THE COMMISSIONER OF INCOME vs. DOOWON AUTOMOTIVE SYSTEMS IN

Judgment dt. 30.09.2019 in T.C.(A) No.722 of 2019 CIT v. M/s.Doowon Automotive Systems India Pvt. Ltd. IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 23.09.2019 CORAM : THE HON'BLE DR.VINEET KOTHARI, ACTING CHIEF JUSTICE AND THE HON'BLE MR.JUSTICE C.SARAVANAN Tax Case Appeal No.722 of 2019 The Commissioner of Income-tax, Chennai. ... Appellant Vs. M/s.Doowon Automotive Systems Pvt. Ltd., No.19 & 20, SIPCOT Industrial Park, Oragadam Sriperumbadur Taluk, Kancheepuram District-602 105 PAN NO.AACCD4172F ... Respondent Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, 'D' Bench, Chennai, dated 19.05.2016 made in ITA No.852/Mds/2014. __________ Page 1 of 9 http://www.judis.nic.in Judgment dt. 30.09.2019 in T.C.(A) No.722 of 2019 CIT v. M/s.Doowon Automotive Systems India Pvt. Ltd. For Appellant : Mr.T.Ravikumar Sr. Standing Counsel For Respondent : Mr.S.P.Chidambaram JUDGMENT (Delivered by The Hon'ble Acting Chief Justice) The Revenue has filed this appeal under Section 260A of the Income Tax Act, 1961 (for brevity, “the Act”) aggrieved by the order dated 19.5.2016 passed by the learned Income Tax Appellate Tribunal, remanding the case back to the Assessing Officer/Dispute Resolution Panel (DRP) in the matter of assessment for the assessment year 2009-2010. The relevant portion of the order passed by the learned Income Tax Appellate Tribunal is quoted below: “6. We have carefully gone through the provisions of sec. 144C of the Act. Sec. 144(5) says that the DRP shall issue such directions as it thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment. Sec. 144C(13) of the Act says that once a direction was given by the DRP under __________ Page 2 of 9 http://www.judis.nic.in Judgment dt. 30.09.2019 in T.C.(A) No.722 of 2019 CIT v. M/s.Doowon Automotive Systems India Pvt. Ltd. sub-section (5) of sec. 144C, the Assessing Officer shall in conformity with the direction, complete the assessment without providing any further opportunity of being heard to the assessee. Therefore, the scheme of the international transaction under the Income-tax Act, enables the Assessing Officer to complete the assessment in conformity with the direction of the DRP. Since an opportunity was given before the DRP, Section 144C(13) specifically provides that no further opportunity shall be given to the assessee. In this case, the DRP directed the TOP to apply TNMM with adjustment on account of working capital. On the basis of this direction, the TOP has passed another order dated 22.1.2014 and subsequently, the Assessing Officer gave effect to the order of the TPO dated 22.1.2014. When the mandate of sec. 144C(13) is to pass an assessment order in conformity with the direction of the DRP, the TOP has no role to pass a subsequent order after the direction given by the DRP. In this case, the Assessing Officer has not passed the assessment order in conformity with the direction of the DRP. In fact, the direction of the DRP was to the TPO. Therefore, the assessee has no occasion to file its objection to the subsequent order of the TPO dated 22.1.2014. When the TPO passed the order dated __________ Page 3 of 9 http://www.judis.nic.in Judgment dt. 30.09.2019 in T.C.(A) No.722 of 2019 CIT v. M/s.Doowon Automotive Systems India Pvt. Ltd. 22.1.2014, the Assessing Officer in all fairness ought to have given an opportunity to the assessee to file its objection. Such an opportunity was not given to the assessee. Moreover, the TPO was not empowered to pass any order subsequent to the direction of the DRP. The Assessing Officer is expected to pass an assessment order in conformity with the direction of the DRP without any intervention either by the TPO or by any authority. Therefore, there is a clear violation of the procedure prescribed u/s 144C of the Act. Moreover, as rightly submitted by the ld. Counsel for the assessee, the DRP made adjustment with regard to capacity utilization and customs duty adjustment without issuing any notice. This Tribunal is of the considered opinion that there was a clear violation of the principles of natural justice. Therefore, the matter needs to be reconsidered by the DRP. The direction of the DRP shall be specific and clear so that the Assessing Officer can implement the same without any intervention either by the TPO or any authority. If the DRP directs the TPO to consider any of the things, that would amounts to violation of the procedure laid down in sec. 144C of the Act. If the DRP finds that any further investigation is required by the TPO, it is open to the DRP to keep the matter pending and call for __________ Page 4 of 9 http://www.judis.nic.in Judgment dt. 30.09.2019 in T.C.