DCIT, New Delhi V. M/s. Eltek SGS Pvt. Ltd., New Delhi

ITA 1253/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4749 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-06-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 05-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Transfer pricing; Opportunity of being heard; Principle of natural justice; International transaction; Period of limitation; Permanent establishment; Time period of passing order
• Section: 143(3); 14A; 80IB; 147

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B: NEW DELHI BEFORE SHRI I.C.SUDHIR, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 1253/DEL/2014 (ASSESSMENT YEAR: 2005 - 06) DCIT, CIRCLE - 11(1), NEW DELHI VS. ELTEK SGS PVT. LTD, B - 17, MAHARANI BAGH, NEW DELHI PAN:AAACE2920L (APPELLANT) (RESPONDENT) CO NO. 88/DEL/2016 (IN TA NO. 1253/DEL/2014) (ASSESSMENT YEAR: 2005 - 06) ELTEK SGS PVT. LTD, B - 17, MAHARANI BAGH, NEW DELHI PAN:AAACE2920L VS. DCIT, CIRCLE - 11(1), NEW DELHI (APPELLANT) (RESPONDENT) ITA NO. 1319/DEL/2014 (ASSESSMENT YEAR: 2009 - 10 ) ELTEK SGS PVT. LTD, B - 17, MAHARANI BAGH, NEW DELHI PAN:AAACE2920L VS. DCIT, CIRCLE - 11(1), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL BHALLA, ADV REVENUE BY: SHRI ANSHU PRAKASH, SR. DR DATE OF HEARING 06/09 / 2017 DATE OF PRONOUNCEMENT 13 / 09 / 2017 O R D E R PER PRASHANT MAHARISHI, A. M. A Y 2005 - 06 1. THESE ARE THE APPEALS FILED BY THE REVENUE AND TH E CROSS OBJECTION FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2005 - 06 WHEREIN THE LD. CIT ( APPEALS ) XIII, NEW DELHI VIDE ORDER DATED 06/12/2013 ALLOWED THE CLAIM OF THE DEDUCTION UNDER SECTION 80 IB OF THE INCOME TAX ACT, WHICH WAS DISALLOWED BY LD. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11 (1), N EW DELHI (HEREINAFTER REFERRED TO AS THE LD. AO) WIDE HER PAGE 2 OF 14 ORDER DATED 28/01/2013 PASSED UNDER SECTION 143 (3) READ WITH SECTION 147 OF THE INCOME TAX ACT. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF IN ITA NO. 1253/DEL/2014 1. ON THE FACTS AND CIRCUM STANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 42101744/ - MADE BY DISALLOWING DEDUCTION U/S 80IB OF THE ACT AS THE ASSESSEE COMPANY WAS NOT COVERED THE DEFINITION OF SMALL SCALE INDUSTRY. 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF IN CO NO. 88/DEL/2016: - 1. THE LD COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT GROUND NO.1 TO 1.2 IN REGARD TO ILLEGALITY OF THE ASSUMPTION OF JURISDICTION U/S 147 WAS NOT PRESSED BEFORE COMMISSIONER OF INCOME TAX (APPEAL S). WITHOUT PREJUDICE THE LD ASSESSING OFFICER HAS ASSUMED JURISDICTION U/S 147 INCORRECTLY AND CONSEQUENTLY THE ORDER U/S 143(3)/ 147 IS ILLEGAL AND HAS TO BE QUASHED. 4. BRIEFLY THE FACTS OF THE CASE SHOWS THAT ASSESSEE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF ELECTRONIC AND ELECTRICAL EQUIPMENTS. IT FILED ITS RETURN OF INCOME ON 31/10/2005 SHOWING THE TOTAL INCOME AT RS. 1 0388 2080/ WHICH WAS ASSESSED UNDER SECTION 143 (3) OF THE INCOME TAX ACT DATED 23/12/2008 AT RS. 1 0394 6700/ WHEREIN CLAIM OF THE ASSESSEE UNDER SECTION 80 IB OF THE INCOME TAX WAS ALLOWED OF RS. 4 2101744/ - AGAINST CLAIM OF THE ASSESSEE OF RS. 4 216 6368/ . SUBSEQUENTLY THE CASE OF THE ASSESSEE WAS REOPENED WHEN IT WAS NOTED THAT THE INDUSTRIAL UNDERTAKING HAS STARTED THE PRODUCTION ON 15/03/1997 I.E. AFTER THE SUNSET DATE OF 31/ 3/ 1995. FURTHER, IT WAS NOTED THAT THE IMPUGNED UNDERTAKING OF THE ASSESSEE WAS ALSO NOT A SMALL - SCALE INDUSTRIAL UNDERTAKING. HENCE, THE DEDUCTION CLAIMED UNDER SECTI ON 80 IB OF THE INCOME TAX ACT OF RS. 4 210 1744/ WAS WITHDRAWN AND TOTAL INCOME WAS ASSESSED AT RS. 4 4578 5450/ . AGAINST WHICH THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT (A) . THE LD. CIT (A) , HELD THAT GROSS BLOCK OF INVESTMENT IN PLANT AND MACHINE RY OF THE ASSESSEE WAS ONLY RS. 5 564817, WHEREAS THE OVERALL LIMIT FOR INVESTMENT IN A SMALL - SCALE INDUSTRIAL UNDERTAKING WAS RS. 3 CRORES. HENCE, ACCORDING TO HIM THE INVESTMENT WAS WITHIN THE PRESCRIBED LIMIT AND ASSESSEE WAS A SMALL - SCALE INDUSTRIAL UN DERTAKING. FURTHER, THE ASSESSEE HAS BEEN ALLOWED THE DEDUCTION FOR ASSESSMENT YEAR 2003 04 AND 2004 05 IN EARLIER YEARS. HE DIRECTED THE LD. ASSESSING OFFICER TO ALLOW THE CLAIM OF DEDUCTION UNDER SECTION 80 IB OF THE INCOME TAX FOR THE YEAR UNDER CON SIDERATION OF THE ASSESSEE. AGGRIE VED BY THE ORDER OF THE LD. CIT(A) , THE REVENUE IS IN APPEAL BEFORE US. