TMI Blog2017 (9) TMI 1026X X X X Extracts X X X X X X X X Extracts X X X X ..... ticular argument with respect to the jurisdiction was also not challenged. In view of this we are not inclined to accept the claim of the assessee against the jurisdiction assumed by the assessing officer. In view of this we dismiss the cross objection of the assessee. Validity of assessment under section 144C - TPA - period of limitation - need for draft assessment order - Held that:- It is an admitted fact that Ld. Transfer Pricing Officer has not proposed any variation to the arm’s length price of the international transactions entered into by the assessee. Therefore, the right course of action for the Ld. assessing officer was to pass an assessment order under section 143(3) of the Income Tax Act and not to pass the draft assessment order. The above issue is squarely covered in favour of the assessee by the decision of the Hon’ble Delhi High Court in case of ESPN STAR SPORTS MAURITIUS S. N. C. ET COMPAGNIE(Now Known as Ess Advertising (Mauritius) S. N. C. ET Compagnie) [2016 (4) TMI 45 - DELHI HIGH COURT ] The final assessment order passed by the Ld. assessing officer is beyond the limitation period which should have been passed on or before 31st. December 2012, but was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned when it was noted that the industrial undertaking has started the production on 15/03/1997 i.e. after the Sunset date of 31/ 3/ 1995. Further, it was noted that the impugned undertaking of the assessee was also not a small-scale industrial undertaking. Hence, the deduction claimed under section 80 IB of the income tax act of ₹ 4 210 1744/ was withdrawn and total income was assessed at ₹ 4 4578 5450/ . Against which the assessee preferred appeal before the Ld. CIT(A). The Ld. CIT(A), held that gross block of investment in plant and machinery of the assessee was only ₹ 5 564817, whereas the overall limit for investment in a small-scale industrial undertaking was ₹ 3 crores. Hence, according to him the investment was within the prescribed limit and assessee was a small-scale industrial undertaking. Further, the assessee has been allowed the deduction for assessment year 2003 04 and 2004 05 in earlier years. He directed the Ld. assessing officer to allow the claim of deduction under section 80 IB of the income tax for the year under consideration of the assessee. Aggrieved by the order of the Ld. CIT(A), the revenue is in appeal before us. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 144C dated 27/11/2013 passed on the draft assessment order dated 15/02/2013 wherein the order of the Ld. transfer pricing officer dated 10/09/2012 was incorporated. Assessee has raised the following grounds of in ITA No. 1319/Del/2014:- 1. The learned deputy commissioner of Income tax has erred both on facts and in law in passing the assessment order beyond the time limit as prescribed u/s. 153 of the Income tax act, 1961 therefore assessment order passed by the AO is barred by limitation. 1.1. The learned deputy commissioner of Income Tax has further erred both on facts and in law in holding the appellant company as an eligible assessee as defined in section 144C (15) of the Income Tax Act, 1961 and thereby wrongly applying the procedure for issuance of Draft order. 2. The learned Deputy Commissioner of Income Tax has erred both on facts and in law in disallowing expenses amounting to ₹ 20,06,906/- u/s 14A in addition to ₹ 80,000/- disallowed by the appellant company in its return of income by wrongly applying Rule 8D and thereby not following decision of jurisdictional High Court in Maxopp Investment Ltd 203 Taxman 364. 10. Assessee is a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377. 12. The Ld. departmental representative submitted that the order passed by the Ld. assessing officer is not barred by limitation. 13. We have carefully considered the rival contentions. It is an admitted fact that Ld. Transfer Pricing Officer has not proposed any variation to the arm s length price of the international transactions entered into by the assessee. Therefore, the right course of action for the Ld. assessing officer was to pass an assessment order under section 143(3) of the Income Tax Act and not to pass the draft assessment order. The above issue is squarely covered in favour of the assessee by the decision of the Hon ble Delhi High Court in case of 388 ITR 383 ESPN STAR SPORTS MAURITIUS S. N. C. ET COMPAGNIE(Now Known as Ess Advertising (Mauritius) S. N. C. ET Compagnie) . ESS DISTRIBUTION (MAURITIUS) S. N. C. ET COMPAGNIE v. UNION OF INDIA AND ANOTHER where the issue is identically decided as under:- 2. In Writ Petition (Civil) No. 2384 of 2015, the petitioner, M/s. ESPN Star Sports Mauritius S.N.C. ET Compagnie (now known as ESS Advertising (Mauritius) S.N.C et Compagnie) (hereinafter referred to as ESPN Star Sports ) is a partnership firm establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 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-3 CEB filed by the petitioners. 6. In each of the cases, the Transfer Pricing Officer has, by an order dated December 17, 2013, accepted the value of the international transactions as reported by the petitioners. In other words, there was no variation or transfer price adjustment as a result of the order of the Transfer Pricing Officer. During the course of the assessment proceedings, the Assessing Officer, i.e., the Additional Director of Income-tax, Range 1 (ADIT), International Taxation specifically asked each of them as to why the status of the firm should not be treated as foreign company and taxed accordingly. 7. By a separate letter dated March 27, 2014, each of the petitioners filed submissions before the Assessing Officer pointing out the difference between a foreign company and a foreign partnership firm. It was pointed out that neither petitioner could be considered to be a company, as it was not a body corporate in terms of section 2(17) of Act. 8. At t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end of the month in which such direction issued by the Dispute Resolution Panel is received. 13. In the above context, the petitioners urged before the Assessing Officer, 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 Transfer Pricing Officer passed under section 92CA(3) of the Act. Further, neither of them were a foreign company . 