TaxTMI 
TaxTMI 
2023 (8) TMI 1735
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....ts of the assessee firm. The adjustment proposed is wholly illegal, erroneous and untenable in law and on the facts of the case of the appellant and is prayed to be deleted. 2) That the Ld. Assessing Officer (AO) and consequently the Dispute Resolution Panel (DRP) have grossly erred in law and on facts and circumstances of the appellant's case in proposing and sustaining a disallowance to the income of the appellant amounting to INR 4,24,39,963/- under sec 36(1)(va) of the Income Tax Act, 1961. The adjustment proposed is wholly illegal, erroneous and untenable in law and on the facts of the case of the appellant and is prayed to be deleted. 3) That the order of Assessment including order of the Ld. TPO and the DRP Directions are bad in law and erroneous on the facts of the appellant. Transfer Pricing Grounds Choice of Method 4) That the Hon'ble DRP as well as Ld, TPO have grossly erred in law and on facts of the assessee's case in rejecting the Other Method applied by the assessee as the Most Appropriate Method (MAM) to determine the arm's length price of the Specified Domestic Transactions entered into by the assessee wi....
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....ounds of appeal under Rule 29 of Income Tax (AT) Rules, 1963: "3.1 That the Assessment Order dated 28.10.2022 passed by Ld. AO u/s 143(3) r.w.s. 144C(13) pursuant to Hon'ble DRP directions dated 23.06.2022 is time barred and prayed to be quashed." 4. Admission of the additional ground has been opposed in principle by the ld. DR. Keeping in view, the judgment of the Hon'ble Apex Court in the case of National Thermal Power Co. Ltd. Vs CIT (1998) 229 ITR 383, the additional ground filed by the assessee is accepted. The relevant portion of the judgment is as under: "5. Under Section 254 of the Income-tax Act, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permi....
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....cretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. 8. The reframed question, therefore, is answered in the affirmative, i.e., the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee. We remand the proceedings to the Tribunal for consideration of the new grounds raised by the assessee on the merits." 5. Respectfully following the above judgment of the Hon'ble Apex Court, the additional grounds taken up by the assessee are hereby admitted. 6. The ld. AR argued that the Assessment order is bad in law. In this regard, it was submitted that the Final order of assessment passed u/s 143(3)/44C(13)/ 144B being time barred by limitation as per the provisions of Section 144C(13) of the Act is null and void. 7. The ld. AR argue....
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....n of the Hon'ble Bench. (B) This case was selected for scrutiny under CASS and statutory notice u/s 143(2) was issued on 22.09.2019. Further, the case was referred to TPO u/s 92(CA)(1) and TPO passed order u/s 92CA (3) on 31.07.2021. Afterwards, the draft assessment order with TP adjustment of Rs. 60,54,09,008 was passed on 21.09.2021. As the draft assessment order contained transfer pricing addition also, the assessee went to the DRP and Hon'ble DRPs directions to the AO were passed on 27.06.2022. The final assessment order was passed by the jurisdictional AO on 28.10.2022 u/s 143(3) r.w.s. 144C(13) of the IT Act. In the final assessment order, two types of additions/adjustments were made, which are mentioned below: - (i) TP adjustment of Rs. 12,23,24,828/-. (ii) Corporate addition i.e. disallowance of employees contribution of provident fund/ESI u/s 36(1)(va) r.w.s 2(24)(x) of the Rs. 4,24,39,963/ -. In this case, besides other grounds, the assessee, has also taken the additional ground, that was filed on 8th May 2023, that the assessment order passed u/s 143(3) r.w.s. 144C(13) in pursuance to Hon'ble DRP directions, is tim....
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....d by the Hon'ble Supreme Court and also considering revenue interest, the final assessment order should not be quashed. (D) Besides the above submissions, reliance is also placed on some of the recent decisions of Hon'ble High Court in the case, where the violation of section 144C were there but the Hon'ble High Courts, in all those cases, did not quash the entire assessment proceedings and mainly annulled the assessment order only, with the directions to restore back the proceedings back to DRP/AO for passing the fresh orders. In other words, the Hon'ble High Courts considered these violations as procedural defects, which can be cured and not fatal defects. On the same lines, it is most humbly prayed that the error committed by the Assessing Officer may not be treated as fatal one because this will result in lot of revenue loss to the Govt .. It is specifically submitted that above decision are with regard to non incorporation of DRPs directions in the assessment order by the AO's, which is the clear cut violation of section 144C, the Hon'ble Jurisdictional Delhi High Court, Hon'ble Karnataka High Court and the Hon'ble Madras High Court hav....
