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TMI Blog2021 (12) TMI 1420X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of salaries and wages incurred in foreign currency amounting to INR 14,10,000 without appreciating the fact that such salaries and wages comprise of a) reimbursement of certain employee welfare related expenses amounting to INR 9,18,000 and b) salary expenses of international assignees amounting to INR 4,92,000. B. Grounds of appeal relating to transfer pricing matters 3. The learned AO/ learned TPO have erred, in law and in facts, by making negative working capital adjustment in relation to the services provided by the Appellant without appreciating the fact that the Appellant is a captive service provider and does not bear any working capital risk. 4. The learned TPO/ learned AO have erred, in law and in facts, by accepting/rejecting certain companies based on unreasonable comparability criteria. 5. The learned TPO/ learned AO have erred, in law and in facts, by erroneously computing the operating margins of certain comparable companies identified in the transfer pricing order. 6. The learned TPO / learned AO have erred, in law and in facts, by not applying a higher threshold while applying the turnover filter. 7 The learned TPO/ learned AO have erred, in law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f sum of advertising, marketing and distribution expenses to sales less than 3%. 17. The learned AO has erred in making a reference to the TPO without recording a finding that he considers it 'necessary or expedient' to do so as required under section 92CA(1) of the Act, hence the reference made by the learned AO to learned TPO suffers from jurisdictional error. 18. The learned TPO/ learned AO have erred, in law and in fact, by using the information by exercising powers under section 133(6) of the Act. The Appellant submits that each of the above grounds is independent and without prejudice to one another. The Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon'ble Tribunal to decide on the appeal in accordance with the law." 2. The assessee has also raised additional ground and modified specific ground as follows:- "Additional Ground - Challenging validity of draft assessment order passed in violation section 144C of the Act 19. The learned AO has erred in law, in treating the draft order as final order by issuing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order along with demand notice loses its sanctity. Being so, it deserves to be treated as null and void in the eyes of law. He relied on the following judgments:- 1. Bangalore Tribunal in case of M/s Suretex Prophylactics (India) Pvt Ltd (ITA (TP) 430/Bang/2016) dated April 01, 2021 2. Madras High Courtin case of Vijay Television Private Limited (407 ITR 642) dated April 23, 2018 3. Mumbai Tribunal in case of Lionbridge Technologies Pvt Ltd (ITA 1041/M/2015) dated May 29, 2015 4. Bombay High Court in case of Lionbridge Technologies Pvt Ltd (ITA 622/2016) dated December 03, 2018 5. Delhi Tribunal in the case of Olympus Medical Systems India Pvt. Ltd. (ITA No 8892/Del/2019) dated August 26, 2020 6. Pune Tribunal in the case of Kohler Power India Private Limited (ITA No, 2467/PUN/2016) dated August 26, 2019 7. Delhi Tribunal in the case of Perfetti Van Melle (India) Pvt. Ltd. (ITA No 9116/De1/2019) dated August 11, 2020 8. Pune Tribunal in the case of M/s. Sandvik Asia Pvt. Ltd. (ITA No. 607/PUN/2014 & ITA No. 465/PUN/2014) dated March 26, 2018 9. Pune Tribunal in the case of Skoda Auto India Pvt. Ltd. (ITA No. 2344/PUN/2012) dated June 03, 2019 10. Pune Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y specified in the notice, -- (i) issued under clause (i) of sub-section (2), or as soon afterwards as may be, after hearing such evidence and after taking into account such particulars as the assessee may produce, the Assessing Officer shall, by an order in writing, allow or reject the claim or claims specified in such notice and make an assessment determining the total income or loss accordingly, and determine the sum payable by the assessee on the basis of such assessment; (ii) issued under clause (ii) of sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment: Provided that in the case of a - (a) research association referred to in clause (21) of section 10; (b) news agency referred to in clause (22B) of section 10; (c) association or institution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order to the concerned university, college or other institution and the Assessing Officer: Provided also that notwithstanding anything contained in the first and the second provisos, no effect shall be given by the Assessing Officer to the provisions of clause (23C) of section 10 in the case of a trust or institution for a previous year, if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in such previous year, whether or not the approval granted to such trust or institution or notification issued in respect of such trust or institution has been withdrawn or rescinded. 144C. Reference to dispute resolution panel.