Income Tax Appellate Tribunal - Chennai
L & T Thales Technology Services Private ... vs Dcit, Chennai on 23 November, 2016
आयकर अपील य अ
धकरण, 'डी' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL
' D' BENCH : CHENNAI
ी एन.आर.एस. गणेशन, या यक सद य एवं
ी अ ाहम पी. जॉज%, लेखा सद य के सम' ।
[BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND
SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER]
आयकर अपील सं./I.T.A. No. 1663/Mds/2015
नधा रण वष /Assessment year : 2008-2009.
L & T Thales Technology Services Vs. The Deputy Commissioner of
Private Limited, Income Tax,
(formerly known as Thales Corporate Circle 4(1)
Software India Pvt Ltd) Chennai 600 034.
RR Tower, 8th floor,
SIDCO Industrial Estate,
Guindy,
Chennai 600 032.
[PAN AACCT 4657M]
(अपीलाथ*/Appellant) (+,यथ*/Respondent)
अपीलाथ क ओर से/ Appellant by : Shri. Sharath Rao, C.A.
यथ क ओर से /Respondent by : Shri. D.N. Kar, CIT, DR
सन
ु वाई क तार ख/Date of Hearing : 07-11-2016
घोषणा क तार ख /Date of Pronouncement : 23-11-2016
आदे श / O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
This appeal by the assessee is directed against an order dated 26.02.2015 passed by the ld. Assessing Officer pursuant to the ld. TPO recommendation giving effect to the directions dated 12.03.2014 of ld. Dispute Resolution Panel (herein referred as ''the DRP'').
:- 2 -: ITA No. 1663/2015.
2. Ld. Counsel for the assessee at the outset submitted that the impugned order dated was time barred and beyond time mentioned u/s.144C(13) of the Income Tax Act, 1961 (hereinafter referred as ''the Act'').
3. Recapitulating the events leading to this appeal, ld. Authorised Representative submitted that original assessment order dated 31.10.2012 of the ld. Assessing Officer pursuant to ld. DRP directions dated 18.05.2012 was a subject matter of appeal before Tribunal. As per ld. Authorised Representative, the Tribunal vide its order dated 22.05.2013 in ITA No.2325/Mds/2012 had setaside the directions of the ld. DRP and restored the matter back to them for passing a speaking order. As per ld. Authorised Representative there was clear direction issued by the Tribunal to the ld. Assessing Officer for passing an order u/s.144C(13) of the Act, after receiving the directions of the ld. DRP. Contention of the ld. Authorised Representative was that directions passed by ld. DRP, pursuant to the Tribunal order mentioned (supra) was received in the office of the Assessing Officer in the month of March, 2014. According to him, by virtue of Sec. 144C(13) of the Act, ld. Assessing Officer was bound to complete the assessment before the end of April, 2014. However, according to him, the order was passed by the ld. Assessing Officer on 26.02.2015. Argument of the ld. Authorised Representative was that :- 3 -: ITA No. 1663/2015.
such order was clearly barred by limitation and therefore required to be squashed.
4. Per contra, ld. Departmental Representative submitted that the proceedings arose from a Tribunal order and hence Sec. 144C(13) of the Act did not apply. Relying on Sec. 153(2A) of the Act. Ld. Departmental Representative submitted that there was no time limit for passing an order pursuant to the direction of the Tribunal. According to ld. Departmental Representative, the ld. DRP order pursuant to the direction of Tribunal was passed on 12.03.2014. As per the ld. Departmental Representative the directions issued by the ld. DRP in the said order was to the ld. TPO and not to the ld. Assessing Officer. According to him, ld. TPO had pursuant to the directions of the ld. DRP passed a giving effect order on 10.02.2015. As soon as the ld. Assessing Officer received the order of the ld. TPO he had passed final assessment order. According to ld. Departmental Representative, law never required a person to do what is impossible. Ld. Departmental Representative pointed out the directions of ld. DRP was exclusively for ld. TPO and Sec. 144C(13) of the Act had no application. In answer to the query from the bench, ld. Departmental Representative submitted that the directions of ld. DRP though given to ld. TPO, had to be construed as given to ld. Assessing Officer and at best it would only be a procedural lapse which was curable. According :- 4 -: ITA No. 1663/2015.
to him, assessee's ground that the order of the ld. Assessing Officer was time barred needed to be rejected.
