Fiat India Automobiles Private Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 1497/PUN/2015

AI Insights

The case involves cross-appeals by the Revenue and the assessee, Fiat India Automobiles Private Limited, against the order of the CIT(A)-13, Pune. The primary contention was the validity of the assessment order dated 30.05.2013, which included transfer pricing adjustments and other disallowances. The assessee challenged the jurisdiction of the ACIT, Circle-10(1), Mumbai, who made a reference to the TPO for determining the arm's length price of international transactions, arguing that jurisdiction had been transferred to Pune. The Tribunal agreed with the assessee, citing a lack of jurisdiction and procedural improprieties in the issuance of the assessment order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137961 (ITAT-PUNE)
• Duration Of Justice: 7 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2023
• Appeal Filed By: Assessee
• Order Result: AllowedAllowed
• Bench Allotted: C
• Next Hearing Date: 09-03-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 17-11-2015
• Other Referred Cases: All Cargo Global Logistics Ltd. vs. DCIT [2012] 137 ITD 287 (Mum.) (S.B.), National Thermal Power Co. Ltd. vs. CIT [1998] 229 ITR 383 (SC), PCIT vs. Capstone Securities Analysis (P.) Ltd. [2023] 146 taxmann.com 423 (Bom.)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Procedural lapse; Competent authority; Set aside
• Section: 148; 92CA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “C” : PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA.Nos.1483 & 1497/PUN./2015 Assessment Year 2009-2010 The DCIT, Circle-1(2), PMT Building, Swargate, Pune – 411 057. vs. Fiat India Automobiles Private Limited, Plot No.B- 19, Ranjangaon MIDC Industrial Area, Ranjangaon PIN 412 220Taluka – Shirur, Dist. Pune, Maharashtra, India. PAN AAACF1716D (Appellant) (Respondent/Cross-Appellant) For Assessee : Shri Percy Pardiwala For Revenue : Shri J.P. Chandrakar Date of Hearing : 10.03.2023 Date of Pronouncement : 13.03.2023 ORDER PER BENCH : These Revenue’s and assessee’s cross appeals ITA.Nos.1483 & 1497/PUN./2015 arise against the CIT(A)-13, Pune’s order dated 31.08.2015 passed in case no.PN/CIT(A)- 13/DCIT, Cir.1(2)/48 dated 31.08.2015, in proceedings u/s.143(3) r.w.s.144C(1) of the Income Tax Act, 1961 (in short "the Act"). Heard both the parties. Case files perused. 2 ITA.Nos.1497 & 1483/PUN./2015 Fiat India Automobiles Private Limited, Ranjangaon, Dist. Pune. 2. The Revenue’s appeal ITA.No.1483/Pun./2015 raises the following substantive grounds : 3. The assessee’s cross-appeal ITA.No.1497/PUN/ 2015 on the other hand contains the following pleadings : 3 ITA.Nos.1497 & 1483/PUN./2015 Fiat India Automobiles Private Limited, Ranjangaon, Dist. Pune. 4 ITA.Nos.1497 & 1483/PUN./2015 Fiat India Automobiles Private Limited, Ranjangaon, Dist. Pune. 3.1. It transpires during the course of hearing that the assessee had filed it’s petition dated 26.08.2022 seeking to raise an additional ground challenging validity of the impugned assessment dated 30.05.2013 itself for want of a valid reference u/s.92CA of the Act as under : 5 ITA.Nos.1497 & 1483/PUN./2015 Fiat India Automobiles Private Limited, Ranjangaon, Dist. Pune. 4. The Revenue vehemently objected the assessee’s foregoing additional ground that such a course of action could not be accepted at this belated stage. We hardly see any merit in the Revenue’s instant technical objections as this tribunal’s Special Bench decision in All Cargo Global Logistics Ltd. vs. DCIT [2012] 137 ITD 287 (Mum.) (S.B.); after considering hon’ble apex court’s landmark judgment in National Thermal Power Co. Ltd. vs. CIT [1998] 229 ITR 383 (SC), holds that we could very well entertain such a pure legal question going to root of the matter in order to determine correct tax liability of an assessee provided all the relevant facts are already on record. These Revenue’s technical objection stand declined accordingly. 