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M/s. Planet Online Private Limited Versus Asstt. Commissioner of Income Tax, Circle 16 (2) , Hyderabad

2015 (10) TMI 390 - ITAT HYDERABAD

Validity of assessment order passed u/s 144C(2) - whether barred by limitation - determination of the Arms’ Length Price of the international transaction - Held that:- Section 144C of the I.T. Act deals with the circumstances under which the AO can make a reference to the DRP and the procedure to be followed by the AO in making a reference to the Dispute Resolution Panel and also the procedure to be followed by the DRP while dealing with the objections raised before it by the assessee and the pa .....

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the DRP for the guidance of the AO to enable him to complete the assessment. Therefore, the final assessment order passed by the AO after rejection of the assessee’s objections by the DRP ‘in limini’ is thus not sustainable. The final assessment order passed by the AO dated 7.1.2015 allegedly u/s 143(3) r.w.s. 92CA(3) r.w.s. 144C(5) is therefore to be quashed. See Bank of America NA Versus Assistant Director of Income-tax (IT) Cir. 3(2), Mumbai [2012 (12) TMI 375 - ITAT MUMBAI ] - Decided in fa .....

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s of appeal were also filed vide its application dated 17.8.2015. The additional grounds of appeal filed by the assessee are as under: 1. We would like to submit that as per the ratio laid down by the Hon'ble Supreme Court of India in the case of National Thermal Power Co. Ltd. V. CIT (1998) 229 ITR 382 (SC), the ITAT has jurisdiction to examine the question of law which though not arose before the AO but arose before the ITAT for the first time. 2. The AO erred in not passing the final asse .....

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of the additional grounds of appeal are that the assessee company which is engaged in the business of providing software development services to its Associated Enterprise (AE) in USA, had filed its return of income for A.Y 2010-11 on 29.09.2010 admitting a total income of ₹ 56,29,645 under the normal provisions of the Income Tax Act and book profit u/s 115JB of the Act at ₹ 99,17,033. During the assessment proceedings u/s 143(3) of the Act, AO observed that the assessee has entered i .....

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order, the assessee did not either file any letter accepting the variations, or file any objections before the DRP within the time specified under sub-section 2 of section 144C of the Act. Thereafter, after a period of 9 months, assessee realized that it was required to file objections on the draft assessment order before the DRP. Therefore, it filed its objections in Form No.35A on 15.12.2014 along with an application for condonation of delay of 237 days. The DRP however, did not condone the d .....

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l assessment order passed by the AO u/s 144C(5) of the Act is also not sustainable. 4. The ld DR, on the other hand, supported the orders of the authorities below and submitted that on receipt of the draft assessment order consequent to the transfer pricing order u/s 92CA of the Act, the option was to be exercised by the assessee to file its objections before the DRP or to file an appeal before the CIT (A). Since the assessee has failed to exercise any of these options, AO had not passed the fin .....

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not exercised by the assessee within the prescribed time. In support of his above contentions, he placed reliance upon a decision of the Coordinate Bench of the Tribunal at Mumbai in the case of Bank of America NA vs. Asstt. Director of Income Tax (IT) in ITA Nos.7100/Mum/2010 and ITA No.109/Mum/2011 dated 30.10.2012 and 16.11.2012 respectively. 6. Having regard to the rival contentions and the material on record, we find that the additional grounds of appeal raised by the assessee are legal gro .....

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le?. For the sake of convenience and ready reference, the provisions of section 144C are reproduced hereunder: 144C. (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 prejudi .....

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icer the acceptance of the variation; or (b) no objections are received within the period specified in subsection (2). (4) The Assessing Officer shall, notwithstanding anything contained in section 153 75[or section 153B], 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 .....

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ealing with the objections raised before it by the assessee and the passing of the final assessment order by the AO. Sub-section (1) provides that upon the receipt of the order of the Transfer Pricing Officer suggesting the adjustments after determination of the ALP, AO shall pass a draft assessment order and forward the same 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 interes .....

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exercise the options provided in sub section-2, the AO shall pass the final assessment order. Sub section (4) provides the time limit within which the final assessment order is to be passed i.e. one month from the end of the Month in which the assessee exercises the option of accepting the variation or fails to file its objections within the period prescribed under sub section (2) of section 144C. In the case before us, the assessee has not exercised any of the two options within the specified .....

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under sub section (5), the DRP shall issue such directions as it deems fit for the guidance of the AO to enable him to complete the assessment. In the case before us, the assessee did not file the objections before the DRP within the prescribed time and therefore, the objections are not maintainable until the delay is condoned by the DRP. We find that the DRP has refused to condone the delay in raising of the objections before it by the assessee and therefore it amounts to non admission of the g .....

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ench of this Tribunal in the case of Bank of America cited (Supra), we reproduce hereunder the relevant portion for ready reference: 4 Having considered the rival submissions and carefully perusal of the relevant material on record, we find that the Assessing Officer has passed two orders in this case one u/s 144C(3) dt 10.2.2010 and another u/s 144C(13) dt 20.8.2010. Both these orders are identical and with same demand of tax. There is no dispute about the ITA No. 7100/M/2010 Bank of America NA .....

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to exercise the option and file an appeal later before the Commissioner of Income Tax(Appeals) against the assessment order passed by the Assessing Officer. When the clarification came to the knowledge of the assessee it had immediately filed a letter dated 29.1.2010 before the DRP for expressing the exercise of the option of filing an appeal before the Commissioner of Income Tax(Appeals) and withdrawing the objections filed u/s 144C(2). 4.1 Though, the assessee had an option to exercise either .....

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without permission of the DRP, the application/objection, once filed, cannot be withdrawn by the party in view of sub. Sec. 7 & 8 of section 144C of the I T Act which read as under: 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) cause 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 .....

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ion while passing the order dt 13.7.2010 and therefore, no direction per-se were passed by the DRP as per sub. Sec. 5 of sec 144C of the Act. We quote the order of the DRP as under: "In this case, draft assessment order dated 29.12.2009 was issued by the Assessing Officer against which the assessee has filed following objections before the Dispute Resolution Panel vide its letter dated 25.1.2010. .................................................................................. ............ .....

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entative and Mr. Saurabh Doshi, Asst. Vice President, Country Tax & Finance Bank of America NA attended the proceedings on 28.4.2010. Assessee confirmed its request for withdrawal of objection. In view of the request of the assessee, the objections filed before the Panel are dismissed as withdrawn. The Assessing Officer is directed to complete assessment as proposed in the draft order." 5. Even otherwise, when the objections filed by the assessee were allowed to be withdrawn on the grou .....

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