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION BEFORE US CHALLENGING THE JURISDICTION UNDER SECTION 147 OF THE INCOME TAX ACT. 5. THE LD. DEPARTMENTAL REPRE SENTATIVE SUPPORTED THE ORDER OF THE LD. ASSESSING OFFICER, WHEREAS THE LD. AUTHORISED REPRESENTATIVE RELIE D UPON THE ORDER OF THE LD. CIT(A) . PAGE 3 OF 14 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITY. THE LD. CI T (A) HAS CATEGORICALLY HELD THAT ASSESSEES INVESTMENT IN PLANT AND MACHINERY IS BELOW THE SPECIFIED LIMIT AND THEREFORE IT IS ENTITLED TO DEDUCTION UNDER SECTION 80 IB OF THE INCOME TAX ACT. IT WAS FURTHER HELD BY HIM THAT IN EARLIER YEARS. THE DEDUCTION HAS NOT BEEN DISTURBED AND THEREFORE THE ELIGIBILITY CONDITIONS OF THE ASSESSEE ARE SATISFIED. LD. DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY INFIRMITY IN THE ORDER OF THE LD. CIT (A) BEFORE US WITH RESPECT TO DEDUCTION UNDER SECTION 80IB CLAIMED BY THE ASSESSEE. HE ALSO COULD NOT CONTROVERT THAT INVESTMENT IN PLANT AND MACHINERY OF THE ASSESSEE IS HIGHER THAN THE PRESCRIBED LIMIT. IN VIEW OF THIS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT (A) , IN ALLOWING THE APPEAL OF THE ASSESSEE BY ALLOWING THE RELIEF UNDER SECTION 80 IB OF THE INCOME TAX ACT OF RS. 42101744/ - . IN THE RESULT, THE SOLITARY GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 7. THE CROSS OBJECTION OF THE ASSESSEE IS WITH RESPECT TO THE ASSUMPTION OF JURISDICTION UNDER SECTION 147 OF THE INCOME TAX ACT. BEFORE US NO ARGUMENTS WERE ADVANCE BY THE LD. AUTHORISED REPRESENTATIVE. WITH RESPECT TO THE SAME AND WE HAVE ALSO PERUSED THE ORDER OF THE LD. CIT (A) , WHEREIN THIS PARTICULAR ARGUMENT WITH RESPECT TO THE JURISDICTION WAS ALSO N OT CHALLENGED. IN VIEW OF THIS WE ARE NOT INCLINED TO ACCEPT THE CLAIM OF THE ASSESSEE AGAINST THE JURISDICTION ASSUMED BY THE ASSESSING OFFICER. IN VIEW OF THIS WE DISMISS THE CROSS OBJECTION OF THE ASSESSEE. 8. IN THE RESULT APPEAL OF THE REVENUE AS WELL A S THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED FOR ASSESSMENT YEAR 2005 - 06. ITA NO. 1319/DEL/2014 ASSESSMENT YEAR 2009 - 10 9. FOR ASSESSMENT YEAR 2009 - 10 , ASSESSEE HAS FILED APPEAL AGAINST THE ORDER OF THE LD. DEPUTY COMMISSIONER OF INCOME TAX , CIRCLE 11 (1), NEW DELHI (HEREINAFTER REFERRED TO AS THE LD. AO) PASSED UNDER SECTION 144C ON 16/12/2013 PURSUANT TO THE DIRECTION OF THE LD. DISPUTE RESOLUTION PANEL UNDER SECTION 144C DATED 27/11/2013 PASSED ON THE DRAFT ASSESSMENT ORDER DATED 15/02/2013 WHEREI N THE ORDER OF THE LD. TRANSFER PRICING OFFICER DATED 10/09/2012 WAS INCORPORATED. A SSESSEE HAS RAISED THE FOLLOWING GROUNDS OF IN ITA NO. 1319/DEL/2014: - 1. THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX HAS ERRED BOTH ON FACTS AND IN LAW IN PASSING THE ASSESSMENT ORDER BEYOND THE TIME LIMIT AS PRESCRIBED U/S. 153 OF THE INCOME TAX ACT, 1961 THEREFORE ASSESSMENT ORDER PASSED BY THE AO IS BARRED BY LIMITATION. 1.1. THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN HOLDING THE APPELLANT COMPANY AS AN 'ELIGIBLE ASSESSEE' AS PAGE 4 OF 14 DEFINED IN SECTION 144C (15) OF THE INCOME TAX ACT, 1961 AND THEREBY WRONGLY APPLYING THE PROCEDURE FOR ISSUANCE OF DRAFT ORDER. 2. THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX HAS ERRED BOTH ON FACTS AND IN LAW IN DISALLOWING EXPENSES AMOUNTING TO RS. 20,06,906/ - U/S 14A IN ADDITION TO RS.80,000/ - DISALLOWED BY THE APPELLANT COMPANY IN ITS RETURN OF INCOME BY WRONGLY APPLYING RULE 8D AND THEREBY NOT FOLLOWING DECISION OF JURISDICTIONAL HIGH COURT IN MAXOPP INVESTMENT LTD 203 TAXMAN 364. 10. ASSESSEE IS A PRIVATE LIMITED COMPANY WHO FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2009 - 10 ON 29/09/200 9 SHOWING TOTAL INCOME OF RS. 4 48571582/ - . THE LD. ASSESSING OFFICER REFERRED THE MATTER TO THE LD. TR ANSFER PRICING OFFICER TO PASS THE ORDER UNDER SECTION 9 2CA(3) OF THE INCOME TAX ACT, WHO PASSED THE ORDER ON 10/09/2012 WITHOUT DRAWING ANY ADVERSE INFERENCES OR MAKING ANY ADJUSTMENT TO THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS ENTERED INT O BY THE ASSESSEE. THEREAFTER THE DRAFT ASSESSMENT ORDER WAS PASSED BY THE LD. ASSESSING OFFICER ON 15 /02/ 2013 AGAINST WHICH ASSESSEE PREFERRED OBJECTIONS BEFORE THE LD. DISPUTE RESOLUTION PANEL ON 19/03/2013. THE LD. DISPUTE RESOLUTION PANEL ISSUED DIRECT ION UNDER SECTION 144C(5) OF THE ACT ON 27/11/2013 STATING THAT IT DOES NOT HAVE ANY JURISDICTION TO ISSUE ANY DIRECTION AS THERE IS NO VARIATION TO THE TOTAL INCOME PROPOSED BY THE LD. TRANSFER PRICING OFFICER AND ONLY DISALLOWANCES MADE BY THE LD. ASSESS ING OFFICER UNDER SECTION 14 A OF THE INCOME TAX ACT. HENCE OBJECTIONS FILED BY ASSESSEE BEFORE THE LD. DISPUTE RESOLUTION PANEL WERE DISMISSED. CONSEQUENT TO THAT FINAL ASSESSMENT ORDER WAS PASSED BY THE LD. ASSESSING OFFICER ON 16/12/2013 BY MAKING AT DI SALLOWANCE UNDER SECTION 14 A OF THE INCOME TAX ACT OF RS. 2006906/ - AND ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT RS. 4 50578486/ - . AGGRIEVED BY THE FINAL ASSESSMENT ORDER, THE ASSESSEE HAS PREFERRED APPEAL BEFORE US. 11. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT AO COULD NOT HAVE PROCEEDED TO PASSED THE FINAL ASSESSMENT ORDER UNDER SECTION 143(3) ON 16/12/2013 IN VIEW OF THE DIRECTION OF THE DRP HOLDING THAT ASSESSEE, NOT TO BE AN ELIGIBLE ASSESSEE. HE THEREFORE SUB MITTED THAT LIMITATION PRESCRIBED UNDER SECTION 144C(13) DOES NOT APPLY TO THE ASSESSEE AND HENCE THE ORDER PASSED BY THE LD. ASSESSING OFFICER IS BEYOND LIMITATION PERIOD. HE FURTHER SUBMITTED THAT THE DRAFT ASSESSMENT ORDER DATED 15/02/2013 IS ALSO INVAL ID. AS THE ASSESSEE IS NOT AN ELIGIBLE ASSESSEE. ACCORDING TO THE PROVISIONS OF SECTION 144C OF THE INCOME TAX ACT . HE FURTHER SUBMITTED THAT LIMITATION PERIOD AS PRESCRIBED UNDER SECTION 153 OF THE INCOME TAX ACT HAS ENDED ON 31 ST . DECEMBER 2012, WHEREAS THE FINAL ASSESSMENT PASSED ON 16/12/2013 AND HENCE, BARRED BY LIMITATION. HE THEREFORE REFERRED TO THE DECISION OF HONBLE DELHI HIGH COURT IN 382 ITR 88 AND 68 TAXMANN.COM 377. PAGE 5 OF 14 12. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ORDER PASSED BY THE LD . ASSESSING OFFICER IS NOT BARRED BY LIMITATION. 13. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. IT IS AN ADMITTED FACT THAT LD. TRANSFER PRICING OFFICER HAS NOT PROPOSED ANY VARIATION TO THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS ENTERE D INTO BY THE ASSESSEE. THEREFORE, THE RIGHT COURSE OF ACTION FOR THE LD. ASSESSING OFFICER WAS TO PASS AN ASSESSMENT ORDER UNDER SECTION 143(3) OF THE INCOME TAX ACT AND NOT TO PASS THE DRAFT ASSESSMENT ORDER. THE ABOVE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF 388 ITR 383 ESPN STAR SPORTS MAURITIUS S. N. C. ET COMPAGNIE (NOW KNOWN AS ESS ADVERTISING (MAURITIUS) S. N. C. ET COMPAGNIE) & . ESS DISTRIBUTION (MAURITIUS) S. N. C. ET COMPAGNIE V. UNION OF INDIA AND ANOTHER WHERE THE ISSUE IS IDENTICALLY DECIDED AS UNDER: - 2. IN WRIT PETITION (CIVIL) NO. 2384 OF 2015, THE PETITIONER, M/S. ESPN STAR SPORTS MAURITIUS S.N.C. ET COMPAGNIE (NOW KNOWN AS ESS ADVERTISING (MAURITIUS) S.N.C ET COMPAGNIE) (HEREINAFTER REFERRED TO AS 'ESPN STAR SPORTS') IS A PARTNERSHIP FIRM ESTABLISHED UNDER THE LAWS OF MAURITIUS. IT WAS ESTABLISHED BY ESPN MAURITIUS LIMITED (NOW KNOWN AS WORLDWIDE WICKETS, MAURITIUS) HAVING 99.9 PER CENT. SHARE IN PROFIT AND ESS ASIAN NETWORK PVT. LIMITED (INCORPORATED IN SINGAPORE) HAVING 0.1 PER CENT. SHARE. ESPN STAR SPORTS IS ENGAGED IN THE BUSINESS OF ALLOTTING ADVERTISING TIME AND PROGRAMME SPONSORSHIP ('AD TIME') IN CONNECTION WITH TELEVISION PROGRAMMING. IT IS FURTHER STA TED THAT ESPN STAR SPORTS HAS ENTERED INTO AGREEMENTS WITH ESPN SOFTWARE INDIA PRIVATE LIMITED (NOW KNOWN AS STAR SPORTS INDIA PRIVATE LIMITED) FOR ALLOTTING ADVERTISEMENT TIME TO VARIOUS ADVERTISERS AND ADVERTISING AGENCIES IN INDIA. 3. IN WRIT PETITION ( CIVIL) NO. 2397 OF 2015, THE PETITIONER, M/S. ESS DISTRIBUTION (MAURITIUS) (HEREINAFTER REFERRED TO AS 'ESS DISTRIBUTION'), IS ALSO A PARTNERSHIP FIRM ESTABLISHED UNDER THE LAWS OF MAURITIUS. IT WAS ALSO ESTABLISHED BY ESPN MAURITIUS LIMITED (NOW KNOWN AS WORLDWIDE WICKETS, MAURITIUS AND ALSO INCORPORATED IN MAURITIUS) HAVING 99.9 PER CENT. SHARE IN PROFIT, AND ESS ASIA LIMITED (INCORPORATED IN MALAYSIA) HAVING 0.1 PER CENT. SHARES. ESS DISTRIBUTION IS ENGAGED IN THE BUSINESS OF DISTRIBUTION OF SPORTS AND S PORTS RELATED TELEVISION PROGRAMMES BROADCAST BY ESPN STAR SPORTS, SINGAPORE. ESS DISTRIBUTION HAS ALSO ENTERED INTO AGREEMENTS WITH ESPN SOFTWARE INDIA PRIVATE LIMITED (NOW KNOWN AS STAR SPORTS INDIA PRIVATE LIMITED) FOR DISTRIBUTION OF THE CHANNELS. 4. B OTH ESPN STAR SPORTS AS WELL AS ESS DISTRIBUTION FILED THEIR RESPECTIVE RETURNS OF INCOME FOR THE ASSESSMENT YEAR ('AY') 2010 - 11 ON OCTOBER 1, 2010, WITH THE STATUS OF A FIRM. THE STAND TAKEN BY BOTH THE PETITIONERS IS THAT THE REVENUE GENERATED FROM DISTR IBUTION BEING BUSINESS PROFIT WAS NOT TAXABLE IN INDIA IN VIEW OF THE ARTICLE 7(1) OF THE INDIA - MAURITIUS DOUBLE TAXATION AVOIDANCE AGREEMENT (HEREINAFTER REFERRED TO PAGE 6 OF 14 AS THE 'TREATY') SINCE THERE WAS NO PERMANENT ESTABLISHMENT (PE) OF EITHER THE PETITIONER IN INDIA IN TERMS OF ARTICLE 5 OF THE SAID TREATY. IT IS STATED THAT IN THE NOTES TO THE RETURN OF INCOME FILED BY THE PETITIONERS, IT WAS CLEARLY MENTIONED THAT EACH OF THEM WAS A PARTNERSHIP FIRM INCORPORATED ON MARCH 29, 2002, UNDER THE LAWS OF MAURITI US. 5. BOTH THE RETURNS WERE PICKED UP FOR SCRUTINY BY THE ASSESSING OFFICER. SINCE BOTH THE PETITIONERS HAD ENTERED INTO INTERNATIONAL TRANSACTIONS DURING THE ASSESSMENT YEAR 2010 - 11, THEIR CASES WERE REFERRED TO THE TRANSFER PRICING OFFICER ('TPO') FOR D ETERMINATION OF THE ARM'S LENGTH PRICE ('ALP') OF ALL THE INTERNATIONAL TRANSACTIONS REPORTED IN THE FORM - 3 CEB FILED BY THE PETITIONERS. 6. IN EACH OF THE CASES, THE TRANSFER PRICING OFFICER HAS, BY AN ORDER DATED DECEMBER 17, 2013, ACCEPTED THE VALUE OF THE INTERNATIONAL TRANSACTIONS AS REPORTED BY THE PETITIONERS. IN OTHER WORDS, THERE WAS NO VARIATION OR TRANSFER PRICE ADJUSTMENT AS A RESULT OF THE ORDER OF THE TRANSFER PRICING OFFICER. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFI CER, I.E., THE ADDITIONAL DIRECTOR OF INCOME - TAX, RANGE 1 (ADIT), INTERNATIONAL TAXATION SPECIFICALLY ASKED EACH OF THEM AS TO WHY THE STATUS OF THE FIRM SHOULD NOT BE TREATED AS 'FOREIGN COMPANY' AND TAXED ACCORDINGLY. 7. BY A SEPARATE LETTER DATED MARCH 27, 2014, EACH OF THE PETITIONERS FILED SUBMISSIONS BEFORE THE ASSESSING OFFICER POINTING OUT THE DIFFERENCE BETWEEN A FOREIGN COMPANY AND A FOREIGN PARTNERSHIP FIRM. IT WAS POINTED OUT THAT NEITHER PETITIONER COULD BE CONSIDERED TO BE A COMPANY, AS IT WAS NOT A BODY CORPORATE IN TERMS OF SECTION 2(17) OF ACT. 8. AT THIS STAGE REFERENCE MAY BE MADE TO THE APPLICABLE PROVISIONS. IN TERMS OF THE MECHANISM PROVIDED UNDER SECTION 144C OF THE ACT, WHERE AN ASSESSING OFFICER PROPOSES TO MAKE, ON OR AFTER THE OCTO BER 1, 2009, ANY VARIATION IN THE INCOME OR LOSS RETURNED WHICH IS PREJUDICIAL TO THE INTEREST OF AN 'ELIGIBLE ASSESSEE', THE ASSESSING OFFICER SHALL, IN THE FIRST INSTANCE, FORWARD A DRAFT OF THE PROPOSED ORDER OF ASSESSMENT TO SUCH 'ELIGIBLE ASSESSEE'. 