under Section 148 of the Income Tax Act is a jurisdictional notice and it is not curable by issuing a notice under Section 292 B of the Act, if it was not served in accordance with the provisions of the Act. 27. Similarly, 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 violate....
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.... procedure like issue of notice under Section 143 (2)/142. This does not provide accepting the return as provided under Section 143 (1) (a). The Officer has to complete the assessment order under Section 143 (3) only. If an assessment is to be completed under Section 143 (3) read with Section 158BC, notice under Section 143 (2) should be issued within one year from the date of filing of the block return. Omission on the part of the assessing officer to issue notice under Section 143(2) cannot be a procedural irregularity and is not curable." 30. It is evident from the above decision of the Division Bench of this Court that where there is an omission on the part of the assessing officer 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 th....
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.....2009 i.e., from the assessment year 2010-2011. It is not disputed that the memorandum explaining the Finance Bill and the Notes and clauses accompanying the Finance Bill which preceded the Finance (No.2) Act, 2009 clearly indicated that the amendments relating to S.144C would take effect from 01.10.2009. In our view, the circular No.5/2010 issued byt he CBDT stating that S.144C(1) would apply only from the assessment year 2010-2011 and subsequent years and not for the assessment year 2008-09 is contrary to the express language in S.144C(1) and the said view of the Revenue is unacceptable. The circular may represent only the understanding of the Board/Central Government of the statutory 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 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 23.12.201....