TaxTMI 
TaxTMI 
2024 (3) TMI 1323
X X X X Extracts X X X X
X X X X Extracts X X X X
....67,73,620. 2. That on the facts and circumstances of the case and in law, the assessment order passed by the AO is bad in law and void ab-initio as the same has been passed without following the mandatory provisions of section 144C(13) of the Act and the rectification order dated July 01,2022, passed in pursuance to such invalid order is also equally bad in law. 3. That on the facts and circumstances of the case and in law, the order passed by the DRP is bad in law and void ab-initio as the same has been passed without following the mandatory provisions of section 144C(8) of the Act. 4. That on the facts and circumstances of the case and in law, the orders passed by the AO / TPO were bad in law as the pre-requisite for applying Chapter - X, i.e., existence of an international transaction between two Associated Enterprises ("AE") under section 92B of the Act, was not satisfied or existed as there was no agreement, understanding or arrangement between the Appellant and the AE for incurrence of such expenditure by the Appellant and the Dispute Resolution Panel ("DRP") erred in upholding the same. 4.1 That on the facts and circumstances of the case and in law, the AO / DRP / TP....
X X X X Extracts X X X X
X X X X Extracts X X X X
....39;) for making transfer pricing adjustment amounting to INR 101,10,35,905, on protective basis, without appreciating that BLT has been expressly rejected by the Hon'ble Tribunal in Appellant's own case for earlier AYs. The DRP further erred in upholding the action of the AO/ TPO. 9. That on facts and circumstances of the case and in law, the AO / DRP / TPO have erred in making an adjustment in respect of alleged AMP expenditure as an international transaction, without appreciating that adjusted gross profit margin as well as operating margin of the Appellant was better than the comparable companies. 10. That on the facts and circumstances of the case and in law, AO / DRP / TPO have erred in not appreciating that the Appellant had not provided any value added / brand building services to its AE by incurring AMP expenditure, and therefore, no mark-up could have been charged / levied on such expenditure, even if the same was to be characterized as an 'international transaction". 10.1 Notwithstanding and without prejudice that no mark-up could have been levied, on the facts and circumstances of the case and in law, AO / TPO have erred in cherry picking the comparable....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rs.82,67,73,620/-. The ROI so filed was subjected to scrutiny assessment. A draft order under Section 144C(1) dated 29.09.2021 was passed proposing TP adjustments towards alleged international transactions alleging excessive Advertisement / Marketing Promotion (AMP) expenditure for development of brand owned by its foreign AE. 4. Aggrieved, the assessee filed objection against the said order before the Dispute Resolution Panel (DRP) under Section 144C(2) of the Act. The DRP vide order dated March 17, 2022 endorsed the AMP spends to be bracketed in the league of 'international transaction' and issued certain directions to the TPO/AO under Section 144C(5) of the Act. the TPO passed another order dated May 19,2022 giving effect to the directions of DRP and modified the additions towards AMP at Rs. 1,01,10,35,905/- Subsequent to the DRP order, the Jurisdictional Assessing officer (JAO) eventually passed final assessment order dated June 30,2022 under Section 143(3) r.w. Section 144C(13) of the Act. A TP adjustment of Rs. 49,97,50,823/- was however made in the final assessment order towards alleged international transactions of AMP alleged to be incurred for development of the brand o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... order has been duly passed within the stipulated time period in tune with Section 144C(13) r.w. Section 144B of the Act. The ld. AR also filed a letter dated 07.11.2023 along with affidavit of the AO in support of its contention that the DRP directions were actually received by the AO in the month of May 2022 rather than March/April 2022 as contended on behalf of the Assessee and hence the final assessment order was duly passed within the limitation period and without any breach of s. 144C(13) of the Act. The copy of such reports was provided to the assessee and the hearing continued thereafter. 8. The ld. DR for the Revenue, on its part, vehemently objected to such contentions on bar of limitation raised on behalf of the assessee. The Report of the AO, noted above, was extensively referred and it was asserted that the limitation period requires to be counted from the date on which the AO actually received the DRP directions and became privy to such order, which in the instant case stands at 2nd May, 2022. The ld. DR contended that mere delivery of directions in the portal of NFAC cannot be reckoned and equated with receipt of order by AO. The Ld. CIT-DR extensively referred to f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ions were uploaded manually in the system. The Revenue refers to and relies upon the report of the AO dated 12.01.2024 annexed to the covering letter dated 19.01.2024 along with 'Systems Report' annexed to such report of the Assessing Officer, to submit that in the instant case, the DRP order has been uploaded by using the option of manually entering the details of Section 144C(5) order to the System and therefore, such DRP order passed does not automatically become visible inside the 'Case History Noting' of pending assessment proceedings work - item of the AO (JAO/FAO) in the faceless environment. The Revenue also refers to the 'Systems Report' to submit that the DRP order was uploaded in the 'Case History Noting' of the pending assessment proceedings by the DC/ACIT/NeAC-2(2)(2) Delhi on 02.05.2022 at 15:37:02 p.m. The AO thus could obtain custody of such order on 02/05/2022 and not before. The uploading of order manually to NFAC per se is not the receipt of the order by an AO contemplated under s. 144C(13) of the Act, be it FAO or JAO. The JAO (in the instant case) thus was having direct access to DRP order from May 2, 2022 and was accountable for actions from this date. The Rev....