CARRIER TECHNOLOGIES INDIA LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX-3(1)(1), MUMBAI
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Income Tax Appellate Tribunal, “K” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & MS. KAVITHA RAJAGOPAL, JM
IN THE INCOME TAX APPELLATE TRIBUNAL “K” BENCH, MUMBAI
BEFORE SHRI PRASHANT MAHARISHI, AM AND MS. KAVITHA RAJAGOPAL, JM ITA No. 822/Mum/2022 (Assessment Year: 2017-18) Carrier Technologies India Limited Dy. CIT-3(1)(1), Office No. 8, The Centrium, Level-1, Mumbai Phoenix Market City, Kamani Junction, Vs. Lal Bahadur Shastri Marg, Kurla (W), Mumbao-400 070 PAN/GIR No. AAACV 2873 P (Appellant) (Respondent) :
Assessee by : Shri M P Lohia Revenue by : Dr. Yogesh Kamat
Date of Hearing : 23.11.2022 Date of Pronouncement : 17.02.2023
O R D E R Per Kavitha Rajagopal, J M: This appeal has been filed by the assessee, challenging the assessment order
passed by the Assessing Officer (A.O. for short) u/s. 143(3) r.w.s. 144C(13) r.w.s 144B
of the Income Tax Act, 1961 (‘the Act'), pursuant to the direction of the Hon’ble Dispute
Resolution Panel-1, Mumbai (‘DRP’ for short) and the order of the Transfer Pricing
Officer – 4(2)(ii), Mumbai (‘TPO’ for short), pertaining to the Assessment Year (‘A.Y.’
for short) 2017-18.
The assessee has challenged the assessment order on various grounds - both non
corporate tax and on corporate tax grounds.
The brief facts are that the assessee company is part of the UTC group and is
engaged in the business of import and resale of various fire protection and security
2 ITA No. 822/Mum/2022 (A.Y. 2017-18) Carrier Technologies India Limited vs. Dy. CIT systems (trading activity) and assisting its group companies in sale of these systems in
India in manufacturing, erection, installment and maintenance of fire protection and
security system as per various government and semi government turnkey projects and
rendering research and development services to its group companies in relation to fire
protection and security business. The assessee company has three different divisions
namely trading and commission business from Gurgaon (GGN Segment), manufacturing
businesses from Mumbai (MUM segment) and Research and development services
business from Hyderabad (HYD Segment). The assessee company filed its return of
income for A.Y. 2017-18 dated 30.11.2017, declaring total income at Rs.Nil. The
assessee’s case was selected for scrutiny and the assessment order u/s. 143(3) r.w.s. 144C
of the Act dated 28.02.2022 was passed, where the A.O. determined the total income at
Rs.16,80,09,929/-, as against the loss of Rs.26,34,96,140/-, declared by the assessee in its
return of income and made the transfer pricing adjustment of Rs.5,77,09,121/- pursuant to
the direction of the ld.DRP after disposing off the objections raised by the assessee.
Aggrieved by the said order, the assessee is in appeal before us, challenging the
assessment order on various grounds.
It is pertinent to point out that the assessee has challenged the assessment
proceeding as being null and void on the ground that the draft assessment order dated
20.04.2021 was passed without issuing show cause notice cum draft order in respect of
the proposed addition as mandated u/s. 144B of the Act, thereby rendering the assessment
proceeding as non est, bad in law and contrary to the provisions of the Act. The assessee
has also challenged the assessment order on the ground that section 144B of the Act is
3 ITA No. 822/Mum/2022 (A.Y. 2017-18) Carrier Technologies India Limited vs. Dy. CIT not applicable, where the draft assessment order is passed u/s. 144C of the Act, which is
contrary to the provision of section 144B of the Act. The assessee has also challenged the
transfer pricing grounds and corporate tax grounds. As the above legal ground goes to the
root of the present appeal, we hereby proceed to decide this legal ground before getting
into the merits of the case.
