Income Tax Appellate Tribunal - Pune
Brintons Carpets Asia Private Ltd.,, ... vs Deputy Commissioner Of Income-Tax,, on 28 January, 2019
आयकर अपील य अ धकरण] पण
ु े यायपीठ "ए" पण
ु े म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
BEFORE SHRI R.S. SYAL, VICE PRESIDENT
AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं
. / ITA No.261/PUN/2015
नधा रण वष / Assessment Year : 2006-07
Brintons Carpets Asia Private Limited, ........Appellant.
Gat No.414/415/416,
Village - Urawade, Tal. - Mulshi,
Pune - 412108.
PAN : AAACB7059H.
बनाम v/s
The Dy. Commissioner of Income Tax, ..Respondent.
Circle - 1(1), Pune.
Assessee by : Shri Nikhil Pathak.
Revenue by : Shri Ashok Babu, JCIT.
सन
ु वाई क तार ख / घोषणा क तार ख /
Date of Hearing : 16.01.2019 Date of Pronouncement: 28.01.2019.
आदे श / ORDER
PER VIKAS AWASTHY, JM :
This appeal by assessee is directed against the order of Commissioner of Income Tax (Appeals)-13, Pune dated 31.12.2014 for the assessment year 2006-07.
2. The brief facts of the case as emanating from records are :
The assessee is a subsidiary of Brintons Carpets Asia Private Limited, U.K. and is engaged in manufacturing and exporting of machine made woollen and nylon Carpets. During the period relevant to the 2 ITA No.261/PUN/2015 assessment year under appeal, the assessee had entered into international transactions with its Associated Enterprises (A.Es.).
Consequently, reference u/s 92CA(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") was made to the Transfer Pricing Officer (TPO). The TPO vide order dated 19.10.2009 made adjustments to the tune of Rs.16,19,83,910/-. The Assessing Officer passed draft assessment order, accordingly.
3. Against the draft assessment order, the assessee filed objections before the Dispute Resolution Panel (DRP). The DRP vide directions dated 30.07.2010 upheld the Transfer Pricing adjustments proposed by the TPO. In accordance with the directions of DRP, final assessment order dated 27.09.2010 was passed by the AO. The assessee assailed the additions in appeal before the Tribunal in ITA No.1296/PN/2010. The Tribunal vide order dt.15.06.2011 restored the issues back to the TPO with specific directions qua comparables to be adopted for making transfer pricing adjustments, Transactional Net Marginal Method (TNMM) to be considered as the most appropriate method to determine Arms Length Price (ALP), to allow adjustment for labour unrest, etc., while determining the ALP of the exports to A.Es. In second round, the TPO in his order dated 31.10.2012 while giving effect to the order of the Tribunal made adjustments to the tune of Rs.3,22,68,500/- in respect of international transactions. The Assessing Officer passed assessment order dated 30.11.2012 in line with the additions proposed by the TPO. Aggrieved with the assessment order dt.30.11.2012, the assessee filed appeal before the CIT(A). The CIT(A) vide impugned 3 ITA No.261/PUN/2015 order partly accepted the appeal of assessee. Still aggrieved, the assessee is in second appeal before the Tribunal.
4. Shri Nikhil Pathak appearing on behalf of assessee submitted at the outset that assessment order dated 30.11.2012 has been passed in violation of the provisions of Sec.144C of the Act and hence, is bad in law and void ab initio.
5. The ld.A.R. filed additional ground of appeal challenging the validity of the assessment order. The ld.A.R. submitted that as per the provisions of Sec.144C of the Act, the Assessing Officer in the first place is duty bound to pass draft assessment order. However, in the instant case, the Assessing Officer passed final assessment order after the order of TPO and has also issued demand notice u/s 156 of the Act. The ld.A.R. submitted that Hon'ble Bombay High Court in a recent decision in the case of PCIT Vs. Lionbridge Technologies Pvt. Ltd., in Income Tax Appeal No.622 of 2016 decided on 03.12.2018 has held that final assessment order passed without passing draft assessment order is in violation of the provisions of Sec.144C(1) of the Act, and such order is without jurisdiction. To further buttress his submissions, the ld.A.R. placed reliance on various decisions. Some of them are as under :
1. International Air Transport Association Vs. DCIT W.P. (L) No.351 of 2016 [68 Taxman.com 246] [Hon'ble Bombay High Court].
