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M/s. Carrier Race Technologies Pvt. Ltd. Versus The Income Tax Officer

2015 (12) TMI 837 - MADRAS HIGH COURT

Transfer pricing adjustment - Held that:- Since the provisions of the Act makes it very clear that under Section 92 CA of I.T. Act the only option is to place the matter to the TPO and the same has not been followed, this Court feels it appropriate to set aside the order of the assessing authority so that the matter can be referred to the TPO.

Accordingly, the order impugned in this writ petition is set aside and the matter is remanded to the Assessing Authority who shall in turn refe .....

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: Mr. T. Pramod Kumar Chopda ORDER The impugned assessment order dated 27.03.2015 relating to PAN/GIR No. AABCR1863L for assessment year 2012-2013 and the Corrigendum to Assessment Order dated 9.4.2015 bearing No: AABCR1863L/12-13/99 are being challenged on the ground that the circular issued by the department in accordance with Section 144 C of the Income Tax Act has not been complied with. The international transactions involved by the petitioner in this writ petition are referred to in parag .....

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pass a draft assessment order, forward it to the assessee with all the details and after the assessee files his objections, the assessment can be completed within one month. Section also provides an option to the assessee to file the objections before the Disputes Resolution Panel which can issue a direction for guidance of the assessing authority to enable him to complete the assessment. Since the respondent failed to follow the above provision, the petitioner is before this Court. 2. According .....

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fficer so as to proceed further. In this case, admittedly, the matter has not been referred to the Transfer Pricing Officer. Hence, he seeks to quash the said order. 3. The standing counsel for the respondent submitted that as per Section 92 CA (1) where the assessee has entered into an international transaction or specified domestic transaction and the assessing officer considers it necessary or expedient so to do, he may with the previous approval of the competent authority refer the computati .....

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the Income Tax Act, 1961 reads as under : " 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 prejudicial to the interest of such assessee. (2) On receipt of the d .....

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ceived within the period specified in sub-section (2). (4) The Assessing Officer shall, notwithstanding anything contained in section 153 50[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 is received under sub-section (2), issue such directions, as it t .....

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ed by, or caused to be collected by, it; and (g) result of any enquiry made by, or caused to be made by, it. (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 enhance the variations proposed in the draft order so, however, that it s .....

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ligible assessee.] (9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members. (10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer. (11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the ass .....

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of being heard to the assessee, within one month from the end of the month in which such direction is received. (14) The Board may make rules52 for the purposes of the efficient functioning of the Dispute Resolution Panel and expeditious disposal of the objections filed under sub-section (2) by the eligible assessee. The following sub-section (14A) shall be inserted after sub-section (14) of section 144C by the Finance Act, 2013, w.e.f. 1-4-2016 : (14A) The provisions of this section shall not .....

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e of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and any foreign company.] Section 92 C of the Act, reads as under : " 92CA. The assessing officer may refer the case for determination of the arm's length price to the TPO where the assessing officer considers it necessary and expedient to do so." 6. While dealing with a similar circumstance, this Court in W.P. No: 1526 and 1527 of 2014, vide its order dated 29.04.2014, held as follows :- & .....

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ssing a draft assessment order. 21. .... ....... ........ 22. As mentioned supra, as per Section 144C (1) of the Act,the second respondent assessing officer has no right to pass a final order pursuant to the recommendations made by the TPO. In fact, the second respondent assessing officer himself has admitted by virtue of the corrigendum dated 15.04.2013, that the order dated 26.03.2013 is only a final order and it was directed to be treated as a draft assessment order. In this context, it is wo .....

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atory procedures prescribed in the Act, such an omission cannot be termed as a mere procedural irregularity and it cannot be cured. 31. In identical case as that of the case on hand, the Division Bench of the Andhra Pradesh High Court, in an unreported decision, had an occasion to consider the scope of the validity of the demand notice issued by the assessing officer in the case of Zuari Cement Limited vs. Assistant Commissioner of Income Tax, Circle 2 (1) passed in WP No. 5557 of 2012 dated 21. .....

