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PER PAWAN SINGH, JUDICIAL MEMBER;
These cross appeal under Section 253 of Income-tax Act (the Act) are directed against the order of ld. CIT(A)-15, Mumbai dated 22.02.2012 for Assessment Year 2007-08. The assessee has raised the following grounds of appeal:
(Each ground of appeal is without prejudice to and independent of each other)
& 2936 Mum 2012-Nhava Sheva International Container Terminal Pvt. Ltd.
Based on the facts and the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) - 15, Mumbai (,CIT (An erred in upholding the assessment order dated 30 November 2010 issued by the learned Additional Commissioner of Income-tax, Range- 2(2), Mumbai (hereinafter referred to as 'the AO') under section 143(3) of the Income-tax Act, 1961 ('the Act') in relation to the AY 2007-2008 in the case of your Appellant on certain grounds. Your Appellant's Grounds of Appeal against the order of the CIT (A) are specifically stated below:
Ground 1: Additions made under Section 115JB of the Act - Rs 68,402,962 The CIT(A) erred in treating amount of Rs 68,402,962 as unascertained liability thereby confirming the addition to the book profit computed the income under Section 115JB of the Act. The CIT(A) failed to appreciate the fact that such accrued liability was determined on the basis of the agreement entered into with various vendors. Your Appellant prays that the AO be directed to treat the provision of Rs 68,402,962 as provision towards an ascertained liability. Accordingly, the addition made to the book profit computed under Section 115JB of the Act be deleted.
Ground 2: Deduction under Section 80-IA of the Act for other income Rs 60,536,836 The CIT (A) erred in not allowing deduction, under Section 80-IA of the Act, in respect of the following income earned by your Appellant Particulars of other Amount income (in Rs) Rent recovery 374,403 Scrap sales 2,183,659 Miscellaneous income 1,175,975 Interest 56,802,799 Total 60,536,836
The CIT(A) failed to appreciate that the other income earned by your Appellant is derived from the business of operating and maintaining the container terminal. The CIT(A) failed to appreciate the fact that the said income would not have been received by your Appellant, had your Appellant not been carrying on its business of operating and maintaining the container terminal. Without prejudice to the above, the CIT (A) erred in not observing the principles of judicial consistency of allowing deduction under Section 80-IA of the Act in respect of scrap sales and miscellaneous income allowed by the Commissioner of Income-Tax (Appeals) in A Y 2004-05. Your Appellant prays that the AO be directed to allow deduction under Section 80-IA of the Act for other income earned by your Appellant. 2 & 2936 Mum 2012-Nhava Sheva International Container Terminal Pvt. Ltd.
The assessee vide its application dated 14th August 2012 raised following grounds of appeal;
(Ground No. 4 Transfer Pricing adjustment – Rs. 18,848,591/-) The CIT(A) erred in making proportionate adjustment for arm’s length payment of technical services by rejecting 50 percent of the benefits received from seven categories of services. The CIT(A) failed to appreciate the fact that Technical Services Agreement with the associated enterprise is a consolidated contract and individual segregation under various heads of technical services should not be done. The Appellant craves leave to add, alter, amend, modify or withdraw all or any of the above ground(s) of appeal either at the time of hearing of this appeal or before the hearing of this appeal.
The assessee again vide its application dated 06.04.2016 raised the following additional ground of appeal:
The assessment order dated 30 November 2010 passed by the learned assessing Officer is contrary to the procedure prescribed by the section 144C of the Income Tax Act, 1961 and was without jurisdiction, null and void.
The Revenue in its cross appeal has raised the following grounds of appeal:
On the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in allowing relief to the assessee to the extent impugned in the ground enumerated below:- 1. The order of the CIT(A) is opposed to law and facts of the case. 2. "On the facts and circumstances of the case and in law, the ld CIT (A) erred in giving general directions for restricting disallowance of technical services for the year concerned provided by the Associated Enterprises (AE) to 50% of amount claimed by the appellant, without giving any specific finding on the issue contrary to the finding given by the TPO that services rendered were only for three aspects of agreement?"
