Sandvik Information Techonology AB., Pune V. Deputy Director of Income-tax,

CO 10/PUN/2015

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2653 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-12-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-09-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 06-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMOL KAMAT
• Assessee Lawyers: DANESH BAFNA
• Keywords: Reopening of assessment; Transfer pricing; International transaction; Tangible material; Difference of opinion; Condonation of delay; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 148; 11

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , ! , # $ BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.128/PUN/2014 #& & / ASSESSMENT YEAR : 2005-06 DDIT (INTERNATIONAL TAXATION) - II, PUNE . / APPELLANT V/S SANDVIK INFORMATION TECHNOLOGY AB, C/O. SANDVIK ASIA PVT. LTD., MUMBAI PUNE ROAD, DAPODI, PUNE 411 012 PAN : AADCA5375J . / RESPONDENT C.O. NO.10/PUN/2015 (ARISING OUT OF ITA NO.128/PUN/2014) #& & / ASSESSMENT YEAR : 2005-06 SANDVIK INFORMATION TECHNOLOGY AB, C/O. SANDVIK ASIA PVT. LTD., MUMBAI PUNE ROAD, DAPODI, PUNE 411 012 PAN : AADCA5375J . / APPELLANT V/S DDIT (INTERNATIONAL TAXATION) - II, PUNE . / RESPONDENT ASSESSEE BY : SHRI DANESH BAFNA REVENUE BY : SHRI AMOL KAMAT (CIT) / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE DEPARTMENT IS AGAINST THE DIRECTIONS O F DISPUTE RESOLUTION PANEL, PUNE DATED 06-09-2013 FOR THE A SSESSMENT YEAR 2005-06. / DATE OF HEARING :23.12.2016 / DATE OF PRONOUNCEMENT:28.12.2016 2 ITA NO.128/PUN/2014 AND CO NO. 10/PUN/2015 2. THE ASSESSEE HAS ALSO FILED CROSS OBJECTIONS. THE CRO SS OBJECTIONS ARE TIME BARRED BY 142 DAYS. THE ASSESSEE HAS FILED PETITION FOR CONDONATION OF DELAY SUPPORTED BY AN AFFIDAVIT C ITING REASONS CAUSING DELAY. AFTER PERUSAL OF THE SAME, WE AR E SATISFIED THAT THE DELAY IN FILING OF THE CROSS OBJECTIONS IS NOT WILLFUL O R DELIBERATE. THE DELAY OF 142 DAYS IN FILING OF THE CROSS OBJ ECTIONS IS CONDONED. THE CROSS OBJECTIONS ARE ADMITTED FOR ADJUDIC ATION AND ARE DISPOSED OF ALONGWITH THE APPEAL. 3. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORDS A RE : THE ASSESSEE IS A NON-RESIDENT COMPANY INCORPORATED IN SWED EN. DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPE AL THE ASSESSEE RECEIVED FEES FOR I.T. SUPPORT SERVICE TO THE TUNE OF RS.2 ,43,74,970/-. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A.Y. 2005-0 6 ON DATED 28-10-2005 DECLARING NIL INCOME. THE ORIGINAL ASSESSMENT WA S COMPLETED U/S.143(1). THEREAFTER, THE ASSESSING OFFICER ISSUED NOTICE U/S.148 OF THE ACT ON 30-03-2012. THE REASONS FOR REO PENING WERE COMMUNICATED TO THE ASSESSEE. THE PRIME REASON FOR RE OPENING WAS THAT AS PER THE DETAILS FURNISHED BY M/S. SANDVIA ASIA LTD . (IN SHORT SAL) IN REPORT 3CEB IT WAS FOUND THAT PAYMENT OF RS.2,38 ,85,567/- WAS MADE TO THE ASSESSEE. ACCORDING TO THE ASSESSING OFFICER THE INFORMATION DERIVED FROM THE REPORT 3CEB OF SAL CONSTITUTE S TANGIBLE MATERIAL AND HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX FOR A.Y. 2005-06 HAS ESCAPED ASSESSMENT. ACCORDINGLY, THE P ROVISIONS OF SECTION 148 R.W.S. 147 OF THE ACT WERE INVOKED. THE ASS ESSING OFFICER VIDE DRAFT PROPOSED ASSESSMENT ORDER DATED 31-12-2012 PASSED U/S.144C R.W.S. 143(3) R.W.S.147 OF THE ACT PROPOSED THE AD DITION OF RS.2,43,74,790/-. 3 ITA NO.128/PUN/2014 AND CO NO. 10/PUN/2015 4. AGGRIEVED BY THE DRAFT PROPOSED ASSESSMENT ORDER DATED 31-12-2012, THE ASSESSEE FILED OBJECTIONS BEFORE THE DRP CHALLENGING THE REOPENING OF THE ASSESSMENT, AS WELL AS ADDITION MADE ON MERITS. THE DRP VIDE IMPUGNED ORDER ALLOWED THE OBJECTIONS RAIS ED BY THE ASSESSEE AND HELD THE REOPENING TO BE INVALID. AGAINS T THE FINDINGS OF DRP, THE DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL. 5. THE REVENUE HAS ASSAILED THE ORDER OF DRP BY RAISING FOLLOWING GROUNDS : 1. ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE DR P WAS NOT CORRECT IN DISMISSING THE RE-OPENING OF THE ASSESSMENT AS N OT BEING IN ACCORDANCE WITH THE PROVISIONS OF THE LAW AND TERMING THE SAME TO BE INVALID. 2. ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE DRP WAS NOT CORRECT IN HOLDING THAT THE REOPENING WAS NOT BASED O N THE FACT THAT THERE WAS A REASON TO BELIEVE THAT THE INCOME HAD ESCAPED ASSE SSMENT SINCE NO ASSESSMENT U/S 143(3) WAS COMPLETED IN THE ASSESSMENT YEAR UN DER CONSIDERATION. 