9. SECTION 144C(15)(B) DEFINES 'ELIGIBLE ASSESSEE' AS : '(I) ANY PERSON IN WHOSE CASE THE VARIATION REFERRED TO IN SUB - SEC TION (1) ARISES AS A CONSEQUENCE OF THE ORDER OF THE TRANSFER PRICING OFFICER PASSED UNDER SUB - SECTION (3) OF SECTION 92CA ; AND (II) ANY FOREIGN COMPANY.' 10. THE PROCEEDINGS ENVISAGED UNDER SECTION 144C(2) IS HAT THE 'ELIGIBLE ASSESSEE' SHALL, WITHIN 30 DAYS OF THE RECEIPT OF THE DRAFT ORDER, EITHER FILE HIS ACCEPTANCE OF THE VARIATIONS TO THE ASSESSING OFFICER OR FILE HIS OBJECTIONS TO SUCH VARIATION WITH THE DISPUTE RESOLUTION PANEL AS WELL AS THE ASSESSING OFFICER. 11. UNDER SECTION 144C(15)(A) THE DISPUTE RESOLUTION PANEL HAS BEEN DEFINED AS A 'COLLEGIUM COMPRISING OF THREE PRINCIPAL COMMISSIONERS OR COMMISSIONERS OF INCOME - TAX' CO NSTITUTED BY THE CENTRAL BOARD OF DIRECT TAXES FOR THAT PURPOSE. WHERE OBJECTIONS ARE FILED BEFORE THE DISPUTE PAGE 7 OF 14 RESOLUTION PANEL, IT IS EXPECTED THAT IN TERMS OF SECTION 144C(5), THE DISPUTE RESOLUTION PANEL SHALL ISSUE DIRECTIONS 'AS IT THINKS FIT, FOR THE GUIDANCE OF THE ASSESSING OFFICER TO ENABLE HIM TO COMPLETE THE ASSESSMENT.' THE DISPUTE RESOLUTION PANEL, UNDER SECTION 144C(8) OF THE ACT, HAS THE POWER TO CONFIRM, REDUCE OR ENHANCE THE VARIATION PROPOSED IN THE DRAFT ASSESSMENT ORDER. SECTION 144C(10) OF THE ACT PROVIDES THAT 'EVERY DIRECTION ISSUED BY THE DISPUTE RESOLUTION PANEL SHALL BE BINDING ON THE ASSESSING OFFICER'. 12. FURTHER SECTION 144C(13) OF THE ACT PROVIDES THAT THE ASSESSING OFFICER SHALL, UPON RECEIPT OF THE DIRECTIONS ISSUED UNDER SEC TION 144C(5), COMPLETE THE ASSESSMENT IN CONFORMITY WITH THE SAID DIRECTIONS ISSUED UNDER SECTION 144C (5) NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION 153 OR SECTION 153B, WITHOUT PROVIDING ANY FURTHER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IT IS FURTHER STIPULATED UNDER SECTION 144C(13) THAT THE ASSESSING OFFICER SHALL COMPLETE THE ASSESSMENT WITHIN ONE MONTH FROM THE END OF THE MONTH IN WHICH SUCH DIRECTION ISSUED BY THE DISPUTE RESOLUTION PANEL IS RECEIVED. 13. IN THE ABOVE CONTEXT, THE PETI TIONERS URGED BEFORE THE ASSESSING OFFICER, I.E., ADIT THAT NEITHER OF THEM WAS AN 'ELIGIBLE ASSESSEE' AS DEFINED UNDER SECTION 144C(15)(B) OF THE ACT. IT WAS POINTED OUT THAT NEITHER OF THEM WERE THE 'PERSON' IN WHOSE CASE THE VARIATION AROSE AS THE CONSE QUENCE OF THE ORDER OF THE TRANSFER PRICING OFFICER PASSED UNDER SECTION 92CA(3) OF THE ACT. FURTHER, NEITHER OF THEM WERE A 'FOREIGN COMPANY'. 14. THE ASSESSING OFFICER PASSED THE DRAFT ASSESSMENT ORDER IN THE CASE OF EACH OF THE PETITIONERS ON MARCH 28, 2014. IN PARA. 1.2 OF THE DRAFT ASSESSMENT ORDER FOR ESS DISTRIBUTION AND PARA. 2 OF THE DRAFT ASSESSMENT ORDER FOR ESPN STAR SPORTS, THE ASSESSING OFFICER NOTED THE FACT THAT THE ASSESSEES ARE PARTNERSHIP FIRMS ESTABLISHED UNDER THE LAWS OF MAURITIUS ON M ARCH 29, 2002. FURTHER IT WAS NOTED THAT IN THE CASE OF ESPN STAR SPORTS, ITS RETURN HAD BEEN FILED BY IT DISCLOSING AN INCOME OF RS. 91,63,940 AND IN RESPECT OF ESS DISTRIBUTION, IT DISCLOSED AN INCOME OF RS. 97,07,350. IT WAS FURTHER NOTED BY THE ASSESSI NG OFFICER THAT IN BOTH REPORTS OF THE TRANSFER PRICING OFFICER, THE TRANSFER PRICING OFFICER PROPOSED NO ADJUSTMENT OR VARIATION TO THE ARM'S LENGTH PRICE IN THE INTERNATIONAL TRANSACTIONS FILED BY THE PETITIONERS. NEVERTHELESS, THE ASSESSING OFFICER, I.E ., THE ADIT, COMPUTED THE TOTAL TAXABLE INCOME AS RS. 406,95,60,867 IN THE CASE OF ESS DISTRIBUTION AND RS. 94,93,95,777 IN THE CASE OF ESPN STAR SPORTS. IN THE ABOVE DRAFT ASSESSMENT ORDERS, EACH OF THE PETITIONERS WAS INFORMED THAT IF IT INTENDS TO FILE OBJECTIONS WITH THE DISPUTE RESOLUTION PANEL, IT SHOULD DO SO WITHIN 30 DAYS OF THE RECEIPT OF THE ORDER OR FILE AN ACCEPTANCE OF THE ORDER WITHIN THE SAME PERIOD. IF NO OBJECTIONS ARE RECEIVED DURING THAT PERIOD, THE ASSESSMENT WOULD BE COMPLETED ON THE B ASIS OF THE DRAFT ASSESSMENT ORDER ITSELF. 15. AGGRIEVED BY THE ABOVE DRAFT ORDER, BOTH THE PETITIONERS FILED THEIR RESPECTIVE OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL ON MAY 9, 2014. ONE OF THE GROUNDS IN THE OBJECTION WAS THAT THE ASSESSING OFFICER ERRED IN PASSING A DRAFT ASSESSMENT ORDER UNDER SECTION 144C(1) OF THE ACT NOTWITHSTANDING THAT NEITHER OF THE PETITIONERS WAS AN 'ELIGIBLE ASSESSEE'. PAGE 8 OF 14 16. THE DISPUTE RESOLUTION PANEL ISSUED NOTICES DATED OCTOBER 16, 2014, UNDER SECTION 144C(11) OF THE AC T CALLING UPON THE PETITIONERS TO REPRESENT THEIR CASE AND FILE THEIR RESPECTIVE SUBMISSIONS. A COPY OF THE NOTICES WERE ALSO SENT TO THE ASSESSING OFFICER, I.E., ADIT TO REPRESENT HIS CASE. 17. PURSUANT TO THE ABOVE NOTICES, THE PETITIONERS FILED THEIR RE SPECTIVE WRITTEN SUBMISSIONS. IN EACH OF THE CASE, THE DISPUTE RESOLUTION PANEL PASSED A SEPARATE ORDER DATED DECEMBER 26, 2014, ACCEPTING THE PLEA OF THE PETITIONERS THAT NEITHER OF THEM WAS 'ELIGIBLE ASSESSEE' IN TERMS OF SECTION 144C(15)(B) OF THE ACT. PARA. 4.2 OF BOTH THE ORDERS OF THE DISPUTE RESOLUTION PANEL READS AS UNDER: - '4.2 IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE IS NOT AN 'ELIGIBLE ASSESSEE' IN ACCORDANCE WITH SECTION 144C(15)(B) AS NEITHER THE TRANSFER PRICING OFFICER PROPOSED ANY VARI ATION IN THE RETURNED INCOME NOR THE ASSESSEE IS A FOREIGN COMPANY. THUS, WE DO NOT HAVE THE JURISDICTION OVER THE CASE. CONSEQUENTLY, WE DECLINE TO ISSUE ANY DIRECTION IN THIS CASE. THE PROCEEDINGS HERE ARE, THEREFORE, DISMISSED IN LIMINE IN VIEW OF THE ABOVE.' 