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... conduct of faceless assessment proceedings in a centralized manner. The receipt of an order or directions by the NFAC centre can not be read to be receipt of such order / directions by the assessment unit entrusted with the task of assessment. Significantly, the DRP order has been uploaded with NFAC manually and therefore, such manual uploading does not automatically get an entry or passage in the Case History Notings of the assessment unit. While the AO concerned can possibly access such information as a mere ITBA user by entering appropriate passwords such as PAN etc, the AO cannot be made accountable statutorily in the capacity of AO unless such information does figure in the case history noting. As per scheme of things, thus, the date of receipt of order by the assessment unit has to be necessarily counted as the date on which such document / DRP order becomes visible inside the Case History Noting of the assessment proceedings pending before an AO and not any date before. The role of NFAC is not that of an AO but it only act as a co-ordinating agency. The NFAC exercises some powers and functions of the AO concurrently in a limited manner to merely facilitate the conduct of fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er dated 17.03.2022 was received by the deponent of the affidavit, i.e. JAO- (DCIT) Circle-3(1) Gurugram on 02.05.2022 digitally after uploading the same by DC/ACIT (NeAC)-2(2)(2) Delhi i.e FAO. 15. The System's Report annexed in the status report of the AO filed by covering letter dated 19.01.2024 heavily relied upon on behalf of Revenue being relevant is extracted herein: "Dear AO Please refer to the trailing email. In this regard, I am directed to furnish the requisite information as under: Visibility of the DRP Orders to Assessing Officers (FAO or JAO): (a) The DRP Order is reflected automatically in the pending assessment work-item (pending either with FAO or JAO), if DRP user initiates DRP proceedings in the ITBA DRP Module, by using the option of "SELECT DRAFT ORDER U/S 144C" in the screen. When DRP proceedings are initiated in this manner, this creates linkage with the Assessment Module and hence when DRP passes the order u/s 144C(5), such order is automatically reflected in the Case History Noting of AO (FAO or JAO) with whom the assessment work-item is pending. (b) However, in a case wherein the DRP user initiates DRP proceedings by using the option of manual....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ownload - Order/Letter/Notices Tab" functionality, without the order appearing in the 'Case History/Noting', would amount to receipt" of the order for the purpose of Section 144C(13) of the Act, is a purely legal question not within the purview of ITBA. It may be reiterated that the ITBA team can only provide inputs with respect to the description of workflows in ITBA software and inputs regarding the information available in the system. Legal and administrative aspects vest with the field authorities/their hierarchies. 16. To appreciate the facts in perspective, it will also be relevant to reproduce the affidavit filed by the AO on the subject matter. Affidavit I, Sonia Nain, D/o Sh. Balwant Singh Nain, aged about 34 years presently holding the additional charge of Circle-3(1), Gurugram do hereby solemnly affirm and state as under: 1. I am, in my official capacity as Dy. Commissioner of Income Tax Officer, Circle3(1), Gurugram is conversant with the facts and circumstances of the present case, as such, competent to swear the present affidavit. 2. That as per records of this office, the directions of Hon'ble DRP-1, New 7 Delhi passed vide order dated 17.03.202....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Response to Letter Circle - 3(1) Gurgaon AO - Regional e-Assessment Unit Response to Letter 1043268433(1)-31052022.pdf Noting / Remarks: Signature: 31/05/2022 Response to Letter Circle - 3(1) Gurgaon AO - Regional e-Assessment Unit Response to Letter 1043268433(1)-31052022.pdf Noting / Remarks: Signature: 30/06/2022 Response to Draft Order submitted. Circle - 3(1) Gurgaon Circle - 3(1) Gurgaon Noting / Remarks: Objection filled by Assessee as per order Signature: 30/06/2022 Demand Notice generated u/s. 156 of Income Tax Act 1961 Circle - 3 (1) Gurgaon Nikon India Pvt Ltd. AACCN5100F_Demand Notice u/s. 156_1043694894(1)_30062022.pdf Noting / Remarks: Objection filled by Assessee as per order Signature: 30/06/2022 Action Taken Circle - 3(1) Gurgaon _ Noting / Remarks: Objection filled by Assessee as per order Signature: 30/06/2022 Demand Notice generated u/s. 156 of Income Tax Act 1961 Circle - 3 (1) Gurgaon Nikon India Pvt Ltd. AACCN5100F_Demand Notice u/s. 156_1043694894(1)_30062022.pdf Noting / Remarks: Objection filled by Assessee as per order Signature: 30/06/2022 Issued Computation sheet. Circle - 3(1) Gurg....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... we are of the considered view that limitation period prescribed under Section 144C(13) is clearly breached in the present case. On a combined reading of 'Systems Report', affidavit of the AO and order sheet notings extracted in paragraphs 15, 16 and 17 respectively, it is seen that embargo of limitation for passing the final assessment order is not complied with. 20.1 As per Section 144C(13) of the Act, the AO is required to pass the final assessment order within one month from the end of the month in which the DRP directions are received by the AO. The AO would encompass both FAO as well as JAO without any distinction for the purposes of limitation. To put it little differently, a transfer of case records by FAO to a different jurisdiction, i.e. JAO will not entitle the Department to get extension of the limitation period for framing assessment. The limitation period does not get extended by virtue of transfer of the case record internally from FAO to JAO. 20.2 From the order-sheet noting, it is evident that assessment case was transferred on 22.04.2022. From the Systems' Report, when read in conjuction, it is observed that while the DRP order was stated to be received by the J....