AI Drafter 
TaxTMI 
TaxTMI 
2026 (4) TMI 1764
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....e is having international transactions with its AEs, therefore, a reference was made u/s 92CA(1) of the Act to the TPO. The TPO vide its order dated Nil has made adjustments to the international transactions with AEs wherein adjustment of Rs. 10,79,15,788/- is made on the provisions of software development services and Rs. 3,8253,681/- was made for provisions of ITeS segment. Accordingly, total enhancement of Rs. 14,61,69,469/- is made by the TPO on the international transactions of the assessee. Thereafter, the AO has passed the draft assessment order on 27.09.2021 wherein the adjustment made by the TPO vide order on 31.07.2021 of Rs. 14,61,69,469/- were proposed and total income of assessee was proposed at Rs. 61,78,01,729/-. 3. Against the said order, the assesses filed objections before the DRP and vide its order dated 09.03.2022 has given certain directions to the TPO to exclude/include certain comparables proposed on the directions given by the TPO by the Ld. DRP. The AO/TPO has passed the order giving effect dated 18.04.2022 wherein the total adjustments were made at Rs. 2,72,37,829/- with respect to the provisions of ITeS and accordingly, the total income of the assessee....
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....rmed by ld. DRP. 6. Brief facts of the case are that the assessee has applied TNMM for working out the transfer pricing adjustment as per its TP study Report according to which OP/OC was worked out between 9.22% to 14.16% wherein tested mean margin was 16%. The assessee has taken 19 comparables for benchmarking the transactions whereas the TPO has accepted 10 comparables and excluded 09 comparables. Besides this the TPO includes 06 new comparables and worked out total adjustment at INR 4,74,58,710/-. Ld. DRP while disposing the objections raised has given directions for exclusion of comparables which has failed RPT filter or having dissimilar FAR. Accordingly, the TPO has reworked the amount of adjustment and reduced it to INR 2,72,37,829/-. 7. Before us, Ld.AR for the assessee submits that AO/TPO has included two new comparables namely M/s. Larsen & Turbo Infotech Ltd. and M/s Manipal Digital Systems Pvt. Ltd. and both of these comparables are functionally dissimilar. As per ld. AR, the assessee is providing back-office support services to its AEs which includes application support services, technical support services and hosting services. Ld. AR submits that Larsen & Turbo ....
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....tware products company and is not a valid comparable. Regarding Manipal Digital Systems P. Ltd., we find that this company is also engaged in the activity which is altogether different from the function carried out by the assessee company and on this aspect, only this company could not be held as valid comparable. Accordingly, we direct the AO/TPO to exclude both the companies from the final set of comparables. 11. Now coming to the submissions of the assessee with respect to the exclusion of 02 comparables made by TPO namely E-Care India P. Ltd. and Ultramarine & Pigments Ltd. which as per assessee, were considered as valid comparables for benchmarking the transactions. Ld. AR for the assessee submits that the assessee has inadvertently ignored the RPT Filter of transactions of less than 25%, and E-Care India Pvt. Ltd. failed this filter. For this, ld. AR drew our attention to the financial statements of E-Care India Pvt. Ltd. where total transaction with related parties was given. Regarding Ultramarine & Pigments Ltd., it was the submission of ld. AR that TPO has applied filter of employee cost of less than 25% and services income less than 75% filter however, from the financi....
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....ce, the DRP has passed the order on 14.03.2022 through online portal, therefore, the same was served upon the assessee as well as Revenue on the same day. As per section 144C(13) of the Act, the AO has to pass the final assessment order within a period of one month from the end of the month in which order of Ld. DRP is received, however, in the instant case, the final assessment order was passed on 17.05.2022 which is barred by limitation and, thus, is invalid order. He prayed accordingly. 17. Ld. CIT DR further submits that in none of the Grounds of appeal, the assessee has precisely challenged the issue of limitation and therefore, this issue cannot be taken and decided. Ld. CIT DR further submits that no submission was made on behalf of the assessee when the hearing was taken place and for the first time, this issue was raised by the ld. AR when the case was fixed for clarification and thus, it was not the intention of the assessee to raise this issue and accordingly, the same should not be considered and adjudicated. Ld.CIT DR also filed detailed submissions which is placed on record. 18. We have heard the parties and perused the material available on record. For the sake....
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....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 Officer. (11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the revenue, respectively. (12) No direction under sub-section (5) shall be issued after nine months from the end of the month i....