3. ON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, T HE DRP WAS NOT CORRECT IN OBSERVING THAT THERE WAS NO MATERIAL O N THE BASIS OF WHICH THE BELIEF IS FORMED SINCE THE MATERIAL FOR FORMATION OF BELIEF WAS DEFINITE AND NOT VAGUE AND FANCIFUL. THE RE-OPENING OF THE A SSESSMENT WAS WELL WITHIN THE SCOPE OF PROVISIONS OF INCOME-TAX ACT AND T HE REASONS RECORDED BY THE ASSESSING OFFICER BEFORE ISSUING NOTICE U JS.148 ARE EXPLICIT AND GOOD ENOUGH TO MAKE OUT A FIT CASE FOR RE-OPENING OF THE ASSESSMENT. 4. AS PER PROVISIONS OF SECTION 144C(5), 'THE DISPUTE R ESOLUTION PANEL SHALL, IN A CASE WHERE ANY OBJECTION IS RECEIVED UNDER SUB- SECTION(2), ISSUE SUCH DIRECTIONS, AS IT THINKS FIT, FOR T HE GUIDANCE OF THE ASSESSING OFFICER TO ENABLE HIM TO COMPLETE THE ASSESSMENT. ' THUS, THE DRP SHOULD NOT HAVE ISSUED DIRECTIONS, DIRECTING THE AO TO DROP THE ASSESSMENT PROCEEDINGS. 5. THE APPELLANT CRAVES LEAVE TO ADD TO OR MODIFY AN Y OF THE GROUNDS OF APPEAL. 6. SHRI AMOL KAMAT REPRESENTING THE DEPARTMENT SUBMITTED THAT THE ORIGINAL ASSESSMENT IN THE CASE OF ASSESSEE WAS FRAME D U/S.143(1). THE ASSESSING OFFICER HAD NO OCCASION TO VERIFY T HE DETAILS FURNISHED BY THE ASSESSEE. SUBSEQUENTLY, WHEN THE ASSE SSING OFFICER 4 ITA NO.128/PUN/2014 AND CO NO. 10/PUN/2015 EXAMINED THE RECORDS OF SAL IT TRANSPIRED THAT THE ASSE SSEE HAS RECEIVED A SUM OF RS.2,38,85,567/- FROM THE SAID COMPANY O N ACCOUNT OF I.T. SUPPORT SERVICES. IT IS NOT A CASE OF RE APPRAISAL OF DOCUMENTS ON RECORD OR CHANGE OF OPINION. SINCE THE AS SESSING OFFICER HAD NOT FORMED ANY OPINION AT THE TIME OF ORIGINAL ASS ESSMENT, THERE IS NO QUESTION OF CHANGE OF OPINION AT ALL. THE LD. DE PARTMENTAL REPRESENTATIVE IN SUPPORT OF HIS SUBMISSIONS PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF DY.CIT VS. ZUARI ESTATE DEVELOPMENT & INVESTMENT CO. LTD. REPORTED AS 63 TAXMANN.COM 177 AND THE DECISION OF HONBLE BOMBAY HIGH C OURT IN THE CASE OF INDIAN HUME PIPE CO. LTD. VS. ACIT REPORTED AS 16 TAXMANN.COM 180 (BOM.). THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED T HAT THE DRP HAS NO POWER TO ANNUL THE ASSESSMENT. A CONJOINT READING OF PROVISIONS OF SECTION 144C(5) AND (8) OF THE ACT WOULD SHOW THAT THE DRP HAS POWER TO CONFIRM, REDUCE OR ENHANCE THE ADDITION S PROPOSED IN DRAFT ASSESSMENT ORDER BUT DOES NOT HAVE SWEAPING P OWERS TO SET ASIDE THE ASSESSMENT ORDER. 7. ON THE CONTRARY, SHRI DANESH BAFNA APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE INFORMATION ON WHICH THE AS SESSING OFFICER HAS RELIED FOR INITIATING REASSESSMENT PROCEEDINGS WAS ALREADY FURNISHED BY THE ASSESSEE IN PRESCRIBED FORM 3CEB FILED AL ONG WITH THE RETURN OF INCOME. THE LD. AUTHORISED REPRESENTATIVE REFERRED TO STATEMENT OF COMPUTATION OF TOTAL INCOME AT PAGE 15 OF TH E PAPER BOOK TO SHOW THAT THE ASSESSEE IN NOTES HAD CATEGORICALLY MENTIONED THAT THE ASSESSEE HAS CHARGED FOR RENDERING INFORMATION TECH NOLOGY SERVICES TO SAL AND WALTER TOOLS INDIA PVT. LTD. DURING TH E YEAR ENDED 5 ITA NO.128/PUN/2014 AND CO NO. 10/PUN/2015 ON 31-03-2005. SINCE THE ASSESSEE HAS RECOVERED ITS C OST FROM SAL AND WALTER TOOLS INDIA PVT. LTD., THE RECEIPTS IN THE HANDS OF THE ASSESSEE ARE PURE REIMBURSEMENT OF COSTS. THE ASSESSEE HAS NOT EARNED ANY INCOME DURING THE PREVIOUS YEAR ENDED ON 31 -03-2005 AND HENCE THERE IS NO TAXABLE EVENT IN INDIA. THE SERVIC ES PROVIDED BY ASSESSEE INCLUDES : DATA NETWORK SERVICES, BACKUP AND RE COVERY SERVICES AND OTHER OPERATIONAL SERVICES. 8. THE LD. AUTHORISED REPRESENTATIVE FURTHER POINTED THAT IN FORM 3CEB AT PAGES 17 TO 24 OF THE PAPER BOOK THE ASSESSE E HAS SPECIFICALLY DECLARED IN NOTE THAT SANDVIK ASIA LTD. HAS MADE CERTAIN PAYMENTS IN RESPECT OF I.T. SUPPORT SERVICES TO THE ASS ESSEE ON THE BASIS OF ACTUAL COSTS INCURRED BY THE ASSESSEE. THE ASSESSEE BELIEVES THAT SUCH RECEIPTS BEING IN THE NATURE OF REIMBURSEM ENT OF EXPENSES CANNOT BE REGARDED AS ITS INCOME. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT SIMILAR NOTE HAS BEEN GIVEN BY THE ASSESSEE AND SAL IN THEIR RESPEC TIVE FORM 3CEB. THE AO HAS PLACED RELIANCE ON FORM 3CEB OF SAL TO INITIATE REASSESSMENT PROCEEDINGS. THE INFORMATION WHICH THE REV ENUE IS ALLEGING TO BE FRESH TANGIBLE MATERIAL AND OUTSIDE THE BOO KS OF THE ASSESSEE IS INFACT ALREADY PROVIDED BY THE ASSESSEE AT T HE TIME OF FILING OF RETURN. FORM 3CEB OF THE ASSESSEE AND FORM 3CEB OF SAL HAVE SIMILAR NOTES IN SO FAR AS THE PAYMENT OF I.T. SUPPORT SER VICE IS CONCERNED. THE ASSESSEE HAD MADE FULL DISCLOSURE IN ITS R ETURN OF INCOME. THEREFORE, NO NEW TANGIBLE MATERIAL WAS AVAILABLE WITH THE ASSESSING OFFICER FOR INVOKING