AVL TECHNICAL CENTRE PVT. LTD.,NEW DELHI vs. DCIT, CIRCLE-3(2), NEW DELHI

(5) That on the facts and circumstances of the case and in law, the CIT(A) erred in summarily upholding the action of AO/ TPO to benchmark the international transactions undertaken by the Appellant , holding the same to be technical consultancy service provider on the basis of conjectures and incorrect appreciation of functional, asset and risk ("FAR") profile of the Appellant.

(6) That on the facts and circumstances of the case, the CIT(A)/AO/TPO have erred in arbitrarily rejecting the 2 | P a g e AVL TECHNICAL CENTRE PVT LTD VS DCIT, CIRCLE-3(2) comparable companies selected by the Appellant for benchmarking its international transactions and further erred in arbitrarily selecting new companies, which were functionally dissimilar.

(7) That on the facts and circumstances of the case and in law, the CIT(A)VAO/ TPO have erred in not granting the claim of the Appellant for capacity utilisation adjustment, without appreciating the submissions filed by the Appellant in this regard.

(8) The ClT (A) has erred in upholding the action of the AO/ TPO to use unaudited data requisitioned by taking recourse to the provisions of section 133(6) of the Act, without appreciating that the same is in complete violation of the fundamental principles of natural justice since, (a) information which was not available with the Appellant was used; and (b) no opportunity was provided to cross-examine the companies whose information has been used.

(9) That on the facts and circumstances of the case and in law, the AO/ TPO have erred in considering and the CIT(A) erred in upholding the use of single year financial data of the comparable companies, without taking into consideration the fact that that the same was not available in the public domain at the time of conducting the transfer pricing study.”

3 | P a g e AVL TECHNICAL CENTRE PVT LTD VS DCIT, CIRCLE-3(2) an appeal before the Ld. CIT(A), who partly allowed the appeal by restricting the TP adjustment to Rs. 2,27,11,706/- and, deleting the addition on account of provision for diminution in value of investment amounting to Rs. 34,797/-. Aggrieved, the Assessee filed further appeal before the Tribunal. Vide order dated 04.09.2015, the Hon’ble Co-ordinate Bench restored the matter to the file of TPO/AO with regard to the addition made on account of TP adjustment. The matter was again referred to the TPO vide a fresh reference with regard to the matter set-aside for de novo examination; after taking approval of Ld. PCIT-1, Delhi. Pursuant to the TPO’s order u/s 92CA(3) dated 30.12.2016, the assessment was completed u/s 254/143(3) r.w.s 144C of the Act dated 30.12.2016, determining the total loss at Rs. 1,80,69,390/-, after making an addition on account of TP adjustment amounting to Rs. 1,65,54,708/. Aggrieved, the assessee again preferred an appeal before Ld. CIT(A). Vide order dated 28.06.2019, the appeal of the Assessee was partly allowed by Ld. CIT(A). Further aggrieved, the Assessee has filed the present appeal before the Tribunal against the order of Ld. CIT(A).

4.1 The First Ground of the appeal relates to the legal issue regarding violation of provisions of section 144C of the Act due to which, the order dated 30.12.2016 is liable to be quashed as contended by the assessee.

4 | P a g e AVL TECHNICAL CENTRE PVT LTD VS DCIT, CIRCLE-3(2) 4.2 Before us, the Ld. AR has submitted that while making the second round of assessment, the provisions of section 144C of the Act have been violated in so far as no draft order was issued by the Ld. AO, as mandated under sub- section 1 of Section 44C. He has argued that issuance of a draft assessment order is a condition precedent to passing a final order, in case a variation prejudicial to the Assessee is proposed to be made. In this regard, Ld. AR has relied upon several judicial pronouncements including some by the Hon’ble jurisdictional High Court wherein it has been held that even in the second round of assessment proceedings, the issuance of draft order u/s 144C is mandatory. Specifically, reliance has been placed on the following decisions:

(1) Principal CIT vs. Sumitomo Corporation [2024] 166 taxmann.com 55 wherein it has been held that it was mandatory for the AO to pass a draft assessment order u/s 144C during remand proceedings and that a final assessment order passed without passing draft assessment order as mandated u/s144C of the Act is not tenable.

(2) Control Risk India (P) Ltd. v DCIT: [2019] 107 taxmnn.com 82 (Del) wherein under similar circumstances where the matter was remitted to the TPO by the ITAT and the TPO undertook a fresh benchmarking analysis, and, thereafter, instead of passing a draft assessment order, the AO passed a final order. This was challenged by the assessee and finally quashed by the Hon’ble jurisdictional High Court.

(3) Additional CIT v. Nokia India (P.) Ltd: [2018] 98 taxmann.com 373 (Del)

5 | P a g e AVL TECHNICAL CENTRE PVT LTD VS DCIT, CIRCLE-3(2) wherein the Hon’ble Apex Court has dismissed the SLP against the order of the Hon’ble High Court, highlighting that once there was a clear order of setting -aside of the assessment order with requirement of AO/TPO to undertake a fresh exercise of determining Arm’s Length Price, failure to pass a draft assessment order, would violate section 144C(1); this is not a curable defect in terms of section 292B of the Act.

4.3 On the other hand, Ld. DR has argued that this ground is being raised for the first time and, was not raised before the CIT(A). Moreover, the draft assessment order was duly issued during the first round of proceedings and in the second round undertaken as per the directions of the Hon’ble Co-ordinate Bench, there was no requirement to issue the draft assessment order once again. Ld. DR has also made an alternative plea and submitted that the procedural lapse in this regard, if any, would be covered by provisions of section 292B and, hence, argued that the legal ground raised by the assessee deserved to be dismissed.

In the result, appeal of the assessee is allowed.

Order pronounced in the Open Court on 11-12-2025.