DCIT, NEW DELHI vs. M/S. GLOBERIAN INDIA PVT. LTD., NEW DELHI

Brief facts of the case are that M/s Globerian India Private Limited (“the assessee”) is a wholly-owned subsidiary of GI, which outsources all the ITES call services, medical billing, medical coding and account receivable management services to the assessee which are offered by the GI to its clients in US. For the Asstt. Year 2008-09, assessee filed their return of income on 21.08.2008 by declaring nil income. Since the assessee entered into certain international transactions with its associated enterprises, determination of the arm’s-length price was referred by the learned Assessing Officer to the Learned Transfer Pricing Officer (TPO). Assessee disclosed the margin of 17.33% whereas the Ld. TPO determined it at 26.61% and suggested an addition of Rs.2,69,12,021/- in accordance with which the learned Assessing Officer passed the draft assessment order.

Assessee filed objections before the Ld. Dispute Resolution Panel (DRP)- I, New Delhi and it was disposed of by order dated 9.7.2012. Aggrieved by the said order, assessee filed an appeal before the ITAT. ITAT in by order dated 28.02.2013 set aside the order of the Assessing Officer and remitted the issue to the file of the Assessing Officer for adjudication, on the ground that without giving any reasons by the Ld. DRP for concurring with the conclusions of the Ld. TPO, Ld. DRP disposed of the matter and no reasons are forthcoming in the impugned order.

Subsequently, learned Assessing Officer passed the order dated 25.3.2015 under section 254/143(3) read with section 144C of the Act making similar addition of Rs.2,69,12,021/-.

Aggrieved by the said order, assessee preferred an appeal before the Ld. CIT(A) stating that the Assessing Officer has not followed the directions given by the ITAT and therefore the assessment became time-barred. It is also canvassed before the Ld. CIT(A) that pursuant to the directions given by the ITAT, all assessment proceedings had to be started afresh subject to the provisions under section 92CA of the Act by issuing draft assessment order under section 144C of the Act so that the matter can either be adjudicated by the Ld. DRP or alternatively after receiving no objections from the assessee, the Assessing Officer could have proceeded and passed an order under section 143(3)/254 of the Act.

By way of impugned order, Ld. CIT(A) allowed the appeal quashing the assessment order for the Assessing Officer not following the procedure established under section 92CA of the Act. Aggrieved by such a finding given by the Ld. CIT(A), Revenue preferred this appeal challenging the impugned order.

It is the submission of the Ld. DR that the lapse on the part of the learned Assessing Officer is at best a procedural lapse and does not vitiate the proceedings per se. He further submitted that a meritorious case cannot be thrown out merely basing on the procedural lapses and, therefore, the Ld. CIT(A) could have allowed the Assessing Officer to follow the procedure under section 92CA of the Act, instead of quashing the assessment order.

Per contra, the contention of the Ld. AR is that the lapse committed by the learned Assessing Officer strikes at the root of his jurisdiction and is an incurable defect. He further submitted that the Ld. CIT(A) followed the binding precedents of the Hon’ble Madras High Court in the case of Vijay Television Private Limited vs DRP and the Delhi Tribunal in the case of Capsugel Healthcare Ltd vs ITO 152 ITD 152 and, therefore, it cannot be said that the Ld. CIT(A) committed any error in quashing the assessment order. He further argued that in assessee’s own case for the Asstt. Year 2007-08, in by order dated 12.10.2017 (as rectified by order dated 22.02.2018 the Tribunal, following the decision of the jurisdictional High Court in the case of JCB India vs DCIT in WP (C) No. 3399, 3429 and 3431 of 2016, held that failure on the part of the AO to first pass a draft order is not a curable defect, and it renders the assessment order invalid and not curable. In PCIT vs NT Officer Services P. Ltd. in by order dated 26.11.2018, the Hon’ble jurisdictional High Court also held a similar view.

We have gone through the record in the light of the submissions made on either side. Facts are simple and admitted. After the remand of the matter by the Tribunal to the learned AO for the adjudication, learned Assessing Officer without passing draft assessment order under section 144C of the Act by enabling the assessee to choose the path of filing objections before the Ld. DRP or informing no objections to the learned Assessing Officer so that the learned AO could have passed the final assessment order. The fact remains admitted that there is failure on the part of the Assessing Officer to subject the proceedings to section 92CA of the Act.

Ld. CIT(A) followed the decision of the Hon’ble Madras High Court in the case of Vijay Television Private Limited and the Delhi Benches of the Tribunal in the case of Capsugel (supra) to reach a conclusion that the failure of the Assessing Officer to follow the mandate of the provisions under section 144C of the Act renders the order without jurisdiction and consequently, null and void and an unforceable. Under very similar circumstances in assessee’s own case for the assessment year 2007-08 by order dated 22.02.2018 this Tribunal reached the same conclusion while following the decision of the Hon’ble jurisdictional High Court in the case of JCB India (supra). Apart from this the Hon’ble judicial High Court in the case of NT office services (supra) reiterated the said view.

In the circumstances, we do not find anything illegal or irregular in the conclusions reached by the Ld. CIT(A) to hold that the assessment order dated 25.3.2015 is bad under law and is liable to be quashed. We, therefore, uphold the same. Appeal of the Revenue being devoid of any merits is dismissed.

In the result appeal of the Revenue is dismissed. Pronounced in open court on this the 30th August, 2019.