14. The Assessing Officer passed the draft assessment order in the case of each of the petitioners on March 28, 2014. In para. 1.2 of the draft assessment order for ESS Distribution and para. 2 of the draft assessment order for ESPN Star Sports, the Assessing Officer noted the fact that the assessees are partnership firms established under the laws of Mauritius on March 29, 2002. Further it was noted that in the case of ESPN Star Sports, its return had been filed by it disclosing an income of ₹ 91,63,940 and in respect of ESS Distribution, it disclosed an income of ₹ 97,07,350. It was further noted by the Assessing Officer that in both repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 Assessing Officer under section 144C(10) of the Act. He, therefore, ought to have been 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 Assessing Officer proceeded to pass final assessment orders on January 28, 2015, on the basis of the draft assessment orders. The Assessing Officer 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 Dispute Resolution Panel, the Dispute Resolution Panel 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 Assessing Officer. The Dispute Resolution Panel has not acted in accordance with the provisions of the Act while passing this order which is grossly illegal, against the intent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that neither of them was an eligible assessee within the meaning of section 144C(15) of the Act. Mr. Kaka submitted that under section 144C(13) of the Act, the Assessing Officer was bound to issue an order in conformity with the order of the Dispute Resolution Panel. Mr. Kaka further submitted that although the Dispute Resolution Panel declined to issue any direction, its finding that neither of the petitioners was eligible assessee was binding on the Assessing Officer 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. Asst. CIT decision dated February 21, 2013 in W.P. (C) No. 5557 of 2012, decision of the Bombay High Court in International Air Transport Association v. Deputy CIT decision dated February 18, 2016 in W. P. (L) No. 351 of 2016 - [2016] 7 ITR-OL 227 (Bom) and decision of this court dated February 17, 2016 in W. P. (C) No. 4262 of 2015 Honda Cars India Ltd. v. Depu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30. It appears to the court that it is plain that under section 144C, the Assessing Officer should have proceeded to pass an order under section 143(3) of the Act. Instead the Assessing Officer 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 January 28, 2015, is without jurisdiction and null and void. The draft assessment order dated March 28 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 Assessing Officer in the present case has chosen to label the order of the Dispute Resolution Panel to be invalid and that is the justification for not complying with the said order. As already noticed, the Dispute Resolution Panel, in terms of section 144C(15)(a) is a collegium of three Principal Commissioners or the Commissioner of Income-tax. The Dispute Resolution Panel admittedly is the superior authority in relation to an Assessing Officer who in this case appears to be the Additional Commissioner of Income-tax. Section 144C( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cars India Limited v. Deputy CIT (supra) is concerned, the question that arose is whether the Assessing Officer could have passed the draft assessment order when the assessee did not satisfy the condition eligible assessee under section 144C(15)(b) of the Act. Answering the question is in the negative, the court held that the draft assessment order of the Assessing Officer is null and void and quashed on that basis. In para. 15 of the said decision, it was observed as under (page 93 of 382 ITR) : Since we have quashed the draft assessment order, the question that the assessment has now become time barred as left open and it is open to the parties to take recourse of such remedy, as may be avail able to them in law. 37. As regards the conduct of the Assessing Officer 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 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is the sub ject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result would only be undue harass ment to the assessees and chaos in administration of tax laws. 39. In Nav Bharat Impex v. Union of India (supra) the Division Bench of this court dealt with the case where despite the clear directions given by the Commissioner of Income-tax (Appeals), the delayed refunds were paid to the petitioner without any element of interest. It was noted that the Assistant Commissioner was merely required to comply with the directions given by the Commissioner of Income-tax (Appeals) in the appellate order. However, the Assistant Commissioner took it upon himself to examine the case, as per his 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 comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary to the order of the Dispute Resolution Panel which held in favour of the petitioners. The order of the Dispute Resolution Panel was not challenged by the Revenue. In the circumstances, the final assessment order was without jurisdiction and this constitutes sufficient ground for the court to exercise its powers under article 226 of the Constitution. 45. For the above reasons, the draft assessment order dated March 28, 2014, and the final assessment order dated January 28, 2015 passed by the Assessing Officer are held to be void ab initio and quashed on that basis. The orders consequential thereto also do not survive. However, it is clarified that the court has not expressed any opinion regarding the validity of the proceedings against the petitioners under section 147/148 of the Act. The rights and contentions of the parties in those proceedings are left open to be urged and decided by the appropriate authority in accordance with law. [Extracted from ITR online] 14. In view of this, it is apparent that the final assessment order passed by the Ld. assessing officer is beyond the limitation period which should have been passed on or before 31st. December 2012, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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