2. ACIT Vs. Vijay Television Pvt. Ltd. [W.P.Nos.1526 & 1527 of 2014] [46 Taxman.com 100].4 ITA No.261/PUN/2015
3. DCIT Vs. Rehau Polymers Pvt. Ltd. [ITA No.566/PN/2015] [85 Taxmann.com 23] [Pune ITAT].
4. Soktas India Pvt. Ltd. Vs. ACIT [ITA No.206/PN/2015] [77 Taxman.com 19] [Pune ITAT].
6. On the other hand, Shri Ashok Babu representing the Department vehemently defended the validity of assessment order. The ld.D.R. submitted that in the first round of litigation, the Assessing Officer had passed draft assessment order and after the directions of the DRP, final assessment order was passed by the Assessing Officer. Now, in the second round of litigation, where the TPO has passed order in proceedings giving effect to the order of the Tribunal, there is no need to pass draft assessment order.
7. We have heard the submissions of rival sides and have examined the orders of the authorities below. The assessee has raised grounds / additional grounds challenging the additions on merits. The assessee has also filed additional grounds of appeal challenging the validity of assessment order on the ground that the final assessment order has been passed without passing draft assessment order in violation of the provisions of Sec.144C(1) of the Act.
8. First we will take up the additional ground of appeal challenging the validity of assessment order. It is no more "res integra" that passing of draft assessment order is mandatory under the provisions of Sec.144C(1) of the Act. Final assessment order passed without passing draft assessment order is bad-in-law. In the 5 ITA No.261/PUN/2015 present case, it is an undisputed position that the assessment order dated 30.11.2012 is the only assessment order passed by the AO. The said assessment order is followed by the notice of demand u/s 156 of the Act. The Hon'ble Jurisdictional High Court in catena of judgments has time and again held that final assessment order passed u/s 144C(13) of the Act without passing a draft assessment order u/s 144C(1) of the Act deserves to be quashed being violative of the provisions of Sec.144C of the Act.
9. The Hon'ble Bombay High Court in a recent decision in the case of PCIT Vs. Lionbridge Technologies Pvt. Ltd., (supra) has reiterated this legal position. In the said case, the matter was remanded to the AO by the Tribunal. The AO referred the International Transactions to the TPO. After the receipt of order from TPO, the AO passed the final assessment order without passing the draft assessment order. The AO tried to rectify the mistake by issuing Corrigendum. The issue travelled to the Tribunal. The Tribunal held the assessment order bad-in-law. The Revenue carried the matter in appeal before the Hon'ble High Court. The Hon'ble High Court after considering the decisions in the case of ACIT Vs. Vijay Television Pvt. Ltd. (supra) and International Air Transport Association Vs. DCIT (supra) confirmed the findings of Tribunal. The relevant extract of the order and observations of the Hon'ble High Court on this issue are as under :
"11. It must be noted that in respect of the procedure and determination of the ALP of International Transaction between related person, the law provides a special dispensation. In terms of Section 6 ITA No.261/PUN/2015 144C(1) of the Act, the Assessing Officer is to first pass a draft Assessment Order which is subject to challenge, by way of representation to the DRP. It is only after the DRP disposes of the representation, that the Assessing Officer passes a final order in terms of the directions of the DRP and such final order is appealable to the Tribunal. In this case, it is undisputed that on 12th March, 2014, the Assessing Officer passed a final Assessment Order in terms of the directions made by the DRP in the earlier round. The time to pass any such order, would expire in the present facts on 31st March, 2014, however, in case a Draft Assessment