THE PROVISIONS OF SECTION 148 R .W.S. 147 OF THE ACT. THE LD. AUTHORISED REPRESENTATIVE CONTENDED THAT THE CASE OF ASSESSEE IS NOT BASED ON CHANGE OF OPINION. T HE CONTENTION 6 ITA NO.128/PUN/2014 AND CO NO. 10/PUN/2015 OF THE ASSESSEE IS THAT THERE IS NO TANGIBLE MATERIAL FOR R EOPENING AND THE ASSESSING OFFICER HAS NO FRESH MATERIAL OR REASON TO B ELIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT WITHIN TH E MEANING OF SECTION 147 OF THE ACT. 9. THE LD. AUTHORISED REPRESENTATIVE CONTENDED THAT TH E CASE LAWS ON WHICH THE DEPARTMENT HAS PLACED RELIANCE ARE DISTINGU ISHABLE ON FACTS. IN THE CASE OF DCIT VS. ZUARI ESTATE DEVELOPMEN T AND INVESTMENT COMPANY LTD. (SUPRA) THE ASSESSING OFFICER CAME ACROSS CERTAIN DOCUMENTS WHICH FORM TANGIBLE MATERIAL FOR INITIATING REASSESSMENT PROCEEDINGS. WHEREAS, IN THE PRESENT CAS E THE ASSESSING OFFICER HAD NO FRESH MATERIAL TO FORM SUCH BELIEF. IN THE CASE OF INDIAN HUME PIPE CO. LTD. VS. ACIT, THE ASSESSEE AT THE TIME OF FILING ORIGINAL RETURN OF INCOME HAD CLAIMED EXE MPTION U/S.54EC WITHOUT DISCLOSING DATES ON WHICH AMOUNTS WERE IN VESTED IN SPECIFIED SECURITIES. FOR CLAIMING EXEMPTION U/S.54EC, DATE OF INVESTMENT IS VITAL AND MATERIAL INFORMATION FOR DETERMINING ASSESSEES ELIGIBILITY FOR CLAIMING EXEMPTION. THERE WAS NO FULL AND PROPER DISCLOSURE BY ASSESSEE OF ALL MATERIAL FACTS NECESS ARY FOR ASSESSMENT. IN SUCH CIRCUMSTANCES THE HONBLE COURT U PHELD THE REOPENING OF ASSESSMENT. 10. THE LD. AUTHORISED REPRESENTATIVE TO REINFORCE HIS SUBMISSIONS PLACED RELIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COUR T IN THE CASE OF KHUBCHANDANI HEALTHPARKS (P.) LTD. VS. ITO REPORTED AS 68 TAXMANN.COM 91 (BOM.). THE LD. AUTHORISED REPRESENTATIVE CONTENDED THAT THE HONBLE JURISDICTIONAL HIGH COURT IN TH E SAID CASE HAS CONSIDERED THE JUDGMENT OF HONBLE SUPREME COURT O F INDIA IN THE CASE OF CIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD. RE PORTED AS 291 7 ITA NO.128/PUN/2014 AND CO NO. 10/PUN/2015 ITR 500, AS WELL AS THE JUDGMENT IN THE CASE OF DCIT VS . ZUARI ESTATE DEVELOPMENT AND INVESTMENT COMPANY LTD. (SUPRA). THE HO NBLE HIGH COURT AFTER CONSIDERING BOTH THE DECISIONS HELD THAT NOTICE ISSUED U/S.148 WOULD BE WITHOUT JURISDICTION FOR ABSENCE OF REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT EVEN IN A CA SE WHERE ASSESSMENT HAS BEEN COMPLETED EARLIER BY INTIMATION U/S.14 3(1). SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE GUJARAT HIGH C OURT IN THE CASE OF PRAKRIYA PHARMACEM VS. ITO REPORTED AS 66 TAX MANN.COM 149. IN THE SAID CASE THE HONBLE HIGH COURT HAS CONSID ERED THE DECISIONS OF HONBLE APEX COURT IN BOTH THE CASES, I.E. RAJE SH JHAVERI STOCK BROKERS PVT. LTD. (SUPRA) AND ZUARI ESTATE DEVELO PMENT AND INVESTMENT COMPANY LTD. (SUPRA). THE LD. AUTHORISED REP RESENTATIVE FURTHER PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ORIENT CRAFT LTD. REPORTED AS 354 ITR 536 T O BUTTRESS HIS SUBMISSIONS THAT IN THE ABSENCE OF TANGIBLE MATERIAL, REAS SESSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER ARE NOT SUST AINABLE IN THE EYE OF LAW EVEN IF THE ORIGINAL ASSESSMENT WAS MADE U/ S.143(1) OF THE ACT. 11. IN RESPECT OF GROUND NO.4, THE LD. AUTHORISED REPRES ENTATIVE SUBMITTED THAT THE DRP HAS INHERENT POWER TO ANNUL ASS ESSMENT. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT PERUSA L OF SECTION 144C(5) WOULD SHOW THAT THE DRP HAS POWER TO ISSUE SUCH DIRECTIONS AS IT THINKS FIT FOR THE GUIDANCE OF ASSESSING OFFICER TO CO MPLETE THE ASSESSMENT. THE POWER TO ISSUE DIRECTIONS INCLUDES POWER TO ANNUL OR MODIFY THE ASSESSMENT. THE LD. AUTHORISED REPRESENTAT IVE IN SUPPORT OF HIS SUBMISSIONS PLACED RELIANCE ON THE DECISION OF HONBL E BOMBAY HIGH COURT IN THE CASE OF VODAFONE INDIA SERVICE PVT. LTD . VS. UOI & OTHERS REPORTED AS 359 ITR 133 (BOMBAY) AND SUBSEQUEN TLY FOLLOWED 8 ITA NO.128/PUN/2014 AND CO NO. 10/PUN/2015 IN VODAFONE INDIA SERVICES PVT. LTD. VS. ACIT REPORTED AS 361 ITR 531(BOM.) (HEREINAFTER REFERRED TO AS VODAFONE-II CASE) 12. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BE LOW. WE HAVE ALSO CONSIDERED VARIOUS DECISIONS ON WHICH RELIANCE HAS BE EN PLACED BY BOTH THE SIDES. TWO ISSUES HAVE EMERGED FROM THE GR OUNDS RAISED IN THE APPEAL AND THE SUBMISSIONS MADE BY THE REPRESENT ATIVES OF BOTH THE SIDES : (A) WHETHER THE REASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER ARE VALID AND SUSTAINABLE; AND (B) WHETHER THE DRP HAS POWER TO ANNUL ASSESSMENT. 