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....e objections before the DRP in accordance with Section 144C(2) of the Act. The power of the AO to complete the assessment on the basis of the draft order stands interdicted in case objections have come to be preferred within the 30 day period as contemplated in Section 144C(2) of the Act. It is the DRP which thereafter proceeds to decide the objections and frame directions to enable the AO to complete the assessment in accordance with Section 144C(5) of the Act. 15. In terms of sub-section (13) of Section 144C of the Act, the AO is mandated to complete the assessment "in conformity with the directions" as framed by the DRP. That very provision commands the AO to complete the assessment within one month from the end of the month in which such a direction is received. 16. This is evident from Section 144C of the Act which is extracted herein below:- ........ 17. As is manifest from a reading of sub-section (13) of Section 144C of the Act, the AO is not accorded any discretion in the framing of an order of assessment once directions have come to be framed by the DRP. In fact, the provision requires the AO to frame an order of assessment in conformit....
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....spondent (TPO) and the fourth respondent (Additional/Joint/Deputy/Assistant Commissioner of Income Tax, National Faceless Assessment Centre, New Delhi) on 27 June 2022. It is thereafter that the TPO appears to have passed the order dated 25 July 2022. XXX XXX XXX 22. It is thus manifest that as per the provisions of E-as, 2019, all orders, notices and decisions have to be necessarily uploaded on the ITBA portal and as part of the larger faceless assessment regime which now holds the field. The uploading of the directive of the DRP on the ITBA portal would thus constitute valid and sufficient service and the period of limitation as prescribed in Section 144C(13) of the Act would be liable to be computed bearing that crucial date in mind. Once the aforesaid position becomes clear, it is evident that the order of assessment, if at all could have been framed lastly by 31 July 2022. There has thus been an abject failure on the part of the first respondent to comply with the mandatory timelines as incorporated in the aforenoted provisions. Accordingly, the writ petition is liable to be allowed and the impugned order of assessment and the consequential penalty proceedings are ....
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.... interest of assessee. Hence, the FAO cannot be believed that the DRP direction was received by him only on 23rd August 2023 despite being uploaded on the ITBA portal on 25th March 2021. The failure on the part of department to follow the procedure under Section 144C of the Act is not merely a procedural irregularity, but is an illegality and vitiates the entire proceeding. 22. In a decision in the matter of Turner International India Private Limited v. Deputy Commissioner of Income Tax, Circle-25(2), New Delhi, the Delhi High Court has held that the question "whether the final assessment order stands vitiated for failure to adhere to the mandatory requirements of Section 144C of the Act?", is no longer res integra and any order passed contrary to Section 144C of the Act cannot be sustained. 23. In a decision cited by Mr. Mistri in the matter of Shell India Markets (P) Ltd. (supra), this Court has also held as follows: "10. Sub-section (13) of Section 144C, therefore, is very clear inasmuch as the Assessing Officer shall, upon receipt of the directions issued under Sub-section (5), in conformity with the directions, complete the assessment within one mont....
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....rder be circulated to the CBDT and the Principal Secretary, Ministry of Finance, GOI. 27. Mr. Singh seeks stay of the judgment. Stay refused." 22. Further the decision of Hon'ble Madras High Court in the case of M/s Taeyang Metal India Private Limited vs. DCIT in Writ Petition No.12159 of 2023 and W.M.P. No.11989 of 2023 vide order dated 23.02.2024 has held as under: "6. The interpretation of sub-section 13 of Section 144C takes center stage in the adjudication of this dispute. The said sub-section is set out below: "(13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 [or section 153B], the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received." From the above provision, it is evident that the specified time limit is one month from the end of the month in which directions are received. It is also clear that the time limit should be computed from the date of receipt of directions issue....
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....d beyond the time limit specified in sub-section (13) of Section 144C. By taking into account not only statutory prescription but also the interpretation thereof by the Division Bench of this Court in Roca and that of the Division Bench of the Delhi High Court in Louis Dreyfus, 1 conclude that the assessment order cannot be sustained. 9. In view of the conclusion that the assessment proceedings are barred by limitation, it is unnecessary to examine as to whether the assessing officer was duly authorized to exercise jurisdiction either under the WhatsApp message issued on 13.04.2022 or upon the physical file being signed on 21.04.2022." 23. Similar view was expressed by the ITAT, Chennai Bench 'D" in the case of M/s Cognizant Technology Solutions India Private Limited (as successor-in-interest of M/s KBACE Technologies Private Limited) vs. ACIT in IT(TP)A 61/CHNY/2023 vide its order dated 29/05/2024. has held has under: 10. "We have heard rival submissions in the light of facts of the case, evidence placed on record and judicial citations relied upon. Ground of appeal no.1 is general in nature and hence bereft of any meritorious adjudication. Coming to grounds o....