TMI Blog2023 (2) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... a ORDER PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by the assessee challenging the impugned final assessment order dated 25/01/2016, passed under section 143(3) r/w section 144C(13) of the Income Tax Act, 1961 ( the Act ), pursuant to the directions issued by the learned Dispute Resolution Panel 2, Mumbai, ( learned DRP ), for the assessment year 2011 12. 2. In its appeal, the assessee has raised following grounds: 1. On the facts and in the circumstances of the case and in law, the learned Transfer Pricing Officer (the learned TPO) and the learned Assessing Officer (the learned AO) erred and the Hon'ble Dispute Resolution Panel (DRP) further erred in upholding / confirming an addition of Rs. 4,52.41.176/- to the Appellant's total income. 2. On the facts and in the circumstances of the case and in law, the learned AO/TPO erred and the Hon ble DRP further erred in upholding / confirming the action of the learned AO/TPO in in not stating any reasons to show that either of the conditions mentioned in clauses (a) to (d) of Section 92C(3) of the Act were satisfied before making an adjustment to the total income of the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the Hon'ble DRP further erred in upholding confirming the action of the learned AO/TPO in making an adjustment of Rs. 3,61.13,977 to the total income of the Appellant in respect of the international transactions pertaining to availing of intra-group administrative services 9. On the facts and in the circumstances of the case and in law, the learned AO TPO erred and the Hon'ble DRP further erred in upholding / confirming the action of the learned AO/TPO in adopting an arbitrary approach by disallowing the expenses relating to certain services without providing cogent reasons and without appreciating the detailed evidences filed by the Appellant in support of such services, with a pre-determined mind set of making an adjustment to the income of the Appellant. 10. On the facts and in the circumstances of the case and in law, the learned AO/TPO erred and the Hon'ble DRP further erred in upholding/ confirming the action of the learned AO/TPO in making an adjustment without appreciating the facts of the case and without considering the detailed benchmarking analysis conducted and detailed submissions made by the Appellant before the learned AO/TPO Other grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever all any of the foregoing grounds of appeal at or before the hearing of the appeal. 4. In the aforesaid additional grounds of appeal, the assessee has raised jurisdictional issues challenging the validity of the assessment, which goes to the root of the matter, therefore the parties were heard on the jurisdictional issue at the outset. In additional grounds No. 2 and 3, the assessee has challenged the validity of the draft assessment order and directions issued by the learned DRP on a non-existing entity. While, in additional ground No. 1, the assessee has challenged that the final assessment order is barred by limitation. Since the validity of the draft assessment order is vital for finalising the assessment, therefore, we proceed to first deal with additional grounds No. 2 and 3. 5. The brief facts of the case pertaining to this issue are: For the year under consideration, Siemens VAI Metals Technologies Pvt. Ltd. filed its return of income on 29/11/2011, declaring a total income of Rs. 4,39,26,124. The return of income filed was processed under section 143(1) of the Act. Subsequently, the case was selected for scrutiny, and notice dated 08/08/2012, under section 143( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( AO ) vide draft assessment order dated 20/02/2015, passed under section 143(3) r/w section 144C(1) of the Act computed the total income of the assessee at Rs. 9,00,79,800. It is pertinent to note that the aforesaid draft assessment order was passed in the name of the erstwhile company. Siemens Ltd filed detailed objections before the learned DRP against the additions made by the AO/TPO. Vide its directions issued under section 144C(5) of the Act, passed in the name of Siemens VAI Metals Technologies Pvt. Ltd. (through their successors Siemens Ltd), the DRP, inter-alia, rejected the objections. The AO passed the final assessment order under section 143(3) read with section 144C(13) of the Act in the name of Siemens Ltd (successor in interest to Siemens VAI Metals Technologies Pvt. Ltd.), assessing the total income at Rs. 5,30,53,320. 6. During the hearing, the learned Authorised Representative ( learned AR ) submitted that despite due intimation by the assessee regarding the amalgamation, the draft assessment order was passed in the name of a non-existing entity and therefore the same cannot be said to be valid draft assessment order in existence. Thus, all the subsequent proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ab initio. It is evident from the record that immediately after the approval of the scheme of amalgamation by the Hon ble Bombay High Court vide order dated 17/08/2012, the assessee intimated the AO, Kolkata about the amalgamation. As per the letter dated 06/05/2013, filed by the assessee before the AO, Kolkata as well as before CIT 7, Mumbai, forming part of the paper book from pages 39 41, we find that the assessee again intimated about the amalgamation and the fact that the erstwhile entity has ceased to exist as an independent legal entity. We find that the Hon ble Supreme Court in Pr. CIT v. Maruti Suzuki India Ltd. [2019] 