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....ormed the working of Income Tax department and has ended the human interface and brought about the complete transparent and efficient tax administration. The faceless scheme is, in its nascent stage and department after implementation of faceless scheme is facing certain technical/procedural issues. (F) Reliance is also placed on the decision of Hon'ble Supreme Court of India in the case of M. Pirai Choodi vs. ITO (2012) 20 taxmann.com. 733 (SC) wherein the Hon'ble Supreme Court set aside the order of the Hon'ble High Court which quashed the entire assessment proceedings because opportunity to cross examine was not granted to the assessee. In this case, the Hon'ble Supreme Court has held that the Hon'ble High Court should not have quashed the entire assessment proceedings and instead should have directed the AO to grant an opportunity to the assessee to cross examine the concerned witnesses. By applying the ratio laid down by the Hon'ble Supreme Court, it is humbly stated that the entire proceedings should not be quashed and at max, only, the additions pertaining to transfer pricing may be deleted, if the assessment order is proved to be passed afte....
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....a moment the exploration of the true office of procedural conditions, we have no doubt that what is of the essence of r. 3 is not that three copies should be furnished, but that copies of all the three important documents referred to in that rule, shall be produced. We further feel that the Court should, if it thinks it necessitous, exercise its discretion and grant further time for formal compliance with the rule if the copies fall short of the requisite Number. In this view and to the extent indicated, we over-rule the decision in Bikram Dass's (supra) case." The above stated landmark Judgment of the Supreme Court besides clearly decided that if and procedural lapses can be corrected without any prejudice to the party concerned then breach of such procedural lapses should be corrected and decision should be on merits of the cases and not on the technicalities. The ratio laid down by the Hon'ble Supreme Court in the above noted case applies to the facts of the instant case. (H) In view of the above, even at the cost of repetition, it is submitted that the entire assessment order may not be quashed because it will result in huge revenue loss to the Governm....
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....rd. 11. As per the facts of the case below is the time chart of the various orders passed by the revenue authorities: Particulars Date of order AOs Draft Order u/s 144C- NFAC 21.09.2021 DRP directions u/s 144C(5) dated 23.06.2022 (intimated to AO on 27.06.2022 via letter having DIN) 23.06.2022 TPO order giving effect to DRP directions 21.07.2022 AO Final order giving effect to DRP directions- JAO 28.10.2022 12. The provisions of Section 144C are as under: "Reference to dispute resolution panel. 144C. (1) 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 1st day of October, 2009, any variation which is prejudicial to the interest of such assessee. (2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order, - (a) file his acceptance of the variations to the Assessing Officer; or (b) file his objections,....
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....essment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee. (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 in which the draft order is forwarded to the eligible assessee. (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 fro....
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....ation letter addressed to the assessee dated 27.06.2022. The page 15 (last page) of the order of the ld. DRP shows the signature of the Secretary of DRP-1 along with File No. which reads F. No. DRP-I/Del/Obj. No.283/2022- 23/532 dated 27.06.2022 which also clearly reflects copy to, 1. The Commissioner of Income Tax, TP-1, New Delhi 2. The DCIT TPO-1(1)(1), New Delhi 3. NFAC, New Delhi 4. The Assessee 14. Thus, the record of the ld. DRP clearly shows that the copy has been marked to NFAC, New Delhi on 27.06.2022. Further, the TPO has also followed the directions of the ld. DRP and passed an order on 21.07.2022 whereas the Assessing Officer has passed the order on 28.10.2022. 15. A concurrent reading of Section 144C(5) and Section 144C(13) reveals that the ld. DRP shall issue directions for the guidance of the Assessing Officer to enable him to complete the assessment and the Assessing Officer on receipt of directions issued under sub-Section (5) shall complete 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. The contention o....
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....der has been quashed, the other grounds on merits are not adjudicated and are left open. Ordered accordingly." Fresenius Kabi Oncology Ltd., ITAT Delhi "10. From the aforesaid provisions it is clear that the AO shall pass the assessment order inconformity with the direction given by the DRP within one month from the end of the month in which such direction has been received. In the aforesaid provisions, the use of the word "shall" makes it mandatory for the AO to comply with the directions of the Id. DRP and pass the assessment order within one month of the receipt of such directions. It is also noticed that this sub-Section (13) of Section 144C of the Act has an overriding effect on the provisions contained in Section 153 of the Act because the sentence starts with non-obstante clause and it has been provided in Section 144C(13) of the Act that "notwithstanding" anything to contrary, contained in Section 153 or Section 153B of the Act, the assessment shall be completed within one month from the end of the month in which directions given by the DRP are received by the AO." Dentsply India (P) Ltd., ITAT Delhi "15. However, in the present case it is an admitte....