TMI Blog2021 (12) TMI 1420X X X X Extracts X X X X X X X X Extracts X X X X ..... ft assessment order passed by the AO is without following the due process of law as enumerated in the judgment in the case of Vijay Television [ 2014 (6) TMI 540 - MADRAS HIGH COURT] Since the order passed by the AO is without following the due process of law and it cannot survive in the eyes of law, accordingly we quash the impugned assessment order before us. Appeal by the assessee is allowed. - IT(IT)A No. 2888/Bang/2017 - - - Dated:- 27-12-2021 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER For the Appellant : Shri Rajan Vora, CA For the Respondent : Shri Sumer Singh Meena, CIT(DR)(OSD), (ITAT), Bengaluru. ORDER Per Chandra Poojari, Accountant Member This appeal by the assessee is directed against the order of the AO dated 27.10.2017 passed u/s. 143(3) r.w.s. 144C(5) of the Income-tax Act, 1961 [the Act] on the following grounds:- A. Grounds of appeal relating to corporate tax matters 1. The learned DRP/ learned AO have erred in law and in fact, by not considering the plea of the Appellant that foreign currency expenditure incurred in relation to salaries and wages constitute 'reimbursements' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omic analysis for the determination of the ALP in connection with the impugned international transaction and holding that the Appellant's international transaction is not at arm's length. 12. The learned TPO/ learned AO have erred, in law and in facts, by applying the filter of companies having different accounting year for rejecting the comparable companies (i.e., companies having accounting year other than March 31 or companies whose financial statements were for a period other than 12 months). 13. The learned TPO/ learned AO have erred, in law and in facts, by determining the arm's length margin/price using only FY 2012-13 data, which was not available to the Appellant at the time of complying with the transfer pricing documentation requirements. 14. The learned TPO/ learned AO have erred, in law and in f acts, by rejecting the filter of ratio of research and development expenses to sales less than 3% considered by the Appellant for the purpose of selecting the companies which do not own intangibles and are pure service providers. 15. The learned TPO/ learned AO have erred, in law and in fact, by rejecting the filter adopted by the Appellant for selecting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability of the assessee. He relied on the decision of the Hon ble Supreme Court judgment in the case of M/s National Thermal Power Co. Ltd. Vs. CIT, 229 ITR 383 (SC) and submitted that these do grounds do not involve any investigation into facts, otherwise on the records of the department and are also pure questions of law and prayed for admission of the same for adjudication on merits. 4. We have heard the rival submissions and perused the material on record. In our opinion, the issue raised by the assessee being a legal issue and does not require any investigation of facts which are already on record. Accordingly, these grounds are admitted for adjudication following the decision of Hon ble Supreme Court judgment in the case of M/s National Thermal Power Co. Ltd. (supra) . 5. The ld. AR submitted that the draft assessment order was passed on 21.12.2016 with a mention that such order was passed u/s. 143(3) r.w.s. 144C(13) of the Act. Further, the draft assessment order was also accompanied with a demand notice u/s. 156 of the Act at Rs.20,85,95,610 and also in the draft assessment order the AO initiated penalty proceedings u/s. 271(1)(c) of the Act. According to the ld. AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noticed that the coordinate Bench in the case of Suretex Prohphylactics (India) Ltd., 62 CCH 0002 Bang Trib., considered similar issue and given finding after following the decision of Hon'ble Madras High Court in case of Vijay Television (2014) 369 ITR 113 (Mad) observed as follows:- 11. Various decisions relied by the Ld.AR reproduced hereinabove highlight that, it is mandatory for Ld.AO to follow the procedures laid down under section 144C of the Act in an assessment that involves assessment of international transaction. Hon ble Madras High Court in case of Vijay Television (supra) observed as under:- Admittedly, the case of the petitioner company was taken up for scrutiny by the second respondent relating to the assessment years 2009-2010 inasmuch as the petitioner company had entered into international transactions during such assessment year. Ultimately, the case was referred to the TPO for determination of the ALP of all such international transactions reported in Form 3CEB filed by the petitioner company. The TPO, after conducting enquiry, has ultimately passed an order on 30.01.2013. Thereafter, according to the petitioner company, the second respondent, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority the contravention of the provisions of clause (21) or clause (22B) or clause (23A) or clause (23B) or sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, as the case may be, by such [research association], news agency, association or institution or fund or trust or university or other educational institution or any hospital or other medical institution, where in his view such contravention has taken place; and (ii) the approval granted to such research association or other association or fund or trust or institution or university or other educational institution or hospital or other medical institution has been withdrawn or notification issued in respect of such news agency or fund or trust or institution has been rescinded : Provided further that where the Assessing Officer is satisfied that the activities of the university, college or other institution referred to in clause (ii) and clause (iii) of sub-section (1) of section 35 are not being carried out in accordance with all or any of the conditions subject to which such university, college or other institution was approved, he may, after giving a reasonable op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment. (6) The Dispute Resolution Panel shall issue the directions referred to in sub- section (5), after considering the following, namely:-- (a) draft order; (b) objections filed by the assessee; (c) evidence furnished by the assessee; (d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority; (e) records relating to the draft order; (f) evidence collected 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 shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) any foreign company.' 