TMI Blog2023 (11) TMI 1097X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Atlas Copco India Ltd. [ 2019 (8) TMI 1415 - ITAT PUNE] has held that on identical facts, the assessment order was held to be null and void. As decided in the case of Vijay Television (P.) Ltd. vs. DRP [ 2014 (6) TMI 540 - MADRAS HIGH COURT] held that the omission on the part of the A.O. to follow the mandatory procedures is not a curable defect nor was it a procedural irregularity. We would also like to place reliance on the decision of Lion Bridge Technologies Private Limited [ 2018 (12) TMI 764 - BOMBAY HIGH COURT] wherein it was held that failure to follow the mandatory procedures will render the assessment order null and void. We hereby hold the assessment order to be null and void. As the assessment order has been held to be invalid, we do not find it necessary to adjudicate the other grounds raised by the assessee and the Revenue. TP Adjustment - comparable selection - assessee has objected to the inclusion of the comparable namely Eclerx Services Ltd. selected by the TPO for the reason that the said comparable company was a KPO - HELD THAT:- As decided B C Management Services P. Ltd. [ 2017 (5) TMI 1501 - ITAT DELHI] wherein it was held that the compara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia 3.1 The learned AO TPO erred in ignoring the fact that IMS US undertakes all the entrepreneurial risks and has also incurred loss on a consolidated level for F.Y 2006-07 (December 31, 2006 and December 31, 2007). However the appellant company being a risk mitigated captive service provider is always compensated on a cost-plus model. Thereby, by no stretch of imagination, one can conclude that the profits have been shifted outside India on account of related party transactions. 4 Ground 3: Hon'ble CIT(A) erred in confirming the action of learned AO / TPO in rejecting the contemporaneous search carried out by the appellant company 4.1 On the facts and in the circumstances of the case and in law, the learned AO / TPO erred and the Hon'ble CIT(A) further erred in upholding / confirming the action of the learned Assessing Officer ('A.O.' for short) /TPO in disregarding the benchmarking analysis and comparable companies selected by the appellant company based on the contemporaneous data in the transfer pricing study report maintained as per section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 ('the Rules') and the vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irming the action of learned AO TPO in disregarding the multiple year data 7.1 On the facts and in the circumstances of the case and in law, the learned AO /TP0 erred and the Hon'ble CIT(A) further erred in upholding / confirming the action of the learned Assessing Officer ('A.O.' for short) /TPO in rejecting the contention of the appellant to compute the margin of the alleged comparable companies based on multiple year financial data. 3. The additional grounds of appeal raised by the assessee dated 18.02.2014 are as follows: 1:0 Re.: Validity of Order: ADDITIONAL GROUNDS OF APPEAL 1:1 The Assessing Officer has erred in passing the impugned order under section 143(3) r.w.s. 144C(3) of the Income-tax Act, 1961 ( the Act ) without complying with the mandatory provisions of section 144C of the Act. 1:2 The appellant submits that the Assessing Officer has erred in issuing a Notice of Demand dated 06 December 2010 u/s. 156 of the Act and a Notice dated 06 December 2010 u/s. 274 r.w.s. 271 (1) (c) of the Act alongwith the Order dated 06 December 2010 1:3 The Appellant submits that the impugned Order dated 22 February 2011 passed u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed the draft assessment order dated 06.12.2010 u/s. 143(3) r.w.s. 144C of the Act after duly considering the submission of the assessee and made an adjustment of Rs. 4,56,50,117/-. The assessee made a submission to the A.O. that it had opted to exercise its option to appeal to the ld. CIT(A) against the impugned addition and not processed before the learned Dispute Resolution Panel ('ld. DRP' for short). Therefore, final assessment order was passed on 22.02.2011. 6. The assessee was in appeal before the ld. CIT(A). 7. The ld. CIT(A) has partly allowed the appeal filed by the assessee for which both the Revenue and the assessee are in appeal before us, challenging the impugned order of the ld. CIT(A). 8. The assessee has raised the additional ground, wherein the assessment order passed u/s. 143(3) r.w.s. 144C(3) of the Act challenged on the ground that the A.O. has failed to comply with the mandatory provision of section 144C of the Act by issuing a notice of demand dated 06.12.2010 u/s. 156 of the Act and a notice dated 06.12.2012 u/s. 274 r.w.s. 271(1)(c) of the Act along with the draft assessment order dated 06.12.2010. As the legal issue raised by way of addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er pricing adjustment of Rs. 4,56,50,117/- by rejecting the comparable companies considered by the assessee and had considered the other comparable companies for bench marking the said transaction for determining the ALP. The assessee had challenged the selection of comparable companies made by the TPO namely Eclerx Services Ltd. and Mold Tek Technologies Ltd. which according to the assessee has been decided in favour of the assessee by various decisions of the Tribunal and the Hon'ble High Courts. The Revenue, on the other hand, had challenged the order of the ld. CIT(A) in rejecting some of the comparables selected by the ld. TPO. On this background, the assessee vide submission dated 18.02.2014 had raised the additional ground challenging the validity of the order. On perusal of the records, it is evident that the ld. A.O. while passing the draft assessment order dated 06.12.2010 had issued a notice of demand u/s. 156 and the penalty notice u/s. 274 r.w.s. 271(1)(c) of the Act. The ld. AR for the assessee has relied on the following decisions which are cited hereunder for the proposition that the draft assessment order issued along with the demand notice and penalty notice h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O. in issuing the demand notice along with the draft assessment order that the demand got crystalised on passing of the draft assessment order thereby converting the draft assessment order to be the final assessment order passed by the A.O. The intention of the legislature is clear where it has proposed a draft assessment order