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Income Tax Appellate Tribunal, DELHI BENCH ‘I-1’, NEW DELHI
Before: SH. N. K. BILLAIYA & SH. YOGESH KUMAR US
This appeal by the revenue is preferred against the order of the CIT(A)-44, New Delhi dated 24.08.2018 pertaining to A.Y. 2011-12.
The grievance of the revenue read as under :-
The DR sought time to call for a report from the AO whether any draft assessment order was framed. On similar request the appeal was adjourned on earlier date of hearing.
We have given a thoughtful consideration to the request of the DR but do not find any merit. Whether a draft assessment order was framed can be easily ascertained from the appeal folder itself and we do not find any such mention in the body of the assessment order.
5. When the assessee preferred appeal against the assessment order dated 30.03.2017 before the CIT(A). The assessee raised following grounds of appeal :-
l. Assessment order passed u/s 254/143(3) r.w.s 144C r.w.s. 92CA(3) under the set aside directions of Hon’ble Delhi High Court and Hon’ble Delhi IT AT is bad in law and needs to be quashed.
2. Ld. AO erred in passing the Final Assessment Order u/s 254/143(3) r.w.s. 144C without passing Draft Assessment Order as per the provisions of section 144C(1) thereby denying the appellant its right to raise objections before the Hon’ble Dispute Resolution Panel. '' 3. Assessment Order passed 254/143(3) r.w.s 144C is void-ab-initio as the same is not based on any directions of the Hon’ble DRP in view of the fact that the Ld. AO has not complied with the mandatory procedure laid down u/s 144C while passing the order. 4. Assessment order passed by Ld. AO is barred by limitation u/s 143(3) r.w.s. 53(5)/153(7) as the same was dispatched through speed post (No. ED54058793IN) on 01.04.2017 i.e. after the time barring date of31.03.2017. 5. Ld. AO/TP O has erred in law and on facts by proposing to add Rs. 7,96,32,880/- to the income of assessee u/s 92CA(3). 6. Ld.TPO failed to appreciated that when CUP cannot be applied due to absence of comparables then ALP should be determined under other suitable method which may be TNMM. 7. Ld. TPO failed to follow the directions issued by Hon'ble Delhi High Court requiring to follow the directions issued by it in Magneti Marelli Pwertrain India Pvt. Ltd vs. DC1T [(2016) 389 ITR 469(Del)] and Sony Ericsson Mobile Communication India (P) Ltd. vs. C1T[(2015) 374 ITR 118(Del)].
8. Ld. TPO failed to apply CUP as directed by Hon’ble ITAT.
9. Ld. TPO has erred in disallowing the Royalty and FTS on the ground that royalty is not required to be paid to the AE as it is not bringing any income to the assessee. 10. Ld.TPO has erred in law and on facts of the case by rejecting the aggregation approach under TNMM for benchmarking royalty and FTS at entity level on ground that aggregation can be accepted only if the volume of expenses is very small as compared to the operating expenses. 11. Ld.TPO failed to appreciate that application of aggregation approach is based on principle of close inter-relation between the transaction and non upon volume of expenses. 12. Ld. TPO failed to appreciate that purchase of Raw Material is closely inter- linked with the payment of Royalty & FTS. 13. Ld. AO has erred in initiating the penalty proceedings u/s 274 r.w.s 271 of the Income Tax Act, 1961. 14. The Ld. AO has erred in charging interest u/s 234B/234C of the Income Tax Act, 1961. The appellant craves leave to add, amend, alter or withdraw any of the above grounds of objections whether before or during the course of the appellant proceedings in the interest of justice. ”
6. Before proceeding to decide the appeal it is mandatory for the CIT(A) to send a copy of Form no.35 alongwith notice to the AO. There is no mention in the body of the order of the CIT(A) that the AO had raised any objection on the grounds taken by the assessee in Form No.35.