5. Ad libitum reply of the ld. Authorised Representative was that Sec. 144C(13) of the Act was a complete code by itself and Sec. 153 of the Act had no application in construing the time limits. Reliance was placed on the decision of the Cochin Bench of the Tribunal in the case of M/s. Envestnet Asset Management (India) Pvt Ltd vs. ACIT, (2015) 67 SOT 217 (URO). In any case, according to him, ld. TPO could for all purpose be considered an ''Assessing Officer'' as well by virtue of Explanation to Sec. 92CA of the Act. Relying on explanatory note to Finance Bill, 2008, ld. Authorised Representative submitted that Sec. 144C of the Act proposed an alternative dispute mechanism. According to him, Revenue cannot rely on Sec.153 of the Act for extending period of limitation set out in Sec. 144C(13) of the Act. As per the ld. Authorised Representative, order dated 26.02.2015 of the ld. Assessing Officer was far beyond the limitation period mentioned under the said sub-section had to be quashed.
6. We have considered the rival contentions and perused the orders of the authorities below. In the first round of proceedingS before this Tribunal, it was noted by this Tribunal that ld. DRP had summarily rejected the grounds taken by the assessee, without giving :- 5 -: ITA No. 1663/2015.
details and reasons. Thereafter, relying on the decision of Delhi Bench of the Tribunal in the case of Evalueserve Co (P) Ltd vs. ITO (2012) 134 ITD 546 it was held as under:-
''8. Respectfully following the above cited order, we set aside the order of the DRP and restore the matter back to its file to pass a speaking order stating all the objections of the assessee and disposing them by giving cogent reasons for adjudication of the objections of the assessee. Needless to mention that the DRP, before adjudicating the issues upon, shall allow reasonable and proper opportunity of hearing to the assessee. After receiving the order of the DRP, the Assessing Officer will again pass order u/s 144C(13) of the Act''.
Two things are clear from the above order. One is that Tribunal had setaside the order of the ld. DRP and restored the matter back to its file for disposal afresh. Second is that Tribunal had directed the ld. Assessing Officer to pass an order u/s.144C(13) of the Act, once he received the order of the ld.DRP. This leads us to ld. DRP order passed pursuant to the above direction of the Tribunal. The directions of the ld. DRP in their order dated 12.03.2014 appears at paragraph 8 & 9 and this read as under:-
''8. On the other issues no fresh objections have been raised before us. The DRP's earlier order would therefore remain effective on all the other issues except the one mentioned above which had remained to the properly adjudicated by the DRP. To sum up the DRP's earlier order is modified to that extent that :
(a) TPO would compute margins of the comparables based on the annual reports of the respective comparable company.
(b) KALS is excluded from the comparable set.
(c) VJIL be included in the comparable set.
:- 6 -: ITA No. 1663/2015.
9. This order is passed consequent to the order of the honorable Tribunal disposing off the assessee's objections not properly adjudicated in DRP's earlier order''.
Apart from the above, ld. DRP had given specific directions to ld. TPO in paragraphs 3, 4 & 6 of the above order. Thus the ld. DRP had given directions only to ld. TPO and not to the ld. Assessing Officer. The Tribunal had set aside the earlier order of the ld. DRP and therefore the second proceedings before ld. DRP was as good as a fresh one. Sub-Section (5) of Sec. 144C is relevant here and it is reproduced hereunder:-
''The Dispute Resolution Panel shall, in a case where any objection is received 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''.
A reading of the above show that, ld. DRP has power to give directions to the Assessing Officer only.
7. This brings us to the question how far Sub-section (13) of Sec. 144C of the Act will apply. Said section mandates the Assessing Officer to complete assessment within one month from the end of the month in which directions from ld. DRP are received by him. Sub- section (13) of Sec. 144C is reproduced hereunder:-
''Upon receipt of the directions issued under sub- section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in Sec. 153 (or section 153B), the assessment without providing any :- 7 -: ITA No. 1663/2015.
further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received''.
We cannot say that in the instant case the proceedings had reached the stage where Sec. 144C(13) of the Act could be applied. This is because, as mentioned by us at para 6 above, ld. DRP had never issued any direction to ld. Assessing Officer under Sub-section (5) of Sec. 144C of the Act. That directions issued by the ld. DRP were to the ld. TPO, is clear from the notings of the ld. TPO himself in his order dated 10.02.2015. Relevant para of the said order is reproduced hereunder:-
1. We direct the TPO to verify the computation of margins of the comparable companies and adopt margins as per the annual reports of the comparable companies.
