TMI Blog2016 (4) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... ers were not ‘eligible Assessees’ could not have been ignored by the AO. It appears to the Court that it is plain that under Section 144C, the AO should have proceeded to pass an order under Section 143 (3) of the Act. Instead the AO confirmed the draft assessment order passed under Section 144C (1) of the Act. This, therefore, vitiated the entire exercise. The Court has no hesitation in holding that the final assessment order dated 28th January 2015 is without jurisdiction and null and void. The draft assessment order dated 28th March 2014, having been passed in respect of entities which were not 'eligible assessees', is also held to be invalid. An assessment order passed by the AO which is contrary to the mandatory requirement of Section 144C of the Act, is entirely without jurisdiction. Thus the draft assessment order dated 28th March 2014 and the final assessment order dated 28th January 2015 passed by the AO are held to be void ab initio and quashed on that basis. The orders consequential thereto also do not survive. - W. P. (C) 2384/2015 & CM No. 4277/2015, W.P.(C) 2397/2015& CM No. 4298/2015 - - - Dated:- 23-3-2016 - S. Muralidhar And Vibhu Bakhru, JJ. For t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h ESPN Star Sports as well as ESS Distribution filed their respective returns of income for the Assessment Year ( AY ) 2010-11 on 1st October 2010 with the status of a firm. The stand taken by both the Petitioners is that the revenue generated from distribution being business profit was not taxable in India in view of the Article 7 (1) of the India-Mauritius Double Taxation Avoidance Agreement ( hereinafter referred to as the Treaty ) since there was no permanent establishment (PE) of either Petitioner in India in terms of Article 5 of the said Treaty. It is stated that in the notes to the return of income filed by the Petitioners, it was clearly mentioned that each of them was a partnership firm incorporated on 29th March 2002 under the laws of Mauritius. 5. Both the returns were picked up for scrutiny by the AO. Since both the Petitioners had entered into international transactions during the AY 2010-11, their cases were referred to the Transfer Pricing Officer ( TPO ) for determination of the arm s length price ( ALP ) of all the international transactions reported in the Form-3CEB filed by the Petitioners. 6. In each of the cases, the TPO has, by an order dated 17th Dece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 144C (10) of the Act provides that every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer. 12. Further Section 144C (13) of the Act provides that the AO shall, upon receipt of the directions issued under Section 144C (5), complete the assessment in conformity with the said directions issued under Section 144C (5) notwithstanding anything to the contrary in Section 153 or Section 153B , without providing any further opportunity of being heard to the Assessee. It is further stipulated under Section 144C (13) that the AO shall complete the assessment within one month from the end of the month in which such direction issued by the DRP is received. 13. In the above context, the Petitioners urged before the AO, i.e., ADIT that neither of them was an eligible assessee as defined under Section 144C (15) (b) of the Act. It was pointed out that neither of them were the person in whose case the variation arose as the consequence of the order of the TPO passed under Section 92CA (3) of the Act. Further, neither of them were a foreign company . 14. The AO passed the draft assessment order in the case of each of the Petitioners on 28th Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessee is a foreign company. Thus, we do not have the jurisdiction over the case. Consequently, we decline to issue any direction in this case. The proceedings here are, therefore, dismissed in limine in view of the above. 18. A copy of each of the orders was marked to the Commissioner of Income Tax-I, International Tax, New Delhi as well as the Additional Commissioner of Income Tax, Range-I, International Transactions, New Delhi and the Assessee. The above orders were binding on the AO under Section 144C (10) of the Act. He, therefore, ought to have, consistent with the said orders, not proceeded to pass final assessment orders on the basis of the draft assessment orders passed by him. However, the AO proceeded to pass final assessment orders on 28th January 2015 on the basis of the draft assessment orders. The AO proceeded to further notice Section 144C (10) of the Act and then concluded in para 4.2 as under: 4.2 Thus, even if the Assessee filed seven objections before the DRP, DRP has examined only first objection, came to the conclusion that the Assessee is not an eligible assessee and declined to consider objections of the Assessee for giving directions to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Kaka further submitted that although the DRP declined to issue any direction, its finding that neither of the Petitioners was eligible assessee was binding on the AO and he could not have proceeded to pass the final assessment order contrary to the above finding. 26. In support of the plea that the final assessment order was without jurisdiction and therefore, this order should be set aside by the Court, reliance was placed by Mr. Kaka on the decision of the Andhra Pradesh High Court in Zuari Cement Limited v. Assistant Commissioner of Income Tax, Circle- 2(1), Tirupathi (decision dated 21st February 2013 in W.P. (C) No. 5557 of 2012), decision of the Bombay High Court in International Air Transport Association v. Deputy Commissioner of Income Tax (decision dated 18th February 2016 in W.P. (L) No. 351 of 2016) and decision of this Court dated 17th February 2016 in W.P. (C) No. 4262 of 2015 [Honda Cars India Limited (Formerly M/s. Honda Siel Cars India Limited) v. Deputy Commissioner of Income Tax] . 27. Mr. Kaka drew attention to the deliberate disobedience by the AO of the order of the DRP and also questioned the validity and legality of the said order. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd void. The draft assessment order dated 28th March 2014, having been passed in respect of entities which were not 'eligible assessees', is also held to be invalid. 31. It is a matter of concern that the AO has in the present case has chosen to label the order of the DRP to be invalid and that is the justification for not complying with the said order. As already noticed, the DRP, in terms of Section 144C (15) (a) is a collegium of three Principal Commissioners or the Commissioner of Income Tax. The DRP admittedly is the superior authority in relation to an AO who in this case appears to be Additional CIT. Section 144C (10) read with Section 144C (13) makes it abundantly clear that there is no option with an AO but to be bound by orders and subject to review by the DRP. It is bound by the DRP. A reference may also be made to the decision in Zuari Cement Limited (supra) where it was held that an order of assessment which is contrary to the mandatory provisions of Section 144C of the Act was declared as one without jurisdiction, null and void and enforceable. It is therefore, for this reason, in the said case, the High Court of Andhra Pradesh set aside the impugned orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e recourse of such remedy, as may be available to them in law. 37. As regards the conduct of the AO in the present case, the Court would only like to highlight the lead portion of the decision of the Supreme Court in Union of India v. Kamlakshi Finance Corporation Limited (supra). The facts in that case were that the according to the Assistant Collector ( AC ), the electrical insulation tapes manufactured by the Assessee, Kamlakshi Finance Corporation Limited ( KFCL ) fell under the Tariff heading 39.19 of the Schedule to the Central Excise Tariff Act, 1985 whereas the Assessee was claiming they fell under Entry 85.47. The impugned order of the AO was set aside by the Collector (Appeals) who issued a direction to the AC to pass a fresh reasoned and speaking order. However, the AC declined to follow the order of the Collector (Appeals) and reiterated his earlier decision that was set aside by the Collector (Appeals). The writ petition filed by the Assessee was allowed by the Bombay High Court against which the Union of India went before the Supreme Court. 38. The Supreme Court in Union of India v. Kamlakshi Finance Corporation Limited (supra) took exception to the conduct of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own understanding and therefore, had gone to the extent of overreaching the orders of his superior authority, that is, the Commissioner (Appeals). 40. Relying on the decision in Union of India v. Kamlakshi Finance Corporation Limited (supra) the Court set aside the rejection of claim of interest by the Petitioner in that case and directed the Assistant Commissioner to comply with the orders passed by the Commissioner Appeals). 41. The language used in the present case by the AO while disagreeing with the binding order of the DRP is wholly unacceptable. In the final assessment order dated 28th January 2015, the AO while discussing the order of the DRP observed inter alia in para 4.2 that The DRP has not acted in accordance with the provisions of the Act while passing this order which is grossly illegal, against the intent of legislature, without following the basic principles of natural justice and adopting very narrow interpretation of the provisions of the Act. 42. In the circumstances, the Court, while setting aside the final assessment order dated 28th January 2015, directs that the draft assessment order, the order of the DRP, the final assessment order as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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