PANASONIC LIFE SOLUTIONS INDIA PVT LTD,THANE vs. ASST CIT CC 7(2), MUMBAI

This appeal is filed by the assessee /appellant against the assessment order passed by the Asst. Commissioner of Income Tax, Central Circle, 7(2), Mumbai (the learned Assessing Officer) under Section 143(3) read with section 144C(13) of the Income-tax Act, 1961 (the Act) in pursuance to the direction issued by the Dispute Resolution Panel-2 (the learned DRP) and order passed by the Addl. Commissioner of Income Tax, Transfer Pricing, 1(1)(2), Mumbai (the learned TPO), wherein the return of

Assessee has raised following grounds of appeal:-

erred in holding that the order of the assessment order dated 30 November 2018 was not time barred in terms of the provisions of section 153 of the Act,

erred in holding that the order of the transfer pricing order under section 92CA(3) of the Act dated 30 October 2018 was valid;

erred in holding that the reference to the TPO made by the AO was valid, having failed to appreciate that:

erred in holding that the jurisdiction under section 92CA of the Act of the AO was put under abeyance by the order of the Hon'ble High Court and was revived by issue of letter dated 7 June 2018 to the TPO after disposal of objections of the appellant against the reassessment proceedings

erred in upholding the validity of the reassessment proceedings under section 147 of the Act.

erred in not appreciating that the reassessment proceedings initiated are bad in law in the absence of any fresh tangible material to satisfy income escaping assessment & ought to be quashed:

erred in not appreciating the fact that reassessment proceedings have been initiated only with a view to revive original assessment proceedings which got time barred and hence ought to be quashed,

erred in making adjustment of INR 11,00,72,725 on international transaction of payment of royalty for use of trade marks to AES,

erred in not considering/ accepting the comparability analysis as documented by the appellant in the Transfer Pricing Study Report for benchmarking the international transaction of payment of royalty to AEs;

erred in rejecting the Transactional Net Margin Method (TNMM') adopted by the Appellant for benchmarking the international transaction of payment of royalty to AES:

erred in selecting Comparable Uncontrolled Price (CUP) as the most appropriate method for

erred in considering gross total income of INR 192,79,86,767 as starting point for computation of total income as against the total income of INR 192,42,07,339;

erred in holding that receipt by way of scrap sales is not eligible for deduction under section 80-IC of the Act;

without prejudice, erred in considering the entity level income from scrap sales of INR 21,64,00,000 for making disallowance while computing profits eligible for deduction under section 80-IC of the Act as against the scrap sales of INR 4,35,53,654 pertaining to Haridwar unit;

erred in reducing interest income of INR 18,64,00,000 while computing deduction under section 80-IC of the Act without appreciating that the appellant has suo moto reduced it from profits eligible for deduction under section 80-IC of the Act:

without prejudice, erred in considering the entity level amount of other income of INR 54,00,000 for making disallowance while computing profits eligible for deduction under section 80-IC of the Act as against the other income of INR 24,37,118 pertaining to Haridwar unit;

erred in not granting credit for Dividend Distribution Tax paid of INR 4,83,38,022;

erred in charging interest under section 234B of INR 4,05,81,440

erred in initiating penalty proceedings under section 274 r.w.s. 271(1)(c) of the Act;

Consequent to that, a draft assessment order was passed under Section 143(3) read with section 147 read with section144C(1) of the Act on 30th November, 2018, wherein over and above the adjustment in respect of international transaction of ₹11,72,725/-, the assessee was also denied the deduction under Section 80IC of the Act of ₹73,26,45,705/-. Thus, the draft assessment order determined the total income of the assessee at ₹203,80,58,490/-. 08. In paragraph no.6 of the draft assessment order, the Assessing Officer mentioned that “Assessed under Section 143(3) read with section 144C (13) of the Income-tax Act, 1961 (the Act). Penalty proceedings are hereby initiated under Section 271(1) (c) of the Act. Credit for taxes paid is allowed as per records. Interest is charged under Section 234A, B and C of the Act as applicable and notice of demand is issued under Section 156 of the Income-tax Act, 1961 (the Act). Tax calculation sheet (ITNS 150 is annexed).” Thus, along with the draft assessment order dated 30th 09. November, 2018, a notice of demand amounting to

The learned Departmental Representative vehemently submitted that when learned Assessing Officer has withdrawn the notice of demand by passing an order under Section 154 of the Act and further also withdrawing the show cause notice issued for initiation of penalty proceedings, the so called error of the draft assessment order is already been rectified and therefore, now there is no prejudice caused to the assessee. He submitted that it is not the case of the assessee that based on the demand notice issued along with the draft assessment order resulted into recovery of taxes. Further, show cause notice for initiation of penalty proceedings was also withdrawn by the learned Assessing Officer and thereafter, penalty proceedings were not levied in pursuance of the draft assessment order. Therefore, the errors cited by the assessee have been rectified by the learned Assessing Officer and further, the same has not been acted upon by the learned Assessing Officer, the draft assessment order is valid. He further submitted that assessee has been heard by the learned Dispute Resolution Panel on its objections and thereafter, the final assessment order is passed. This final assessment order is challenged before the co-ordinate bench. Therefore, now the validity of draft assessment order cannot be challenged.

Undisputed facts of the case are, in the draft assessment order, the Assistant Commissioner has ordered issuance of demand notice and to initiate penalty proceeding under section 271(1)(c). Both the draft assessment order and the demand notice are dated 30-11-2018. Now the issue is squarely covered against the revenue by order of Honourable Karnataka high court in case of Cisco Systems Services B.V. [2023] 149 taxmann.com 486 (Karnataka)[24-02-2023] | where in it has been further held that

Same is also the mandate of Honourable telengana High court in Hyundai Motor India Engineering (P.) Ltd. [2023] 156 taxmann.com 265 (Telangana), Honorable Madras High court in GE Oil & Gas India P. Ltd. [2021] 126 taxmann.com 275 (Madras). Therefore without multiplying the authorities we find that draft assessment order passed coupled with the Notice of demand u/s 156 of the Act and followed by notice u/s 274 rws 271(1)(c) of the Act makes the draft order as final. Thus, the draft assessment order dated 30-11-12018 passed by ld AO is invalid and further as the final assessment order is based on an invalid order, same is also quashed.

However before parting, as assessee has already withdrawn grounds No 10 to 13 of the appeal, respectfully following decision of coordinate bench in ITA No.163/Pun/2013 for A.Y. 2008-09 dated 12th July, 2019, we hold that total income of the assessee shall be the amount of returned income and added thereto amount of income agreed by the assessee in MAP proceedings. 018. Accordingly ground no 9 of the appeal is allowed.

In the result, Appeal of assessee is partly allowed.