TaxTMI 
TaxTMI 
2024 (2) TMI 879
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.... holding that the Teleperformance Global Services pvt. Ltd. Vs. The ACIT, 12(2)(2) transaction of provision of guarantee by the Appellant on behalf of its Associated Enterprise ("AE") is not at arm's length. 1.2. The learned TPO/AO/ DRP erred in not appreciating that considering the facts and circumstances of its case and the law prevailing on the subject, provision of corporate guarantee and performance guarantee cannot be considered as an "international transaction" and therefore the same is not required to be benchmarked. 1.3. The learned TPO/AO/ DRP erred in alleging that guarantees extended by the Appellant should be compensated by way of guarantee commission and thereby erred in alleging a guarantee fee @ 3.3% for both provision for corporate guarantee and performance guarantee, by relying on the average of the generic guarantee fee rates collected from various banks under section 133(6) of the Income-tax Act, 1961 ('the Act) and further adding an adhoc mark-up of 200 basis points to the same. 1.4. The learned TPO/AO/ DRP erred in completely disregarding the submissions of the Appellant providing the benchmarking methodology adopted by the A....
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....ating that under the given facts and circumstances of its case and the various judicial precedents and law prevailing on the subject, the interest received by it from its AEs on the loans granted by it is at arm's length and hence no adjustment in respect thereof was called for. 3.4. The learned AO/DRP erred in alleging the arm's length interest rate on loans granted at LIBOR plus 400 basis points on an adhoc basis. 4.0 Re: Adjustment of Rs. 57,86,224/- relating to notional interest on overdue receivables: 4.1. The learned TPO/AO/DRP erred in making an upward adjustment of Rs. 57,86,224/ to the total income of the Appellant by holding that international transaction relating to receivables is not at arm's length and alleging that a notional interest ought to have been charged on by the Appellant by considering the transaction of receivable as a transaction of intra-group loan. 4.2. The learned TPO/AO/DRP erred in not appreciating that considering the facts and circumstances of the case and the law prevailing on the subject, outstanding receivables cannot be considered as an "international transaction" and therefore the same is not requ....
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....lowing the procedure laid down in Section 144C of the Income-tax Act, 1961 [the Act'], and therefore the said Order ought to be held as void ab initio, and consequently the entire assessment proceedings ought to be quashed. 1:2 The Appellant submits that the Assessing Officer has erred in issuing a Notice of Demand dated 23 March 2016 u/s. 156 of the Act and a penalty Notice dated 23 March 2016 u/s 274 r.w.s.271 (1)(c) of the Act alongwith the Draft Assessment Order thereby not following the procedure laid down u/s. 144C of the Act. 1:3 The Appellant submits that the draft assessment order passed u/s.143(3) r.ws. 144C(1) of the Act be struck down as void ab-initio and bad in law and consequently the entire assessment proceedings ought to be quashed. 2:0 Re: General: 2.1 The Appellant craves leave to add, alter, amend, substitute and/or modify in any manner whatsoever all or any of the foregoing grounds of appeal at or before the hearing of the appeal." 2. Fact in brief is that return of income declaring total loss of Rs. 55,92,45,705/- was filed on 30.11.2012. The case was subject to scrutiny assessment and notice u/s 143(2) of the Act was....
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....o 5 of the paper book showing copy of draft assessment order and copies of penalty notice u/s 274 and copy of demand notice u/s 156 issued alongwith the draft assessment order. The ld. Counsel vehemently contended that assessing officer has passed the draft assessment order dated 23.03.2016 without following the procedure laid down in Sec. 144C of the Act consequently the entire assessment proceedings is bad in law and not valid. In support of their contention the ld. Counsel has referred the decision of Hon'ble Madras High Court in the case of Vijay Television P. Ltd. Vs. DRP Chennai (2014) 46 taxman.com 100 (Madras) and decision of Hon'ble Karnataka High Court in the case of CIT(IT) v/s. Cisco Systems Services B.V. reported in (2023) [149 taxmann.com 486] and decision of the Pune Bench of the Tribunal in the case of Skoda Auto India Private Ltd v/s. ACIT (ITA No. 2344/Pun/2012) dated 03 June 2019 and decision of the Mumbai Bench of the Tribunal in the case of Brightstar Infrastructure Private Limited v/s. NFAC (ITA No. 746/Mum/2022) dated 30 June 2023 and decision of the Mumbai Bench of the Tribunal in the case of Marriott International Licensing Company BVV v/s. DCIT(IT) - 3(2)(....