- (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 IT(TP)A No.430/Bang/2016 the income or loss returned which is prejudicial to the interest of such assessee. (2) On receipt of the draft order, the eligible assessee shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible 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 assessee or the interest of the revenue, respectively. (12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee. (13) Upon receipt of the directions issued under subsection (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 or section 153B, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 271 of the Act. Thereafter, the petitioner was given an opportunity of hearing on 12.04.2013. Subsequently, the second respondent realised the mistake in passing a final order instead of a draft assessment order which resulted in issuing a corrigendum on 15.04.2013. In the corrigendum it was only stated that the order passed on 26.03.2013 under Section 143C of the Act has to be read and treated as a draft assessment order as per Section 143C read with Section 93CA (4) read with Section 143 (3) of the Act. In and by the order dated 15.04.2013, the second respondent granted thirty days time to enable the assessee to file their objections. On receipt of the corrigendum dated 15.04.2013, the petitioner company approached the first respondent, but the first respondent declined to issue any direction to the assessment officer on the ground that the first respondent has got jurisdiction only to entertain such an appeal if the order passed by the second respondent is a pre-assessment order. Therefore, it is evident that the first respondent declined to entertain the objections raised by the petitioner company on the ground that the order passed by the second respondent is not a draft as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e lacked on the expiry of the said period. In that case, the Honourable Supreme Court also held that there is a distinction between an order which is a nullity and an order which is irregular and illegal. Where an authority making order lacks inherent jurisdiction, such an order will be null and void ab initio, as the defect of jurisdiction goes to the root of the matter and strikes at his very IT(TP)A No.430/Bang/2016 authority to pass any order and such a defect cannot be cured even by consent of the parties. 24. This decision squarely applies to the facts of this case. In this case, the order passed by the second respondent lacks jurisdiction especially when it is beyond the period of limitation prescribed by the statute. When there is a statutory violation in not following the procedures prescribed, such an order cannot be cured by merely issuing a corrigendum. 25. In the decision rendered by the Honourable Supreme Court of India in the case of (L. Hazari Mal Kuthiala (supra), which was relied on by the learned standing counsel for the respondents, it was held that the mistake or defect on the part of the Commissioner to consult the Central Board of Revenue did not render h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Division Bench of this Court in the case of V. Ramaiah (supra) is extracted hereunder:-- "Certainly passing an order of assessment under Section 158BC instead of Section 158BD (in spite of clear terminology used in both the sections) would not amount to a mistake, a defect or an omission, much less a curable one. When different contingencies are dealt with under different sections of the Act, allowing an illegality to be perpetrated and then taking a plea by the Revenue that such an action adopted on their part would not nullify the proceedings, cannot be appreciated since by virtue of such actions, the Revenue has attempted to nullify the scheme of things of limitations legally propounded under the Act...." 29. In yet another decision of the Division Bench of this Court in the case of Smt. R.V. Sarojini Devi (supra), which was relied on by the learned senior counsel for the petitioners, it was held as follows: "Under Section 158BC of the Act empowers the assessing officer to determine the undisclosed income of the block period in the manner laid down in Section 158BB and 'the provisions of Section 142, subsections (2) and (3) of Section 143, Section 144 and Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned assessment order. As this has occurred after 01.10.2009, the cut off date prescribed in sub-section (1) of S.144C, the Assessing Officer is mandated to first pass a draft assessment order, communicate it to the assessee, hear his objections and then complete assessment. Admittedly, this has not been done and the respondent has passed a final assessment order dated 22.12.2011 straight away. Therefore, the impugned order of assessment 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 applicable, if there is a proposal by the Assessing Officer to make a variation in the income or loss returned by the assessee which is prejudicial to the assessee, after 01.10.2009. Therefore, this particular provision introduced by Finance (No.2) Act, 2009, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder 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 imposed penalty payable by the petitioner. According to the learned senior counsel for the petitioners, even as on this date, the website of the department indicate the amount determined by the second respondent payable by the company in spite of issuance of the corrigendum on 15.04.2013 as a tax due amount. Thus, while issuing the corrigendum, the second respondent did not even withdraw the taxable amount determined by him or updated the status in the website. In any event, such an order dated 26.03.2013 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 i ..... 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