It is observed that the assessment was conducted as per the Faceless Assessment
Scheme and the assessee submits that the A.O. has to examine the draft assessment order
prepared by the assessment unit and by giving an opportunity to the assessee in case of
any variation proposed by serving a notices to the assessee to show cause as to why the
proposed variation should not be made. The assessee relied on notification no. 6 & 7 of
2021 for this proposition. The assessee further submitted that an addition amounting to
Rs.44,10,97,476/- was proposed in the draft assessment order. It is alleged that the A.O.
has issued the draft assessment order u/s. 144C of the Act without issuing the draft order
as per the faceless assessment scheme. The assessee contends that the A.O. has failed to
comply with the procedures laid down under the Faceless assessment scheme by not
issuing the draft assessment order before passing the draft order as per section 144C of
the Act, where the assessment order is bad in law and contrary to the provisions of the
Act. The ld. DRP, for the objection filed by the assessee has held that section 144C of the
Act is a complete code in itself which is applicable to the eligible assessee defined u/s.
144C(15)(b) of the Act. The ld. DRP further stated that section 144C(1) provides that
A.O. shall forward the draft of the proposed assessment to the assessee if he makes any
variation in the income or loss returned which is prejudicial to the interest of such
assessee, thereby holding that no final order is passed in the case of an eligible assessee if
4 ITA No. 822/Mum/2022 (A.Y. 2017-18) Carrier Technologies India Limited vs. Dy. CIT the assessee exercise its operation to file objection before the DRP to the proposed
addition/adjustment made by the A.O. The ld. DRP further held that addition cannot be
made without rendering opportunity to the assessee to be heard. The ld. DRP stated that
section 144C mandates that the eligible assessee is to be given an opportunity to be heard
before the A.O. at the draft stage itself, if the assessee chooses to file objection before the
DRP. The ld. DRP further held that the decisions relied upon by the assessee are related
to cases in which section 144C was not applicable or to cases where at the assessment
stage, the assessee was not given an opportunity of being heard. In this observation, the
ld. DRP rejected the objection of the assessee and subsequently the A.O. passed the
impugned assessment order.
The assessee has challenged the action of the lower authorities before us. The ld.
AR for the assessee contended that the A.O. has failed to issue show cause notice-cum-
draft order which is mandated in section 144B of the Act which come into play with
effect from 01.04.2021. The ld. AR further contended that non-compliance of the
procedure will make the assessment order null and void. The ld. AR relied on the
decision of Hon'ble Jurisdictional High Court in the case of Piramal Enterprises Ltd. vs.
Addl. CIT [2021] 129 taxmann.com 18 (Bom), which held that the assessment u/s. 143(3)
or section 144(4) of the Act which is not made in accordance with the provisions of
section 144B shall be non est. The ld. AR also relied on the decision of the Hon’ble Delhi
High Court in the case of Gurgaon Realtech Ltd. vs. National Faceless Assessment
Centre [2021] 127 taxmann.com 726 (Del), which also laid the said proposition.
5 ITA No. 822/Mum/2022 (A.Y. 2017-18) Carrier Technologies India Limited vs. Dy. CIT 8. The learned Departmental Representative (ld. DR for short) for the Revenue, on
the other hand, controverted the same and contended that the draft assessment order
issued u/s. 144C by the A.O. was not the final assessment order and that non issue of
show cause cum draft order does not make the assessment non est in the eyes of law. The
ld. DR relied on the orders of the lower authorities.