416 ITR 613 (SC) held that where the assessee company was amalgamated with another company and thereby lost its existence, assessment order passed subsequently in name of the said non-existing entity, is without jurisdiction and is liable to be set aside. The Hon ble Supreme Court further held that participation in the assessment proceedings cannot operate as an estoppel against the law. Insofar as the decision of the Hon ble Supreme Court in Mahagun Realtors Pvt. Ltd. (supra), on which reliance has been placed by the learned DR, we find that in the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: 20. The next question which we are required to examine now is as to whether a valid draft assessment order is mandatory to assume jurisdiction under Section 144C of the Act. In other words, it would be appropriate to examine as to whether an invalid draft assessment order, as noted above in the earlier paras, can be construed as a jurisdictional defect meaning thereby that the same is incurable thereby making the subsequent assessment proceedings null and void in the eyes of law. The phraseology of Sec. 144C(1) of the Act itself shows that the Assessing Officer is required to forward a draft of the proposed order of assessment if he proposes to make a variation in the returned income or loss which is prejudicial to the interests of the assessee. Undoubtedly, the draft assessment order has legal connotations as it lays the foundation of any prospective reduction in the income of the assessee or creates a tax liability over and above the returned income. Thus, in that sense, it is not merely a procedural step in the assessment proceedings. Further, if we go a little deeper into the scheme of Sec. 144C of the Act and consider sub-section (3) of Sec. 144C of the Act, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t order as per Sec. 143(3) r.w.s. 144C(13) of the Act. In view of the above, we hold that it is mandatory for the Assessing Officer to pass a legally valid draft assessment order and without the same, he cannot assume jurisdiction to proceed with the assessment under Section 144C of the Act. 22. Our above understanding stands fortified by the judgment of the Hon'ble Bombay High Court in the case of International Air Transport Association (supra) which has clearly held that a draft assessment order under Section 144C(1) of the Act is 'mandated' before the Assessing Officer passes a final order under Section 143(3) of the Act in case of an 'eligible assessee', and the relevant extract of the judgment reads as under : 5. Therefore, in view of Section 144C(15) of the Act which defines eligible assessee to whom Section 144C(1) of the Act applies to inter alia mean any foreign company. Therefore, a draft assessment order under Section 144C(1) of the Act is mandated before the Assessing Officer passes a final order under Section 143(3) of the Act in case of eligible assessee. An draft assessment order passed under Section 144C(1) of the Act bestows certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a re-look to the proposed order (draft order), if so desired by the Foreign Company. In essence, it obliges the Assessing Officer to first pass a draft of the proposed assessment order indicating the proposed variation in the income returned. This draft Assessment Order is to be passed under Section 144C(1) of the Act, which entitles an eligible assessee such as a Foreign Company to approach the DRP with its objection to the Draft Assessment order. This is so provided, so that an eligible assessee can have his grievance addressed before the final assessment order is passed. In case, an assessee does not object to the draft assessment order, then a final assessment order is passed in terms of the draft assessment order by the Assessing Officer. It is only on passing of the final assessment order that the assessee, if aggrieved by it, would be able to approach the appellate authorities under the Act. These special rights are made available under Section 144C of the Act to an eligible assessee such as the petitioner. Therefore, it cannot be ignored by passing an final order under Section 144(13) of the Act without preceding it with a Draft Assessment order as required therein. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the draft assessment order and the same cannot be equated to an order in itself. As it is only on the basis of the draft assessment order, the AO either completes the assessment or the assessee proceeds to file the objection against the additions made before the learned DRP under section 144C of the Act. We further find that the learned DRP has also issued its directions under section 144C(5) of the Act in the name of Siemens VAI Metals Technologies Pvt. Ltd. (through their successors Siemens Ltd), which we find to be not a valid manner of passing the order as held by the Hon ble Supreme Court in Maruti Suzuki India Ltd (supra). 12. Therefore, in light of the decision of the Hon ble Supreme Court in Maruti Suzuki India Ltd (supra), the draft assessment order passed in the name of the non-existing company cannot be said to be a valid draft assessment order and therefore is set aside. Further, respectfully following the decision of the coordinate bench of the Tribunal in FedEx Express Transportation and Supply Chain Services (India) (P.) Ltd. (supra), all subsequent proceedings resulting from the invalid draft assessment order are also bad in law, void ab initio, and thus are or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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