Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, BANGALORE BENCH ‘A’
Before: SHRI VIJAYPAL RAO & SHRI JASON P BOAZ
PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER :
This appeal by the Revenue is directed against the order of the assessment for asst. year 2011-12 passed u/s 143(3) r.w.s 144C(13) of the Income-tax Act, 1961 (in short ‘the Act’). The assessee has also preferred cross objections (CO) in respect of the aforesaid order of assessment.
Revenue appeal in IT(TP)A No.652/Bang.2012 for A.Y 2011-12 2.1 In this appeal, Revenue has raised the following grounds of appeal:
“1. The Hon'ble DRP has erred in facts & Law and holding that M/s I C C International Agencies Ltd is not a comparable company on the ground of non availability of information regarding nature of services, when the primary activity of company involves processing orders including marketing for its principal Products.
The Hon'ble DRP has erred in imposing
IT(TP)A No.652/B/16 CO No.32/B/17 3 conditions is beyond the scope of law and business reality by rejecting all close comparables on one or the other ground, without appreciating that not two companies can ever be same.”
2.2 At the outset, the ld AR for the assessee submitted that while on the one hand, in the grounds raised (Supra), Revenue has assailed the directions/orders of the DRP as erroneous in holding that the company M/s ICC International Agencies Ltd., is not a comparable company for some reason or other; on the other hand at para 2.3 of the impugned final order of assessment dated 27/1/2016 the Assessing Officer (AO) records that ‘the DRP’, vide its order dated 29/5/2015 did not give any relief to the assessee on the issue of TP adjustment of Rs.1,06,34,177/- made u/s 92CA of the Act. It was strongly contended that from the above it is amply clear that the AO in the impugned final order of assessment has not given effect to or carried out the directions of the DRP; which is clear violation of the provisions of sec. 144C(10) and (13) of the Act. It is argued that in these factual circumstances, no cause of action arises to Revenue/AO to file an appeal against the impugned final order of assessment, as the IT(TP)A No.652/B/16 CO No.32/B/17 4 DRP’s directions have not been carried out by the AO while passing the final order of assessment and, therefore, Revenue’s appeal is not maintainable and is liable to be dismissed in limine.
2.3 Per contra, the ld DR for Revenue contends that when the DRP has issued incorrect directions, the TPO has rightly not followed the same.
2.4.1 We have heard the rival contentions and perused and carefully considered the material on record. An appeal before the Tribunal lies only when the final order is passed framing the assessment in pursuance of and conformity with the directions issued by the DRP.
Therefore, before the final order of assessment is so passed, no appeal lies against the directions of the DRP. It is also undisputed position of law that as per the provisions of sec. 144C of the Act, the directions of the DRP are binding on the TPO/AO and, therefore, the cause of action to file the appeal arises only after passing the final order framing the assessment in pursuance to the directions of the DRP. If the final order of assessment passed is not against or prejudicial to the interests of Revenue, then Revenue would have no grievance against the final order as well as the directions of the DRP. Even otherwise,
IT(TP)A No.652/B/16 CO No.32/B/17 5 the interest of Revenue would depend upon the demand raised by the AO as per the final order of assessment being framed in pursuance and conformity with the directions issued by the DRP. Thus, once the TPO/AO has not passed the final order of assessment in accordance with the directions of the DRP, Revenue has no cause of action and consequently has no right to file the appeal against such order as well as the directions of the DRP; as we find the position to be in the case on hand. The directions issued by the DRP being binding, the AO/TPO is bound to give effect to these directions, irrespective of fact whether the same are acceptable or not to the Department. The remedy against the DRP directions is available to the Department to file the appeal, but only when and after the final order of assessment is passed in pursuance to and in accordance with the directions of the DRP which are binding of the TPO/AO. The conduct of the TPO/AO to the contrary is a clear case of defiance and disregard to the binding directions of the higher authorities, i.e, the DRP in the case on hand.