We have heard the rival submissions and perused the materials on record. The
assessee has challenged the draft assessment order on the ground that the same was
passed without issuing the show cause notice along with the draft order as mandated in
section 144B of the Act, thereby challenging the impugned transfer pricing adjustment
and the other additions/disallowances made by the A.O. The assessee has relied on the
Notification No. 6 & 7 of 2021 whereby the A.O. has to examine the draft assessment
order prepared by the assessment unit by giving the assessee an opportunity to be heard
where any variation prejudicial to the interest of the assessee is proposed. The A.O. has to
issue notice to show cause to the assessee as to the proposed variation. The assessee
contends that for the impugned year, the addition aggregating to Rs.44,10,97,476/- was
proposed to be made in the draft assessment order, thereby contending that the same was
prejudicial to the interest of the assessee for which the A.O. should have issued a draft
order proposing the impugned addition. The assessee further contended that the A.O. has
issued draft assessment order without issuing draft order which was mandated as per the
provisions of section 144B. The objection raised by the assessee before the Hon’ble
Dispute Resolution Panel ('DRP' for short) was not considered on the ground that section
144C in which the draft assessment order was passed was in itself a complete code and
that merely by issuing a draft assessment order in case of an eligible assessee does not
6 ITA No. 822/Mum/2022 (A.Y. 2017-18) Carrier Technologies India Limited vs. Dy. CIT contemplate the same to be a final order. The assessee has the option to file objection
before the DRP against the proposed additions/adjustments and that the impugned
addition was made giving the assessee sufficient opportunity of being heard. The ld. DRP
further held that the decisions relied upon by the assessee does not relate to section 144C
and that the assessee was not prejudiced by non issuance of show cause notice along with
the draft order. It is pertinent to extract section 144B(vii) of the Act for ease of reference :
Faceless Assessment. 144B. (1) Notwithstanding anything to the contrary contained in any other provision of this Act, the assessment, reassessment or recomputation under sub-section (3) of section 143 or under section 144 or under section 147, as the case may be, with respect to the cases referred to in sub-section (2), shall be made in a faceless manner as per the following procedure, namely:— … … (vii) the National Faceless Assessment Centre shall send the report received from the verification unit or the technical unit, as the case may be, based on the request referred to in clause (vi) to the concerned assessment unit;
This provision mandates that in case of variation proposed in the transfer
assessment order, a show cause notice is to be issued as to provide with an opportunity to
the assessee for the reason that the assessee can request for personal hearing to make oral
submissions or to present his case on the proposed variation, also provides for virtual
hearing through video conferencing, video-telephone for the purpose of presenting the
assessee’s case. We would like to place our reliance on the decision of the Hon'ble
Jurisdictional High Court in the case of Piramal Enterprises Ltd. (Supra), wherein it has
stated that in assessment order passed u/s. 143(3) r.w.s. 144(4) of the Act without
adhering the procedure laid down u/s. 144B shall make the assessment non est in the eyes
of law. The relevant extract of the said decision is cited hereunder:
Section 144-B of the Income Tax Act, 1961 captioned 'Faceless Assessment' commences vide its sub-section (1) with a non- obstante clause and compulsively requires assessment u/ss 143(3)
7 ITA No. 822/Mum/2022 (A.Y. 2017-18) Carrier Technologies India Limited vs. Dy. CIT and 144 shall be by prescribed procedure contained in sub-section (1) of section 144-B in the cases referred to in sub-section (2) thereof. 65. Sub-section (9) of section 144B declares that assessment made under section 143(3) or under section 144(4) referable to sub- section (2) other than sub-section (8) on or after 1 st day of April, 2021 shall be non est if such assessment is not made in accordance with the procedure laid down under section 144B. There is a telling / pronounced rigour, to follow the procedure under section 144B, lest the assessment would be non est. 66. Going by the provisions under section 144B, when hearing has been envisioned and incorporated, it is imperative to observe principles of natural justice as stipulated. 11. We would also like to place our reliance on the decision of the Hon'ble
Jurisdictional High Court in the case of Abacus Real Estate (P.) Ltd. vs. Dy. CIT [2021]
133 taxmannn.cm 277 (Bom) in which the Hon'ble Jurisdictional High Court held that the
mandatory procedure prescribed u/s. 144B of the Act if not followed the same would
make the assessment order and the draft assessment order as non est.
From the above observation, we are of the considered view that the assessment
order passed in variation of the procedures prescribed u/s. 144B of the Act would render
the assessment order as non est. This proposition has been reiterated by various decisions
cited by the ld. AR.
By respectfully following the said decision, we hereby hold that the impugned
draft assessment order is non est under the eyes of law and hence quashed.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 17.02.2023.
Sd/- Sd/-
(Prashant Maharishi) (Kavitha Rajagopal) Accountant Member Judicial Member Mumbai; Dated : 17.02.2023 Roshani, Sr. PS
8 ITA No. 822/Mum/2022 (A.Y. 2017-18) Carrier Technologies India Limited vs. Dy. CIT Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER,
(Dy./Asstt. Registrar) ITAT, Mumbai