20. Under Section 144 (C) of the Act, it is evident that the assessing officer is required to pass only a draft assessment order on the basis of the recommendations made by the TPO after giving an opportunity to the assessee to file their objections and then the assessing officer shall pass a final order. According to the learned senior counsel for the petitioners, this procedure has not been followed by the second respondent inasmuch as a final order has been straightaway passed without passing a draft assessment order. 21. As rightly pointed out by the learned senior counsel for the petitioners, in the order passed on 26.03.2013, the second respondent even raised a demand as also imposed penalty. Such demand has to be raised only after a final order has been passed determining the tax liability. The very fact that the taxable amount has been determined itself would show that it was passed as a final order. In fact, a notice for demand under Section 156 of the Act was issued pursuant to such order dated 26.03.2013 of the second responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as a final order:- 10. Shri Rajiv Dutta, learned senior counsel appearing on behalf of the appellant, submitted that in the light of its afore-extracted observations and a clear finding that the assessment order for the assessment year 1995-96 had been anti-dated, the order was null and void. It was urged that assessment proceedings after the expiry of the period of limitation being a nullity in law, the High Court should have annulled the assessment and there was no question of a fresh assessment. Thus, the nub of the grievance of the appellant is that in remanding the matter back to the Assessing Officer, the High Court has not only extended the statutory period prescribed for completion of assessment, it has also conferred jurisdiction upon the Assessing Officer, which he otherwise lacked on the expiry of the said period. 23. It is evident from the above decision of the Honourable Supreme Court that if an order is passed beyond the statutory period prescribed, such order is a nullity and has no force of law. In that case before the Honourable Supreme Court, the period for assessment proceedings expired and thereafter, fresh assessment orders have been issued by anti-da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Court in the decision in the case of V. Ramaiah (supra) Madras held that when an order is passed under Section 158BC of the Act instead of Section 158BD, it is not valid since it is not a defect curable under Section 292B of the Act. It was also held that an order passed after the period of limitation laid down in Section 158BC is not a valid order. It was further held that when there is a prescribed procedure contemplated under the Act or in a particular section and it is violated, then it cannot be cured. In the present case, certain procedure has been contemplated under Section 144C of the Act and they have been violated by the second respondent by passing final order of assessment and therefore such order passed by the second respondent has got no jurisdiction or it can be cured by virtue of issuing a corrigendum. 28. By referring to the decision of the Division Bench of this Court dated 10.02.2014 passed in Tax Case (Appeal) No. 2412 of 2006, the learned standing counsel for the respondents sought to make a distinction with the decision of the Division Bench of this Court mentioned in the preceding paragraph. That is a case where the facts relating to the order covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to follow the mandatory 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 Ltd. (supra), wherein it was held as under:-- A reading of the above section shows that if the assessing officer proposes to make, on or after 01.10.2009, any variation in the income or loss returned by an assessee, then, notwithstanding anything to the contrary contained in the IT(TP)A No.430/Bang/2016 Act, he shall first pass a draft assessment order, forward it to the assessee and after the assessee files his objections, if any, the assessing officer shall complete assessment within one month. The assessee is also given an 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 TP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utory provisions, but it will not bind this Court or the Supreme Court. It cannot interfere with the jurisdiction and power of this Court to declare what the legislature says and take a view contrary to that declared in the circular of the CBDT (Ratan Melting and Wire Industries Case (1 Supra), Indra Industries (2 supra). The IT(TP)A No.430/Bang/2016 Revenue has not been able to pursuade 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 Bench of the Andhra Pradesh High Court, the Revenue went on appeal before the Honourable Supreme Court. The record of proceedings of the Supreme Court indicate that the Special Leave Petition was dismissed on 27.09.2013. 33. The decision of the Division Bench of the Andhra Pradesh High Court deals with an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due process of law are liable to be set aside. Thus, this ratio will prevail over the view taken by Hon'ble Kolkotta Hyderabad Tribunal (Supra). We place reliance on the decision of Kaneel Oils Export Inds. Ltd. Vs. JCIT reported in (2009) 121 ITD 596, which is a Third Member decision. As the assessment order passed dated 25/2/2015 has been quashed and set aside, all other issues raised on merits become academic. 8. In the present case, the AO passed the draft assessment order u/s. 143(3) r.w.s. 144C(13) of the Act on 21.12.2016 which is accompanied with demand notice issued u/s. 156 of the Act dated 21.12.2016 and it is also noticed that in the draft assessment order itself, the AO recorded the statement as follows:- Demand notice issued accordingly. Penalty proceedings u/s. 271(1)(c) are initiated separately for the additions made. 9. Being so, it is observed that the draft assessment order passed by the AO is without following the due process of law as enumerated in the judgment in the case of Vijay Television (supra). 10. Since the order passed by the AO is without following the due process of law and it cannot survive in the eyes of law, accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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