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Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SMT. P. MADHAVI DEVI & SHRI ABRAHAM P GEORGE
Date of hearing : 02/07/2015. Date of pronouncement: 08/07/2015. O R D E R
Per Smt. P.MADHAVI DEVI, JM:
This appeal by the assessee is against the order of the CIT(A)-IV, Bangalore, dated 30/03/2012 for the assessment year 2007-08.
Brief facts of the case are that the assessee-company was engaged in the business of development of software. The filed its return of income for the assessment year 2007-08 on 31/10/2007 declaring loss of (-) Rs.1,57,64,669/-. During the assessment
IT(TP)A No.766/Bang/2012 M/s.Nirvana Business Solutions Pvt. Ltd. Page 2 of 4 proceedings u/s 143(3), the AO observed that the international transaction of the assessee exceeded Rs.5 crores. Therefore, he referred the matter to the Transfer Pricing Officer (TPO) for determination of the arms’ length price (ALP) of the international transaction. The TPO, vide order u/s 92CA of the Act dated 27/10/2010 determined the ALP in respect of software services at Rs.20,65,21,165/- as against Rs.10,85,35,102/- shown by the assessee. The difference of Rs.9,79,86,063/- was determined as an adjustment u/s 92CA of the Act. The TP order was supplied to the assessee but the assessee did not file any objections to the same before the DRP. Thereafter, the AO completed the assessment order bringing the TP adjustment of Rs.9,79,86,063/- to tax.
Against the same, assessee preferred an appeal before the CIT(A) who dismissed the same holding that the assessee has not filed any objections before the DRP within the period specified nor has he intimated the acceptance of the variation and therefore the appeal is not maintainable. Aggrieved by the order of the CIT(A), assessee is in appeal before us.
The learned counsel for the assessee submitted that as per sec.144C and sub-section (2) thereof, an assessee shall file his acceptance of the variation or file his objections before the AO to the TP adjustment within the specified period failing which, the AO was required to pass the final assessment order. The learned counsel for the assessee submitted that the assessee had chosen
IT(TP)A No.766/Bang/2012 M/s.Nirvana Business Solutions Pvt. Ltd. Page 3 of 4 to file an appeal before the CIT(A) and therefore had not filed any objections before the DRP and accordingly after the lapse of the specified period, the assessment order was passed. It was submitted that the CIT(A) has rejected the assessee’s appeal without appreciating the provisions u/s 144C(2) of the Act and without considering assessee’s appeal on merit.
The learned Departmental Representative, however, supported the orders of the authorities below.
Having regard to the rival contentions and the material on record, we find that at the outset, it is necessary to consider the provisions of sec.144C(2). For ready reference, the said provision is reproduced hereunder:-
“144C. (1) ………………………………………. (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”
From a plain reading of the above provision, it is clear that the assessee is entitled to file its objections before the DRP or accept the variation. Where an assessee files objections before the DRP, the objections are to be considered by the DRP and in consonance with the directions of the DRP, final assessment order is to be passed. However, where the assessee does not file objections,
IT(TP)A No.766/Bang/2012 M/s.Nirvana Business Solutions Pvt. Ltd. Page 4 of 4 the AO is obliged to pass final assessment order and against the same assessee is entitled to file an appeal before the CIT(A) u/s 246 of the Act. This position has also been confirmed by the CBDT in its clarification dated 20/01/2010 wherein it is clarified that it is the choice of the assessee whether to file an objection before the DRP against the draft assessment order or not to exercise this option and file an appeal later before CIT(A) against the assessment order passed by the AO. Therefore, we are of the opinion that the interpretation of the CIT(A) is not sustainable. In view of the above, the order of the CIT(A) is set aside and the matter is remitted back to the file of the CIT(A) for consideration of the appeal on merits in accordance with law. Needless to mention, the assessee shall be given a fair opportunity of being heard.
In the result, the assessee’s appeal is treated as allowed for statistical purposes.