13. THE ASSESSING OFFICER INITIATED REASSESSMENT PROCEEDINGS ON THE BASIS OF DETAILS FURNISHED BY SAL (ONE OF THE GROUP COMPANY OF ASSESSEE) IN REPORT 3CEB. AS PER THE INFORMATION DERIVED FROM THE DOCUMENTS OF SAL, PAYMENT OF RS.2,38,85,567/- HAS BEEN MAD E TO THE ASSESSEE ON ACCOUNT OF I.T. SUPPORT SERVICE FEES. T HE ASSESSING OFFICER TREATED THE SAID INFORMATION AS TANGIBLE MATERIAL AND INITIATED PROCEEDINGS U/S.148 R.W.S. 147 OF THE ACT AGAINST THE ASS ESSEE. THE CASE OF THE DEPARTMENT IS THAT ON THE BASIS OF ABOVE SA ID INFORMATION THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME OF ASSESSEE FOR A.Y. 2005-06 HAS ESCAPED ASSESSMENT. 14. THE LD. AUTHORISED REPRESENTATIVE HAS BROUGHT TO OU R NOTICE THAT THE INFORMATION DERIVED FROM ALLEGED TANGIBLE MATERIAL FOR INITIATING REASSESSMENT PROCEEDINGS WAS ALREADY FURNISHED B Y THE ASSESSEE IN FORM 3CEB FILED ALONG WITH RETURN OF INCOME. TH E ASSESSEE HAS PLACED ON RECORD ITS RETURN OF INCOME ALONG WITH THE COMPUTATION OF INCOME AND FORM 3CEB IN THE FORM OF PAPER BOOK. 9 ITA NO.128/PUN/2014 AND CO NO. 10/PUN/2015 THE RELEVANT EXTRACT OF FORM 3CEB FURNISHED BY ASSESSE E ALONGWITH ITS RETURN OF INCOME GIVING DETAILS OF TRANSACTIONS WITH ASS OCIATED ENTERPRISES ARE REPRODUCED HEREINUNDER : SR. NO. NAME AND ADDRESS OF THE ASSOCIATED ENTERPRISE AND WHOM THE INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO DESCRIPTION OF SUCH MUTUAL AGREEMENT OR ARRANGEMENT AMOUNT PAID/RECEIVED OR PAYABLE/RECEIVABLE IN THE TRANSACTION METHOD USED FOR DETERMINING THE ARMS LENGTH PRICE (SEE SECTION 92(C)(1) AS PER BOOKS OF ACCOUNT AS COMPUTED BY THE ASSESSEE HAVING REGARD TO THE ARMS LENGTH PRICE CLAUSE 12(A) CLAUSE 12(B) CLAUSE 12(C) CLAUSE 12(D) 1 SANDVIK ASIA LIMITED, MUMBAI PUNE ROAD, DAPODI, PUNE 411012 REIMBURSEMENT OF IT SUPPORT SERVICE FEES 23 885 567 23 885 567 NOT APPLICABLE (REFER NOTE 1) 2 WALTER TOOLS INDIA PRIVATE LIMITED, MUMBAI PUNE ROAD, DAPODI, PUNE 411012 REIMBURSEMENT OF IT SUPPORT SERVICE FEES 489 403 489 403 NOT APPLICABLE (REFER NOTE 2) NOTE 1 : SANDVIK ASIA LIMITED HAS MADE CERTAIN PAYM ENTS IN RESPECT OF IT SUPPORT SERVICES TO THE ASSESSEE ON THE BASIS OF ACTUAL COS TS INCURRED BY THE ASSESSEE. THE ASSESSEE BELIEVES THAT SUCH RECEIPTS BEING IN THE N ATURE OF REIMBURSEMENT OF EXPENSE CANNOT BE REGARDED AS ITS INCOME. IN THIS REGARD, THE ASST. COMMISSIONER OF INCOME-TA X, CIRCLE-8, HAS, VIDE HIS ORDER DATED 14 MAY 2004 ISSUED UNDER SECTION 195 OF THE INCOME- TAX ACT, 1961, AUTHORIZED SANDVIK ASIA LIMITED TO MAKE PAYMENT TO THE ASSESSEE FOR SU CH SERVICES WITHOUT DEDUCTING TAX AT SOURCE. NOTE 2: WALTER TOOLS INDIA PRIVATE LIMITED HAS MADE CERTAIN PAYMENTS IN RESPECT OF IT SUPPORT SERVICES TO THE ASSESSEE ON THE BASIS OF AC TUAL COSTS INCURRED BY THE ASSESSEE. THE ASSESSEE BELIEVES THAT SUCH RECEIPTS BEING IN T HE NATURE OF REIMBURSEMENT OF EXPENSES CANNOT BE REGARDED AS HIS INCOME. 15. A COMPARATIVE STUDY OF FORM 3CEB OF SAL ON THE BASIS OF WHICH THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 148 R.W.S 147 OF THE ACT AND FORM 3CEB FURNISHED BY THE ASSESSEE REVEAL THAT SIMILAR NOTE HAS BEEN MADE IN FORM 3CEB OF BOTH THE CO MPANIES. FURTHER, THE FACT THAT THE ASSESSEE HAS CHARGED FOR TH E SERVICES RENDERED IS ALSO MENTIONED IN COMPUTATION SHEET. THUS, IT CANNOT BE SAID THAT ANY FRESH TANGIBLE MATERIAL HAS COME TO THE KNO WLEDGE OF THE ASSESSING OFFICER. THE MATERIAL ON THE BASIS OF WHICH THE A SSESSING OFFICER HAS INITIATED REASSESSMENT PROCEEDINGS WAS ALREADY PLACED ON 10 ITA NO.128/PUN/2014 AND CO NO. 10/PUN/2015 RECORD BY THE ASSESSEE AT THE TIME OF FILING OF RETURN OF INCOME. THE ASSESSEE HAD MADE FULL DISCLOSURE OF THE RECEIPTS. THE SAI D RECEIPTS ARE CLAIMED BY THE ASSESSEE TO BE REIMBURSEMENT OF EXPE NDITURE AND NOT AS INCOME. IT IS CLEARLY EVIDENT FROM RECORDS THAT THE ASSE SSEE HAD ALREADY MADE DISCLOSURE OF THE RECEIPTS FROM SAL AND WALT ER TOOLS INDIA PVT. LTD. AT THE TIME OF FILING OF RETURN OF INCOME. THE A SSESSING OFFICER HAS ERRED IN INVOKING THE PROVISIONS OF SECTION 148 R.W.S. 147 OF THE ACT, FOR REOPENING ON THE BASIS OF SAME INFORMATION DERIVED FROM THE DOCUMENTS OF GROUP CONCERN, I.E., SAL. THE ASSESSING OFFICER CAN HAVE REASON TO BELIEVE FOR R EOPENING ASSESSMENT IF THERE IS ANY TANGIBLE MATERIAL IN HIS POSSE SSION. IN THE PRESENT CASE WE ARE OF CONSIDERED VIEW THAT THE ASSESS ING OFFICER HAD NO NEW INFORMATION OR TANGIBLE MATERIAL TO COME TO THE CO NCLUSION THAT THERE IS ESCAPEMENT OF INCOME. IF THE ASSESSING OFFICE R CHOOSES TO CLOSE HIS EYES ON THE MATERIAL/DOCUMENTS FURNISHED BY ASSESSEE AND STARTS SCANNING THE DOCUMENTS OF OTHER CONCERNS A ND IN THE PROCESS COMES ACROSS SOME INFORMATION ABOUT ASSESSEE, WHICH THE ASSESSEE HAS ALREADY DISCLOSED, SUCH INFORMATION CANNOT PA RTAKE THE CHARACTER OF NEW TANGIBLE MATERIAL. 