(A) No.722 of 2019 CIT v. M/s.Doowon Automotive Systems India Pvt. Ltd. remand report from the TPO and upon receiving such remand report, it is for the DRP to pass order u/s 114C(5) of the Act directing the Assessing Officer to make the adjustment as provided under the scheme of the Income-tax Act. Accordingly, we are unable to uphold the order of the authorities below. Hence, the same is set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall refer the matter once again to the DRP and the DRP shall pass a clear and specific order, if necessary, after calling for a remand report from the TPO. An opportunity shall be given to the assessee in respect of the issues raised and considered by the DRP before issuing any direction to the Assessing Officer. The Assessing Officer shall pass the assessment order in conformity with the direction of the DRP without intervention of the TPO or any other authority in between.” 2. The learned Senior Standing Counsel for the Revenue, Mr.T.Ravikumar, submitted that though in the said paragraph (6) of the order passed by the Income Tax Appellate Tribunal, the learned Income Tax Appellate Tribunal has expected the Dispute Resolution __________ Page 5 of 9 http://www.judis.nic.in Judgment dt. 30.09.2019 in T.C.(A) No.722 of 2019 CIT v. M/s.Doowon Automotive Systems India Pvt. Ltd. Panel (DRP) to pass fresh orders under Section 144(5) of the Act, but towards the end of the order, the matter has been again remanded back to the Assessing Officer, which is incorrect. 3. Having heard the learned counsel for the Revenue, we are of the opinion that no substantial question of law arises from the said order of the learned Tribunal. Therefore, we cannot exercise our appellate jurisdiction under Section 260-A of the Act. However, for the clarification required in the said order of the learned Income Tax Appellate Tribunal, it was free for the appellant/Revenue to approach the Income Tax Appellate Tribunal to issue necessary clarification as to which authority they wanted the matter to be remanded back in the order passed by them. Apparently, it appears that the learned Tribunal wanted a fresh order from the Dispute Resolution Panel under Section 144(5) of the Act, but they have remanded the matter back to the Assessing Officer. The Tribunal has wide powers under Section 254 of the Act to pass such orders “as it thinks fit” in the pending appeal before them. Therefore, the order of remand does not call for interference by this Court. We further observe that even the Assessing __________ Page 6 of 9 http://www.judis.nic.in Judgment dt. 30.09.2019 in T.C.(A) No.722 of 2019 CIT v. M/s.Doowon Automotive Systems India Pvt. Ltd. Officer under the said order of the Tribunal is free to refer the matter back to the Dispute Resolution Panel in terms of the order passed by the learned Tribunal. Therefore, either ways the learned Dispute Resolution Panel has to pass a fresh order in terms of the order passed by the learned Tribunal. 4. In these circumstances, leaving it free for the authorities below, including the Appellant/Revenue to make appropriate miscellaneous application before the learned Income Tax Appellate Tribunal seeking clarification, we decline to interfere with the order passed by the learned Tribunal in the present appeal filed by the Revenue. With these observations, the appeal is disposed of. No costs. (V.K., ACJ.) (C.S.N.,J.) 30.09.2019 Index : Yes/No sasi __________ Page 7 of 9 http://www.judis.nic.in Judgment dt. 30.09.2019 in T.C.(A) No.722 of 2019 CIT v. M/s.Doowon Automotive Systems India Pvt. Ltd. To: 1. The Registrar, Income Tax Appellate Tribunal, Madras "D" Bench, Chennai. 2. The Asst. Commissioner of Income Tax, Company Circle I(4), Chennai.

T.C.(A) No.722 of 2019 30.09.2019 __________ Page 9 of 9 http://www.judis.nic.in