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.... "Since tax as per normal assessment is higher than tax on book profit as the Act, the tax assessed will be at normal rate. Assessed u/s. 143(3) r.w.s. 144C(1) of the Act. Give credit for taxes paid, if any, as per system after due verification. Tax and interest calculation are as per ITNS 150A which forms part of this Order. Issue Notice of Demand u/s. 156 of the Act accordingly. Penalty proceedings u/s. 271(1)(c) (Explanation 7) of the I.T. Act are being initiated separately." 8. The ld. Counsel further submitted that the Hon'ble Karnataka High Court in the case of Cisco Systems Services B.V Vs. CIT(IT) as supra has clearly held that at the stage of passing the draft assessment order the issuance of notice of demand and penalty notice was contrary to the mandatory procedure laid down in Sec. 144C of the Act and same could not be cured u/s 292B of the Act. The ld. Counsel has also submitted that decision of Hon'ble Bombay High Court in the case of Rasiklal Amritlal Doshi Vs. A. Nundy, Addl. ITO (1961) 42 ITR 35 (Bom) as referred supra by the ld. D.R. is not applicable to the case of the assessee since in that case the assessing officer has issued notice of demand without ....
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.... issued a demand notice procedure followed by the ACIT was contrary to law and said mistake could not be cured u/s 290B of the Act. Further on similar issue and identical fact we have also perused the various decision referred by the ld. Counsel as under: "1. Hon'ble Karnataka High Court in the case of CIT(IT) v/s. Cisco Systems Services B.V. reported in (2023) [149 taxmann.com 486] 2. Decision of the Pune Bench of the Tribunal in the case of Skoda Auto India Private Ltd v/s. ACIT (ITA No. 2344/Pun/2012) dated 03 June 2019 3. Decision of the Mumbai Bench of the Tribunal in the case of Brightstar Infrastructure Private Limited v/s. NFAC (ITA No. 746/Mum/2022) dated 30 June 2023." In the various decisions of the coordinate benches of the ITAT Mumbai on identical issue on similar facts held that in case assessing officer has failed to follow the mandatory procedure laid down u/s 144C of the Act at the stage of passing draft assessment order, then final assessment order passed is null and void as the mistake committed in the draft assessment order is not curable u/s 290B of the Act. After taking into consideration the decision of Karnataka High Court in th....
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....in held that at stage of passing Teleperformance Global Services pvt. Ltd. Vs. The ACIT, 12(2)(2) draft assessment order, the ACIT also issued a demand notice, procedure followed by ACIT was contrary to law and said mistake could not be cured u/s 292B of the Act. Further on the similar issued and identical fact we have also perused the decision of coordinate bench of ITAT in the case of Aker Powerg as P. Ltd. Vs. The DCIT, Circle 15(1)(1). The relevant part of the decision is reproduced as under: "019. We have carefully considered the rival contentions and perused the orders of the lower authorities. Admittedly the draft assessment order passed by the learned assessing officer on 21/12/2016 is accompanied with the notice of demand as well as show cause notice u/s 274 read with Section 271(1)(c) of the act of the even date. Issue that arises is Whether draft assessment order accompanied with [1] Notice of Demand, [2] tax Computation sheet and [3] Show Cause Notice for penalty u/s 271(1)(C) of the act, can it be considered as draft assessment order or a final assessment order. If it is a final assessment order then naturally the procedure laid down under the act has not been....
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....ised 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 through sub-section (1) of section 144C that: "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 order) to the eligible assessee if he proposes to make, on or after the 1^st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee.' Subsection (2) of section 144C states that the assessee shall either file his acceptance to the AO on the variations proposed in the draft order or file his objections, if any, with the DRP. In case, the assessee accepts the variation in the draft order or no objections are received within 30 days, then subsection (3) states that: 'The Assessing Officer shall complete the assessment on the basis of the draft order'. In case, the assessee....
