AALAYA JEWEL INDUSTRY PRIVATE LIMITED,COIMBATORE vs. ACIT, COIMBATORE

आदेश / O R D E R

PER ABRAHAM P GEORGE, ACCOUNTANT MEMBER:

These two appeals filed by the assessee are against an

order dated 22.03.2017 passed by Assistant Commissioner of Income

Tax, Corporate Circle-2, Coimbatore for the impugned assessment

year.

ITA Nos.970 & 971/Mds./17 :- 2 -:

was withdrawing appeal No.970/CHNY/2017. Accordingly, Appeal of

assessee in ITA No.970/CHNY/2017 is dismissed as withdrawn. This

leaves us with appeal No.971/CHNY/2017.

ground No.1 assails the validity of assessment done on assessee for

the impugned assessment year. As per the assessee, the order was

passed beyond the time prescribed u/s.144C(2) read along with

section 144C(4) of the Income Tax Act, 1961 (in short ‘the Act’).

precision machining of components for various industries, had filed its

return for the impugned assessment year admitting income of

`9,61,980/- under normal provisions and `40,97,548/- under MAT

provisions. Since the assessee had international transactions to the

tune of `50.72 croes, a reference was made by the ld. Assessing

Officer to the TPO u/s.92CA of the Act. The TPO vide its order dated

10.10.2016 recommended a Transfer Pricing (TP) adjustment of

`2,57,04,337/-. A Draft assessment order based on TPO

recommendations was proposed by the ld. Assessing Officer on

29.12.2016. Assessee thereupon filed an application before the Dispute

ITA Nos.970 & 971/Mds./17 :- 3 -:

Resolution Panel, (DRP) on 31.01.2017. Though in such application,

assessee recorded the date of receipt of draft assessment order as

31.12.2016, the DRP noted from records that the draft assessment

order was served on the assessee on 29.12.2016. Since assessee had

filed its objections before the DRP on 31.01.2017, ld.DRP noted that

there was a delay of three (3) days in filing it. According to the ld.DRP,

there was no power under the Act for condoning such delay. As per

ld. DRP, though the Ld.CIT(A) was having power of condonation

u/s.249(3) of the Act and the Tribunal u/s. 253(5) of the Act, there

was no similar power with DRP u/s.144C of the Act. Ld.DRP was also

noted that condonation of delay, if granted, would would result in

curtailing the time available to the DRP for dealing with the objections

of the assessee. The ld.DRP thus held that assessee had failed to file

its application setting out its objections to the draft assessment order

within the time period of 30 days stipulated under the Act and declined

to consider such application. In other words, ld.DRP rejected the

application filed by the assessee. Thereafter, on 22.03.2017, the ld.

Assessing Officer passed an assessment order making an addition of

`257,04,337/- to the income returned by the assessee, based on the

recommendations made by the TPO.

passed by the AO on 22.03.2017 was much after the time period

ITA Nos.970 & 971/Mds./17 :- 4 -:

mentioned in sub-section (4) of section 144C of the Act. According to

her, once the DRP had refused to consider the objections filed by the

assessee, ld. Assessing Officer was obliged to pass the assessment

order within one month from the end of month in which the outer time

limit for filing objections u/s.144C(2) of the Act expired. As per ld.A.R,

the assessment order ought to have been passed by 28.02.2017.

Thus, as per ld.A.R, the order dated 22.03.2017 passed by the AO was

beyond the time period allowed under the Act and had to be quashed.

Ld.AR also pointed out that copy of objections, which was not

accepted by DRP, was filed by the assessee before the AO on

30.01.2017. However, according to her, this had no ramification on

the time limits, since the objections stood rejected by the ld.DRP

without taking into file. Reliance was placed on the judgement of

jurisdictional High Court in the case of Vijay Television P. Ltd., Vs.

Dispute Resolution Panel And Others reported in (2014) 369 ITR 113

(Mad.).

Assessing Officer was well within time. According to her, once

objections were filed by the assessee and these were considered by

the DRP, the time limit for passing the assessment order started to run

from the date of the order of the DRP. According to her, by virtue of

sub-section (13) of section 144C of the Act, AO had a time of one

ITA Nos.970 & 971/Mds./17 :- 5 -:

month from the end of the month in which the directions were issued

by the DRP, for passing his order. As per ld.D.R, the DRP had disposed

off the objections filed by the assessee on 17.03.2017 and hence, the

assessment order passed on 22.03.2017 was well within time.

material on record. Section 144C is reproduced hereunder:-

“Sec.144C. REFERENCE TO DISPUTE RESOLUTION PANEL

(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-

ITA Nos.970 & 971/Mds./17 :- 6 -:

(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 sub-section (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.

ITA Nos.970 & 971/Mds./17 :- 7 -:

(7) The Dispute Resolution Panel may, before issuing any directions

referred to in sub-section (5),-

(a) make such further enquiry, as it thinks fit ; or

(b) clause any further enquiry to be made by any income-tax

authority and report the result of the same to it.