Order is issued, then the time to pass a final Assessment Order gets extended to one month after the passing of the directions by the DRP in terms of Section 144C(13) of the Act. Nevertheless, the Draft Assessment Order should have in the present facts been passed before 31st March, 2014 in terms of Section 153A(2A) of the Act. In this case, undisputedly, a final order was passed on 12th March, 2014 and is being sought to be corrected by issue of corrigendum on 16th April, 2014 i.e. after the time to pass the Draft Assessment Order has expired. In fact, the Tribunal placed reliance upon the decision of a single judge of the Madras High Court in Vijay Television (P) Ltd., (supra). This, decision has now been upheld by the Division Bench of the Madras High Court in Assistant Commissioner of Income Tax v/s. Vijay Television (P) Ltd., 407 ITR 642. In the above case, non issue of Draft Assessment Order could not be corrected by issuing a corrigendum to a final Assessment Order. Just as in the facts before the Madras High Court, here also the demand notice and institution of pending proceedings were not withdrawn by the corrigendum. Besides, in International Air Transport Association v/s. Deputy Commissioner of Income Tax 68 taxmann.com 246 - this Court has held that the Draft Assessment Order is necessary in terms of Section 144 C(1) of the Act before the Assessing Officer can proceed to pass a final Assessment Order. In the absence thereof, the order is without jurisdiction. So far the contention on behalf of the Revenue that the Respondent was estopped from challenging the corrigendum dated 16th April, 2004, as it was accepted by it and a representation also filed to the DRP. This submission overlooks the fact that there can be no estoppel on issue of law pertaining to jurisdiction. Therefore, if the corrigendum dated 16th April, 2014 and the order dated 12th March, 2014 of the Assessing Officer is without jurisdiction, the same can be 7 ITA No.261/PUN/2015 raised at any time and the principle of estoppel will not apply. Mere consent of parties does not bestow jurisdiction, if the order is beyond jurisdiction. Therefore, we do not find any substance in this objection of the Revenue. Besides, the finding of the Tribunal in the impugned order that the order of the Assessing Officer was beyond the scope of the remand by order dated 25th January, 2012 of the Tribunal. This more particularly so as the remand by the Tribunal was occasioned on account of failure of the DRP to deal with the objections of the Respondent to the Draft Assessment Order. Therefore, making a reference again to the TPO for fixing the ALP, was not called for. Nothing has been pointed out to us which would even remotely suggest that the same is not correct."
Thus, in view of the above judgment of Hon'ble Bombay High Court and various other decisions relied on by the Ld.A.R, we find merit in the additional ground raised by the assessee challenging validity of assessment order dt.30.11.2012. Thus, in view of the facts of the case and the law laid down by the Hon'ble Bombay High Court and Hon'ble Madras High Court on this issue, we hold the assessment order void ab initio, consequently the proceedings arising there from are also vitiated. The impugned order is set aside and the appeal of assessee is allowed.
10. In the result, the appeal of assessee is allowed.
Order pronounced on Monday, the 28th day of January, 2019.
Sd/- Sd/-
(R.S. SYAL) (VIKAS AWASTHY)
VICE PRESIDENT JUDICIAL MEMBER
पण
ु े Pune; दनांक Dated : 28th January, 2019.
Yamini
8
ITA No.261/PUN/2015
आदे श क! " त$ल%प अ&े%षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. CIT(A)-13, Pune.
4. Pr. CIT-5, Pune.
5 "वभागीय %त%न&ध, आयकर अपील य अ&धकरण, "ए" / DR, ITAT, "A" Pune;
6. गाड- फाईल / Guard file.
आदे शानस ु ार/ BY ORDER // True Copy // व/र0ठ %नजी स&चव / Sr. Private Secretary आयकर अपील य अ&धकरण ,पुणे / ITAT, Pune.