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TMI Blog2014 (12) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... t order dated December 28, 2011 passed by Learned AO and the orders dated October 15, 2010 and October 11, 2012 passed by Additional Commissioner of Income Tax, Transfer Pricing-II(2), New Delhi ('Learned TPO'), are bad in law and void-ab-initio. 2. That on the facts and circumstances of the case and in law, the DRP/AO have grossly erred in not appreciating that the assessment under section 147 of the Act is barred by limitation as per the provisions of section 153(2) of the Act. 3. That on the facts and in law, the Learned AO has erred in computing the total income of the Appellant at Rs. 27,806,100 as against the returned income of Rs. 5,433,580 by making an upward adjustment of Rs. 22,372,524 with respect to transfer pricing ("TP") matters. 4. That on the facts and in circumstances of the case and in law, the Learned AO grossly erred in : (i) assuming jurisdiction while issuing notice under section 148 of the Act, in the absence of any material to form his belief that certain income has escaped assessment. (ii) assuming jurisdiction for re-opening the assessment under section 147 of the Act, thereby taking section 147 as a recourse to substitute the regular assessment proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee was even picked up for scrutiny assessment under section 143(3), the Assessing Officer proceeded to reopen the assessment, which had by then achieved finality, by reopening the assessment. While doing so, as evident from the letter dated 7th October 2011 issued by the Assessing Officer- copy filed before us at page 128 of the paper-book, the Assessing Officer recorded the reasons as follows: "In this case, return of income was filed on 29.10.2007 declaring income of Rs. 54,33,850. The same was processed under section 143(1) of the Income Tax Act, 1961. As per form 3CB, the international transactions entered into by the assessee with the associated enterprises were of Rs. 40,11,86,678. To ascertain as to whether the international transactions with the AEs were at arm's length, reference was made under section 92 CA(3) of the Act to TPO-II(4) New Delhi vide order dated 15/10/2010. The TPOII ( 4) found that the international transactions of the assessee with its associated enterprises were not at arm's length and an adjustment of Rs. 2,80,91,619 was directed to be made to the income of the assessee. As per the order u/s 92CA(3) of the Act, the income of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference to TPO in absence of notice u/s 143(2) was bad in law hence void ab initio. Thus the basic premise of issuing notice u/s 148 does not exist. This objection of the assessee is not sustainable. The common law position in relation to the admissibility of evidence emphasizes on the relevance of the evidence rather than how it was obtained. For example, in R v Leatham, we find the oft-quoted statement of Crompton J., "It matters not how you get it; if you steal it even, it would be admissible". Similar view was token in English Law in case of R v Song , where it was stated that there was "no discretion to refuse to admit relevant admissible evidence on the ground that it was obtained by improper or unfair means. The court is not concerned with how it was obtained. ..... ". There is a catena of other decisions of Indian Courts also which support this proposition. In view of the above, it may be inferred that the reference to TPO was invalid but it does invalidate the findings of the TPO which are based on the facts of the case. The assessee itself appeared before the TPO from time to time and did not contest or, the notice issued by the TPO to compute the arm's length pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h material information for a reasonable man to form an opinion that income had escaped assessment. The assessee further relied on order of Dharia construction Co. wherein Hon'ble Apex Court observed that a case cannot be reopened on the basis of opinion of DVO. This contention of the assessee also does not hold ground. The assessee failed to appreciate that the opinion of DVO cannot be compared to directions of TPO. The observations of DVO are merely observations which are not binding on the Assessing Officer. They only have persuasive value, whereas the findings of TPO are based on a set of facts and are binding on the Assessing Officer. 5. In view of the above, the objection filed by you against the initiation of reassessment proceedings is rejected. You are requested to comply with the reassessment proceedings and file your return in compliance to notice U/s. 148 on the reassessment shall be framed ex-parte." 5. It was in this backdrop that the Assessing Officer, despite objections by the assessee proceeded with reassessment proceedings and, thus, finalized the draft assessment order. Aggrieved by the stand so taken by the Assessing Officer, the assessee raised objection agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t proceedings. It was pointed out that at the point of time when reference to the Transfer Pricing Officer was made, no proceedings were pending before the Assessing Officer. Our attention was then invited to Hon'ble Bombay High Court's judgment in the case of CWT vs. Sona Properties Pvt. Ltd., 327 ITR 592 wherein it was held that reassessment proceedings initiated on the basis of a valuation report obtained after close of assessment proceedings cannot constitute information based on which reassessment proceedings can be initiated. It was also submitted that similar position emerges out of the decision of Hon'ble Supreme Cour t in the case of ACIT vs. Dharia Construction Co. 328 ITR 515. Learned counsel submitted that no reference could have been made by the Assessing Officer under section 92CA(3) of the Act as there were no proceedings pending before him at any stage. Learned counsel suggested that the provisions of section 92C and 92CA of the Act have to be read in harmony since section 92C relates to computation of Arm's Length Price and section 92CA permits the ITO to make reference for the purpose of determination of Arm's Length Price of the International transactions. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h its associate enterprise, it is clearly a case for any reasonable person to come to the conclusion and to hold belief that income has escaped assessment. The reasons of reopening of assessment were, thus, according to the learned Departmental Representative, legally sound and wholly sustainable in law. He emphatically argued that there is no bar on reference being made to the Transfer Pricing Officer by the Assessing Officer whether or not there is any pending proceeding before the Assessing Officer. It was submitted that in the absence of any such restrictions being provided by the statute, it would not be proper for us to read those restrictions into the provisions. It was also submitted that the assessee has all along co-operated with the proceedings before the Transfer Pricing Officer and thus, it cannot be open to the assessee to object to the logical outcome of proceedings before the Transfer Pricing Officer. It was certainly not an academic exercise. The Transfer Pricing Officer was to ascertain the Arm's Length Price of international transaction. It was, according to the learned Departmental Representative, the natural corollary of the ascertainment of Arm's Length Price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer cannot be made by the AO. As to what is the relevance of an order passed by the Transfer Pricing Officer's order, in a situation in which the reference itself is unsustainable in law, we find guidance from Hon'ble Bombay High Court's judgment in the case of CWT Vs Sona Properties (327 ITR 592). That was a case in which the Assessing Officer had made a reference to the Departmental Valuation Officer after the end of the assessment proceedings. Their Lordships held that such a reference could not have been made under the scheme of the Act because the assessment proceedings had come to an end before the point of time when such a reference was made, and as such the reference itself was legally invalid. The stand of the revenue was that even if reference to the DVO is to be held to be invalid, the DVO's report constituted information and as such it could be a good basis for coming to the conclusion that wealth has escaped assessment. Rejecting this plea, Their Lordships observed that, "a report called by an authority having no jurisdiction would be a nullity at law and consequently proceedings based solely on such report considering the requirement of s. 17 would be illegal and will ..... X X X X Extracts X X X X X X X X Extracts X X X X
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