(8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub- section (5) for further enquiry and passing of the assessment order.

(9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members.

(10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer.

(11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the Revenue, respectively.

(12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee.

(13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete,

ITA Nos.970 & 971/Mds./17 :- 8 -:

notwithstanding anything to the contrary contained in section 153, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received.

(14) The Board may make rules for the purposes of the efficient functioning of the Dispute Resolution Panel and expeditious disposal of the objections filed under sub-section (2) by the eligible assessee. (14A) The provisions of this section shall not apply to any assessment or reassessment order passed by the Assessing Officer with the prior approval of the Commissioner as provided in sub-section (12) of section 144BA.

(15) For the purposes of this section,- (a) "Dispute Resolution Panel" means a collegium comprising of three Commissioners of Income-tax constituted by the Board for this purpose ; (b) "eligible assessee" means,- (i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA ; and (ii) any foreign company.”

Vide sub-section (2) of above Section and eligible assessee has an

option to file, either his acceptance of the variation proposed in the

draft assessment order to the ld. Assessing Officer, or if he objects to

file objections. If he chooses to file objections, it has to be filed before

the DRP, and the ld. Assessing Officer. There are two sub-clauses for

ITA Nos.970 & 971/Mds./17 :- 9 -:

sub-section(2) of Sec.144C of the Act, viz. clause-(a) & clause-(b).

These sub-clauses are joined by the term “ o r ” . This is a

disjunctive expression. Thus, the assessee has to choose one of two

options, either to file acceptance or to file his objection. If the

assessee chooses for the second option given in sub-clause (b), then

he has to comply with the two limbs (i) & (ii) of such sub-clause.

These two limbs are joined by the term ‘a n d ’. This is a conjunctive

term. Hence, if the assessee chooses to file his objection, such

objections have to be filed both before the DRP and the AO. Filing of

such objections with any one of these two authorities will not suffice.

In any event, i.e. whether the assessee chooses option as per clause

(a) or option as per clause (b), it has to be done within 30 days of the

receipt of the draft assessment order.

analysis of facts in the case before us. It is not disputed that the draft

assessment order was served on the assessee on 29.12.2016 and the

assessee filed objections before the DRP as on 31.01.2017. Or in

other words, it was filed after the thirty day time period allowed under

sub-section (2) of Section 144C of the Act. As rightly pointed out by

the ld.DRP, there is no power u/s.144C for the DRP to condone any

delay. Powers of the DRP are exhaustively set out in Sec.144C of the

Act and it has no power to condone any delay in filing of objections.

ITA Nos.970 & 971/Mds./17 :- 10 -:

Hence, DRP rightly held that application of objections could not be

accepted. In our opinion, delayed filing of objections gives rise to the

same consequence as non-filing of the objections. This is because

objection filed after 30 days, which is beyond statutory limit, is as good

as no objection. Copy of the objections was filed by the assessee

before the ld. Assessing Officer only on 30.03.2017, and even this was

beyond the limit of 30 days. Thus, assessee did not satisfy any of the

conditions mentioned in sub-section (2) of section 144C. Non-filing of

objections within the time period allowed under 30 days will

automatically attract application of sub-section (4) of Section 144C of

the Act. Sub-section (4) clearly say that an assessment order has to

be passed within one month from the end of the month when the

period of filing of objections under sub-section (2) expires. Contention

of the ld.D.R is that the order of the DRP rejecting the application filed

by the assessee was a direction of the DRP and hence time limit set

out in sub-section (13) of Section 144C was available to the Assessing

Officer for passing the assessment order. We are afraid, we cannot

accept this reasoning. An order passed by the DRP rejecting an

application of objections, due to belated filing, in our opinion, cannot

be equated with a direction coming within the meaning of sub-sections

(5) of section 144C of the Act. There is no guidance whatsoever to the

ld.AO, from such an order. Hence, the argument of the ld.DR that

ITA Nos.970 & 971/Mds./17 :- 11 -:

time limit given in sub-section (13) of Section 144C of the Act would

apply cannot be accepted. In the case before us, the time limit for

filing objections expired on 28.01.2017. Hence, the assessment order

should have been passed on or before 28.02.2017. The assessment

order was passed only 22.03.2017. Thus, assessment done was

beyond the statutory limit allowed under the Act. The assessment

stands set aside.

allowed.

No.970/CHNY/2017 is dismissed and in ITA No.971/CHNY/2017 is

allowed

Order pronounced on 05th April, 2018, at Chennai.

Sd/- Sd/- (अ�ाहमपी.जॉज�) (एन.आर.एस. गणेशन) (N.R.S. GANESAN) ( ABRAHAM P GEORGE) �या�यक सद�य/Judicial Member लेखा सद�य /ACCOUNTANT MEMBER चे�नई/Chennai �दनांक/Dated: 05th April, 2018 K S Sundaram आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 3. आयकर आयु�त (अपील)/CIT(A) 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 4. आयकर आयु�त/CIT 6. गाड� फाईल/GF