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option to file objections before the Dispute Resolution Panel in which event the latter can issue directions for the guidance of the Assessing Officer to enable him to complete the assessment. In the case of the petitioner, admittedly the TPO suggested an adjustment of ₹ 52.14 crores u/s.92CA of the Act on 20.09.2011 and forwarded it to the Assessing Officer and to the assessee under sub-section (3) thereof. The assessing officer accepted the variation submitted by the TPO without giving .....

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essment is clearly contrary to S.144C of the Act and is without jurisdiction, null and void. The contention of the Revenue that the circular No.5/2010 of the CBDT has clarified that the provisions of S.144C shall not apply for the assessment year 2008-09 and would apply only from the assessment year 2010-2011 and later years is not tenable in as much as the language of Sub-section (1) of Section 144C referring to the cut off date of 01.10.2009 indicates an intention of the legislature to make it .....

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It is not disputed that the memorandum explaining the Finance Bill and the Notes and clauses accompanying the Finance Bill which preceded the Finance (No.2) Act, 2009 clearly indicated that the amendments relating to S.144C would take effect from 01.10.2009. In our view, the circular No.5/2010 issued by the CBDT stating that S.144C(1) would apply only from the assessment year 2010-2011 and subsequent years and not for the assessment year 2008-09 is contrary to the express language in S.144C(1) a .....

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ursuade us to take a contra view by citing any authority. In this view of the matter, we are of the view that the impugned order of assessment dated 23.12.2011 passed by the respondent is contrary to the mandatory provisions of S.144C of the Act and is passed in violation thereof. Therefore, it is declared as one without jurisdiction, null and void and unenforceable. Consequently, the demand notice dated 23.12.2011 issued by the respondent is set aside. 32. As against this order of the Division .....

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herein and the first respondent refused to entertain it by stating that the order passed by the second respondent is a final order and it had jurisdiction to entertain objections only if it is a draft assessment order. While so, the order dated 26.03.2013 of the second respondent can only be termed as a final order and in such event it is contrary to Section 144C of the Act. As mentioned supra, in and by the order dated 26.03.2013, the second respondent determined the taxable amount and also imp .....

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3.2013 passed by the second respondent can only be construed as a final order passed in violation of the statutory provisions of the Act. The corrigendum dated 15.04.2013 is also beyond the period prescribed for limitation. Such a defect or failure on the part of the second respondent to adhere to the statutory provisions is not a curable defect by virtue of the corrigendum dated 15.04.2013. By issuing the corrigendum, the respondents cannot be allowed to develop their own case. Therefore, follo .....

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llows : " 13. On the basis of aforesaid reasoning, the Tribunal concluded that once validity of CBDT Circular was upheld, as per the said circular the Assessing Officer was duty bound to refer the matter to the TPO having regard to the purpose of Specialized Cell created by the Revenue Department to deal with complicated and complex issues and since this channel was not resorted to by the Assessing Officer in the instant case, the Commissioner was right in passing the order under Section 26 .....

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age cannot be drawn by the appellant from those observations as these observations were made while dealing with the contention of the petitioner in the said petition. That instruction completely takes away the discretion of the Assessing Officer in relation to an international transaction if the aggregate value thereof exceeded ₹ 5 crore. This contention was turned down in the following words :- " 37. The other ground on which the instruction is challenged is that it completely takes .....

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ore, the question of the CBDT supplanting the judicial discretion of the AO does not arise. It is perfectly possible that, independent of the circular, the AO might still "consider it necessary or expedient" to refer an nternational transaction of such value of the TPO for determination of the ALP. At the same time it is not as if the transactions of the valueof less than ₹ 5 crores cannot be referred to the TOP by the AO. Ultimately, any exercise of discretion by the AO is bound .....

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