5. Next come the basic relevant facts so far as the assessee’s foregoing legal ground challenging validity of the impugned assessment itself is concerned. This assessee is a company manufacturing, selling passenger cars and power trains [engine and gear box]. It had e-filed it’s return on 25.09.2009 disclosing loss of Rs.12,32,99,26,796/-. This followed it’s revised return dated 14.03.2011 declaring total loss of Rs.12,19,45,33,056/-. The said return stood processed u/s.143(1) of the Act accepting the returned loss. It’s case was thereafter selected for scrutiny and the Assessing Officer i.e., ACIT, Circle-10(1), Mumbai issued sec.143(2) notice dated 6 ITA.Nos.1497 & 1483/PUN./2015 Fiat India Automobiles Private Limited, Ranjangaon, Dist. Pune. 24.08.2010 to the assessee. He thereafter made sec.92CA(1) reference to the Transfer Pricing Officer [in short the “TPO”] to determine arm’s length price [in short “ALP”] of the assessee’s international transactions with its overseas associated enterprises [in short “AEs"]. This TPO’s order dated 26.11.2012 inter alia proposed arm’s length price adjustment(s) of Rs.266 crores. The Assessing Officer i.e., DCIT, Circle-1(2), Pune, thereafter framed his sec.143(3) r.w.s.144(1) assessment inter alia making the above transfer pricing adjustment of Rs.266 crores followed by disallowances/additions of deferment of sales tax, warranty expenses provision and bank interest of Rs.80,28,67,840/-, 2,27,57,400/- and Rs.41.18 lakhs, respectively. The assessee preferred appeal before the CIT(A)'s; who in turn has partly accepted it’s corresponding substantive grounds which leaves both these parties aggrieved to the extent of their respective pleadings. 6. Learned senior counsel’s legal argument in this factual drop is that the ACIT, Circle-10(1) herein was not competent to make sec.92CA reference itself to the TPO. Mr. Pardiwala has filed before us the CIT-10, Mumbai’s order dated 22.11.2011 transferring the assessee’s jurisdiction from ACIT, Circle-10(1), Mumbai to DCIT, Circle-1(2), Pune with 7 ITA.Nos.1497 & 1483/PUN./2015 Fiat India Automobiles Private Limited, Ranjangaon, Dist. Pune. immediate effect. He took us to the TPO i.e., Addl. CIT/TPO- 1(3), Mumbai’s sec.92CA(2) notice dated 22.02.2012 making it clear that the Assessing Officer i.e., ACIT, Circle-10(1), Mumbai had made reference in respect of it’s international transactions vide letter dated 24.11.2011. Mr. Pardiwala’s case, therefore, is that once the competent authority i.e., CIT- 10, Mumbai had already passed sec.127(2) order transferring the assessee’s assessment jurisdiction from ACIT, Circle-10(1), Mumbai to DCIT, Circle-1, Pune from 22.11.2011 itself, the former authority was hardly left with any jurisdiction to proceed further i.e., on 24.11.2011 and, therefore, all subsequent proceedings in furtherance thereto, are void and not sustainable in the eyes of law. Learned senior counsel has also filed before us the CIT(A)-13, Pune’s order dated 24.12.2014 for preceding assessment year 2008-2009 quashing the corresponding assessment for this precise reason alone which is stated to have been attained finality. Mr. Pardiwala lasted invited our attention to hon’ble jurisdictional high court’s decision dated 16.10.2012 in assessee’s writ petition no.8657/2012 deciding the very issue of transfer of jurisdiction dated 22.11.2011 [reported [2012] 27 taxmann.com 37 (Bom.) ] in it’s favour as follows : “2. This writ petition is filed to challenge the notice dated 30.03.2012 issued by the Assistant 8 ITA.Nos.1497 & 1483/PUN./2015 Fiat India Automobiles Private Limited, Ranjangaon, Dist. Pune. Commissioner of Income Tax-10(1) Mumbai under Section 14 8 of the Income Tax Act, 1961 ('the Act'). 