16. IN SO FAR CONTENTIONS OF THE DEPARTMENT THAT THE A SSESSING OFFICER DID NOT GET OPPORTUNITY TO APPLY HIS MIND ON THE D OCUMENTS FURNISHED BY ASSESSEE AS THE ORIGINAL ASSESSMENT WAS COM PLETED U/S.143(1), WE DO NOT FIND ANY FORCE IN THE SAID CONTENTIONS. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ORIENT CRAFT LTD. (SUPRA) HAS HELD THAT EXPRESSION, REASON TO BELIEVE DOES NOT HAVE DIFFERENT MEANING, WHERE ASSESSMENTS ARE FRAMED U/S.143(1) AND 11 ITA NO.128/PUN/2014 AND CO NO. 10/PUN/2015 WHERE ASSESSMENT IS COMPLETED U/S.143(3) OF THE ACT. TH E RELEVANT EXTRACT OF THE FINDINGS OF THE HONBLE HIGH COURT ARE AS UNDER : 13. HAVING REGARD TO THE JUDICIAL INTERPRETATION P LACED UPON THE EXPRESSION REASON TO BELIEVE, AND THE CONTINUED USE O F THAT EXPRESSION RIGHT FROM 1948 TILL DATE, WE HAVE TO UNDERSTAND THE MEANING OF THE EXPRESSION IN EXACTLY THE SAME MANNER IN WHICH IT HAS B EEN UNDERSTOOD BY THE COURTS. THE ASSUMPTION OF THE REVENUE THAT SOMEH OW THE WORDS REASON TO BELIEVE HAVE TO BE UNDERSTOOD IN A LIBERA L MANNER WHERE THE FINALITY OF AN INTIMATION UNDER SECTION 143(1) IS SOU GHT TO BE DISTURBED IS ERRONEOUS AND MISCONCEIVED. AS POINTED OUT EARLIER, TH ERE IS NO WARRANT FOR SUCH AN ASSUMPTION BECAUSE OF THE LANGUAGE EMPLOYED IN SECTION 147; IT MAKES NO DISTINCTION BETWEEN AN ORDER PASSED UNDER SECTION 143(3) AND THE INTIMATION ISSUED UNDER SECTION 143(1). THERE FORE IT IS NOT PERMISSIBLE TO ADOPT DIFFERENT STANDARDS WHILE INTERPRE TING THE WORDS REASON TO BELIEVE VIS--VIS SECTION 143(1) AND SECT ION 143(3). WE ARE UNABLE TO APPRECIATE WHAT PERMITS THE REVENUE TO ASSUM E THAT SOMEHOW THE SAME RIGOROUS STANDARDS WHICH ARE APPLICABLE IN THE INTERPRETATION OF THE EXPRESSION WHEN IT IS APPLIED TO THE REOPENING OF AN ASSESSMENT EARLIER MADE UNDER SECTION 143(3) CANNOT APPLY WHER E ONLY AN INTIMATION WAS ISSUED EARLIER UNDER SECTION 143(1). IT WOULD IN E FFECT PLACE AN ASSESSEE IN WHOSE CASE THE RETURN WAS PROCESSED UNDER SECT ION 143(1) IN A MORE VULNERABLE POSITION THAN AN ASSESSEE IN WHOSE CASE THERE WAS A FULL-FLEDGED SCRUTINY ASSESSMENT MADE UNDER SECTION 143( 3). WHETHER THE RETURN IS PUT TO SCRUTINY OR IS ACCEPTED WITHOUT DEMUR IS NOT A MATTER WHICH IS WITHIN THE CONTROL OF ASSESSEE; HE HAS NO CHOICE IN THE MATTER. THE OTHER CONSEQUENCE, WHICH IS SOMEWHAT GRAVER, WOULD BE THAT THE ENTIRE RIGOROUS PROCEDURE INVOLVED IN REOPENING AN A SSESSMENT AND THE BURDEN OF PROVING VALID REASONS TO BELIEVE COULD BE C IRCUMVENTED BY FIRST ACCEPTING THE RETURN UNDER SECTION 143(1) AND THERE AFTER ISSUE NOTICES TO REOPEN THE ASSESSMENT. AN INTERPRETATION WHICH MAKES A D ISTINCTION BETWEEN THE MEANING AND CONTENT OF THE EXPRESSION RE ASON TO BELIEVE IN CASES WHERE ASSESSMENTS WERE FRAMED EARLIER UNDER SECTION 143(3) AND CASES WHERE MERE INTIMATIONS WERE ISSUED EARLIER UNDER S ECTION 143(1) MAY WELL LEAD TO SUCH AN UNINTENDED MISCHIEF. IT WOUL D BE DISCRIMINATORY TOO. AN INTERPRETATION THAT LEADS TO ABSURD RESULTS OR MISCHIEF IS TO BE ESCHEWED. 17. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF KHUBCH ANDANI HEALTHPARKS (P) LTD. VS. ITO (SUPRA) HAS REITERATED THAT NOTICE ISSUED U/S.148 WOULD BE WITHOUT JURISDICTION FOR ABSENCE OF REASO N TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT EVEN IN CAS E WHERE ASSESSMENT HAS BEEN COMPLETED EARLIER BY INTIMATION U/S.1 43(1) OF THE ACT. THE HONBLE HIGH COURT WHILE HOLDING SO, CONSIDE RED THE DECISIONS RENDERED BY THE HONBLE APEX COURT IN THE CAS E OF CIT VS. RAJESH JHAVERI STOCK BROKERS (P) LTD. REPORTED AS 291 IT R 500 AND 12 ITA NO.128/PUN/2014 AND CO NO. 10/PUN/2015 CIT VS. ZUARI ESTATE DEVELOPMENT & INVESTMENT CO. LTD. (SU PRA). THE RELEVANT EXTRACT OF THE JUDGMENT RENDERED IN THE CASE OF KHUBCHANDANI HEALTHPARKS (P) LTD. VS. ITO (SUPRA) READS AS UNDER : 3. ON HEARING THE PARTIES, WE FIND THAT THE APEX COURT IN ASSISTANT COMMISSIONER OF INCOME TAX VS. RAJESH JHAVERI STOCK BRO KERS P. LTD. 291 ITR 500, HAD AN OCCASION TO DEAL WITH IDENTICAL FACT S, NAMELY REOPENING NOTICES ISSUED UNDER SECTION 148 OF THE ACT WHERE ASSESSME NT IS COMPLETED EARLIER BY INTIMATION UNDER SECTION 143(1 ) OF THE ACT. IN THE ABOVE CASE, THE APEX COURT HELD THAT A NOTICE FOR-RE OPENING AN ASSESSMENT UNDER SECTION 148 OF THE ACT COULD ONLY BE J USTIFIED IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME CHARG EABLE TO TAX HAS ESCAPED ASSESSMENT. THIS DECISION OF THE SUPREME COURT IN RAJESH JHAVERI STOCK BROKERS P. LTD. (SUPRA) HAS NOT BEEN DISTURBED B Y THE APEX COURT IN ZUARI ESTATE DEVELOPMENT AND INVESTMENT CO. LTD. (SUP RA). IN FACT, THE SUPREME COURT IN ZUARI ESTATE DEVELOPMENT AND INVESTM ENT CO. LTD. (SUPRA) MAKES A SPECIFIC REFERENCE TO ITS DECISION IN R AJESH JHAVERI STOCK BROKERS P. LTD. (SUPRA) TO HOLD THAT WHERE THE ASSESSMEN T HAS BEEN COMPLETED BY INTIMATION UNDER SECTION 143(1) OF THE ACT, THERE CAN BE NO QUESTION OF CHANGE OF OPINION. 