Brief facts of the case are that the assessee-company is engaged in the business of construction, operation, management, and maintenance of a Container handling and unit loading/uploading facilities at Jawaharlal Nehru Port Trust (‘JNPT’). The assessee filed its return of income for Assessment 3 & 2936 Mum 2012-Nhava Sheva International Container Terminal Pvt. Ltd. Year 2007-08 on 06.11.2007 declaring total income of Rs. 110.64 Crore under the Minimum Alternative Tax (MAT) provisions. The assessment was completed on 30.11.2010 under section 143(3) (rectified to have been passed under section 143(3) r.w.s 144C(5) vide order dated 30.12.2010. The Assessing Officer while passing the assessment order made the adjustment/addition of Rs. 2,15,41,247/- under section 92CA(3) and denied the deduction under section 80IA of Rs. 6,05,56,386/- (consisting of rent recovery of Rs. 3,74,403/-, scrap sale of Rs. 21,83,659/-, miscellaneous income of Rs. 1175975/- and interest income of Rs. 5,68,02,799/-) and made the addition under section 115JB of Rs. 6,84,02,692/-. On appeal before the ld. CIT(A), the Transfer Pricing Adjustment was restricted to 50%, however, the addition under section 115JB and denial of deduction under section 80IA was confirmed. Thus, aggrieved by the order of ld. CIT(A), both the parties have filed their appeal raising the grounds of appeal
as referred above.
6. We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue and perused the material available on record. The ld. AR of the assessee submits that the assessee has raised additional ground of appeal that Assessing Officer passed the assessment order in violation of provisions of section 144C of the Act. The ld. AR of the assessee submits that additional ground of appeal relates to the jurisdictional issue and may be decide first. It was submitted that all facts related to raising of additional ground of appeal are available on ITA No. 3092 & 2936 Mum 2012-Nhava Sheva International Container Terminal Pvt. Ltd. record. The additional grounds of appeal emanates from the facts available on record. The ld. AR of the assessee invited our attention to the draft assessment order passed under section 143(3) r.w.s 144C(1) dated 29.09.2010. The ld. AR of the assessee submits that in paragraph 5.3, the Assessing Officer has referred the reply of assessee dated 29.10.2010 and in paragraph no. 5.5 has referred the reply of assessee dated 29.11.2010. The Assessing Officer has extracted the contents of reply dated 29.10.2010 and 29.11.2010 in paragraph 5.3 and 5.5 respectively. In fact, the draft assessment order was neither passed nor served upon the assessee. The assessee has no opportunity to file objection against the draft assessment dated 29.09.2010. The Assessing Officer passed the final assessment order on 30.11.2010 under section 143(3). The conduct of Assessing Officer is apparent by passing the rectification order under section 154 on 30.12.2010 wherein it was referred that assessment order under section 143(3) r.w.s 144C(1) was sent to the assessee on 29.10.2010 and that assessee opted not to file objection before the DRP or that the period for filing objection is expired on 29.11.2010, therefore, the assessment order under section 143(3) was passed. Therefore, the Assessing Officer rectified the order mentioning that the order should be as passed under section 143(3) r.w.s 144C(5). The ld. AR of the assessee further submits that reference of all dates mentioned on the draft assessment, in the rectification order clearly goes to show that neither the draft assessment order was passed nor it was served upon the & 2936 Mum 2012-Nhava Sheva International Container Terminal Pvt. Ltd. assessee and the final assessment order under section 143(3) was passed by Assessing Officer in gross violation of procedure prescribed under section 144C of the Act. Therefore, the assessee has raised the additional ground of appeal that the assessment order dated 30.11.2010 is contrary to the procedure prescribed under section 144C. And the assessment order passed in violation of procedure prescribed under section 144C is void ab-initio.
Hence, all subsequent actions of Assessing Officer are invalid and nonest in the eyes of law.
On the other hand, the ld. DR for the Revenue supported the order of Assessing Officer. The ld. DR further submits that there may be typographical mistake while passing the draft assessment order under section 143(3) r.w.s 144C(1). The draft assessment order was served upon the assessee on 29.10.2010.
In rejoinder submission, the ld. AR of the assessee submits that as per direction of the Bench vide order dated 17.08.2017 he has filed an affidavit of Devang Mankodi contending that the letter (reply) of assessee dated 29.11.2010 was filed before Assessing Officer only on 29.11.2010. The Assessing Officer has no occasion to refer the contents of assessee’s letter dated 29.11.2010 while passing the draft assessment order on 29.10.2010.
We have considered the rival submission of the parties and have gone through the orders of authorities below. We have noted that the assessee has raised additional ground of appeal
, which relates to jurisdictional issue. We & 2936 Mum 2012-Nhava Sheva International Container Terminal Pvt. Ltd. have noted that no additional facts or evidence is necessary to bring on record for adjudication of additional ground of appeal. Therefore, we admit the additional ground of appeal raised by assessee vide its application dated 06.04.2016 that the assessment order dated 30.11.2010 is contrary to the procedure prescribed under section 144C of the Act.
10. We have noted that on 17.08.2017, while hearing the appeals for the year under consideration, the ld. DR for Revenue was directed to file the order- sheet of file of Assessing Officer from 27.08.2009 onwards. On the direction of Bench, the order-sheet of Assessing Officer was filed. The perusal of order-sheet of Assessing Officer reveals that the hearing was fixed on 28.10.2010 and Miss Madhavi Mehta attended on behalf of assessee and filed submission and reconciliation of creditors and a show-cause notice was issued to the Assessing Officer as to why provision of Rs. 6.84 Crore made as an estimated liability, which being as unascertained liability, may not be added back while computing book profit under MAT in term of Explanation (c) of section 115JB and case was adjourned to 29.10.2010. On 29.09.2010 Miss Madhavi Mehta attended the hearing and filed submission and case was discussed with her. No further reference about passing of draft assessment order, issuance of notice/show-cause notice for service of draft assessment on assessee, is mentioned in the order-sheet, nor passing of final assessment order under section 143(3) dated 30.11.2010 mentioned in the order-sheet. Further, there is no reference about order of rectification dated ITA No. 3092 & 2936 Mum 2012-Nhava Sheva International Container Terminal Pvt. Ltd. 30.12.2010, rectifying the of assessment order under section 143(3) r.w.s 144C(5) on the order-sheet.
11. For better appreciation of facts Section 144-C is extracted below:- "Reference to dispute resolution panel. 144C. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. (2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order,— (a) file his acceptance of the variations to the Assessing Officer; or (b) file his objections, if any, to such variation with,- (i) the Dispute Resolution Panel; and (ii) the Assessing Officer. (3) The Assessing Officer shall complete the assessment on the basis of the draft order, if— (a) the assessee intimates to the Assessing Officer the acceptance of the variation; or (b) no objections are received within the period specified in sub-section (2). (4) The Assessing Officer shall, notwithstanding anything contained in section 153, pass the assessment order under sub- section (3) within one month from the end of the month in which, — (a) the acceptance is received; or (b) the period of filing of objections under sub-section (2) expires. (5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment. (6) The Dispute Resolution Panel shall issue the directions referred to in subsection (5), after considering the following, namely:— (a) draft order; (b) objections filed by the assessee; (c) evidence furnished by the assessee; (d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority; (e) records relating to the draft order; (f) evidence collected by, or caused to be collected by, it; and (g) result of any enquiry made by, or caused to be made by, it. & 2936 Mum 2012-Nhava Sheva International Container Terminal Pvt. Ltd.
12. A careful reading of section 144C mandates the Assessing Officer, in the first instance, to forward a draft of the proposed order of assessment to the eligible assessee in relation to any variation in the income or loss returned, which is prejudicial to the interest of such assessee, who on receipt of the said draft order, within the time prescribed, shall either file his acceptance of the variations to the Assessing Officer or file his objections to the variation with the DRP and the Assessing Officer.
We have also perused the contents of draft assessment dated 29.10.2010, forwarding letter of draft assessment dated 29.10.2010, assessment order dated 30.11.2010 passed under section 143(3) and rectification order passed under section 154 dated 30.12.2010. The perusal of draft assessment shows that it was framed in a hurriedly manner. The Assessing Officer referred the reply of assessee dated 29.10.2010 (para 5.3) and reply dated 29.11.2010 (para 5.5). The reference of assessee’s reply dated 29.11.2010 in the draft assessment order passed allegedly under section 143(3) r.w.s 144C(1) is far from imagination. Even if it is presumed as per the contention of ld. DR for the revenue, that there may be typographical mistake (may have been passed on 29.11.2010), the Assessing Officer has to wait for 30 days for filing of objection before Dispute Resolution Panel, before passing the final assessment order. The final assessment order was passed on 30.11.2010, therefore, the contention of ld. DR for the Revenue that there may be some typographical mistake in writing the dates is not convincible. & 2936 Mum 2012-Nhava Sheva International Container Terminal Pvt. Ltd.
The Hon’ble Delhi High Court in Turner International India (P.) Ltd. V DCIT [2017] 398 ITR 177/82 taxmann.com 125 (Delhi), had an occasion to consider a similar issue, as raised in this writ petition and it was held as under:
“10. The short ground on which the aforementioned final assessment orders and the consequent demand notices have been challenged is that there was non- compliance with the mandatory provision contained in Section 144C(1) of the Act requiring the AO to first frame draft assessment orders.
The question whether the final assessment order stands vitiated for failure to adhere to the mandatory requirements of first passing draft assessment order in terms of Section 144C(1) of the Act is no longer res intregra. There is a long series of decisions to which reference would be made presently.
In Zuari Cement Ltd. v. ACIT (decision dated 21st February, 2013 in WP(C) No. 5557/2012), the Division Bench (DB) of the Andhra Pradesh High Court categorically held that the failure to pass a draft assessment order under Section 144C (1) of the Act would result in rendering the final assessment order "without jurisdiction, null and void and unenforceable." In that case, the consequent demand notice was also set aside. The decision of the Andhra Pradesh High Court was affirmed by the Supreme Court by the dismissal of the Revenue's SLP (C) [CC No. 16694/2013] on 27th September, 2013.”
Further Hon’ble Bombay High Court in Dimension Data Asia Pacific PTE Ltd. Vs. Deputy Commissioner of Income-tax [2018] 96 taxmann.com 182 (Bombay) held that wherein, Assessing Officer passed final assessment order under section 144C(13), read with section 143(3) without passing a draft assessment order under section 144C(1), said order being violative of provisions of section 144C(1), deserved to be set aside. Considering the factual discussion as discussed above the Assessing Officer has not passed the draft assessment order nor was the copy of it served upon the assessee.
Therefore, the Assessing Officer acted in violation of provisions of section & 2936 Mum 2012-Nhava Sheva International Container Terminal Pvt. Ltd. 144C. Thus, the assessment order deserves to be set-aside/quashed. Hence, we allowed the additional grounds of appeal raised by assessee.
As we have allowed the additional ground of appeal which relates to jurisdictional issue and set-aside/quashed the assessment order. Hence, the discussion on other issues has become academic.
In the result, appeal of the assessee is allowed.
Considering the fact of the case that we have already allowed the appeal of assessee on jurisdictional issue and set-aside/quashed the assessment order.
Therefore, the grounds of appeal raised by Revenue have become infructuous. 19. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 26/09/2018.