JOINT COMMISSIONER OF INCOME-TAX, (OSD) , CIRCLE -3,, PUNE vs. M/S. BOBST INDIA PVT.LTD,, PUNE

आयकर अपीलीय अिधकरण “lh” �यायपीठ पुणे म� । IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, PUNE BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI S. S. VISWANETHRA RAVI, JM आयकर अपील सं. / ITA No.445/PUN/2019 िनधा�रण वष� / Assessment Year : 2008-09 JCIT (OSD), Circle-1(1), .......अपीलाथ� / Appellant Pune. बनाम / V/s. M/s. Bobst India Pvt. Ltd., Plot No.82, 126 to 132, Village Kasar Amboli, Ambadvet, Ghotawade Road, Tal-Mulshi, Pirangut, Pune-412108. ……��यथ� / Respondent PAN : AAACB7295F C.O. No.42/PUN/2019 (Arising out of ITA No.445/PUN/2019) िनधा�रण वष� / Assessment Year : 2008-09 M/s. Bobst India Pvt. Ltd., Plot No.82, 126 to 132, Village Kasar Amboli, Ambadvet, Ghotawade Road, Tal-Mulshi, Pirangut, Pune-412108. .......अपीलाथ� / Appellant PAN : AAACB7295F बनाम / V/s. JCIT (OSD), Circle-1(1), ……��यथ� / Respondent Pune. Revenue by : Shri T. Vijaya Bhaskar Reddy Assessee by : Shri R. G. Agiwal सुनवाई क� तारीख / Date of Hearing : 02.01.2020 घोषणा क� तारीख / Date of Pronouncement : 06.01.2020 आदेश / ORDER PER D. KARUNAKARA RAO, AM: The appeal filed by the Revenue is against the order of the CIT(A)-1, Pune dated 17.12.2018 for the assessment year 2008-09. The assessee filed the Cross Objection.

2 ITA No.445/PUN/2019 C.O. No.42/PUN/2019 2. In this appeal, there is an issue relating to the non-issuance of the “draft assessment order” to the assessee. Appreciating the existing law, the CIT(A) granted relief to the assessee. Therefore, the Revenue is aggrieved with the decision of the CIT(A) and filed an appeal before the Tribunal with the following grounds :- “1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(Appeal) was justified in not considering that the issue restore back to TPO was merely to re-compute the PLI after giving an opportunity of being heard and not to decide the entire TP adjustment issue afresh on a de novo basis? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(Appeal) has erred in not considering the merits of the case and holding that when the proceedings were restored back to TPO merely to re- compute the PLI whether a draft assessment order was required to be issued? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(Appeal) was justified in holding that the final assessment order stands vitiated for failure at adhere to the mandatory requirements of first passing draft assessment order in terms of section 144C(1) of the Act is no longer res integra?”

3 ITA No.445/PUN/2019 C.O. No.42/PUN/2019 an enhancement while giving effect to the Hon’ble ITAT order which is not permissible; 4. erred by granting TDS credit (as a part of pre-paid taxes) of Rs. 9,40,447 as against an amount of Rs. 9,73,815 claimed by the Assessee in its return of income. The Assessee craves, to consider each of the above cross-objections without prejudice to each other and craves leave to add, alter, delete or modify all or any of the above cross-objections.” 4. From the above, it is evident that the ground no.3 raised by the Revenue and cross objection no.1 raised by the assessee, revolve around the issue of non-issuance of the draft assessment order to the assessee. 5. Before us, at the outset, ld. Counsels for the assessee and the Revenue submitted that the legal issue relating to the non-issuance of draft assessment order to the assessee is the core issue for adjudication and the same is required to be decided in priority before going to the merits of the additions/adjustments. Therefore, to start with, we proceed to discuss the relevant facts on this issue of non-issuance of draft assessment order to the assessee. 6. Briefly stated the relevant facts include that the assessee is a domestic company and filed return of income declaring total income of Rs.2,52,17,110/-. In the return of income, the assessee shown international transactions with its AEs to the extent of Rs.36,97,43,284/-. The Assessing Officer made reference to the TPO. The TPO proposed an upward adjustment of Rs.10,37,82,300/- in respect of the international transaction to arrive at ALP. Accordingly, the Assessing Officer proposed a draft order making an upward adjustment of Rs.10,37,82,300/- to the assessee’s total income on account of adjustment made to ALP of the international transactions with the AEs. Incorporating the same, the assessee approached the DRP. The DRP

4 ITA No.445/PUN/2019 C.O. No.42/PUN/2019 vide its directions u/s 144C(5) of the Act 29.08.2012 confirmed the proposed addition of Rs.10,37,82,300/-. Incorporating the same, the Assessing Officer passed “final assessment order” u/s 143(3) r.w.s. 144C(13) of the Act. Further, aggrieved with the said order of the Assessing Officer, the assessee filed an appeal before the Tribunal. The Tribunal vide its order dated 03.02.2017 allowed the appeal of the assessee, but on certain issues remitted back to the file of the Assessing Officer with certain directions. As per the directions of the Tribunal, the TPO vide order u/s 92CA(3) r.w.s. 254 of the Act proposed an adjustment of Rs.1,54,59,142/- made to international transactions. As a consequent to this adjustment, the income of the assessee got increased by Rs.1,54,59,142/-. The order u/s 143(3)/254 of the Act was passed by the Assessing Officer on 08.12.2017 without issuance of the “Draft Assessment Order”. 7. Aggrieved with the above, enhancement of income/adjustments, the assessee filed the appeal before the CIT(A). During the proceedings before the CIT(A), the assessee raised an additional ground (ground no.7), which is extracted in para 6 of the order of the CIT(A). This ground relates to the validity of the assessment order made by the Assessing Officer in the second round of proceedings without issuing/forwarding a draft assessment order to the assessee in violation of the procedure or proceedings laid down in section 144(C) of the Act. In this regard, assessee relied on various decisions in support of admitting and allowing of the said additional legal ground. It is an argument of the assessee before the CIT(A) that, in the second round of the proceedings also, the Assessing Officer under statutory obligation to issue draft assessment order to the assessee before final assessment order is made. The contents of para 7 to 7.3 of the order of the CIT(A) are relevant in this regard. The CIT(A) allowed the appeal of the assessee on the legal issue.

5 ITA No.445/PUN/2019 C.O. No.42/PUN/2019 8. Aggrieved with the above decision of the CIT(A) on the legal issue, the Revenue is in appeal before the Tribunal with the grounds mentioned above. Supporting the said order of the CIT(A), the assessee is filed the present Cross Objection with the cross-objections mentioned above. Proceedings before the Tribunal 9. Before us, ld. Counsel for the assessee brought our attention to the cross objection no.1 and explained the above narrated facts and developments on this issue. Supporting the order of the CIT(A), the ld. Counsel for the assessee brought our attention to the provisions of the Act as well as the judgement of the Hon’ble Bombay High Court in the case of Pr.CIT vs. M/s Andrew Telecommunications P. Ltd. vide Tax Appeal No.144 of 2017 dated 16th July, 2018 and submitted that the Jurisdictional High Court already considered such an issue in an identical case where the Assessing Officer failed to issue draft assessment order to the assessee before passing the final assessment order. Referring to para 18 and 19 of the said judgement (supra), the ld. Counsel for the assessee submitted that passing of draft assessment order in any case is not an empty formality. When such order is passed, copy is provided to the assessee, the assessee gets chance to raise objection, if any, before the DRP and the CIT(A), as the case may be. In this regard, he read out the facts of that case and submitted that it was also a case where the Tribunal remanded the issue to the file of the TPO with certain directions. In that case also the Tribunal allowed the issue in favour of the assessee and the Revenue was in appeal before the Hon’ble High Court. 10. On the other hand, ld. DR for the Revenue argued vehemently stating that the requirement of issuing draft assessment order is restricted to original

6 ITA No.445/PUN/2019 C.O. No.42/PUN/2019 proceedings and not relevant to the remand proceedings. Referring to the expression i.e. “in the first instance” as mentioned in sub-section (1) of section 144C of the Act, ld. DR for the Revenue submitted that the said expression qualifies his argument and the same is not applicable to the second round of the proceedings. However, ld. AR submitted that the said expressions refer to the stage before the final assessment order is passed in every round of the assessment proceedings. 11. We heard both the sides on the said legal issue and perused the above judgement of the Jurisdictional High Court as well as the orders of the lower authorities. On going through the said judgement of the Hon’ble Jurisdictional High Court (supra), we find the facts are more or less closed to the facts of the present case. For the sake of completeness, the relevant paras 7, 16, 18 and 19 of the said judgement (supra) are extracted hereunder :- “7. The Assessee filed its objection before the Dispute Resolution Panel on 28 January 2010. The Panel, by order dated 24 September 2010, directed the Assessing Officer to modify the order passed on Arms Length Price by the Transfer Pricing Officer. The Transfer Pricing Officer, by its order dated 29 October 2010, directed the transfer pricing adjustment be made under Section 92CA at Rs.44,18,04,792/-. The Assessing Officer passed an order on 24 November 2010, giving effect to the revised transfer pricing adjustment of Rs.44,18,04,792/-. ......... 16. We have gone through the order of the Tribunal dated 1 October 2012 by which the proceedings were remanded. The Tribunal noted that during the course of the proceedings, a new Transfer Pricing Officer took charge of the Assessee’s case and he passed an order without issuing any show cause and without hearing the Assessee. The Tribunal upheld the grievance of the Assessee that a notice ought to have been issued when the new Transfer Pricing Officer took charge by observing thus :- “11. In view of the aforesaid decision of the Hon’ble Supreme Court and the other case laws, we are of the view that the new TPO should have given a show cause notice and also the copy of the material gathered by him which he wanted to use against the assessee prior to making adjustment. There is clear cut violation of principles of natural justice. We, accordingly set aside the assessment order and restore the matter back to the file of the assessing officer in the interest of justice and fair play to both the parties as in our opinion no prejudice shall be caused to either of the parties if matter is restored to the file of the

7 ITA No.445/PUN/2019 C.O. No.42/PUN/2019 assessing officer. The assessing officer is directed to pass a fresh order in accordance with law after providing adequate and sufficient opportunity of being heard on the various objections and then decide the matter afresh in accordance with the law. Thus, the Tribunal set aside the assessment order and restored the matter back to the file of the Assessing Officer. Ms. Razaq raised a contention that the order of the Panel was not set aside. In paragraph 10 of the order the tribunal had adverted to this issue. After reaching the conclusion that the assessment has to be set aside, the Tribunal considered to which authority it should be sent to. In that context, the Tribunal noted that even the Dispute Resolution Panel had not dealt with all objections including the objections regarding the denial of natural justice. Therefore, the Tribunal found it necessary that the matter should be de novo considered by the Assessing Officer. It is in this context the matter was relegated to the stage of Section 144C(1). Further proceedings were therefore not under Section 144C(13) as the entire exercise was set aside to be started afresh. Therefore the contention that the order passed thereafter was under Section 144C(13), cannot be accepted. 17. In the case of International Air Transport Association, the Division Bench of this Court has held that the order passed by the Assessing Officer without their being any draft assessment order is illegal and without jurisdiction. The same view has been reiterated in the case of Zuari Cement Ltd., Vs ACIT by the Division Bench of Andhra Pradesh High Court which also held that the failure to pass a draft assessment order under Section 144C(1) of the Act would result in rendering the final assessment as one without jurisdiction. This position of law is settled. Now to consider whether after remand, it was necessary to issue a 18. draft assessment order. Firstly, the issuance of a draft assessment order is not an empty formality. When a draft assessment order is passed and copy is given to the Assessee, the Assessee can raise objections before the Dispute Resolution Panel on any of the proposed variations. There is a right given to the Assessee to object, and to have the objections considered not by the Assessing Officer, but by the Dispute Resolution Panel. 19. The Tribunal, by order dated 1 October 2012, set aside the entire exercise and the matter was relegated to the Assessing Officer. Once the matter was sent back to be decided afresh it went back to the stage of Section 144C(1) of the Act. Since the Tribunal set aside the proceedings on the ground of violation of principles of natural justice, the first exercise was void and without jurisdiction. Therefore, nothing remained on the record, including the draft assessment order. Therefore, issuance of a draft assessment order was necessary. We do not find from the scheme of Section 144C that if the proceedings were to be started a fresh on remand, the draft assessment order is not required to be given. Non issuance of the draft assessment order has thus vitiated the final assessment order.” 12. From the above, the requirement of passing of draft assessment order is not an empty formality. The philosophy behind the requirement of passing the draft assessment order stands explained. Considering the above settled legal issue, we are of the opinion the order of the CIT(A) is fair and reasonable and it does not call for any interference on this issue. Thus, the ground no.3

8 ITA No.445/PUN/2019 C.O. No.42/PUN/2019 raised by the Revenue are dismissed and the cross objection no.1 raised by the assessee is allowed. 13. Considering the relief granted to the assessee on the legal issue, the adjudication of other merits related issues raised by both the appeal of Revenue and the Cross Objection by the assessee become academic exercise only. Thus, the other cross objections raised by the assessee are dismissed as academic. 14. In the result, the appeal of the Revenue is dismissed and the Cross Objection filed by the assessee is partly allowed. Order pronounced on this 06th day of January, 2020. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (D. KARUNAKARA RAO) �याियक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER पुणे / Pune; �दनांक / Dated : 06th January, 2020. Sujeet आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A)-1, Pune. 4. The Pr.CIT-1, Pune. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “lh” ब�च, 5. पुणे / DR, ITAT, “C” Bench, Pune. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.