4. WE FURTHER FIND THAT THE APEX COURT IN ZUARI EST ATE DEVELOPMENT AND INVESTMENT CO. LTD. (SUPRA) HAS NOT DEALT WITH TH E ISSUE WHETHER BEFORE INVOKING SECTION 148 OF THE ACT, THE ASSESSING O FFICER MUST HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS E SCAPED ASSESSMENT, WHERE THE ORIGINAL ASSESSMENT HAS BEEN COMPLETED BY INT IMATION UNDER SECTION 143(1) OF THE ACT. THE REVENUE IS TRYING TO INFER THAT BECAUSE THE APEX COURT IN ZUARI ESTATE DEVELOPMENT AND INVESTMENT CO. LTD. (SUPRA) HAS SET ASIDE THE ORDER OF THIS COURT AND RESTORED THE I SSUE TO BE DECIDED ON MERITS BY THE TRIBUNAL, IT MUST BE INFERRED THAT T HE APEX COURT HAD COME TO THE CONCLUSION THAT REASON TO BELIEVE WAS NOT NECESSARY FOR ISSUING REASSESSMENT NOTICES WHERE THE REGULAR ASSESSMENT WAS COMPLETED UNDER SECTION 143(1) OF THE ACT. AS RIGHT LY POINTED OUT BY MR. PARDIWALLA, IT CAN EQUALLY BE INFERRED THAT THE APE X COURT IN THE ABOVE CASE HAD COME TO THE CONCLUSION THAT THERE IS REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT AND CONSEQUENTLY RESTORED T HE ISSUE TO THE TRIBUNAL TO DECIDE THE REASSESSMENT PROCEEDINGS ON M ERITS. 18. THUS, IN VIEW OF THE FACTS OF THE PRESENT CASE AND TH E CASE LAWS DISCUSSED ABOVE WE HOLD THAT THE ASSESSING OFFICER HAD NO TANGIBLE MATERIAL TO JUSTIFY HIS REASON TO BELIEVE THAT INCOME HA S ESCAPED ASSESSMENT. THE REASSESSMENT PROCEEDINGS INITIATED BY T HE ASSESSING OFFICER U/S.147 ARE WITHOUT JURISDICTION AND HENCE, ARE NOT SUSTAINABLE. ACCORDINGLY GROUND NO.1 TO 3 RAISED BY DEP ARTMENT IN APPEAL ARE DISMISSED. 13 ITA NO.128/PUN/2014 AND CO NO. 10/PUN/2015 19. THE SECOND ISSUE IN APPEAL IS, WHETHER THE DRP HAS P OWER TO ANNUAL ASSESSMENT. BEFORE PROCEEDING FURTHER TO DECIDE T HE ISSUE, IT WOULD BE RELEVANT TO FIRST SEE THE RELEVANT PROVISIONS OF T HE ACT WHICH DEFINE THE POWERS OF DRP. REFERENCE TO DRP IS MADE U/S.14 4C. THE SCOPE OF DRPS JURISDICTION IS ENVISAGED IN SUBSECTION (5) T O (8) OF SECTION 144C. FOR THE SAKE OF QUICK REFERENCE, THE RELEVA NT PROVISIONS OF SECTION 144C ARE REPRODUCED HEREINUNDER : (5) THE DISPUTE RESOLUTION PANEL SHALL, IN A CASE WH ERE ANY OBJECTION IS RECEIVED UNDER SUB-SECTION (2), ISSUE SUCH DIRECTION S, AS IT THINKS FIT, FOR THE GUIDANCE OF THE ASSESSING OFFICER TO ENABLE HIM TO COMPLETE THE ASSESSMENT. (6) THE DISPUTE RESOLUTION PANEL SHALL ISSUE THE DIRECT IONS REFERRED TO IN SUB-SECTION (5), AFTER CONSIDERING THE FOLLOWING, N AMELY: ( A ) DRAFT ORDER; ( B ) OBJECTIONS FILED BY THE ASSESSEE; ( C ) EVIDENCE FURNISHED BY THE ASSESSEE; ( D ) REPORT, IF ANY, OF THE ASSESSING OFFICER, VALUATION OFFICER OR TRANSFER PRICING OFFICER OR ANY OTHER AUTHORITY; ( E ) RECORDS RELATING TO THE DRAFT ORDER; ( F ) EVIDENCE COLLECTED BY, OR CAUSED TO BE COLLECTED BY, IT; AND ( G ) RESULT OF ANY ENQUIRY MADE BY, OR CAUSED TO BE MAD E BY, IT. (7) THE DISPUTE RESOLUTION PANEL MAY, BEFORE ISSUING A NY DIRECTIONS REFERRED TO IN SUB-SECTION (5), ( A ) MAKE SUCH FURTHER ENQUIRY, AS IT THINKS FIT; OR ( B ) CAUSE ANY FURTHER ENQUIRY TO BE MADE BY ANY INCOM E-TAX AUTHORITY AND REPORT THE RESULT OF THE SAME TO IT. (8) THE DISPUTE RESOLUTION PANEL MAY CONFIRM, REDUCE OR ENHANCE THE VARIATIONS PROPOSED IN THE DRAFT ORDER SO, HOWEVER, TH AT IT SHALL NOT SET ASIDE ANY PROPOSED VARIATION OR ISSUE ANY DIRECTION UNDER SUB -SECTION (5) FOR FURTHER ENQUIRY AND PASSING OF THE ASSESSMENT ORDER. A PERUSAL OF THE PROVISIONS SHOW THAT DRP ON RECEIPT OF OBJECTIONS SHALL ISSUE SUCH DIRECTIONS, AS IT THINKS FIT AFTER CONSIDERING 14 ITA NO.128/PUN/2014 AND CO NO. 10/PUN/2015 THE RELEVANT DOCUMENTS AND RECORDS AS SPECIFIED IN SUB-S ECTION (6). A FURTHER STUDY OF SUB-SECTION (8) CLARIFIES THAT THE DRP HAS POWER TO CONFIRM, REDUCE OR ENHANCE THE VARIATIONS PROPOSED IN THE DRAFT ORDER, BUT HAS NO POWER TO SET ASIDE ANY PROPOSED VARIATION O R ISSUE ANY DIRECTIONS TO PASS ASSESSMENT ORDER AFTER FURTHER ENQUIRY. 20. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF VODAFON E INDIA SERVICES PVT. LTD. VS. UOI AND OTHERS (SUPRA) AND VODAFON E-II CASE HAD EXPLAINED THE PROVISIONS OF SECTION 144C RELATING TO TH E POWERS OF DRP IN ADJUDICATING VARIOUS ISSUES INCLUDING JURISDICTIONAL ISSU ES. THE HONBLE HIGH COURT HELD THAT THE DRP HAS WIDE POWER S TO ADJUDICATE OBJECTIONS FILED BY THE ASSESSEE. THE DRPS P OWER TO CONFIRM WOULD ALSO INCLUDE THE POWER NOT TO CONFIRM. THE RE LEVANT EXTRACT OF THE JUDGMENT RENDERED BY HONBLE APEX COUR T IN THE CASE OF VODAFONE INDIA SERVICES PVT. LTD. VS. UOI AND OTHERS IS AS UNDER : 85. ONCE THIS IS ACCEPTED THE FALLACY IN THE PETITIO NERS INTERPRETATION OF SECTION 144C(8) IS CLEAR. THE WORDS THE VARIATIO NS PROPOSED IN THE DRAFT ORDER USED IN SUB-SECTION (8) OBVIOUSLY REFER TO THE VARIATIONS IN THE INCOME OR LOSS RETURN IN THE DRAFT ASSESSMENT ORDER R EFERRED TO IN SUB- SECTION (1)OF SECTION 144-C. THUS, SUB-SECTION (8) OF SECTION 144-C EMPOWERS THE DRP TO CONFIRM, REDUCE OR ENHANCE THE VARIATIONS PROPOSED IN THE DRAFT ORDER AS A WHOLE AND NOT THE VARIATIONS IN THE ARMS LENGTH PR ICE OF THE INTERNATIONAL TRANSACTIONS ALONE. THE DRP, THEREFORE , IS ENTITLED TO CONFIRM, REDUCE OR ENHANCE ANY VARIATIONS IN THE DR AFT ORDER AND THE DRAFT ORDER, AS WE HAVE HELD, MAY CONTAIN VARIATIONS IN THE INCOME OR LOSS RETURN GENERALLY. 86. WE ALSO AGREE WITH THE ADVOCATE GENERAL THAT IF THE ASSESSEE CHOOSES TO FILE AN OBJECTION BEFORE THE DRP, HE MUST D O SO IN RESPECT OF THE ENTIRE DRAFT ORDER AND NOT MERELY IN RESPECT OF A PART THEREOF. IN OTHER WORDS, ONCE AN ASSESSEE OPTS TO FILE OBJECTIONS BEFORE T HE DRP HE CANNOT RESTRICT THE SAME ONLY INSOFAR AS IT RELATES TO THE INTE RNATIONAL TRANSACTIONS. A VIEW TO THE CONTRARY WOULD RENDER TH E ENTIRE ASSESSMENT PROCEEDINGS UNWORKABLE. THE ASSESSEE CANNOT POSSIBLY HAV E A PART OF THE ASSESSMENT ORDER DECIDED BY THE DRP AND A PART OF IT DE CIDED IN AN APPEAL BEFORE THE CIT(APPEALS). THERE IS, IN ANY EVENT, NO PROVISION FOR THE SAME IN THE ACT. 15 ITA NO.128/PUN/2014 AND CO NO. 10/PUN/2015 87. MOREOVER, THE DRP HAS VIDE JURISDICTION AS IS EVIDE NT, INTER-ALIA, FROM SUB-SECTION (8) OF SECTION 144-C. THE DRP IS REQU IRED TO ISSUE DIRECTIONS UNDER SUB-SECTION (5) AFTER CONSIDERING A VA RIETY OF MATTERS MENTIONED IN SUB-SECTION (6) OF SECTION 144-C. FIRST, CLAUSE (A) OF SUB-SECTION (6) DOES NOT RESTRICT T HE DRPS CONSIDERATION TO ANY PARTICULAR ASPECT OR ASPECTS OF TH E DRAFT ORDER. CLAUSE (B) OF SUB-SECTION (2) OF SECTION 144-C DOES NOT RESTRICT THE NATURE OF THE OBJECTIONS THAT CAN BE FILED BEFORE THE DRP. SIMILARLY, CLAUSE (B) OF SUB-SECTION (6) OF SECTION 144-C DOES NOT RESTRICT THE D RPS CONSIDERATION TO ANY PARTICULAR TYPE OF THE OBJECTIONS. IT MERELY REFERS TO OBJECTIONS FILED BY THE ASSESSEE. SUB-SECTION (6)(C) DOES NOT LIMI T THE DRPS CONSIDERATION OF THE EVIDENCE TO ANY PARTICULAR ASPEC T OR ISSUE. IT REFERS IN GENERAL TO THE EVIDENCE FURNISHED BY THE ASSESSEE. CLAUSE (D) ALSO DOES NOT LIMIT THE CONSIDERATION BY THE DRP TO ANY PA RTICULAR ASPECT OF THE REPORT OF THE AO OR THE TPO. NOR DOES IT LIMIT THE CONSIDERATION BY THE DRP TO THE NATURE OF THE REPORT RELATING TO THE DRA FT ASSESSMENT ORDER. SUB-SECTION (6) AND ESPECIALLY CLAUSES (A) AND (B) TH EREOF ILLUSTRATE THAT THE DRP WOULD ALSO BE ENTITLED TO CONSIDER WHET HER OR NOT THE TPO WAS ENTITLED TO EXERCISE JURISDICTION. 88. THIS VIEW IS NOT REPUGNANT TO THE WORDS CONFIRM, REDUCE OR ENHANCE IN SECTION 144C(8). THE SUGGESTION THAT THESE THREE WORDS REFER ONLY TO THE VALUATION OR QUANTIFICATION OF THE ARM S LENGTH PRICE IS UNFOUNDED. A REDUCTION OR AN ENHANCEMENT INDEED RE LATE TO THE VALUATION OR QUANTIFICATION. THE WORD CONFIRM, H OWEVER, IS MUCH WIDER. THE DRPS POWER TO CONFIRM WOULD INCLUDE THE POWER N OT TO CONFIRM. IT WOULD INCLUDE THE POWER TO ANNUL THE VARIATIONS OR A NY OF THEM. THE DOUBT, IF ANY, IS SET TO REST BY THE USE OF THE WORDS M AY CONFIRM. ONCE THE ENTIRE DRAFT ORDER IS BEFORE THE DRP FOR CONFIRM ATION, IT IS AXIOMATIC THAT IT WOULD HAVE THE POWER TO CONSIDER THE ENTIRE DRAFT ASSESSMENT ORDER, INCLUDING THE QUESTION AS TO WHETHER THE UNREP ORTED TRANSACTIONS ARE INTERNATIONAL TRANSACTIONS OR NOT OR EVEN WHETHER THE TPO CONSIDERED WAS A TRANSACTION AT ALL. THE DIVISION BENCH OF THE GUJARAT HIGH COURT IN VEE R GEMS (SUPRA) ALSO HELD THAT THE ISSUE WHETHER THERE WAS AN INTERNATI ONAL TRANSACTION OR NOT CAN ALSO BE EXAMINED BY THE DRP. 89. THIS VIEW, IN FACT, PROTECTS THE RIGHT OF AN ASSESSEE WHO WOULD OTHERWISE BE DEPRIVED OF A VALUABLE