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....d 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. 144; and (iv) issuing of the notice of demand under s. 156 on the basis of the order of assessment. The process of assessment thus commences with the filing of the return or where the return is not filed, by the issuance by the AO of notice to file the return under s. 142(1) and it culminates with the issuance of the notice of demand under s. 156. On going through the above precedents, it is manifested that the assessment proceedings come to an end on the issue of notice of demand u/s 156 of the Act. Once a notice of demand is issued, the AO becomes functus officio in so far as the completion of assessment is concerned. It consequently follows that issue of notice of demand marks the completion of the assessment. 12. Turning to the facts of the instant case, it turns out that the AO issued notice of demand on 2....
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....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.) in which it has been held that the issuance of demand notice along with the draft order is only a procedural mistake. In our considered opinion, this case does not advance the Departmental stand. Unlike the assessee in the instant case not raising objections before the DRP and pursuing the appeal straight away before the ld. CIT(A), the assessee in that case adopted the route of the DRP. Be that as it may, it is found that similar issue came up for consideration before the Pune Benches of the Tribunal in series of cases including Eaton Fluid Power Ltd. Vs. DCIT (2018) 96 taxmann.com 512 (Pune Trib.). In that case also, the AO passed the draft order u/s.143(3) r.w.s. 144C(1) of the Act. Thereafter, he issued notice of demand u/s.156 and initiated penalty pr....
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....e and identical facts in the case of Marriott International Licensing Company BV Vs. DCIT(IT) 3(2)(1) as referred supra in this order. The relevant part of the decision is reproduced as under: "10. We have heard the rival submissions and perused the material available on record. It is evident that the A.O. had passed a draft assessment order dated 29.12.2016 and had proposed variation to the return filed by the assessee, thereby determining the assessee to be an eligible assessee. It is observed that the A.O. has issued the draft assessment order along with the notice of demand u/s. 156 and also notice u/s. 271(1)(c) of the Act dated 29.12.2016. The moot question here is whether the A.O.'s action in issuing the demand notice along with the draft assessment order is only a procedural defect or it makes the assessment order bad in law, thereby making it null and void. For this proposition, we would like to place our reliance on some of the decisions cited by the assessee which are as follows: 11. The assessee has relied on the decision of the Hon'ble Madras High Court in the case of Vijay Television (P.) Ltd. (supra), which has held that when there is an omission by....
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....ft assessment order, therefore, following the decision of Hon'ble High Court and coordinate bench of ITAT as discussed supra we are of the considered view that final assessment order passed is null and void as the mistake committed in passing the draft assessment order is not curable us/ 292B of the Act. Therefore, additional ground of appeal of the assesse is allowed. " In view of the facts as discussed above and following the decision of Hon'ble Karnataka High Court in the case of CIT (IT) Vs. Cisco Systems Services B.V. (2023) 456 ITR 50 and decision of coordinate benches of the ITAT as referred above and following the finding of the ITAT in the case of Brightstar Infrastructure Pvt. Ltd. reported in (2023) 154 taxman.com 588 (Mumbai Trib) there is nothing before us on hand to differ from the findings of the aforesaid judicial pronouncements as cited supra so as to take a different view of this issue. Since issue on hand being squarely covered following the principle of consistency we find merit in the submission of the assessee, therefore, we allow the additional ground raised by the assessee and quash the assessment order. 10. In the other grounds of appeal filed by the ....
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.... Act, 1961, If you intend to appeal against the aforesaid order, you may present an appeal under Part B of Chapter XX of the said Act to the income-tax Appellate Tribunal, within sixty days of the receipt of that order, in Form No. 36. duly stamped and verified as laid down in that form . (RP Holly Deputy Commissioner of Income Tax. Circle- 4. Gurgaon Document 2 To, Sir, Date: 23.03-2016 Notice u/s 274 read with Section 271(1)(c) of the Income Tax Act 1961. M/s Intelenet Global Services Pvt. Ltd. (Formerly known as Serco BPO Pvt. Ltd.). Plot no. 408, Udyog Vihar, Phase-III, Gurgaon, Haryana PAN: (AABCV2572L) Whereas in the course of proceedings before me for the assessment year 2012-13 it appears to me that you:- *have-without-reasonable cause failed to comply with a notice u/s 142(1)/143(2) of the Income Tax Act, 1961 dated *have concealed the particulars of your income or furnished inaccurate particulars of such income. You are hereby requested to appear before me at 11.30 AM on 06/04/2016 and show cause why an order imposing a penalty on you should not be made u/s 271(1)(c) of the Income Tax Act, ....