18. A COPY OF EACH OF THE ORDERS WAS MARKED TO THE COMMISSIONER OF INCOME - TAX - I, INTERNATIONAL TAX, NEW DELHI, AS WELL AS THE ADDITIONAL COMMISSIONER OF INCOME - TAX, RANGE - I, INTERNATIONAL TRANSACTIONS, NEW DELHI AND THE AS SESSEE. THE ABOVE ORDERS WERE BINDING ON THE ASSESSING OFFICER UNDER SECTION 144C(10) OF THE ACT. HE, THEREFORE, OUGHT TO HAVE BEEN CONSISTENT WITH THE SAID ORDERS, NOT PROCEEDED TO PASS FINAL ASSESSMENT ORDERS ON THE BASIS OF THE DRAFT ASSESSMENT ORDERS P ASSED BY HIM. HOWEVER, THE ASSESSING OFFICER PROCEEDED TO PASS FINAL ASSESSMENT ORDERS ON JANUARY 28, 2015, ON THE BASIS OF THE DRAFT ASSESSMENT ORDERS. THE ASSESSING OFFICER PROCEEDED TO FURTHER NOTICE SECTION 144C(10) OF THE ACT AND THEN CONCLUDED IN PAR A 4.2 AS UNDER : '4.2 THUS, EVEN IF THE ASSESSEE FILED SEVEN OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL, THE DISPUTE RESOLUTION PANEL HAS EXAMINED ONLY FIRST OBJECTION, CAME TO THE CONCLUSION THAT THE ASSESSEE IS NOT AN ELIGIBLE ASSESSEE AND DECLINED TO CONSIDER OBJECTIONS OF THE ASSESSEE FOR GIVING DIRECTIONS TO THE ASSESSING OFFICER. THE DISPUTE RESOLUTION PANEL HAS NOT ACTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT WHILE PASSING THIS ORDER WHICH IS GROSSLY ILLEGAL, AGAINST THE INTENT OF THE LEGI SLATURE, WITHOUT FOLLOWING THE BASIC PRINCIPLES OF NATURAL JUS TICE AND ADOPTING VERY NARROW INTERPRETATION OF THE PROVISIONS OF THE ACT. LEARNED DISPUTE RESOLUTION PANEL HAS HELD THAT THE ASSESSEE IS NOT AN ELIGIBLE ASSESSEE AS PER THE ACT.' 19. IT WAS FU RTHER STATED IN THE FINAL ASSESSMENT ORDERS PASSED BY THE ASSESSING OFFICER THAT THE DISPUTE RESOLUTION PANEL DID NOT GIVE THE ASSESSING OFFICER ANY OPPORTUNITY PRIOR TO DECIDING TO DISMISS THE PROCEEDINGS 'IN LIMINE'. THE ASSESSING OFFICER PROCEEDED TO AN ALYSE THE SCOPE OF THE POWERS OF THE DISPUTE RESOLUTION PANEL. IT WAS OBSERVED INTER ALIA BY THE ASSESSING OFFICER IN THE FINAL ASSESSMENT ORDER, AS UNDER : PAGE 9 OF 14 '4.5 . . . THE SCOPE OF THE DISPUTE RESOLUTION PANEL, THEREFORE, BEING LIMITED ONLY TO ANY VARIATIO N IN INCOME/LOSS PROPOSED BY THE ASSESSING OFFICER, THE ABOVE OBJECTION RELATING TO THE ACTION OF ASSESSING OFFICER PASSING THE DRAFT ASSESSMENT ORDER TREATING IT AS 'ELIGIBLE ASSESSEE' IS OUTSIDE THE MANDATE OF THE DISPUTE RESOLUTION PANEL.' 20. THE ASSES SING OFFICER, I.E., THE ASSISTANT COMMISSIONER OF INCOME - TAX THEREAFTER PROCEEDED TO PASS THE FINAL ASSESSMENT ORDER CONFIRMING THE TRANSFER PRICING ADJUSTMENT TO THE INCOME IN THE CASE OF EACH OF THE PETITIONERS. 21. IN THESE CIRCUMSTANCES, THE PETITIONER S HAVE APPROACHED THIS COURT UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA CHALLENGING THE FINAL ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER, I.E., THE ASSISTANT COMMISSIONER OF INCOME - TAX. 22. AT THE FIRST HEARING OF THE WRIT PETITIONS, I.E., ON MAR CH 11, 2015 THIS COURT, WHILE DIRECTING NOTICE TO ISSUE IN THESE WRIT PETITIONS, STAYED THE OPERATION OF THE FINAL ASSESSMENT ORDER DATED JANUARY 28, 2015 ISSUED BY THE ASSESSING OFFICER. 23. AT THE SUBSEQUENT HEARING ON JULY 15, 2015, THIS COURT ALSO STAY ED THE PENALTY PROCEEDINGS INITIATED BY VIRTUE OF THE NOTICE DATED JULY 7, 2015. 24. IN RESPONSE TO THE NOTICE, THE RESPONDENT HAS FILED ITS COUNTER AFFIDAVIT. 25. MR. PORUS KAKA, LEARNED SENIOR COUNSEL APPEARING FOR THE PETITIONERS, CONTENDED THAT THE FIN AL ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IN EACH CASE ON JANUARY 28, 2015, WAS IN VIOLATION OF SECTION 144C(10) OF THE ACT INASMUCH AS IT WAS CONTRARY TO THE DETERMINATION BY THE DISPUTE RESOLUTION PANEL BY ITS ORDER DATED DECEMBER 26, 2014 ACCE PTING THE PLEA OF THE PETITIONERS THAT NEITHER OF THEM WAS AN 'ELIGIBLE ASSESSEE' WITHIN THE MEANING OF SECTION 144C(15) OF THE ACT. MR. KAKA SUBMITTED THAT UNDER SECTION 144C(13) OF THE ACT, THE ASSESSING OFFICER WAS BOUND TO ISSUE AN ORDER IN CONFORMITY WITH THE ORDER OF THE DISPUTE RESOLUTION PANEL. MR. KAKA FURTHER SUBMITTED THAT ALTHOUGH THE DISPUTE RESOLUTION PANEL DECLINED TO ISSUE ANY DIRECTION, ITS FINDING THAT NEITHER OF THE PETITIONERS WAS 'ELIGIBLE ASSESSEE' WAS BINDING ON THE ASSESSING OFFICER AND HE COULD NOT HAVE PROCEEDED TO PASS THE FINAL ASSESSMENT ORDER CONTRARY TO THE ABOVE FINDING. 