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TMI Blog2023 (2) TMI 1002X X X X Extracts X X X X X X X X Extracts X X X X ..... iction, bad in law and void ab initio. 2. That on the facts and in the circumstances of the case & in law, the draft assessment order dated December 03, 2018 passed by the Ld. AO under Section i44C(i) read with Sections 147 and 143(3) °f the Act is invalid as the Appellant is not an 'eligible assessee' under Section i44C(is)(b) of the Act. 2.1 That on the facts and in the circumstances of the case & in law, the Ld. DRP erred in confirming the actions of the Ld. AO and holding that the Appellant is a foreign company and thereby is an 'eligible assessee' as per Section i44C(i5)(b) of the Act without appreciating that the Appellant is a limited partnership based in United States of America ("USA"). 3. That on the facts and circumstances of the case and in law, the notice issued under section 148 dated March 29, 2018 is without jurisdiction as there is no allegation or whisper of any failure on the part of the Appellant to disclose fully and truly all material facts in the said notice, a condition precedent and a sine qua non for initiation of valid proceeding under section 148 of the Act. 3.1 That on the facts and circumstances of the case and in law, the Ld. AO erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y supported the orders of the authorities below. 5. We have given thoughtful consideration to the orders of the authorities below. 6. Briefly stated, the facts of the case are that as per the information received through non-filers monitoring system, the Assessing Officer came to know that the assessee has received a sum of Rs. 6,63,17,256/- from different Airlines operating in India. The Assessing Officer found that the assessee has not filed its return of income for the F.Y. 2010-11 relevant to Assessment Year 2011-12. 7. The Assessing Officer issued notice u/s 148 of the Act, pursuant to which, the assessee filed return of income declaring income at NIL. The assessee is a limited partnership based in the state of Delaware, USA having its principal business at Georgia and is engaged in the business of providing information reservations transaction processing and related services of airlines, travel agencies and other travel related entities. The assessee owns and operates global distribution system located outside India and provides subscribers with access to and use of this GDS. 8. While scrutinizing the return of income, the Assessing Officer noticed that the assessee did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereinafter 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 the income or loss returned which is prejudicial to the interest of such assessee." 16. The aforesaid section 144C of the Act can only apply prospectively i.e. from A.Y. 2011-12 and is not applicable to the Assessment Year under consideration. The Hon'ble High Court of Madras in the case of M/s Vedanta Limited vs. ACIT Writ Petition No.1729 of 2011 has categorically held that the provisions of Section 144C of the Act can be held to be applicable prospectively, from AY 2011-12 only. The relevant findings read as under: "26. Thus, where there is a change in the form of assessment itself, such change is not a mere deviation in procedure but a substantive shift in the manner of framing an assessment. A substantive right has enured to the parties by virtue of the introduction of Section 144C, that, bearing in mind the settled position that the law applicable on the first day of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .......(b) "eligible assessee" means,- (i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and(ii) any foreign company.]"10.A reading of the aforesaid provision makes it clear that "eligible assessee‟ would mean a person in whose case the variation proposed in the draft assessment order arises as a consequence of an order passed by the Transfer Pricing Officer under section 92CA(3) of the Act and if it is a foreign company. Keeping in view the above statutory provision if we examine the facts of the present case, it can be seen that the Assessing Officer has neither made any reference to the Transfer Pricing Officer under section 92CA(1) of the Act nor the Transfer Pricing Officer has passed any order under section 92CA(3) of the Act. Therefore, the variation proposed in the draft assessment order is not as a consequence of any order passed by the Transfer Pricing Officer. Therefore, the first condition of section 144C(15)(b) of the Act is not satisfied. Thus, it requires to be seen whether the assessee can fit into the definition of a fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income shown "nil‟ income on 31.10.2005 which was duly processed u/s 143(1) on 18.3.2006. Thereafter, assessee‟s case was reopened U/S 147 vide notice dated 10th June, 2008 issued u/s 148 and in pursuance thereof, draft assessment order was passed/ proposed u/s 144C (1). In the impugned draft assessment order, but has even noted the following facts:-"As the assessee had entered into international transactions with its associated enterprise, a reference was made to Transfer Pricing Officer u/s 92CA(1) on 18.9.2008 who vide his order dated 7.9.2009 did not draw any adverse inference in respect of the international transactions." 7. After noting down such facts, passing of such a draft assessment order in absence of any order passed u/s 92CA(3) thereby making any kind of TP adjustment, then provision of section 144Ccould not have been resorted to, because the assessee cannot be reckoned as "eligible assessee" in whose case the draft order of assessment is required to be passed. Section 144 C(1) reads as: "144C. (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d come up for consideration before the Tribunal in the caseof assessee's sister concern, i.e., ESPN Star Sports Mauritius SNC ET Compagnie (supra) wherein on exactly similar facts this Tribunal following the judgment of Hon'ble Delhi High Court had observed and held as under:-"12. We now espouse the first condition, being, "any person‟ in whose case variation is proposed in the income returned in the draft order consequent upon the passing of an order by the TPO. Though the assessee is "any person‟‟, but admittedly, the TPO has not proposed any variation in the income arising from the international transactions. Thus, it becomes manifest that the assessee has not fulfilled any of the conditions to become "eligible assessee‟ in terms of section 144C(15)(b). A fortiori, no draft assessment could have been proposed u/s 144C(1) of the Act which has in fact been proposed by the Assessing Officer before passing the final impugned assessment order. The Hon'ble jurisdictional High Court in the assessee‟s own case for the assessment year 2010-11, since reported as ESPN Star Sports Mauritius S.N.C.ET Compagnie v. Union of India (2016) 388 ITR 383/241 Taxman.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejudicial to the interest of such assessee. The draft assessment order is to be forwarded to an "eligible assessee" which means that for the section to apply a person has to be an "eligible assessee". 9. Section 144C (15)(b) of the Act defines as " eligible assessee" to mean (i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under section 92CA(3); and (ii) any foreign company. 10................................. 11. In Section 144C (15)(b) of the Act, the term "eligible assessee" is followed by an expression "means" only and there are two categories referred therein (i) any person in whose case the variation arises as a consequence of an order of the Transfer Pricing Officer and (ii) any foreign company. The use of the word "means" indicates that the definition "eligible assessee" for the purposes of Section 144(C)(15)(b) is a hard and fast definition and can only be applicable in the above two categories. 12. First of all, the petitioner is admittedly not a foreign Company. Secondly, the Transfer Pricing Officer has not proposed any variation to the return filed by the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order passed in case of the assessee for the impugned assessment year is invalid. Therefore, all the proceedings consequent thereupon are also invalid. Consequently, the draft assessment order as well as the final assessment order passed in pursuance thereof is quashed. In view of our aforesaid decision in the additional ground raised by the assessee, the main grounds raised in the present appeal have been rendered academic in nature and no adjudication is required." 21. In light of the above judicial decisions and provisions of section 144C of the Act, we have no hesitation in holding that the assessment order is void ab initio. Ground No. 2 with its sub-grounds is allowed. 22. Even on merits of the case, the assessee has to succeed in as much as the findings given by the Assessing Officer is totally based upon the findings given in earlier Assessment Years. Even the directions of the DRP are based upon the directions given in earlier Assessment Years and both the authorities grossly erred in not realizing that the assessee has discontinued its business after Assessment Year 2010-11. Therefore, drawing support from earlier year's order would do no good to the Revenue as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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