TMI Blog2020 (12) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... J) These are the appeals filed by the assessee against the separate orders of Commissioner of Income Tax (Appeals)-3, Bangalore for the Asst. Years 2010-11 2011-12) passed under Section 143(3) r.w.s. 254 and 250 of the Income Tax Act, 1961 (in short 'the Act'). 2. At the time of hearing, the assessee has filed a petition for admission of additional ground of appeal and the Ld. DR has no serious objections. Accordingly additional ground of appeal is admitted and heard. Since the issues in both appeals are common and identical, hence they are clubbed and heard and consolidated order is passed. For the sake of convenience, we shall take up ITA No. 2722/Bang/2018 for asst year 2010-2011. The assessee has raised the following grounds of appeal and additional ground of appeal as under: (1) Erred in making an addition to the total income of the Appellant on transfer pricing adjustment aggregating to INR 22,23,78,359 in respect of its international transactions pertaining to Pune unit of Inteva India. (2) Erred in non-allowance of capacity utilisation adjustment Erred in law and facts by ignoring the submissions of the Appellant for providing the capacity u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect t(OGE) to the ITAT order was passed by the Assessing Officer on 8.8.2017. Aggrieved by the order giving effect, the assessee has filed an appeal with the CIT (Appeals). Whereas the CIT (Appeals) has confirmed the order giving effect and dismissed the appeal of the assessee. Aggrieved by the CIT (Appeals) order, the assessee has filed an appeal with the Tribunal. 4. At the time of Hearing, the Ld. AR has argued only on the additional ground of appeal and has not pressed other grounds of appeal. The Ld. AR submitted that as per the directions of the Hon'ble Tribunal, the order giving effect of order(OGE) was passed on 8-8-2017 and tax demand notice u/sec. 156 of the Act was issued. Further, the assessing officer has passed final order without passing draft assessment order, hence the entire assessment proceedings are bad in law and relied on catena of judicial decisions and supported his arguments with the Paper Book. Contra, the learned Departmental Representative supported the orders of lower authorities and filed written submissions. 5. We heard the rival submissions and perused the material on record. The learned Authorized Representative has restricted his argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 1,19,49,680/- to the Arm's Length Price ('ALP') determined by the Petitioner. 6. Thereafter, instead of passing a draft assessment order, the AO passed a final assessment order on 11th May, 2017 which has been challenged by the Petitioner in this writ petition. 7. That consequent upon an order of the TPO under Section 92 CA (3) of the Act, it is incumbent upon the AO to pass a draft assessment order under Section 144C of the Act, is the settled legal position as explained by the Court in its decision in Turner International India Pvt. Ltd. Vs. DCIT, (2017) 82 Taxman.com 125 (Del). In the present case, clearly the AO overlooked the above legal position and proceeded to pass a final assessment order, thereby depriving the Assessee of an opportunity of questioning the draft assessment order under Section 144C of the Act before the DRP. 8. Consequently, the Court has no hesitation in hereby setting aside the impugned assessment order dated 11th May, 2017 passed by the AO. The consequential notice of demand of the same date under Section 156 of the Act issued to the Petitioner is also hereby quashed. 9. The writ petition is accordingly allowed with no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... final order in terms of the directions of the DRP and such final order is appealable to the Tribunal. In this case, it is undisputed that on 12th March, 2014, the Assessing Officer passed a final Assessment Order in terms of the directions made by the DRP in the earlier round. The time to pass any such order, would expire in the present facts on 31st March, 2014, however, in case a Draft Assessment Order is issued, then the time to pass a final Assessment Order gets extended to one month after the passing of the directions by the DRP in terms of Section 144C(13) of the Act. Nevertheless, the Draft Assessment Order should have in the present facts been passed before 31st March, 2014 in terms of 4 of 6 S.R. JOSHI itxa-622-2016.odt Section 153A(2A) of the Act. In this case, undisputedly, a final order was passed on 12th March, 2014 and is being sought to be corrected by issue of corrigendum on 16th April, 2014 i.e. after the time to pass the Draft Assessment Order has expired. In fact, the Tribunal placed reliance upon the decision of a single judge of the Madras High Court in Vijay Television (P) Ltd., (supra). This, decision has now been upheld by the Division Bench of the Madras Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of sec. 144C(1) of the Act. Later the AO issued a corrigendum on 15.04.2013 modifying the final assessment order passed on 26.03.2013 to be read as Draft assessment order . The Hon'ble Madras High Court noticed that the AO had issued Demand notice raising tax demand upon the assessee. Further, the High Court noticed that the AO has failed to withdraw the demand raised upon the assessee at the time of issuing Corrigendum. The Hon'ble High Court further noticed that the Corrigendum dated 15.04.2013 is beyond the period prescribed for limitation. Under these set of facts, the High Court held that the assessment order dated 26-03-2013 should be construed as final assessment order passed in violation of the statutory provisions of the Act. The High Court further held that such a defect or failure on the part of the AO to adhere to the statutory provisions is not a curable defect by virtue of corrigendum dated 15.04.2013. 