2. The TPO is directed to exclude M/s. KALS information systems Limited.
3. We therefore direct the TPO to include VJIL in the final set of the comparable.
8. Coming to the contention of the ld. Authorised Representative that ld. TPO is having all the powers of an Assessing Officer and hence directions given by DRP to TPO had to be construed as given to the ld. Assessing Officer, it is necessary to have a look at Explanation to Sec. 92CA relied on by the ld. Departmental Representative. Said Explanation is reproduced hereunder:-
:- 8 -: ITA No. 1663/2015.
''For the purposes of this section "Transfer Pricing Officer" means a Joint Commissioner or Deputy Commissioner or Assistant Commissioner authorised by the Board to perform all or any of the functions of an Assessing Officer specified in sections 92C and 92D in respect of any person or class of persons''. A reading of the above, in our opinion clearly indicate that ld. TPO is not the same as Assessing Officer. No authorization from the Board has been placed on record which equates that the powers vested on TPO as similar to that of an Assessing Officer. Section 92CA of the Act clearly sets out the powers of TPO. He has to determine the Arms Length Price in relation to the international transactions. However, power of making the assessment remains with the Assessing Officer only.
9. Now coming to the argument of the ld. Departmental Representative that by virtue of Sub-Sec. (3) of Sec. 153 of the Act, no fetters on time can be placed on an Assessing Officer for passing a giving effect order by the ld. Assessing Officer. In our opinion the argument cannot be accepted, considering the decision of the Cochin Bench of the Tribunal in the case of M/s. Envestnet Asset Management (India) Pvt Ltd (supra). Para 4.3 & 4.4 of this order is reproduced hereunder:-
4.3 Section 144C(13) reads as follows:-
"(13) Upon receipt of the directions issued under subsection (5), the Assessing Officer :- 9 -: ITA No. 1663/2015.
shall, in conformity with the directions, complete, notwithstanding anything to the trary 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 such direction is received."
4.4 In view of section 144C(13), notwithstanding anything contained in section 153, the Assessing Officer has to pass order within one month from the end of the month in which the direction of the DRP is received. Therefore, even though the period of limitation provided in 3rd proviso to section 153(1) expired on 31.3.2013. Section 144C(13) gives extension of further period of one month from the date of receipt of direction from the DRP. In view of the above, the date of receipt of direction of DRP by the Assessing Officer becomes crucial. Before us the Assessing Officer claims that the direction of DRP was initially sent to the ACIT, Circle 1(1), Kochi and the same was redirected. From the assessment order it appears that the assessment order was passed by the ACIT, Circle 1(1), Trivandrum. From the letter of the Assessing Officer dated 09.07.2014, it appears that the direction of DRP was mis-sent to ACIT, Kochi. No material is available on record to suggest that the direction of the DRP was sent to ACIT, Circle 1(1), Kochi, other than the letter of the Assessing Officer. Moreover, it is also not known when actually the ACIT, Circle 1(1), Kochi, received the direction of the DRP, and when it was redirected.
Thus, for the purpose of a proceedings which come under the ambit Sec.144C of the Act, there can be no application of Sec.153 of the Act.
10. In the case before us, there is no direction given by the ld. DRP to ld. Assessing Officer but the directions were only given to the ld. TPO. This has in our opinion resulted in a procedural defect and not a jurisdictional error that could invalidate the proceedings in toto.
It is only a curable defect and when the curing takes place, it
:- 10 -: ITA No. 1663/2015.
puts back the proceedings to the original stage. Viz to a stage when the correct directions are issued by the ld. DRP. We are therefore constrained to setaside the order of the ld.DRP and remit the case back to it for issuing proper directions in accordance with law. Needless to say that all other issues on merits raised by the assessee shall remain open. .
11. In the result, appeal of the assessee is treated as allowed for statistical purpose.
Order pronounced on Wednesday, the 23rd day of November, 2016,
at Chennai
Sd/- Sd/-
(एन.आर.एस. गणेशन)) (अ ाहम पी. जॉज%)
(N.R.S. GANESAN) (ABRAHAM P. GEORGE)
या यक सद य/JUDICIAL MEMBER लेखा सद य/ACCOUNTANT MEMBER
चे$नई/Chennai
%दनांक/Dated:23rd November, 2016
KV
आदे श क त(ल)प अ*े)षत/Copy to:
1. अपीलाथ /Appellant 3. आयकर आयु+त (अपील)/CIT(A) 5. )वभागीय त न/ध/DR
2. यथ /Respondent 4. आयकर आय+
ु त/CIT 6. गाड फाईल/GF
:- 11 -: ITA No. 1663/2015.