26. IN SUPPORT OF THE PLEA THAT THE FINAL ASSESSMENT ORDER WAS WITHOUT 'JURISDICTION' AND THEREFORE, THIS ORDER SHOULD BE SET ASIDE BY THE COURT, RELIANCE WA S PLACED BY MR. KAKA ON THE DECISION OF THE ANDHRA PRADESH HIGH COURT IN ZUARI CEMENT LIMITED V. ASST. CIT DECISION DATED FEBRUARY 21, 2013 IN W.P. (C) NO. 5557 OF 2012, DECISION OF THE BOMBAY HIGH COURT IN INTERNATIONAL AIR TRANSPORT ASSOCIATION V. DEPUTY CIT DECISION DATED FEBRUARY 18, 2016 IN W. P. (L) NO. 351 OF 2016 [2016] 7 ITR - OL 227 (BOM) AND DECISION OF THIS COURT DATED FEBRUARY 17, 2016 IN W. P. (C) NO. 4262 OF 2015 HONDA CARS INDIA LTD. V. DEPUTY C IT [2016] 382 ITR 88 (DELHI). PAGE 10 OF 14 27. MR. KAKA DREW ATTENTION TO THE DELIBERATE DISOBEDIENCE BY THE ASSESSING OFFICER OF THE ORDER OF THE DISPUTE RESOLUTION PANEL AND ALSO QUESTIONED THE VALIDITY AND LEGALITY OF THE SAID ORDER. ACCORDING TO MR. KAKA, THIS COURSE OF ACTION WAS NOT AVAILABLE TO THE ASSESSING OFFICER PARTICULARLY IN VIEW OF THE CLEAR MANDATE OF SECTION 144C(13) OF THE ACT. IN THIS CONTEXT, MR. KAKA REFERRED TO THE DECISION IN UNION OF INDIA V. KAMLAKSHI FINANCE CORPORATION LTD. [1992] (SUPP) 1 SCC 443 AND NAV BHARAT IMPEX V. UNION OF INDIA [2010] 255 ELT 324 (DELHI). MR. KAKA FURTHER SUBMITTED THAT NOTICE HAS BEEN ISSUED TO THE PETITIONER FOR REOPENING OF THE ASSESSMENT OF EACH OF THE PETITIONERS FOR THE ASSESSMENT YEAR 2010 - 11 UNDER SECTION 147/148 OF THE ACT. 28. IN REPLY TO THE ABOVE ARGUMENTS, MR. ASHOK K. MANCHANDA, LEARNED SENIOR COUNSEL APPEARING FOR THE REVENUE, SUBMITTED THAT WHILE THE FINAL ASSESSMENT ORDER CANNOT BE JUSTIFIED IN LAW, THE ASSESS ING OFFICER OUGHT TO HAVE PASSED THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT AGAINST THE PETITIONERS AND THE APPEAL COULD HAVE BEEN FILED BY THE PETITIONERS BEFORE THE COMMISSIONER OF INCOME - TAX (APPEALS) ('CIT(A)'). WHILE HE WAS NOT AWARE THAT TH E PETITIONERS HAVE BEEN ISSUED NOTICE UNDER SECTION 147 OF THE ACT, MR. MANCHANDA SUBMITTED THAT DIRECTIONS SIMILAR TO THE ONE HAVE BEEN ISSUED IN THE CASE OF HONDA CARS INDIA LIMITED V. DEPUTY CIT (SUPRA) GIVING LIBERTY TO THE REVENUE TO TAKE RECOURSE OF SUCH REMEDY, AS MAY BE AVAILABLE TO IT, IN ACCORDANCE WITH LAW. 29. THE ABOVE SUBMISSIONS HAVE BEEN CONSIDERED. IN THE FIRST PLACE THE COURT WOULD LIKE TO OBSERVE THAT THIS IS AN INSTANCE OF BLATANT DISREGARD BY THE ASSESSING OFFICER OF THE ORDER OF THE DI SPUTE RESOLUTION PANEL NOTWITHSTANDING THAT THE DISPUTE RESOLUTION PANEL HAD CATEGORICALLY HELD THAT THE TWO PETITIONERS DO NOT SATISFY THE CONDITIONS OF AN 'ELIGIBLE ASSESSEE' IN TERMS OF SECTION 144(15)(B)(II) OF THE ACT. AS ALREADY NOTICED UNDER SECTION 144C(10) OF THE ACT THE ASSESSING OFFICER HAD NO OPTION BUT TO COMPLY WITH THE ORDER OF THE DISPUTE RESOLUTION PANEL. EVEN IF NO DIRECTION WAS ISSUED BY THE DISPUTE RESOLUTION PANEL UNDER SECTION 144C(5) OF THE ACT, THE FACT THAT THE DISPUTE RESOLUTION PA NEL HELD THAT BOTH THE PETITIONERS WERE NOT 'ELIGIBLE ASSESSEES' COULD NOT HAVE BEEN IGNORED BY THE ASSESSING OFFICER. 30. IT APPEARS TO THE COURT THAT IT IS PLAIN THAT UNDER SECTION 144C, THE ASSESSING OFFICER SHOULD HAVE PROCEEDED TO PASS AN ORDER UNDER SECTION 143(3) OF THE ACT. INSTEAD THE ASSESSING OFFICER CONFIRMED THE DRAFT ASSESSMENT ORDER PASSED UNDER SECTION 144C(1) OF THE ACT. THIS, THEREFORE, VITIATED THE ENTIRE EXERCISE. THE COURT HAS NO HESITATION IN HOLDING THAT THE FINAL ASSESSMENT ORDER DAT ED JANUARY 28, 2015, IS WITHOUT JURISDICTION AND NULL AND VOID. THE DRAFT ASSESSMENT ORDER DATED MARCH 28 2014, HAVING BEEN PASSED IN RESPECT OF ENTITIES WHICH WERE NOT 'ELIGIBLE ASSESSEES', IS ALSO HELD TO BE INVALID. 31. IT IS A MATTER OF CONCERN THAT TH E ASSESSING OFFICER IN THE PRESENT CASE HAS CHOSEN TO LABEL THE ORDER OF THE DISPUTE RESOLUTION PANEL TO BE INVALID AND THAT IS THE JUSTIFICATION FOR NOT COMPLYING WITH THE SAID ORDER. AS ALREADY NOTICED, THE DISPUTE RESOLUTION PANEL, IN TERMS OF SECTION 1 44C(15)(A) IS A COLLEGIUM OF THREE PRINCIPAL COMMISSIONERS OR THE COMMISSIONER OF INCOME - TAX. THE DISPUTE RESOLUTION PANEL ADMITTEDLY IS THE SUPERIOR AUTHORITY IN RELATION TO AN ASSESSING OFFICER WHO IN THIS CASE PAGE 11 OF 14 APPEARS TO BE THE ADDITIONAL COMMISSIONER O F INCOME - TAX. SECTION 144C(10) READ WITH SECTION 144C(13) MAKES IT ABUNDANTLY CLEAR THAT THERE IS NO OPTION WITH AN ASSESSING OFFICER BUT TO BE BOUND BY ORDERS AND SUBJECT TO REVIEW BY THE DISPUTE RESOLUTION PANEL. IT IS BOUND BY THE DISPUTE RESOLUTION PAN EL. A REFERENCE MAY ALSO BE MADE TO THE DECISION IN ZUARI CEMENT LIMITED (SUPRA) WHERE IT WAS HELD THAT AN ORDER OF ASSESSMENT WHICH IS CONTRARY TO THE MANDATORY PROVISIONS OF SECTION 144C OF THE ACT WAS DECLARED AS 'ONE WITHOUT JURISDICTION, NULL AND VOID AND ENFORCEABLE'. IT IS THEREFORE, FOR THIS REASON, IN THE SAID CASE, THE HIGH COURT OF ANDHRA PRADESH SET ASIDE THE IMPUGNED ORDER WHILE ALLOWING THE WRIT PETITION NOTWITHSTANDING THAT THE PETITIONER HAD A STATUTORY REMEDY AVAILABLE TO IT. 32. THE SITUAT ION AS FAR AS THE PRESENT CASE IS CONCERNED IS NO DIFFERENT. THE SAID ORDER OF THE ANDHRA PRADESH HIGH COURT WAS UPHELD BY THE ORDER OF THE SUPREME COURT WHEN IT DISMISSED THE SPECIAL LEAVE APPEAL (CIVIL) NO. 16694 OF 2013 BY ITS ORDER DATED SEPTEMBER 27, 2013. 