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Income Tax Appellate Tribunal, MUMBAI BENCH “K”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI GAGAN GOYAL
IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “K”, MUMBAI BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA No.398/M/2022 Assessment Year: 2017-18
M/s. Imperial Jewels, National Faceless Unit No.72, SDF III, Assessment Centre / Seepz SEZ, Deputy Commissioner of Andheri East, Vs. Income Tax, Mumbai – 400 086 Circle 24(1), PAN: AAEFI3877R Piramal Chambers, Parel, Mumbai – 400 012 (Appellant) (Respondent)
Present for: Assessee by : Shri Nitesh Joshi, A.R. Shri P.P. Bhandari, A.R. Revenue by : Shri Samruddhi Dhananjay Hande, D.R. Date of Hearing : 13 . 10 . 2022 Date of Pronouncement : 31 . 10 . 2022
O R D E R Per : Kuldip Singh, Judicial Member: Appellant M/s. Imperial Jewels (hereinafter referred to as ‘the assessee’) by filing the present appeal sought to set aside the impugned order dated 31.01.2022 passed by the Assessing Officer (AO) inconsonance with the order passed by the Dispute Resolution Panel (DRP) dated 27.12.2021 and order passed by Transfer Pricing Officer (TPO) under section 92CA(3) dated 13.01.2021 under section 143(3) read with section 144C(3) read with section 144B of
ITA No.398/M/2022 2 M/s. Imperial Jewels the Income Tax Act, 1961 (for short ‘the Act’) qua the assessment year 2017-18 on the grounds inter-alia that :-
“The Learned AO issued draft order dated 26.03.2021 under Section 144C of the Income-tax Act, 1961. DRP vide order dated 27.12.2021 held that the assessee is not an "Eligible Assessee" and DRP cannot assume jurisdiction. The Learned AO without taking cognizance of the Provisions of Section 153 of the Act and the DRP Order dated 27.12.2021, passed the impugned order on 31.01.2022 under Section 143(3) r.w.s. 144C(3) of the Act. Based on the DRP Order, provisions of Section 144C are not applicable to the appellant, therefore for technical reasons, an appeal is also filed before the CIT(A) on 18.02.2022. As the DRP has adjudicated the matter, present Appeal is filed before the Hon'ble Income-tax Appellate Tribunal against the impugned order dated 31.01.2022 raising the following grounds: 1. The learned AO erred in making an assessment vide order under Section 143(3) r.w.s. 144C(3) of the Act dated 31.01.2022. It is submitted that the provisions of Section 144C are not applicable to the appellant and as such impugned assessment order passed by the learned AO is barred by limitation and is bad in law and ought to be cancelled. 2. The Learned AO erred in passing the draft order under Section 144C of the Act without appreciating the fact that the appellant is not an "Eligible Assessee" within the meaning of provisions of Section 144C(15)(b) of the Act. The draft order under Section 144C of the Act and Final Assessment Order under Section 143(3) r.w.s. 144C(3) of the Act are void ab initio and bad in law and ought to be cancelled. 3. The Learned AO erred in making an addition of Rs. 45,11,092/- on the ground that the gross profit ratio for the year under consideration is lower by 1.03% as compared to preceding year. Conclusion drawn by the learned AO is based on presumptions and surmises and contrary to the facts. 4. The Learned AO erred in not allowing deduction under Section 10AA of the Act on basis of business income as assessed by him. The entire profits of the Appellant are exempt under section 10AA of the Act. AO ought to have increase the deduction allowable under section 10AA of the Act by the amount of additions made to trading results. 5. The appellant reserves the right to add/ to alter or to amend the grounds of appeal.”
Briefly stated facts necessary for adjudication of the issues at hand are: assessee firm is engaged in the business of manufacturing
ITA No.398/M/2022 3 M/s. Imperial Jewels and exporting of studded jewellery and the profit of the undertaking of the assessee is eligible for 100% deduction under section 10A of the Act being located in a notified Special Economic Zone (SEZ). The AO in order to determine arms length price of Specified Domestic Transaction (SDT) referred the matter of Ld. TPO under section 92CA(1) of the Act. The Ld. TPO, however, proceeded to hold that the SDTs of assessee were in accordance with arms length standards required under the Indian Regulation. Thereafter, the AO passed draft assessment order under section 144C proposing addition of Rs.45,11,092/-.
Assessee carried the matter before the Ld. CIT(A) by way of filing objections who has disposed of the same on the ground that it has no jurisdiction to adjudicate the objections raised by the assessee arising out of the order passed by the AO. The AO framed the assessment at the total income of Rs.45,11,092/- under section 143(3) read with section 144C(3) read with section 144B of the Act. Feeling aggrieved assessee has come up before the Tribunal by way of filing present appeal.
We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto.
At the outset, the Ld. A.R. for the assessee challenged the impugned order passed by the AO/DRP/TPO on the legal ground that since the assessee is not an eligible assessee, provisions contained under section 144C do not apply; that since Ld. TPO has
ITA No.398/M/2022 4 M/s. Imperial Jewels not made any TP adjustment, no draft assessment order could have been passed by the AO and; that order passed by the AO is time barred under section 153(1) of the Act.
However, on the other hand, Ld. D.R. for the Revenue relied upon the orders passed by the AO as well as DRP.
Undisputedly, in order to attract the provisions contained under section 144C of the Act the assessee should be an eligible assessee as required under section 144C(15)(b), whereas assessee in this case is a resident assessee. It is also not in dispute that no TP adjustment has been made by the Ld. TPO and in these circumstances no draft order was required to be passed.
The Ld. A.R. for the assessee contended that order passed by the AO in this case is time barred and brought on record working of the limitation in this case so as to pass assessment order under section 143(3) read with section 144C(3) of the Act, which is extracted for ready perusal as under:
ITA No.398/M/2022 5 M/s. Imperial Jewels 10. So when undisputedly the assessee was classified as a partnership firm and not a foreign company under section 2(23)(A) of the Act the AO was not empowered to pass a draft assessment order under section 144C of the Act. In these circumstances when the draft assessment order passed in this case is invalid being not sustainable in the eyes of law all the consequential proceedings are also invalid.
Even otherwise from the working of limitation given by the assessee, which has not been controverted by the Ld. D.R. the assessment order in this case under section 143(3) read with section 144C(3) of the Act was required to be passed on or before 30.09.2021 whereas the order under challenge before the Tribunal was passed on 31.03.2022 which is beyond the period of limitation, hence not sustainable in the eyes of law.
This issue has also been dealt with by the co-ordinate Bench of the Tribunal in case of Maquet Holdings BV and CO KG vs. DCIT in ITA No.2572/M/2017 order dated 12.04.2019 which has been decided in favour of the assessee by holding that when the draft assessment order passed by the AO is invalid, consequent assessment order passed is liable to be quashed.
In view of what has been discussed above, we are of the considered view that the draft assessment order having been passed by the AO in case of non eligible assessee is invalid and consequent orders passed are also invalid and as such liable to be quashed. Even otherwise assessment order passed in this case is also barred by limitation, hence not sustainable in the eyes of law and thereby set aside. Since assessee has succeeded on legal ground, other
ITA No.398/M/2022 6 M/s. Imperial Jewels ground raised by the assessee on merits have become academic in nature, hence, need not be decided.
Resultantly, appeal filed by the assessee is hereby allowed.
Order pronounced in the open court on 31.10.2022.
Sd/- Sd/- (GAGAN GOYAL) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 31.10.2022. * Kishore, Sr. P.S.
Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench
//True Copy//
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.