2.4.2 As regards the submissions of the ld DR, (Supra) even if the directions of the DRP are not acceptable to the Department and may be contrary to precedents, the only remedy available to Department is IT(TP)A No.652/B/16 CO No.32/B/17 6 to challenge the same in appeal and not by refusing to or not giving effect to the same.
2.4.3 In this regard at para 2.3 of the impugned order, the AO has stated that the DRP vide order dated 29/12/2015 has not given the assessee any relief. The said 2.3 is extracted hereunder:- “2.3 Accordingly, a draft assessment order was passed u/s 143(3) rws 144C(1) of the I.T. 1961 on 02.3.2015 in which addition of Rs. 1,06,34,177/- was made in accordance with the provisions of section 92C(4) and section 92CA(4) of the Income-tax Act, on this issue. The assessee aggrieved by the Draft Assessment order dated 02.03.2015, filed objection before Draft Resolution Panel -2, Bengaluru. The DRP vide their order dated 29/12/2015 did not give any relief to the assessee on this issue.”
2.4.4 A perusal of the said para 2.3 of final asst. order (Supra) indicates that the AO is of the view that the DRP has not given the assessee any relief in respect of the issues on the T.P adjustment of Rs.1,06,34,777/-. Therefore, it is evident that in the circumstances laid out by the AO (Supra) there is no cause of action for Revenue to prefer this appeal and that renders this appeal to be not maintainable.
IT(TP)A No.652/B/16 CO No.32/B/17 7 2.4.5 However, a perusal of the directions issued by the DRP in its order dated 29/12/2015, would go to show that on page 11 and 12 thereof, while dealing with regards to the objections raised to comparables selected by the TPO, the DRP has directed exclusion of the company M/s ICC International Agencies Ltd., holding as under:-
- Space left intentionally -
IT(TP)A No.652/B/16 CO No.32/B/17 8
SN Company DRP directions Name 2.4.6 It is this direction of the DRP to the TPO/AO to exclude M/s ICC International Agencies Ltd., as a comparable (Supra) that in IT(TP)A No.652/B/16 CO No.32/B/17 9 our considered view, has triggered Revenue preferring this appeal and the grounds raised challenging the DRP’s directions (Supra).
2.4.7 As discussed above at para 2.4.1 to 2.4.6 of this order (Supra), since the AO has not excluded M/s ICC International Agencies Ltd., from the set of comparables, he has evidently not given effect to and passed the impugned final order of assessment for asst. year 2011-12 in pursuance and conformity with the directions issued by the DRP in its order dated 29/12/2015, no cause of action lies with Revenue for filing the present appeal. In coming to this view, we draw support from the decision of a co-ordinate Bench of this tribunal in the case of Lenovo India Pvt. Ltd., in IT(TP)A No.511/Bang/2015 dated 31/3/2017. In this factual and legal view of the matter, we hold the preset appeal preferred by Revenue for asst. year 2011-12 in IT(TP)A No.652/Bang/2016 is not maintainable and deserves dismissal in limine.
In the result, Revenue’s appeal for asst. year 2011-12 is dismissed.
IT(TP)A No.652/B/16 CO No.32/B/17 10 Assessés cross objection in C.O No.32/Bang/2017
In the C.O the assessee has raised the following grounds:
IT(TP)A No.652/B/16 CO No.32/B/17 11
In view of our holding that Revenue’s appeal in IT(TP)A No.652/Bang/2016 for asst. year 2011-12 is not maintainable and dismissing the same in limine, We are of the considered view that this C.O filed by the assessee in respect of the said appeal would also not be maintainable. The dismissal of the C.O in no way impinges on the right of the assessee to file an appeal against the impugned final order of assessment for asst. year 2011-12, if otherwise maintainable and it
IT(TP)A No.652/B/16 CO No.32/B/17 12 wishes to do so. In that view of the matter, we also dismiss the assessee’s C.O for asst. year 2011-12 as not maintainable.
In the result, both Revenue’s appeal and the assessee’s cross- objection for asst. year 2011-12 are dismissed. Order pronounced in the open court on 2nd June, 2017.