33. RECENTLY THE HIGH COURT OF BOMBAY HAS IN INTERNATIONAL AIR TRANSPORT ASSOCIATION (SUPRA) HELD THAT AN ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WHICH IS CONTRARY TO THE MANDATORY REQUIREMENT OF SECTION 144C OF THE ACT, IS ENTIRELY WITHOUT JURISDICTION. THERE, DESPITE THE PETITIONER BEING A FOREIGN COMPANY, THE ASSESSING OFFICER DID NOT RECORD THE PROCEDURE UNDER SECTION 144C(1) OF THE ACT AND PROCEEDED TO PASS THE FINAL ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT. 34. IN VIJAY TELEVISI ON P. LTD. V. DISPUTE RESOLUTION PANEL [2014] 369 ITR 113 (MAD) WHERE AGAIN THE ASSESSING OFFICER PASSED THE FINAL ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT INST EAD OF PASSING A DRAFT ASSESSMENT ORDER UNDER SECTION 144C(1) OF THE ACT AND THEN SOUGHT TO ISSUE A CORRIGENDUM MODIFYING THE FINAL ORDER OF THE ASSESSMENT TO BE READ AS A DRAFT ASSESSMENT ORDER BUT BEYOND THE PERIOD PRESCRIBED FOR LIMITATION FOR PASSING S UCH ORDER. THE HIGH COURT HELD THE ENTIRE EXERCISE TO BE WITHOUT JURISDICTION. 35. IN PANKAJ EXTRUSION LTD. V. ASST. CIT [2011] 241 CTR (GUJ) 390 THE DIVISION BENCH OF THE GUJARAT HIGH COURT, IN INTERPRETING SECT ION 144C OF THE ACT HELD THAT WHERE AN ASSESSEE WAS NOT AN 'ELIGIBLE ASSESSEE', THE QUESTION OF PASSING THE DRAFT ASSESSMENT ORDER UNDER SECTION 144C OF THE ACT DID NOT ARISE. 36. AS FAR AS THE DECISION OF THIS COURT IN HONDA CARS INDIA LIMITED V. DEPUTY CIT (SUPRA) IS CONCERNED, THE QUESTION THAT AROSE IS WHETHER THE ASSESSING OFFICER COULD HAVE PASSED THE DRAFT ASSESSMENT ORDER WHEN THE ASSESSEE DID NOT SATISFY THE CONDITION 'ELIGIBLE ASSESSEE' UNDER SECTION 144C(15)(B) OF THE ACT. ANSWERING THE QUESTION IS IN THE NEGATIVE, THE COURT HELD THAT THE DRAFT ASSESSMENT ORDER OF THE ASSESSING OFFICER IS NULL AND VOID AND QUASHED ON THAT BASIS. IN PARA. 15 OF THE SAID DECISION, IT WAS OBSERVED AS UNDER (PAGE 93 OF 382 ITR) : 'SINCE WE HAVE QUASHED THE DRAFT ASSESSMENT ORDER, THE QUESTION THAT THE ASSESSMENT HAS NOW BECOME TIME BARRED AS LEFT OPEN AND IT IS OPEN TO THE PARTIES TO TAKE RECOURSE OF SUCH REMEDY, AS MAY BE AVAIL ABLE TO THEM IN LAW.' PAGE 12 OF 14 37. AS REGARDS THE CONDUCT OF THE ASSESSING OFFICER IN THE PRESE NT CASE, THE COURT WOULD ONLY LIKE TO HIGHLIGHT THE LEAD PORTION OF THE DECISION OF THE SUPREME COURT IN UNION OF INDIA V. KAMLAKSHI FINANCE CORPORATION LIMITED (SUPRA). THE FACTS IN THAT CASE WERE THAT ACCORDING TO THE ASSISTANT COLLECTOR ('AC'), THE ELEC TRICAL INSULATION TAPES MANUFACTURED BY THE ASSESSEE, KAMLAKSHI FINANCE CORPORATION LIMITED ('KFCL') FELL UNDER THE TARIFF HEADING 39.19 OF THE SCHEDULE TO THE CENTRAL EXCISE TARIFF ACT, 1985 WHEREAS THE ASSESSEE WAS CLAIMING THEY FELL UNDER ENTRY 85.47. T HE IMPUGNED ORDER OF THE ASSESSING OFFICER WAS SET ASIDE BY THE COLLECTOR (APPEALS) WHO ISSUED A DIRECTION TO THE ASSISTANT COLLECTOR TO PASS A FRESH REASONED AND SPEAKING ORDER. HOWEVER, THE ASSISTANT COLLECTOR DECLINED TO FOLLOW THE ORDER OF THE COLLECTO R (APPEALS) AND REITERATED HIS EARLIER DECISION THAT WAS SET ASIDE BY THE COLLECTOR (APPEALS). THE WRIT PETITION FILED BY THE ASSESSEE WAS ALLOWED BY THE BOMBAY HIGH COURT AGAINST WHICH THE UNION OF INDIA WENT BEFORE THE SUPREME COURT. 38. THE SUPREME COU RT IN UNION OF INDIA V. KAMLAKSHI FINANCE CORPORATION LIMITED (SUPRA) TOOK EXCEPTION TO THE CONDUCT OF THE ASSESSING OFFICER IN OVERLOOKING THE BINDING ORDER OF THE COLLECTOR (APPEALS) AND REITERATING THE ORDER PASSED BY HIM EARLIER. IN RESPONSE TO THE PLE A OF THE APPELLANT THAT THE OFFICER WHO PASSED THE ORDER WAS NOT ACTUATED BY ANY MALA FIDE, THE SUPREME COURT OBSERVED, IN THIS REGARD, AS UNDER : '6. . . . WE ARE NOT CONCERNED HERE WITH THE CORRECTNESS OR OTHER WISE OF THEIR CONCLUSION OR OF ANY FACTUAL MALA FIDES BUT WITH THE FACT THAT THE OFFICERS, IN REACHING THEIR CONCLUSION, BY - PASSED TWO APPELLATE ORDERS IN REGARD TO THE SAME ISSUE WHICH WERE PLACED BEFORE THEM, ONE OF THE COLLECTOR (APPEALS) AND THE OTHER OF THE TRIBUNAL. THE HIGH COURT HAS, IN OUR VIEW, RIGHTLY CRITICISED THIS CONDUCT OF THE ASSISTANT COLLECTORS AND THE HARASSMENT TO THE ASSESSEE CAUSED BY THE FAILURE OF THESE OFFICERS TO GIVE EFFECT TO THE ORDERS OF AUTHORITIES HIGHER TO THEM IN THE APPELLANT HIERARCHY. IT CANNOT BE TOO VEHE MENTL Y EMPHASISED THAT IT IS OF UTMOST IMPORTANCE THAT, IN DISPOSING OF THE QUASI - JUDICIAL ISSUES BEFORE THEM, THE REVENUE OFFICERS ARE BOUND BY THE DECISIONS OF THE APPELLATE AUTHORITIES. THE ORDER OF THE APPELLATE COLLECTOR IS BINDING ON THE ASSISTANT COLLECT ORS WORKING WITHIN HIS JURISDICTION AND THE ORDER OF THE TRIBUNAL IS BINDING UPON THE ASSISTANT COLLECTORS AND THE APPELLATE COLLECTORS WHO FUNCTION UNDER THE JURISDICTION OF THE TRIBUNAL. THE PRINCIPLES OF JUDICIAL DIS CIPLINE REQUIRE THAT THE ORDERS OF T HE HIGHER APPELLATE AUTHORITIES SHOULD BE FOLLOWED UNRESERVEDLY BY THE SUBORDINATE AUTHORITIES. THE MERE FACT THAT THE ORDER OF THE APPELLATE AUTHORITY IS NOT 'ACCEPTABLE' TO THE DEPARTMENT IN ITSELF AN OBJECTIONABLE PHRASE AND IS THE SUB JECT MATTER OF AN APPEAL CAN FURNISH NO GROUND FOR NOT FOLLOWING IT UNLESS ITS OPERATION HAS BEEN SUSPENDED BY A COMPETENT COURT. IF THIS HEALTHY RULE IS NOT FOLLOWED, THE RESULT WOULD ONLY BE UNDUE HARASS MENT TO THE ASSESSEES AND CHAOS IN ADMINISTRATION OF TAX LAWS.' 39. IN NAV BHARAT IMPEX V. UNION OF INDIA (SUPRA) THE DIVISION BENCH OF THIS COURT DEALT WITH THE CASE WHERE DESPITE THE CLEAR DIRECTIONS GIVEN BY THE COMMISSIONER OF INCOME - TAX (APPEALS), THE DELAYED REFUNDS WERE PAGE 13 OF 14 PAID TO THE PETITIONER WITHOUT ANY ELEMENT OF INTEREST. IT WAS NOTED THAT THE ASSISTANT COMMISSIONER WAS MERELY REQUIRED TO COMPLY WITH THE DIRECTIONS GIVEN BY THE COMMISSIONER OF INCOME - TAX (APPEALS) IN THE APPELLATE ORDER. HOWEVER, THE ASSISTANT COMMISSIONER TOOK IT UPON HIMSELF TO EXAMINE THE CASE , AS PER HIS OWN UNDERSTANDING AND THEREFORE, HAD 'GONE TO THE EXTENT OF OVERREACHING THE ORDERS OF HIS SUPERIOR AUTHORITY, THAT IS, THE COMMISSIONER (APPEALS)'. 