M/S CONERGY ENERGY SYSTEMS PRIVATE LIMITED ,BANGALORE vs. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-2(1)(1), BANGALORE

Per Shri Jason P Boaz, A J.M. : This appeal by the assessee is directed against the order of assessment for Assessment Year 2012-13 completed under Section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (in short 'the Act') vide order dt.8.11.2016, pursuant to the directions issued by the Dispute Resolution Panel-1 (DRP), Bangalore under Section 144C(5) of the Act on 04.01.2016.

2 IT(T.P)A No.88/Bang/2017 2. Briefly stated, the facts relevant for disposal of this appeal are as under :-

2.1 The assessee, a company engaged in the field of renewable energy, mainly solar PV systems, filed its return of income for Assessment Year 2012-13 on 30.09.2012 declaring loss of (-) Rs.35,50,17,741. The return was processed under Section 143(1) of the Act and the case was subsequently taken up for scrutiny. In view of the international transactions reportedly entered into by the assessee in the year under consideration, the Assessing Officer made a reference to the Transfer Pricing Officer (‘TPO’) for determination of the Arm’s Length Price (‘ALP’) of the international transactions entered into by the assessee with its Associated Enterprises (AEs). The TPO vide order under Section 92CA of the Act proposed Transfer Pricing Adjustment of Rs.4,75,03,022 in respect of the international transactions of payment of technical and management costs. The draft order of assessment was concluded under Section 143(3) r.w.s. 144C(1) of the Act vide order dt.9.3.2016, wherein the assessee's loss was determined at (-) Rs.30,75,14,719 in view of the incorporation of the Transfer Pricing Adjustment of Rs.4,75,03,022.

2.2 Aggrieved by the draft order of assessment dt.9.3.2016 for Assessment Year 2012-13, the assessee filed its objections thereto before the DRP. The DRP vide order dt.4.10.2016 dismissed the assessee's objections for the reason that there was a delay of 22 days in filing the

3 IT(T.P)A No.88/Bang/2017 objections and the DRP is not empowered to condone the delay beyond the period specified for filing of objections under Section 144C(2) of the Act. Therefore the assessee's objections raised on merits were not addressed by the DRP. Consequently, the final order of assessment was passed under Section 143(3) r.w.s. 144C(13) of the Act vide order dt.8.11.2016, wherein the assessee's loss was determined at (-) Rs.30,75,14,719; which included the Transfer Pricing Adjustment of Rs.4,75,03,022.

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4.0 Ground No.1 – General Ground. The Ground No.1 (supra), admittedly being general in nature, no adjudication is called for thereon.

5.0 Ground No.2 - DRP directions not condoning the delay in Filing the objections. 5.1 In these grounds, the assessee assails the DRP’s order in not condoning the delay of 22 days in filing the objections before the DRP. Before us, the learned Authorised Representative for the assessee submitted that along with the submission of the objections before the DRP in Form 35A on 3.5.2016, the assessee had filed letter dt.28.4.2016 wherein it had set out the reasons for the delay of 22 days in filing the objections before the DRP. It was submitted that as laid out in the letter dt.28.4.2016, due to termination of the lease agreement in April, 2016, the assessee was in the process of shifting its office to a new location; and also due to ongoing assessment proceedings for Assessment Year 2013-14 and appeal proceedings before the CIT (Appeals) – II, Bangalore for Assessment Year 2011-12. It was in these circumstances, as narrated above that the assessee filed the objections 22 days late before the DRP

