TaxTMI 
TaxTMI 
2024 (9) TMI 641
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....quently, an adjustment to international transaction of Rs. 2,24,36,553/- was proposed by the TPO vide order u/s 92CA(3) of the Act dated 27.07.2021. Accordingly, a show-cause notice along with draft assessment order was issued and served to the assessee on 25.08.2021 with a proposal to enhance the income by TP adjustments as proposed by the TPO and subsequently, assessee requested for an opportunity to explain the facts in the current case in personal hearing through video conferencing and the same was granted and conducted on 15.01.2021. After providing an opportunity, the draft assessment order was passed by NFAC, Delhi dated 15.09.2021 and the income was assessed with TP adjustments proposed by the TPO. 3. Aggrieved, assessee filed objections before the ld. Dispute Resolution Panel (DRP) and made detailed submissions before the ld. DRP. Ld. DRP passed the order dated 03.06.2022 with the directions to Assessing Officer/TPO. Subsequently, final assessment order was passed by the jurisdictional Assessing Officer, Circle 4 (2), Delhi on 28.07.2022 sustaining the adjustments as per draft assessment order after considering the directions of ld. DRP. 4. Aggrieved with the above o....
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....the revenue has violated section 92C of the Act read with Rule 10 of the Income Tax Rules. The TP order dated 27 July 2021 ought to be quashed. 6. On the facts and in law, the Ld. TPO exceeded its jurisdiction by applying the cost benefit analysis in determining the ALP of intra group charges and also erred in not following the binding precedent laid down by the jurisdictional High Court in the case of CIT v. EKL Appliances [2012] 345 ITR 241 (Delhi) B. Erroneous adjustment of INR 1,887,166 with respect to international transaction pertaining to Provision of back-office support services 7. On the facts and in law, the Revenue erred including selecting companies that are not comparable to the Appellant in terms of functions performed, assets employed, and risks assumed 8. On the facts and in law, the Revenue erred in rejecting/ excluding the comparable companies selected by the Appellant forming part of the economic analysis undertaken in the TP documentation. 9. On the facts and in law, the Revenue erred in defying the principles of natural justice by not granting any 5 opportunity of being heard to the Appellant while rejecting R System....
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....tion 270A of the Act in the final assessment order passed for relevant AY." 5. Further, assessee filed following additional grounds of appeal with the application under Rule 11 of the ITAT Rules, 1962:- "Pertaining to Transfer Pricing matters 16. On facts and circumstances of the case and in law, the Ld. AO erred by not passing the final assessment order dated 28 July 2022 in conformity with the DRP directions dated 3 June 2022. Thus, the learned AO has violated the mandatory provisions of Section 144C(10) read with Section 144C(13) of the Act, thereby rendering the assessment proceedings bad in law. The Final assessment order thus deserves to be quashed... 17. On facts and circumstances of the case and in law, the Ld. AO erred by not passing the final assessment order dated 28 July 2022 in conformity with the order giving effect to DRP directions passed by the Transfer Pricing Officer (TPO') dated 22 July 2022, thereby violating the mandatory provisions of Sec 92CA(4) read with 144C(10) and 144C(13) of the Act. The Final assessment order thus deserves to be quashed. 18. On the facts and circumstances of the case and in law, the Assessing ....
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..... 185,52,925/-. He brought to our notice page 9 of the appeal set i.e. final assessment order passed by the jurisdictional AO dated 28.07.2022 wherein he has sustained the additions as per draft assessment order. Ld. AR for the assessee submitted that the Assessing Officer failed to comply and follow the directions of the ld. DRP which is direct violation of section 144C(13) of the Act. He submitted that it is a clear cut violation, therefore, the whole assessment order is bad in law and should be quashed. In this regard, he relied on the decision of Hon'ble Bombay High Court in the case of Hexaware Technologies Ltd. vs. ACIT in Writ Petition No.1778 of 2023 order dated 03.05.2024. 9. On the other hand, ld. DR for the Revenue brought to our notice page 909 of the paper book which is the original TPO proposed adjustment which consists of (a) intra group services for Rs. 1,85,52,925/-, (b) back office support services Rs. 18,87,166/-; and (c) payment of sourcing fee/purchase of sale of software Rs. 19,96,462/-. The total adjustment proposed by the TPO is for Rs. 2,24,36,553/-. He further brought to our notice OGE passed by the TPO and final assessment order passed by the Assessing....
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....e submitted that both sections 144C and sub-sections (11) & (13) of section 114C start with non-substante clause and by not respecting these sections, all the provisions in these sections become otiose. Further, with regard to case of Hitachi Astemo Haryana Pvt. Ltd. (supra) relied by the ld. DR for the Revenue, he submitted that MA is filed by the assessee and the relevant MA is still pending. Therefore, the above said decision cannot be relied and further he submitted that none of the decisions relied by the ld. DR are not related to sections 144B & 144C of the Act which is being raised in this appeal. 12. Considered the rival submissions and material placed on record.. We observed from the record that TPO passed order proposing TP adjustments in three segments of the international transactions and the same was incorporated in draft assessment order and after giving an opportunity to the assessee, draft assessment was finalized and sent to the assessee. Assessee raised objections before the ld. DRP and ld. DRP sustained the TP adjustments in one of the segments, namely, intra group services of Rs. 1,85,52,925/- and deleted the TP adjustments in back office support services and....