for the purpose to show cause the assessee whether he accepts or objects to the proposed addition. The assessee has placed reliance on the decision of the Tribunal in the case of Aker Powergas P. Ltd. (supra), wherein the Tribunal by placing reliance on the decision of the Pune Bench of the Tribunal in the case of Atlas Copco India Ltd. v/s. DCIT [ITA No. 649/ Pun/2013 and 1726/ Pun/ 2014 alongwith CO Nos. 34 35/ Pun/2019] has held that on identical facts, the assessment order was held to be null and void. The ld. AR had also relied on a plethora of cases wherein the said proposition has been reiterated by various benches of the Tribunal and also in the case of Hon ble Madras High Court in the case of Vijay Television (P.) Ltd. vs. DRP [2014] 369 ITR 113 (Mad.) where the Hon'ble High Court held that the omission on the part of the A.O. to follow the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Assessing Officer be directed to delete the upward adjustment of Rs. 5,56,38,789/- made by him to the Appellant's total income and to re-compute its total income and tax liability thereon accordingly. 2.0 General 2.1. The learned AO erred in initiating penalty proceedings under section 271(1)(c) of the Act. 17. The brief facts are that the assessee filed its return of income dated 14.10.2010, declaring total income at Rs. 2,03,428/-. The assessee s case was selected for scrutiny. The A.O. made reference to the TPO u/s. 92CA(1) of the Act for the following international transaction entered into by the assessee with its AE: Sr. No. Description of the transactions Value (Rs.) AY 2010-11 AY 2009-10 Method used 1 Provision of Documentation and Presentation services 60,64,54,221 57,00,82,975 TNMM 2 Reimbursement - 18,403 CUP 18. The operating profit and ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rores Positive net worth Companies incurring persistent losses for last 3 years Advertisement marketing and distribution expenses /sales 3% RPT/Total revenue 10% RPT/Total revenue 25% Export sales/total sales 75% Multiple year data Single year data Income from ITes/operating revenue 75% 20. It is observed that the A.O./TPO had rejected the comparables selected by the assessee and had accepted only one comparable namely e4e Health Care Business Services Pvt. Ltd. and had rejected the other comparables for the reason that the current year data was not used, comparables selected by the assessee did not stand scrutiny of FAR anaylsis, the comparables was in the nature of performing different kinds of services and the selection of the companies was made with significant controlled transactions or related transactions. The TPO rejected the objections of the assessee and included the following comparables : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble while bench marking the international transaction of the assessee for determination of the ALP. The ld. AR relied on the decision of the Tribunal in ITA No. 1074/Mum/2016 along with the other decisions. 24. The ld. DR contended that the transfer pricing report of the assessee infers that the assessee provides services in the nature of KPO and that the assessee has failed to adopt proper filters including the validity export filter of 75% for the reason that the assessee s turnover was mainly from its export to its AEs abroad. The ld. DR further stated that the TPO has rightly rejected some of the comparables selected by the assessee and has included four comparables from the assessee s own accept/reject matrix. The ld. DR relied on the orders of the lower authorities. 25. We have heard the rival submissions and perused the materials available on record. It is observed that the assessee has objected to the inclusion of the comparable namely Eclerx Services Ltd. selected by the TPO for the reason that the said comparable company was a KPO. The lower authorities have rejected the contention of the assessee for the reason that the co-ordinate bench in the case of Agilent Tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services (P) Ltd. v. DCIT [(2017) 83 taxmann.com 346 (Delhi-Trib.) for assessment years 2011-2012 and 2012-2013 - dated 25.05.2017. (ii) Hon'ble Delhi High Court decision in the case of Pr.CIT v. B.C. Management Services (P.) Ltd. reported in [(2018) 89 taxmann.com 68 (Delhi)] dated 28.11.2017. (iii) Delhi Tribunal decision in the case of Agilent Technologies (International) Private Limited v. ITO for assessment years2010-2011 to 2012-2013 dated 12.02.2018. (iv) Hon'ble jurisdictional High Court decision in the case of Pr.CIT v. Aptara Technology (P.) Ltd. reported in [(2018) 92 taxmann.com 240 (Bombay) dated 26.03.2018. (v) Hon'ble jurisdictional High Court in the case of Pr. CIT v. PTC Software (I) Pvt. Ltd. Income Tax Appeal No.598 of 2016 dated 16.04.2018. (vi) Hon'ble jurisdictional High Court decision in the case of Pr. CIT v. DNY Mellon International Operations (India) (P.) Ltd. reported in [(2018) 93 taxmann.com 363 (Bombay) dated 23.04.2018. M/s. Integreon Managed Solutions (India) Pvt. Ltd. 17. We find that the Hon'ble jurisdictional High Court in the case of Pr.CIT v. Aptara Technology (P.) Ltd. reported in [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missed upholding the finding of the fact of the Tribunal that M/s. Coral Hub (formerly known as 'Vishal Information Technologies Ltd.') was a company not only engaged in IT enabled services but also in providing agency services by way of outsourcing to third party vendors. In this case also, the impugned order of the Tribunal has come to a finding of the fact that the services rendered by the Respondent to its AE is different from the activities/services provided by M/s. Coral Hub Ltd. Therefore, they would not be comparable only on the ground that both of them broadly fall under the category ITES providers. (Underlining provided by us ) (d) The finding reached by the Tribunal is one of finding of fact which is not shown to be perverse. Thus, there is no reason to interfere with the finding of fact recorded by the Tribunal. III. Conclusion: In the above view, the question as proposed does not give rise to substantial question of law. Thus, not entertained. 19. We find that the ld.DR also placed certain co-ordinate Bench decisions of the Tribunal for assessment years 2007-2008 and 2008-2009. We hold that the issue is now settled by the Hon'ble jurisdict ..... X X X X Extracts X X X X X X X X Extracts X X X X
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