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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI
Before: MS SUCHITRA KAMBLE & SHRI PRASHANT MAHARISHI
PER SUCHITRA KAMBLE, JM
This appeal is filed by the assessee against the order under Section 263 of the Income Tax Act, 1961 passed by the Pr. Commissioner of Income Tax, Delhi-5 dated 17.11.2017 for Assessment Year 2013-14.
The original Grounds of appeal
filed at the time of filing the appeal by the assessee are as under:- “The Appellant respectfully submits the following grounds of appeal against the revisional order passed by the Learned Principal Commissioner of Income-tax-05, New Delhi (‘Ld. CIT’) for favorable consideration of the Hon’ble Bench:
1. That on the facts and circumstances of the case & in law, the Ld. CIT has erred in passing a revisional order under Section 263 of the Act by setting aside the matter and directing the Ld. AO to re- examine the relevant issues without appreciating/ ignoring that: 1.1 The assessment order passed by the Ld. AO is not erroneous and prejudicial to the interest of the revenue. 1.2 All the details/ documents sought by the Ld. CIT in the show cause notice for initiating the revisionary proceedings under Section 263 of the Act were duly submitted and verified by the Ld. AO during the course of the assessment proceedings under Section 143(3) of the Act. 1.3 No finding that has been recorded by the Ld. CIT that how the order passed by the Ld. AO is erroneous and prejudicial to the interest of the revenue. The above grounds are without prejudice to each other. The Appellant craves leave to alter, amend or withdraw all or any of the grounds herein or add any further grounds as may be considered necessary either before or during the hearing.”
The Additional Grounds of appeal
are as under:- “1. That the Ld. PCIT grossly erred in exercising parallel revisionary jurisdiction under section 263 of the Act against the draft assessment order dated 30 December 2016 passed under section 143(3) read with section 144C of the Act without appreciating that the same was subject to review by Ld. Dispute Resolutions Panel (DRP) comprising of 3 Principal Commissioners or Commissioners of Income-tax.
2. Without prejudice to Ground of appeal no. 1, on facts and circumstances of the case & in law, the Ld. PCIT failed to appreciate a draft assessment order is not an order capable of revision under section 263 of the Act.
3. Without prejudice to Grounds of appeal no. 1 and 2, on facts and circumstances of the case & in law, the Ld. PCIT failed to appreciate a draft assessment order is only tentative in nature and is incapable of casting any tax liability whatsoever on the assessee and hence cannot by any stretch of imagination be prejudicial to the interests of revenue.
4. On a further without prejudice basis, on the facts and circumstances of the case & in law, the Ld. PCIT by not making any inquiry or causing any inquiry to be made under section 263(1) of the Act, grossly erred in leaving it open to the Ld. AO’s judgment to decide whether Ld. AO’s previous assessment order is erroneous or prejudicial to the interest of the revenue.
4. Assessee company e-filed its original return of income for the A.Y. 2013- 14 on 27.11.2013 declaring total loss of Rs. 11,75,03,005/- under normal provision and deemed total income of Rs. 35,14,52,478/- u/s 115JB (under MAT). This return was processed u/s 143(1) of the IT Act. Subsequently, the case was selected for scrutiny and notice u/s 143(2) dated 01.02.2014 of I.T. Act was issued to the assessee. A reference u/s 92CA of the Income Tax Act, 1961 was made by the DCIT to the Transfer Pricing Officer (TPO) and the TPO vide order u/s 92CA(3) of the Act dated 17.10.2016 proposed the Assessing Officer to enhance the income of the assessee company by an amount of Rs. 43,29,855/- being ALP international transactions relating to ITES services provided by the assessee company to its AE. Thereafter, the draft assessment order was passed on 30.12.2016. The assessee filed its objections before the Dispute Resolution Panel (DRP). The DRP issued certain directions and the final assessment was completed on 30.05.2017. In the meanwhile, on examination of the assessment record of the instant A.Y. i.e. 2013-14, the Pr. CIT found that the order passed u/s 143(3) is erroneous and prejudicial to the interest of the Revenue and thus issued show-cause notice u/s 263 of the Act, dated 22.02.2017. The Pr. CIT vide order dated 17.11.2017 held that the Assessing Officer failed to make enquiries or verify the various issues during the assessment proceedings and therefore, directed the Assessing Officer to re- examine the issue and pass the necessary order after giving due opportunity to the assessee.
Being aggrieved by the order u/s 263, the assessee is before us.
The Ld. AR submitted that at the time of initiation of revision proceedings u/s 263 of the Act, the draft assessment order was already subject to review before the Dispute Resolution Panel (DRP) as per Section 144C(15) of the Act. The Ld. AR further submitted that inadvertently the assessee did not raise this ground of appeal challenging the jurisdiction of the Pr. CIT to initiate proceedings u/s 263 of the Act. Therefore, the Ld. AR submitted that the additional ground which is a legal ground should be allowed. The Ld. AR submitted that challenging the jurisdiction of the Pr. CIT to initiate proceedings u/s 263 of the Act is a preliminary ground of appeal of the assessee. The Ld. AR relied upon the decision of the Hon’ble Supreme Court in case of National Thermal Power Company Ltd vs. CIT 229 ITR 353 (SC). The Ld. AR submitted that the Pr. CIT wrongly invoked the provisions of Section 263 of the Act and acted beyond the scope and powers given under Section 263 of the Act. Hence, the order under Section 263 should be quashed.
The Ld. DR opposed the admission of the additional grounds stating therein that the same was not raised before the Pr. CIT when the proceedings u/s 263 was going on. At this juncture admitting this ground would be prejudicial to the interest of Revenue.
We have heard both the parties and perused all the relevant materials available on record. Since additional grounds raised by the Ld. AR are legal ground, in light of decision of National Thermal Power Company Ltd. (supra), we admit these grounds. It is found that order under Section 263 was passed against the draft assessment order. The said draft assessment order was adjudicated before the DRP, therefore, it was in the matter of scrutiny before the Resolution Panel. The draft assessment order is not a final order or is not any order which is described u/s 263 of the Income Tax Act. It is a proposal given to the assessee upon which the assessee has a right to raise objections before the Dispute Resolution Panel. This mechanism is developed in respect of certain specialized matters. The Dispute Resolution Panel has a full authority to direct/propose certain additions or to delete certain additions. Therefore, it is a foolproof mechanism which cannot be doubted by Pr. CIT by invoking Section 263 which is a revisional power in respect of final assessment order or any order but not to a proposal which is called draft assessment order. Thus, we are allowing additional grounds which are preliminary grounds raised in respect of jurisdiction of Pr. CIT u/s 263 of the Act and quashed the order u/s 263 passed by the Pr. CIT as it is bad in law and void ab initio.