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.... Act does not refer to issuance of notice under Section 148 of the Act and hence, the notice cannot be issued by the FAO as per the said Scheme, we express our view as follows:- Section 151A of the Act itself contemplates formulation of Scheme for both assessment, reassessment or recomputation under Section 147 as well as for issuance of notice under Section 148 of the Act. Therefore, the Scheme framed by the CBDT, which covers both the aforesaid aspect of the provisions of Section 151A of the Act cannot be said to be applicable only for one aspect, i.e., proceedings post the issue of notice under Section 148 of the Act being assessment, reassessment or recomputation under Section 147 of the Act and inapplicable to the issuance of notice under Section 148 of the Act. The Scheme is clearly applicable for issuance of notice under Section 148 of the Act and accordingly, it is only the FAO which can issue the notice under Section 148 of the Act and not the JAO. The argument advanced by respondent would render clause 3(b) of the Scheme otiose and to be ignored or contravened, as according to respondent, even though the Scheme specifically provides for issuance of notice under S....
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....l Tax Jurisdiction or Central Circle Jurisdiction out of the ambit of Section 144B of the Act would also apply under the Scheme. Further the exceptions provided in sub-section (7) and (8) of Section 144B of the Act would also be applicable to the Scheme. 37. When an authority acts contrary to law, the said act of the Authority is required to be quashed and set aside as invalid and bad in law and the person seeking to quash such an action is not required to establish prejudice from the said Act. An act which is done by an authority contrary to the provisions of the statue, itself causes prejudice to assessee. All assessees are entitled to be assessed as per law and by following the procedure prescribed by law. Therefore, when the Income Tax Authority proposes to take action against an assessee without following the due process of law, the said action itself results in a prejudice to assessee. Therefore, there is no question of petitioner having to prove further prejudice before arguing the invalidity of the notice. 38 With respect to the Office Memorandum dated 20th February 2023, the said Office Memorandum merely contains the comments of the Revenue issued with the approva....
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....plicability of Section 148 of the Act is on random basis, then the provision of Section 148 itself would become contrary to Article 14 of the Constitution of India as being arbitrary and unreasonable. Randomly selecting cases for reopening without there being any basis or criteria would mean that the section is applied by the Revenue in an arbitrary and unreasonable manner. The word 'random' is used in clause 2(1)(b) of the said Scheme in the definition of "automated allocation". "Automated allocation" is defined in the said clause to mean "an algorithm for randomised allocation of cases.....". The term 'random', in our view, has been used in the context of assigning the case to a random Assessing Officer, i.e., an Assessing Officer would be randomly chosen by the system to handle a particular case. The term 'random' is not used for selection of case for issuance of notice under Section 148 as has been alleged by the Revenue in the Office Memorandum. Further, in paragraph 3.2 of the Office Memorandum, with respect to the reassessment proceedings, the reference to 'random allocation' has correctly been made as random allocation of cases to the Assessment Units by the National Facele....
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....e framed under Section 151A of the Act, which required the notice under Section 148 of the Act to be issued on the basis of random allocation and in a faceless manner. (v) The Revenue has wrongly contended in paragraph 3.1 of the Office Memorandum that "Therefore, whether JAO or NFAC should issue such notice is decided by administration keeping in mind the end result of natural justice to the assessees as well as completion of required procedure in a reasonable time." In our opinion, there is no such power given to the administration under either Section 151A of the Act or under the said Scheme. The Scheme is clear and categorical that notice under Section 148 of the Act shall be issued through automated allocation and in a faceless manner. Therefore, the argument of the Revenue is clearly contrary to the provisions of the Scheme. (vi) In paragraph 3.3 of the Office Memorandum, it is again erroneously stated that "Here it is pertinent to note that the said notification does not state whether the notices to be issued by the NFAC or the Jurisdictional Assessing Officer ("JAO")......It states that issuance of notice under section 148 of the Act shall be through autom....
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....en on the said aspect and, therefore, there is no question of the administration to device and modify procedures with respect to the issuance of notice. 39. With reference to the decision of the Hon'ble Calcutta High Court in Triton Overseas Private Limited (Supra), the Hon'ble Calcutta High Court has passed the order without considering the Scheme dated 29th March 2022 as the said Scheme is not referred to in the order. Therefore, the said judgment cannot be treated as a precedent or relied upon to decide the jurisdiction of the Assessing Officer to issue notice under Section 148 of the Act. The Hon'ble Calcutta High Court has referred to an Office Memorandum dated 20th February 2023 being F No.370153/7/2023 TPL which has been dealt with above. Therefore, no reliance can be placed on the said Office Memorandum to justify that the JAO has jurisdiction to issue notice under Section 148 of the Act. Further the Hon'ble Telangana High Court in the case of Kankanala Ravindra Reddy vs. Income Tax Officer 14 has held that in view of the provisions of Section 151A of the Act read with the Scheme dated 29th March 2022 the notices issued by the JAOs are invalid and bad in law. We ar....