RIGHT OF ONE APP EAL. AN APPEAL AGAINST THE ORDER OF THE DRP LIES ONLY TO THE ITAT. THE LEGISLATURE COULD HARDLY BE EXPECTED TO HAVE INTENDED TO DEPRIVE AN A SSESSEE OF A VALUABLE RIGHT OF AN APPEAL WITHOUT EXPRESS WORDS TO THAT EFFEC T. WE DO NOT SUGGEST THAT THE LEGISLATURE IS NOT COMPETENT TO DO SO. WE ARE NOT INCLINED, HOWEVER, TO ASCRIBE TO THE LEGISLATURE AN I NTENTION TO DEPRIVE AN ASSESSEE OF SUCH A RIGHT IN THE ABSENCE OF ANY PROVISION O R EVEN WORDS TO THAT EFFECT. AGAIN IN VODAFONE-II CASE, WHERE THE PETITIONER/ASSESSEE HAD CONTENDED THAT THE POWERS OF DRP ARE LIMITED AND THE DR P HAS NO POWER TO SET ASIDE ANY PROPOSED VARIATION, THE HONBLE H IGH COURT 16 ITA NO.128/PUN/2014 AND CO NO. 10/PUN/2015 REITERATED THE LAW LAID DOWN IN VODAFONE INDIA SERVICES PVT . LTD. VS. UOI (SUPRA) AND HELD : 28. THUS IT WOULD BE OPEN TO DRP TO CONSIDER ALL ISSUE S, INCLUDING THE JURISDICTIONAL ISSUE OF NO INCOME ARISING AND/OR AFFECT ED BY THE INTERNATIONAL TRANSACTION. THIS THE DRP CAN DO BY ISSU ING FINAL DIRECTIONS UNDER SECTION1 44C(5) TO THE ASSESSING OFFICER OR BEFORE ISSUING FINAL DIRECTIONS, BY ISSUING DIRECTIONS UNDER SECTION 144C(7) TO THE ASSESSING OFFICER TO MAKE A FURTHER ENQUIRY AND REPORT. 21. IN VIEW OF THE LAW LAID DOWN BY THE HONBLE BOMBAY H IGH COURT WE ANSWER THE SECOND QUESTION IN AFFIRMATIVE. THUS, IT CAN BE SAFELY CONSTRUED THAT THE DRP HAS POWER TO ADJUDICATE JURISD ICTIONAL ISSUES AND HAS ALSO HAS POWER TO SET ASIDE ANY PROPOSED VARIATIONS. ACCORDINGLY THE GROUND NO.4 RAISED IN THE APPEAL BY DEPARTMENT IS DISMISSED. 22. BEFORE PARTING WITH THE ORDER, WE WOULD LIKE TO OBSERV E THAT THE DEPARTMENT IN VODAFONE-II CASE HAD TAKEN A STAND THAT THE DRP HAS GOT WIDE POWERS. IN THE WRITTEN SUBMISSIONS BEFORE THE H ONBLE HIGH COURT, ON THE ISSUE THE DEPARTMENT HAD SUBMITTED : 25. ON THE ABOVE ISSUE, THE REVENUE HAS SUBMITTED IN T HEIR WRITTEN SUBMISSIONS AS UNDER : THE PETITIONER IS NOT CORRECT IN CONTENDING THAT TH E POWERS CONFERRED IN SUB-SECTION (5) OF SECTION 144C TO THE DRP ARE CURTAI LED BY ITS SUB-SECTION (8), PARTICULARLY WHEN FETTERS ARE PUT ON THE DRP TH AT IT SHALL NOT SET ASIDE ANY PROPOSED VARIATION OR ISSUE ANY DIRECTION UNDER SUB -SECTION (5) FOR FURTHER ENQUIRY AND PASSING OF THE ASSESSMENT ORDER. IN THIS CONTEXT, IT IS SUBMITTED THAT A PURPOSIVE CONSTRUCTION SHOULD BE GIVEN TO THIS SUB- SECTION BY HARMONIOUSLY READING THE ENTIRE SCHEME OF SE CTION 144C, INCLUDING SUB-SECTIONS (6, (7) AND (12) AND SUB-SECTION (13). IT IS FURTHER SUBMITTED THAT FETTER TO SET ASIDE THE ISSUE OF DIRECTIO NS IS LIMITED TO FURTHER ENQUIRY BY THE AO WHICH CAN BE READ WITH SUB -SECTION (13) SO THAT THE COMPLETION OF ASSESSMENT IS EXPEDITED WITHIN AVAILA BLE LIMITED TIME OF NINE (9) MONTHS. 17 ITA NO.128/PUN/2014 AND CO NO. 10/PUN/2015 IN THE PRESENT CASE, THE DEPARTMENT HAS TAKEN JUST T HE OPPOSITE STAND. HERE, THE DEPARTMENT HAS CONTENDED THAT THE P OWERS OF DRP ARE NOT WIDE ENOUGH TO SET ASIDE THE ASSESSMENT. THE DEPARTMENT CANNOT BE ALLOWED TO APPROBATE AND REPROBATE ON SAME ISSUE IN DIFFERENT CASES, BEFORE DIFFERENT FORUMS. THE DEPARTMENT W HILE DEFENDING/ASSAILING THE ORDERS OF THE AUTHORITIES BELOW IS OS CILLATING BETWEEN TWO EXTREME VIEWS. 23. THE ASSESSEE IN CROSS OBJECTIONS HAS RAISED THE FOLLO WING SOLITARY GROUND : WITHOUT PREJUDICE TO THE RELIEF GRANTED BY THE HON BLE DISPUTE RESOLUTION PANEL [THE DRP] IN RELATION TO REOPENIN G OF THE ASSESSMENT PROCEEDINGS BEYOND FOUR YEARS, THE LEARNED DRP ERRED IN NOT ADJUDICATING UPON OBJECTION NO.2 BEING RECEIPTS FOR IT SUPPORT SERVICES AMOUNTING TO INR 2,43,74,790. IT IS FURTHER PRAYED THAT THE HONBLE APPELLATE AUTH ORITY IS ENTITLED TO CONSIDER THE CLAIM AND HAS THE POWER TO ADJUDICATE TH E SAME IN ACCORDANCE WITH LAW. SINCE, THE APPEAL OF REVENUE HAS BEEN DISMISSED, THE GROUN D RAISED BY ASSESSEE IN CO HAS BECOME ACADEMIC AND HENC E REQUIRES NO ADJUDICATION. ACCORDINGLY THE CO IS DISMISSED AS INFRUCTUOUS. 24. IN THE RESULT, THE APPEAL OF DEPARTMENT AND THE CR OSS OBJECTIONS OF ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 28 TH DAY OF DECEMBER, 2016. SD/- SD/- (R.K. PANDA) (VIKAS AWASTHY) / ACCOUNTANT MEMBER # / JUDICIAL MEMBER / PUNE ; DATED : 28 TH DECEMBER, 2016 . SATISH 18 ITA NO.128/PUN/2014 AND CO NO. 10/PUN/2015 ) *#,! -! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. CIT(A) - IT/TP , PUNE 4. CIT- IT/TP, PUNE 5. ' %%& , & , / DR, ITAT, B PUNE; 6. + / GUARD FILE. / BY ORDER , // TRUE COPY // //TRUE COPY// -. % & / SR. PRIVATE SECRETARY & , / ITAT, PUNE