3. The basic argument of the Petitioner is that once the CIT- 10 Mumbai in exercise of the powers vested in him under Section 127(2) of the Act has transferred the power to assess the Petitioner on 22.11.2011 from ACIT-10(1) Mumbai to DCIT, Circle-1(2) Pune, then the ACIT-10(1) would have no jurisdiction to issue the impugned notice dated 30.03.2012 and therefore, the said notice dated 30.03.2012 is liable to be quashed and set aside. 4. The relevant facts are that on shifting the registered office of the Petitioner from Mumbai to Pune, the Petitioner in June-July, 2009 had applied for transfer of assessment records from Mumbai to Pune. After, exchange of several letters, the CIT-10 Mumbai by his order dated 22.11.2011 transferred the powers to assess the petitioner from ACIT-10(1) Mumbai to DCIT, Circle-1(2) Pune. Thus, from 22.11.2011 ACIT- 10(1) Mumbai did not have any power to assess or reassess the petitioner. 5. It is not in dispute that on transfer of the jurisdiction from Mumbai to Pune, the Additional CIT, (TP) Pune has assumed jurisdiction and accordingly issued a notice dated 29.03.2012 to the Petitioner under Section 92CA of the Act relating to Assessment year 2009-2010. 9 ITA.Nos.1497 & 1483/PUN./2015 Fiat India Automobiles Private Limited, Ranjangaon, Dist. Pune. 6. However, the ACIT-10(1) Mumbai has issued the impugned notice on 30.03.2012 under Section 14 8 of the Act with a view to reopen the assessment for A.Y. 2005-06. The assessee by its letter dated 24.04.2012 objected to the impugned notice by specifically stating that pursuant to the order of CIT dated 22.11.2011, the ACIT-10(1) would have no locus standi or jurisdiction to issue the impugned notice dated 30.03.2012. As there was no reply, the present writ petition is filed inter alia on the ground that once the jurisdiction to assess/reassess the petitioner vested in the ACIT-10(1) is divested by the order of the CIT-10 Mumbai dated 22.11.2011, the ACIT-10(1) Mumbai would cease to have power to assess or reassess the petitioner and hence, the impugned notice issued by ACIT-10(1) Mumbai being without jurisdiction is liable to be quashed and set aside. 7. In the affidavit-in-reply filed by the DCIT-10(1) Mumbai dated 8.10.2012 it is stated that by a corrigendum order dated 27.03.2012, the CIT-10 Mumbai has temporarily withdrawn/ cancelled the earlier transfer order dated 22.11.2011 for the sake of administrative convenience and therefore, the notice dated 30.03.2012 would be valid. It is the case of the petitioner that neither any notice to pass a corrigendum order was issued to the petitioner nor the alleged corrigendum 10 ITA.Nos.1497 & 1483/PUN./2015 Fiat India Automobiles Private Limited, Ranjangaon, Dist. Pune. order dated 27.03.2012 has been served upon the petitioner till date. 8. Mr. Pinto, learned Counsel for the Revenue on instruction from CIT-10 Mumbai informs us that there is no proof of serving the corrigendum order dated 27.03.2012 upon the petitioner. It is neither the case of the revenue that before passing the corrigendum any notice was issued to the petitioner nor it is the case of the revenue that the corrigendum order was passed after hearing the petitioner. 9. Although in the affidavit in reply the revenue claims to have annexed a copy of the corrigendum order dated 27.03.2012 no such order was in fact annexed to the affidavit-in-reply. It is only during the course of hearing the Counsel for the revenue admitted the lapse and tendered a copy of the letter dated 20.03.2012 addressed by ACIT-10(1) Mumbai to CIT-10 Mumbai as well as the corrigendum order dated 27.03.2012 to the Court as also to the Counsel for the Petitioner. 10. The letter dated 20/3/2012 addressed by the ACIT-10(1) to CIT-(10) Mumbai reads thus:- To The Commissioner of Income Tax-10, Mumbai. (Through Proper Channel) 11 ITA.Nos.1497 & 1483/PUN./2015 Fiat India Automobiles Private Limited, Ranjangaon, Dist. Pune. Sir, Sub : Order u/s 127(2) in the case of Fiat India Automobiles Ltd. Ref:No.C.I.T.-10/Juris.1237/Transfer/2011-12 dated 22.11.2011 – reg. Kindly refer to the above, 2. Order u/s. 127(2) was passed in the above mentioned case. There is an interlinked matter in the case of Fiat India (P.) Ltd. The file of Fiat India Automobiles Ltd. For A.Y. 2005-06 has to be reopened. It is therefore requested that a corrigendum to the order may kindly be passed in order to circumvent any jurisdictional issue. Yours faithfully, Sd/- (Virender Singh), Asstt. Commissioner of Income Tax-10(1), Mumbai. 11. The corrigendum order dated 27/3/2012 passed by CIT- 10 Mumbai reads thus:- " :CORRIGENDUM ORDER: The Order No. C.I.T./Juris.127/Transfer/2011-12, dated 22.11.2011 in the case of M/s. Fiat India Automobile Ltd. (PAN AAACF1716D) is temporarily withdrawn for the sake of administrative convenience. 12 ITA.Nos.1497 & 1483/PUN./2015 Fiat India Automobiles Private Limited, Ranjangaon, Dist. Pune. A fresh order is being issued separately. Sd/- (SABJEEV K. ABROL) Commissioner of Income Tax-10,Mumbai." 12. The question therefore to be considered is, when the CIT- 10 Mumbai has transferred the jurisdiction to assess/reassess the petitioner from ACIT-10(1) Mumbai to DCIT Circle-1(2) Pune under Section 127 of the Act after hearing the petitioner on 22.11.2011, whether the CIT-10 Mumbai at the instance of ACIT-10(1) Mumbai is justified in issuing a corrigendum order on 27.03.2012 behind the back of the petitioner & whether the ACIT-10(1) Mumbai is justified in issuing the impugned notice under Section 148 of the Act dated 30.03.2012 on the basis of the said corrigendum order dated 27.03.2012 which is passed without issuing a notice to the petitioner, without hearing the petitioner and which is un-communicated to the petitioner. 13. Mr. Pinto, learned Counsel for the Revenue does not dispute that the corrigendum order was passed without issuing notice and without hearing the petitioner and further admits that the said corrigendum order was not served upon the petitioner till date and that he has tendered a copy of the said corrigendum order upon the counsel for the petitioner today in Court. However, he submits that once the corrigendum order was passed by the CIT-10 Mumbai on 27.03.2012 the ACIT- 13 ITA.Nos.1497 & 1483/PUN./2015 Fiat India Automobiles Private Limited, Ranjangaon, Dist. Pune. 10(1) Mumbai was justified in issuing the impugned notice dated 30.03.2012. 14. In our opinion, the conduct of ACIT-10(1) Mumbai as well as CIT-10 Mumbai is highly deplorable. Once the jurisdiction to assess the petitioner was transferred by the CIT- 10 Mumbai from ACIT-10(1) Mumbai to DCIT Circle-1(2) Pune by order dated 22.11.2011 it was totally improper on the part of ACIT-10(1) Mumbai to request the CIT-10, Mumbai to pass a corrigendum order with a view to circumvent the jurisdictional issue. Making such a request on the part of ACIT- 10(1) Mumbai to the CIT-10 Mumbai in our opinion, was in gross abuse of the process of law. If there was any time barring issue, the ACIT-10(1) Mumbai ought to have asked his counterpart at Pune to whom the jurisdiction was transferred to take appropriate steps in the matter instead of taking steps to circumvent the jurisdictional issue. It does not befit ACIT- 10(1) Mumbai to indulge in circumventing the provisions of law and we strongly condemn the conduct of ACIT-10(1) Mumbai in that behalf. Instead of bringing to book the persons who circumvent the provisions of law, the ACIT-10(1) Mumbai has himself indulged in circumventing the provisions of law which is totally disgraceful. 14 ITA.Nos.1497 & 1483/PUN./2015 Fiat India Automobiles Private Limited, Ranjangaon, Dist. Pune. 15. In any event, the CIT-10 Mumbai ought not to have succumbed to the unjust demands of ACIT-10(1) and instead ought to have admonished the ACIT-10(1) for making such unjust request. The CIT-10 Mumbai ought to have known that there is no provision under the Act which empowers the CIT to temporarily withdraw the order passed by him under Section 127(2) of the Act for the sake of administrative convenience or otherwise. If the CIT-10 Mumbai was honestly of the opinion that the order passed under Section 127(2) of the Act was required to be recalled for any valid reasons, then, the CIT- 10 Mumbai ought to have issued notice to that effect to the petitioner and after hearing the petitioner ought to have passed any order as he deemed fit and serve the same to the petitioner. 16. In the present case, admittedly, the CIT-10 Mumbai has not issued any notice and has not heard the petitioner before passing the Corrigendum order and in fact the said corrigendum order has not been communicated to the petitioner before issuing the impugned notice dated 30.03.2012 and admittedly the alleged corrigendum order is served upon the petitioner for the first time today in Court. 17. In these circumstances, we quash and set aside the impugned notice dated 30.03.2012 issued by the ACIT-10(1) Mumbai based on the corrigendum order dated 27.03.2012 15 ITA.Nos.1497 & 1483/PUN./2015 Fiat India Automobiles Private Limited, Ranjangaon, Dist. Pune. passed allegedly by the CIT-10 Mumbai at the behest of ACIT- 10(1) Mumbai and in gross abuse of the process of law. Apart from the fact that the CIT-10 Mumbai had no jurisdiction to temporarily suspend an order passed under Section 127(2) of the Act, in the fact of the present case, the impugned corrigendum order passed behind the back of the petitioner without issuing any notice to the petitioner, without hearing the petitioner and admittedly un-communicated to the petitioner till date, would have no legal existence and therefore the impugned notice dated 30.03.2012 based on the legally non existent corrigendum order dated 27.03.2012 cannot be sustained. Moreover, in the alleged corrigendum order dated 27.03.2012 it is stated that a fresh order would be issued separately, but, till date no fresh order has been passed by CIT-10 Mumbai. This fact further supports the contentions of the petitioner that the alleged corrigendum order has been passed by the CIT-10 Mumbai in collusion with ACIT- 10(1) Mumbai with a view to circumvent the provisions of law which is wholly impermissible in law. 18. In the result, the writ petition is allowed by quashing the impugned notice dated 30.03.2012 issued by ACIT- 10(1) Mumbai with costs quantified at Rs. 10,000/- to be paid by the revenue to the petitioner within a period of eight weeks from today. It is brought to our notice that the CCIT- 16 ITA.Nos.1497 & 1483/PUN./2015 Fiat India Automobiles Private Limited, Ranjangaon, Dist. Pune. VI Mumbai agrees that the impugned actions of CIT- 10 Mumbai and ACIT-10(1) Mumbai are patently unjustified and not as per law but has expressed his helplessness in the matter. We expect that CCIT-VI takes immediate remedial steps so that no such incidents occur in the future. We make it clear that it will be open to the revenue to collect the costs of Rs. 10,000/- from the respondent Nos. 1 and 2 which is required to be paid by the revenue to the petitioner under this order. The Registry is directed to forward a copy of this order to the CCIT- VI, Mumbai and also to the CBDT, New Delhi.” 6.1. Mr. Pardiwala made it clear before us as an abundant caution that their lordships subsequent order dated 02.03.2013 in Revenue’s civil application No.236 of 2013 in writ petition no.8657 of 2012 has deleted some of the observations from the above extracted detailed judgment dated 16.10.2012 [regarding the corresponding observations and directions in para-14 page-9, para-17 page-12 and para-18 pages 12 to 13] to certain limited extent regarding costs etc. His further case is that their lordships’ conclusion regarding finality of the transfer order and subsequent jurisdiction of the Mumbai authorities still holds the field. Mr. Pardiwala quoted hon’ble jurisdictional high court’s recent decision in PCIT vs. Capstone Securities Analysis (P.) Ltd. [2023] 146 taxmann.com 17 ITA.Nos.1497 & 1483/PUN./2015 Fiat India Automobiles Private Limited, Ranjangaon, Dist. Pune. 423 (Bom.) upholding tribunal’s decision dated 09.08.2017 quashing the corresponding assessment for this precise reason alone. He lastly referred to “functus officio” doctrine that the Assessing Officer at Mumbai could not have exercised any authority in assessee’s case. 7. The Revenue has strongly defended the impugned assessment. Learned CIT-DR’s case before us is that the latter assessing authority at Pune had not conveyed its acceptance of the impugned/transfer dated 22.11.2011, therefore, till that time the corresponding assessment jurisdiction continued to vest with the ACIT, Circle-10(1), Mumbai who had made his valid reference to the TPO. He further submitted that such a technical issue does not render the entire assessment as void ab initio as it is a mere procedural irregularity which is indeed a curable defect u/s.292BB of the Act. 8. We have given our thoughtful consideration to the foregoing rival stands. We find no merit in Revenue’s arguments. We make it clear that the question as to whether the assessment jurisdiction stood transferred from ACIT, Circle-10(1), Mumbai as on 22.11.2011 is no more res integra once hon’ble jurisdictional high court’s detailed discussion has decided the same in assessee’s favour and against the department. This is indeed coupled with the fact that assessee 18 ITA.Nos.1497 & 1483/PUN./2015 Fiat India Automobiles Private Limited, Ranjangaon, Dist. Pune. has further succeeded in the preceding assessment year 2008- 2009 thereby getting the corresponding assessment quashed at the CIT(A)'s level. Faced with the situation, we conclude that the Assessing Officer at Mumbai had no authority at all to make sec.92CA reference to the TPO as on 24.11.2011 which renders the entire subsequent proceedings as void ab initio and not sustainable in law. We further wish to make it clear that sec.292BB quoted at the Revenue’s behest nowhere deals with such an instance of apparent lack of jurisdiction in clauses (a) to (c) thereof. The impugned assessment herein dated 30.05.2013 indeed deserves to be quashed as not only based on an invalid sec.92CA reference but also framed beyond the statutory limitation u/s.153(4) of the Act which is extendable by twelve months therefore. We order accordingly. All other rival pleadings on merits in both these cross-appeals stand rendered academic. 9. To sum-up, the Revenue’s instant appeal ITA.No.1483/PUN./2015 is dismissed and assessee’s cross- appeal ITA.No.1497/PUN./2015 succeeds in above terms therefore. A copy of this common order be placed in the respective case files. Pronounced on 13 th March, 2023. Sd/- Sd/- [INTURI RAMA RAO] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Pune, Dated 13 th March, 2023 VBP/- 19 ITA.Nos.1497 & 1483/PUN./2015 Fiat India Automobiles Private Limited, Ranjangaon, Dist. Pune. Copy to 1. The appellant 2. The respondent 3. The Ld. CIT(A)-13, Pune. 4. The Pr. CCIT. Pune. 5. The CCIT (International Taxation), West Zone, Mumbai 6. D.R. ITAT, Pune “C” Bench, Pune 7. Guard File. //By Order// Assistant Registrar, ITAT, Pune Benches, Pune.