17. In the instant case also, it is not the case of the department that the demand raised in the assessment order dated 12-03-2014 was withdrawn by the AO at the time of issuing Corrigendum dated 16-04- 2015. Further, the Corrigendum itself was issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in all fairness restored the matter to the file of the A.O, with a direction to provide the assessee a reasonable opportunity to support its case in respect of determination of ALP of the commission payments. A perusal of the order of the Tribunal reveals, that the assessee was given the liberty to file a fresh TP study report for the transaction under consideration, in case if he so desired. Further, as is discernible from the order, the Tribunal had observed, that the A.O. would be at discretion, as per the mandate of law, to refer the matter to the TPO, and therein re-adjudicate the issue afresh. We find that pursuant to the aforesaid order of the Tribunal, the assessee vide its letter dated 12.08.2014 addressed to the A.O, had submitted a fresh TP study report in respect of payment of commission to its AE. The A.O. had thereafter referred the matter to the TPO under Sec. 92CA(1) on 13.11.2014. As observed by us hereinabove, the TPO once again worked out the transfer pricing adjustment with respect to commission paid by the assessee to its AE at ₹ 63,60,732/-. On receipt of the aforesaid order passed by the TPO under Sec. 92CA(3), dated 18.01.2016, the A.O. passed the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it thinks fit, for the guidance of the A.O. to enable him to complete the assessment. Further, the aforesaid directions shall be issued by the DRP after considering viz. (i) draft order; (ii) objections filed by the assessee; (iii) evidence furnished by the assessee; (iv) report, if any of the assessing officer, valuation officer or transfer pricing officer or any other authority; (v) records relating to the draft order; (vi) evidence collected by, or caused to be collected by it; and (vii) result of any inquiry made by, or caused to be made by it. A perusal of the aforesaid statutory provision, viz. Sec. 144C, therein reveals that forwarding of a draft of the proposed order of assessment to an assessee in whose case variation in the income or loss returned as a consequence of the order of the TPO passed under sub-section (3) of Sec. 92CA is proposed, is not merely an idle formality, but in fact, the same is a statutory requirement which cannot be dispensed with. As a matter of fact, it is only after receipt of such draft order that the assessee is able to exercise his statutory right of filing his objections, if any, to the proposed variations to his returned income or loss with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid order passed by the TPO under Sec. 92CA(3), dated 18.01.2016, wherein a TP adjustment of ₹ 63,60,732/- was proposed, thus remained under a statutory obligation as envisaged in Sec. 144C(1) r.w.s. 144C(15) to have forwarded a draft of the proposed order of the assessment to the assessee, therein proposing to make a variation to its returned income, in consequence of the aforesaid order of the TPO. We are unable to persuade ourselves to subscribe to the claim of the ld. D.R, that as there was a limited direction by the Tribunal to re-determine the ALP of the commission payment by the assessee to its AE, therefore, there was no obligation cast on the A.O. to have passed a draft order before framing the assessment. In fact, we are of a strong conviction, that the A.O. in the course of the 'set aside' proceedings on receiving the order passed by the TPO u/s. 92CA(3), had triggered Sec. 144C(1) r.w.s. 144C(15), which obligated him to forward a draft of the proposed assessment to the assessee, if he proposed to make any variation in the income returned by the assessee, as a consequence of the aforesaid order passed by the TPO under sub-sec. (3) of Sec. 92CA. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bom) had declined to accept the contention advanced by the revenue, that if a matter was remanded by the Tribunal, then no obligation was cast upon the A.O. to pass a draft assessment order. We find that the Hon'ble High Court observed, that the issuance of a draft assessment order was not an empty formality. In fact, it was observed by the Hon'ble High Court that when a draft assessment order is passed and a copy is given to the assessee, the assessee can raise objections before the DRP on any of the proposed variations. Accordingly, it was held that a right was given to the assessee to object and to have the objections considered not by the A.O, but by the DRP. The Hon'ble High Court after extensive deliberations observed, that it was not discernible from the scheme of Sec. 144C that if the proceedings were started a fresh on remand, there would be no requirement of passing a draft assessment order. In the backdrop of the aforesaid observations, the Hon'ble High Court had observed that non-issuance of the draft assessment order vitiated the final assessment order passed by the A.O. Also, the Hon'ble High Court of Bombay in the case of Dimension Data Asia Pacif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 23.03.2016 is quashed. 16. The appeal of the assessee allowed. We considering the decisions of the Hon'ble High Courts and Hon'ble Tribunal, observe that the Assessing Officer while passing the order giving effect of ITAT order should follow the procedure as envisaged under Section 144C(1) of the Act and pass a draft assessment order and as against the draft assessment order the assessee has right to file objections to the DRP. But in the present case, the assessing Officer has passed the order dt. 8-8-2017 giving effect to ITAT order and raised the demand u/sec. 156 of the Act without passing Draft Assessment order, which cannot be sustained. Accordingly, we set aside the CIT(A) order and quashed the order passed by the Assessing Officer and allow the additional ground of appeal of the assessee. 10. Similarly for the Asst. Year 2011-12, were the facts are similar and identical, the same directions and decision shall apply equally as decided in ITA No. 2722/B/18 for A.Y. 2010-11. Accordingly, we set aside the order of the CIT (Appeals) and quash the Assessing Officer order and allow the additional ground of appeal of the assessee. Since the additional g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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