6 IT(T.P)A No.88/Bang/2017 and this constituted sufficient and reasonable cause for the delay. It was further submitted that the assessee had not filed the objections late intentionally or willfully as that would jeopardize its own case, which no one would do, particularly considering the fact that a huge Transfer Pricing Adjustment of Rs.4,75,03,022 was involved. According to the learned Authorised Representative since it is settled position that legitimate taxes payable by the assessee to the Revenue alone have to be collected, therefore no loss would be caused to Revenue if the delay of 22 days in filing the objections is condoned and the DRP be directed to dispose off the assessee's objections on merits. However, if the said delay of 22 days is not condoned, the assessee would be put to grave hardship and difficulty. It is prayed that in the facts and circumstances of the case as narrated in the petition for condonation of delay and in the interest of substantial justice, the delay of 22 days in filing the objections before the DRP be condoned and the DRP be directed to hear and dispose off the assessee's objections on merits. In this regard reliance was, inter alia, placed by the learned Authorised Representative on the decision of the Hon'ble Apex Court in the case of MST Katiji & Others (1987) 167 ITR 471 (SC) wherein the principles for dealing with matters of condonation of delay have been laid down.

5.2 Per contra, the learned Departmental Representative for Revenue, vehemently opposed the condonation of delay of 22 days in filing the objections before the DRP.

7 IT(T.P)A No.88/Bang/2017 5.3.1 We have heard the rival contentions, perused and carefully considered the material on record. It appears to us from a careful consideration of the reasons put forth in the petition for condonation of delay and the submissions of the learned Authorised Representative, that the delay of 22 days, in filing the objections before the DRP was neither with malafide intention nor willful but for the reasons stated in the assessee's petition which, in our considered opinion, would amount to sufficient and reasonable cause for the assessee's default. It does not stand to reason that any person would intentionally jeopardize its own case; more so when the issue involved is a Transfer Pricing Adjustment of Rs.4,75,03,022.

5.3.2 The Hon'ble Apex Court in the case of MST Katiji & Others (supra), has laid down the principles for examining petitions for condonation of delay in filing appeals, i.e., the substantial justice should prevail over technical considerations. It is settled position that while considering ‘sufficient cause’ the Court should take a liberal view in the interest of substantial justice, especially where it is found that the party has not acted with malafide intentions and explanation/reasons are satisfactory. In the case on hand, the explanation put forth by the assessee as reasons for not filing the objections in time has not been controverted by Revenue or the DRP who has merely rejected the assessee's petition on the ground that they are not empowered by law to condone the delay in filing objections before them. In our considered view, after a careful perusal of the explanation put forth for the delay of

8 IT(T.P)A No.88/Bang/2017 22 days in filing the objections before the DRP, we find that the assessee's default is neither intentional or malafide, as by filing the objections belatedly, the assessee did not stand to benefit. In the factual and legal matrix of the case, as discussed above, we are of the considered opinion that the assessee's explanation as put forth constitute sufficient cause for the delay of 22 days in filing the objections before the DRP. In this view of the matter and respectfully following the ratio of the decision of the Hon'ble Apex Court in the case of MST Katiji & Others (supra), we are of the opinion that this is a fit case for condonation of the delay and accordingly condone the delay of 22 days on the part of the assessee in filing the objections before the DRP. We accordingly set aside the order of the DRP under Section 144C(5) of the Act dt.4.10.2016, as well as the impugned order of assessment for Assessment Year 2012-13 dt.8.11.2016, and restore the matter of examination and adjudication of the assessee's objections raised in Form No.35A in the case on hand, on merits. Needless to add, the DRP shall provide the assessee adequate opportunity of being heard and to file submissions / details on all the objections raised in Form No.35A, which shall be duly considered before adjudicating thereon in accordance with law. We hold and direct accordingly. Consequently, Ground No.2 of the assessee's appeal is allowed.

9 IT(T.P)A No.88/Bang/2017 No.35A for adjudication on merits, we decline to adjudicate the grounds raised by the assessee on various issues on merits in the appeal before us, as the same have not been considered by the DRP.

Order pronounced in the open court on 29th Nov., 2017.

Sd/- Sd/- (LALIET KUMAR) (JASON P BOAZ) Judicial Member Accountant Member Bangalore, Dt.29.11.2017.

*Reddy gp

Copy to : 1 Appellant 4 CIT(A) 2 Respondent 5 DR. ITAT, Bangalore 3 CIT 6 Guard File

Senior Private Secretary Income Tax Appellate Tribunal Bangalore.