40. RELYING ON THE DECISION IN UNION OF INDIA V. KAMLAKSHI FINANCE CORPORATION LIMITED (SUPRA) THE COURT SET ASIDE THE REJECTION OF CLAIM OF INTEREST BY THE PETITIONER IN THAT CASE AND DIRECTED THE ASSISTANT COMMISSIONER TO COMPLY WITH THE ORDERS PASSED BY THE COMMISSIONER (APPEALS). 41. THE LANGUAGE USED IN THE PRESENT CASE BY THE ASSESSING OFFICE R WHILE DISAGREEING WITH THE BINDING ORDER OF THE DISPUTE RESOLUTION PANEL IS WHOLLY UNACCEPTABLE. IN THE FINAL ASSESSMENT ORDER DATED JANUARY 28, 2015, THE ASSESSING OFFICER WHILE DISCUSSING THE ORDER OF THE DISPUTE RESOLUTION PANEL OBSERVED INTER ALIA IN PARA 4.2 THAT : 'THE DISPUTE RESOLUTION PANEL HAS NOT ACTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT WHILE PASSING THIS ORDER WHICH IS GROSSLY ILLEGAL, AGAINST THE INTENT OF THE LEGISLATURE, WITHOUT FOLLOWING THE BASIC PRINCIPLES OF NATURAL JUSTICE AN D ADOPTING VERY NARROW INTERPRETATION OF THE PROVISIONS OF THE ACT'. 42. IN THE CIRCUMSTANCES, THE COURT, WHILE SETTING ASIDE THE FINAL ASSESSMENT ORDER DATED JANUARY 28, 2015, DIRECTS THAT THE DRAFT ASSESSMENT ORDER, THE ORDER OF THE DISPUTE RESOLUTION PA NEL, THE FINAL ASSESSMENT ORDER AS WELL AS THIS ORDER SHALL BE PLACED BEFORE THE CONCERNED COMMISSIONER WHO IS ADMINISTRATIVELY SUPERVISING THE WORK OF THE ADDITIONAL COMMISSIONER OF INCOME - TAX WHO PASSED THE DRAFT AND FINAL ASSESSMENT ORDER. THE COMMISSIO NER WILL THEREAFTER PROCEED IN ACCORDANCE WITH LAW AFTER ISSUING NOTICE TO THE CONCERNED ASSESSING OFFICER AND AFFORDING HIM AN OPPORTUNITY OF BEING HEARD. 43. MR. MANCHANDA THEN SUBMITTED THAT THIS COURT SHOULD CLARIFY THAT IN TERMS OF SECTION 144C(3)(B) OF THE ACT, THE REVENUE CAN WITHIN A PERIOD OF 30 DAYS PASS THE FINAL ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT. THE COURT NOTES THAT THE REVENUE HAS NOT BEEN ABLE TO CONTEST THE SUBMISSION OF THE PETITIONERS THAT IN THE PRESENT CASE THE REVENUE HAS ISSUED A NOTICE TO THE PETITIONER UNDER SECTION 147 OF THE ACT SEEKING TO REOPEN THE ASSESSMENT FOR THE ASSESSMENT YEAR 2010 - 11. THE QUESTION OF THE COURT ISSUING ANY CLARIFICATION AS SOUGHT BY THE REVENUE THEREFORE DOES NOT ARISE. IN ANY EVENT IN THE PRE SENT CASE, THE ASSESSING OFFICER DID PASS THE FINAL ASSESSMENT ORDER IN CONTINUATION OF DRAFT ASSESSMENT ORDER UNDER SECTION 144C(1) OF THE ACT AND THE SAID FINAL ASSESSMENT ORDER HAS BEEN HELD BY THIS COURT, FOR THE REASONS RECORDED HEREINABOVE, TO BE INV ALID. 44. THE OTHER PLEA OF THE REVENUE THAT THE PETITIONERS OUGHT TO HAVE CHALLENGED THE FINAL ASSESSMENT ORDER BEFORE THE COMMISSIONER OF INCOME - TAX (APPEALS) IS UNTENABLE FOR THE REASON THAT IT WAS CONTRARY TO THE ORDER OF THE DISPUTE RESOLUTION PANEL W HICH HELD IN FAVOUR OF THE PETITIONERS. THE ORDER OF THE DISPUTE RESOLUTION PANEL WAS NOT CHALLENGED BY THE REVENUE. IN THE CIRCUMSTANCES, THE FINAL ASSESSMENT PAGE 14 OF 14 ORDER WAS WITHOUT JURISDICTION AND THIS CONSTITUTES SUFFICIENT GROUND FOR THE COURT TO EXERCISE ITS POWERS UNDER ARTICLE 226 OF THE CONSTITUTION. 45. FOR THE ABOVE REASONS, THE DRAFT ASSESSMENT ORDER DATED MARCH 28, 2014, AND THE FINAL ASSESSMENT ORDER DATED JANUARY 28, 2015 PASSED BY THE ASSESSING OFFICER ARE HELD TO BE VOID AB INITIO AND QUASHED ON THAT BASIS. THE ORDERS CONSEQUENTIAL THERETO ALSO DO NOT SURVIVE. HOWEVER, IT IS CLARIFIED THAT THE COURT HAS NOT EXPRESSED ANY OPINION REGARDING THE VALIDITY OF THE PROCEEDINGS AGAINST THE PETITIONERS UNDER SECTION 147/148 OF THE ACT. THE RIGHTS AND CONT ENTIONS OF THE PARTIES IN THOSE PROCEEDINGS ARE LEFT OPEN TO BE URGED AND DECIDED BY THE APPROPRIATE AUTHORITY IN ACCORDANCE WITH LAW. [EXTRACTED FROM ITR ONLINE] 14. IN VIEW OF THIS, IT IS APPARENT THAT THE FINAL ASSESSMENT ORDER PASSED BY THE LD. ASSESSING OFFICER IS BEYOND THE LIMITATION PERIOD WHICH SHOULD HAVE BEEN PASSED ON OR BEFORE 31 ST . DECEMBER 2012, BUT WAS PASSED ON 16/12/2013. IN THE RESULT GROUND NO. 1 OF THE APPEAL OF THE ASSESSEE IS ALLOWED AND THE ASSESSMENT ORDER PASSED BY THE LD. ASSESSING OFFICER IS QUASHED. 15. AS WEVE ALREADY ALLOWED THE GROUND NO. 1 OF THE APPEAL OF THE ASSESSEE HOLDING THAT ASSESSMENT ORDER PASSED BY THE LD. ASSESSING OFFICER IS BARRED BY LIMITATION OF TIME. THE GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE BECOMES INFRUCTUOU S HENCE, SAME IS DISMISSED. 16. IN THE RESULT APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2009 - 10 IN ITA NO. 1319/DEL/2014 IS ALLOWED. ORDER PRO NOUNCED IN THE OPEN COURT ON 1 3 / 0 9 / 2017 . - S D / - - S D / - ( I.C.SUDHIR ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 3 / 0 9 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI