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Before: Honble
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ITA No.332/2019
IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 9TH DAY OF JANUARY, 2023 PRESENT THE HON'BLE MR JUSTICE P.S.DINESH KUMAR AND THE HON'BLE MR JUSTICE G BASAVARAJA INCOME TAX APPEAL NO. 332 OF 2019 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME -TAX, CIT(A) 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU - 560 095.
THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE - 3(1)(1), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU - 560 095. ...APPELLANTS (BY SRI K.V. ARAVIND, SR. STANDING COUNSEL) AND: M/S FLEXTRONICS TECHNOLOGIES (INDIA) PVT. LTD., PLOT NO.3, PHASE II, SIPCOT INDUSTRIAL PARK, SANDAVELLURE C VILLAGE, SRIPERUMBUDUR TALUK, KANCHEEPURAM DISTRICT,
Digitally signed by RAMYA D Location: High Court of Karnataka
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ITA No.332/2019
TAMIL NADU - 602 106. ...RESPONDENT (BY SRI T. SURYANARAYANA, SR. ADVOCATE FOR SMT.TANMAYEE RAJKUMAR, ADVOCATE)
THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT, 1961, ARISING OUT OF ORDER DATED 31/12/2018 PASSED IN IT(TP)A NO.832/BANG/2017, FOR THE ASSESSMENT YEAR 2012-2013, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE AND ETC,.
THIS ITA COMING ON FOR HEARING THIS DAY, P.DINESH KUMAR J., DELIVERED THE FOLLOWING:
JUDGMENT
This appeal by the Revenue challenging the order dated December 31st, 2018, passed in IT(TP)A No.832/Bang/2017 passed by the Income Tax Appellate Tribunal, Bengaluru (for short 'ITAT') has been admitted to consider following questions of law: 1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law holding that entire assessment order as barred by time when the draft order and final
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assessment order were passed within time limit?
Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that final assessment order as bad on the ground that assessing authority has not passed order as per directions of Dispute Resolution Panel?
Whether on the facts and in the circumstances of the case, the Tribunal is right in law in not following the decision of Hon'ble Punjab and Haryana High Court in the case of Des Kul Bhushan (reported in 47 Taxmann 79 (P&H) wherein it is observed that when an assessment order is set aside the limitation gets extended under Section 153(3) of the Act?
Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that assessment order passed under Section
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143(3) read with Section 144C(13) is bad in law even though the said order is passed according to parameters set out in said provision?
Shri. M. Dilip, learned Standing Counsel for the Revenue assailing ITAT's order submitted that Assessing Officer has passed the order in time and therefore the impugned order is unsustainable in law.
Shri.T.Suryanarayana, learned Senior Advocate for the assessee submitted that under Section 144C(10) of the Income Tax Act, 1961 ('IT Act' for short) every direction issued by the Dispute Resolution Panel ('DRP' for short) shall be binding on the Assessing Officer and under Section 144C(13) the Assessing Officer is duty bound to pass the assessment order in conformity with the directions within one month from the end of the month in which such directions are received by the DRP. He argued that the Assessing Officer has recorded in the assessment order that on receipt of directions by the DRP, reference
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was made to Transfer Pricing Officer ('TPO' for short) for re-working the Arms Length Price (ALP). The Order Giving Effect (OGE) in respect of DRP's direction corrected with the TP adjustments were not received in time and the Assessing Officer has confirmed the draft assessment order and the same is in violation of Section 144C. The ITAT has rightly set aside the said order. With these submissions, he prayed for dismissal of this appeal.
We have carefully considered the rival contentions and perused the records.
The Assessing Officer has recorded thus in his order:
"5. The DRP by its order dated 28.12.2016 gave certain directions to the TPO. The AO thereafter passed the impugned order without incorporating the directions given by the DRP dated 28.12.2016. The following were the relevant observations of the AO in the final order of assessment dated 31.01.2017, which is the order impugned in this appeal. "Accordingly, adjustments as determined by the TPO to ALP of Rs. 40,11,77,583/- was added to the
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retuned income of the assessee and draft assessment order was passsed on 29.03.2016 under the provisions of section 144C of the Income-Tax Act,1961. The assessee based on the draft assessment order filed its objections before the Hon'ble DRP, Bangalore on 29.04.2016. The Hon'ble DRP vide its directions issued u/s. 144C(5) r.w.s.144C(8) of the IT Act dated 28.12.2016 has given relief relating to the TP adjustment.
On receipt of direction of Hon'ble DRP a reference was made to TPO for reworking the ALP adjustment as per DRP's direction. The OGE. in respect of DRP's directions connected with the TP adjustments has not been received. As this is a time barring assessment proceedings the assessment order is passed based on the TP adjustment mentioned in the draft assessment order. On receipt of the order giving effect from TP necessary action for a either increase or decrease of the TP adjustment will be done u/s.154 of the IT Act.
As the assessee company has furnished inaccurate particulars penalty proceedings u/s.271(1)(c) is initiated separately. Considering the directions issued by the Hon'ble DRP, the assessment is completed as under.
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Income as per Return of income Nil Add:TP adjustment 40,11,77,5.83 Less: B/f loss set off 40,11.77,583 Total Assessed Income Nil 1 Balance Tax Payable Nil
Issue Demand Notice & Penalty notice accordingly."
Shri.Suryanarayana is right in his submission that under Section 144C of the IT Act, the Assessing Officer is bound by the directions issued by the DRP and required to pass the assessment order in conformity with the directions issued within one month from the end of month in which such directions are issued.
The ITAT has recorded that impugned order is not in conformity with the provisions of Section 144C of the IT Act and barred by time.
Shri.Dilip's contention is, the Assessing Officer has rightly passed the order within time. But it is relevant to note that the said order is not in conformity with
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Section 144C of the IT Act. Hence, no exception can be taken to the impugned order passed by the ITAT.
Hence, we proceed to pass the following: ORDER (1) Appeal is dismissed. (2) Questions of law answered in favour of assessee and against the Revenue.
No costs.
Sd/- JUDGE
Sd/- JUDGE DR List No.: 1 Sl No.: 77