7. Considering the totality of the facts as mentioned here in above the request for adjournment is denied.
Coming to the facts of the case in hand we find that in the first round of litigation the quarrel relating to the transfer pricing adjustment travelled upto the Hon’ble High Court of Delhi and Hon’ble High Court of Delhi vide order dated 20.12.2016 held as under :-
“12. In the light of the above findings, the appeal is partly allowed.
The matter is remitted for re-consideration by the concerned TPO, who shall hear counsel for the parties and render findings on both aspects.”
Once the Hon’ble High Court has remitted the matter for reconsideration by the concerned TPO it meant that the new hearing of the matter had to be conducted as if the original hearing had not taken place. Consequently, the AO had to decide the matter in accordance with elaborate procedure mentioned in section 144 C of the Act.
The TPO framed the order u/s. 92CA (3) r.w.s 254 of the Act vide order dated 29.03.2017 and the AO framed the final assessment order u/s. 254 r.w.s. 143 (3) r.w.s. 144 C of the Act vide order dated 30.03.2017. This means that the AO has bypassed mandatory procedure laid-down by the provision of section 144C of the Act. A similar quarrel was considered by the Hon’ble High Court of Delhi in the case of JCB India Limited Vs. DCIT 85 taxman.com 155 wherein the Hon’ble High Court held as under :-
In the case of Headstrong Services India Private Limited 125 taxmann.com 262 the Hon’ble High Court of Delhi, on similar facts, held as under :-
The Ld. DR in his written submission has stated that the judgment of the Hon’ble Delhi High Court in the case of JCB India (supra) has been distinguished by another judgment of Hon’ble High Court of Delhi in the case of Stryker India Private Limited 103 taxmann.com 267 and prayed for restoration of the appeal to the files of the AO.
We find that the Hon’ble High Court of Delhi in the case of Stryker India Private Limited (supra) has observed as under :-
The petitioner relies upon the judgment of this Court in JCB India Ltd. v. Dy. CIT [2017] 85 taxmann.com 155/251 Taxman 143/398 ITR 189 to say that such orders, which contravene express provisions of law, are to be treated as nullity and have no further consequence.
Learned counsel for the Revenue, on the other hand, urges that the defect found exist is a curable one and urges that this Court should follow the approach adopted in BSC C&C Joint Venture v. Jt. CIT[W.P.(C) 7623 of 2017 dated 05-02- 2018].
We notice that in the JCB India Ltd. (supra), the Court had undoubtedly stated that the order which purports to be a final one to the extent it contravenes Section 144C(3) is a nullity, however, the Court refrains from expressing anything further, which implies that the Revenue's option to proceed afresh and conclude the assessment order, is kept open. Obviously in BSC C&C Joint Venture {supra), the Court took the matter further and directed the completion of proceedings for issuance of final assessment order. Notably, however, BSC C&C Joint Venture (supra) was premised upon consent of the parties to treat the final order a draft order. However, the consent is not forthcoming in the present case.
8. In the present circumstances, the Court hereby quashes the impugned order of the A.O. dated 14.11.2017. The period summoned by the present proceedings under Article 226 of the Constitution of India shall hereby be excluded from reckoning the period of limitation for the purposes of making a fresh assessment order. The A.O. shall proceed in accordance with law and complete the final assessment under Election 144(C) of the Income-tax Act, 1961, in accordance with law.
9. The Writ Petitions are allowed Pending applications also stand disposed of accordingly.
A perusal of the above order show that it was pursuant to a writ petition by the assessee and while deciding writ petition as above the Hon’ble High Court has on principle upheld the findings in the case of JCB India Limited (supra). It was only for the period of limitation, if any, available with the AO, the Hon’ble High Court directed the AO to make fresh assessment excluding the period summoned by the writ proceedings under article 226 of the Constitution of India excluded.
In our considered opinion the decision relied upon by the DR is misplaced and moreover is on different context.
The facts of the case in hand are identical to the facts considered by the Hon’ble High Court of Delhi in the aforementioned cases, therefore, we have no hesitation in dismissing the appeal by the Revenue.
Order pronounced in the open court on 25.05.2022