TRUETZSCHLER INDIA P. LTD, MUMBAI V. DCIT RG 2(3), MUMBAI

ITA 1949/MUM/2015

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5641 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2009-2010
• Appeal Filed On: 06-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction; Period of limitation; Additional evidence; Validity of assessment; Time period of passing order; Revised return
• Section: 143(3); 144C; 274; 153; 92CA; 144; 139

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J, MUMBAI , $ ,% & BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER . 1949 / /201 5 (. . 2009-10 ) ITA NO. 1949/MUM/2015 (A.Y.2009-10) M/S. TRUETZSCHLER INDIA PVT. LTD. 43, V.B. GANDHI MARG, FORT, MUMBAI 400 001 PAN: AAACI2153N ...... . / APPELLANT VS. DY. CIT, RANGE 2(3), ROOM NO.552, AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020 ..... /0 / RESPONDENT [ .1/ APPELLANT BY : SHRI NITESH JOSHI /0 1/ RESPONDENT BY : SHRI A. MOHAN 20 / DATE OF HEARING : 02/09/2020 34 20 / DATE OF PRONOUNCEMENT : 30/09/2020 / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-24, MUMBAI (IN SHORT THE CIT (A)) DATED 16/01/2015 FOR THE ASSESSMENT YEAR 2009-10. THE ASSESSEE IN APPEAL HAS RAISED ADDITIONAL GROUND CHALLENGING THE VALIDI TY OF ASSESSMENT ORDER DATED 13/05/2013 PASSED UNDER SECTION 143(3) R.W.S. 144C(13) OF THE INCOME 2 ITA NO.1949/MUM/2015 (A.Y.2009-10) TAX ACT,1961 (IN SHORT THE ACT). THE ADDITIONAL GROUND OF APPEAL READ AS UNDER:- THE LEARNED AO ERRED IN PASSING THE ASSESSMENT ORD ER AFTER EXPIRY OF TIME LIMIT PRESCRIBED UNDER SECTION 153 OF THE INCOME TAX ACT, 1961. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, ASSESSMENT OR DER PASSED BY THE LD.A.O IS TIME BARRED AND OUGHT TO BE QUASHED. 2. SHRI NITESH JOSHI, APPEARING ON BEHALF OF THE A SSESSEE/APPELLANT SUBMITTED THAT BY WAY OF ADDITIONAL GROUND, THE ASS ESSEE HAS RAISED A LEGAL ISSUE ASSAILING THE VALIDITY OF THE ASSESSMENT ORDE R BEING BARRED BY LIMITATION. NARRATING CHRONOLOGY OF EVENTS, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT TRANSFER PRICING OFFICER (T PO) PASSED THE ORDER UNDER SECTION 92CA(3) OF THE ACT ON 09/01/2013. THE ASSE SSING OFFICER PASSED DRAFT ASSESSMENT ORDER ON 27/03/2013. THEREAFTER, THE ASS ESSING OFFICER WAS REQUIRED TO PASS FINAL ASSESSMENT ORDER WITHIN THE LIMITATION PERIOD PROVIDED UNDER SECTION 153 (1) I.E. BY 31/03/2013, WHEREAS, FINAL ASSESSMENT ORDER WAS PASSED ON 13/05/2013 I.E AFTER THE EXPIRY OF LIMITA TION PERIOD. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE TIME LIMIT FOR PASSING ASSESSMENT ORDER IN THE IMPUGNED ASSESSMENT YEAR DOES NOT GET EXTENDED BY APPLICATION OF SECTION 144C OF THE ACT MANDATING REFERENCE TO DISPUTE RESOLUTION PANEL AS THE PROVISIONS OF SAID SECTION DO NOT APPLY TO THE IMPUGNED ASSESSMENT YEAR. TO SUPPORT HIS CONTENTION S, THE LD. AUTHORISED REPRESENTATIVE PLACED RELIANCE ON THE RECENT DECISI ON OF HONBLE MADRAS HIGH COURT IN THE CASE OF M/S. VEDANTA LIMITED VS. ACIT IN WRIT PETITION NO.1 729 OF 2011 DECIDED ON 22/10/2019. 2.1. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSES SEE SUBMITTED THAT THE ADDITIONAL GROUND RAISED IS PURELY LEGAL IN NATURE AND FOR ITS ADJUDICATION NO 3 ITA NO.1949/MUM/2015 (A.Y.2009-10) ADDITIONAL EVIDENCE IS REQUIRED TO BE ADDUCED. SEC TION 144C WAS INSERTED TO THE STATUTE BY THE FINANCE (NO.2) ACT 2009 WITH RET ROSPECTIVE EFFECT FROM 01/04/2009. THE NEW SECTION GAVE AN OPTION TO THE ELIGIBLE ASSESSEE TO OPT FOR AN ALTERNATIVE MECHANISM FOR THE FAST TRACK DISPUTE RESOLUTION. THE INTRODUCTION OF SECTION 144C WAS NOT MERELY PROCEDU RAL CHANGE BUT A SUBSTANTIVE CHANGE PROVIDING AN OPTION TO THE ASSES SEE TO TAKE THE ADVANTAGE OF FAST TRACK DISPOSAL OF THE GRIEVANCE BY DISPUTE RESOLUTION PANEL (DRP). THE HON'BLE MADRAS HIGH COURT IN THE CASE OF M/S. VEDANTA LTD.(SUPRA) HAS HELD THAT THE PROVISIONS OF SECTION 144C INSERTED BY FIN ANCE (NO.2) ACT 2009 ARE APPLICABLE FROM ASSESSMENT YEAR 2011-12 ONWARDS ON LY AND THEY WOULD NOT APPLY TO ASSESSMENT YEAR 2009-10 OR TO EARLIER ASSE SSMENT YEARS. 2.2. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSES SEE FILED WRITTEN SUBMISSIONS TO SUPPORT HIS ARGUMENTS. THE SAME ARE REPRODUCED HEREIN BELOW: THE APPELLANT HAD FILED ITS RETURN OF INCOME FOR A.Y 2009-10 ON 29.09.2009. ITS CASE WAS REFERRED TO TRANSFER PRICING OFFICE R ('TPO') TO DETERMINE THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTION ENT ERED INTO WITH ITS AE. THE LEARNED TPO HAS PASSED ORDER U/S 92CA ON 09. 01.2013 MAKING AN UPWARD ADJUSTMENT. THEREAFTER LD. AO HAS PASSED DRA FT ASSESSMENT ORDER ON 26.03.2013. (COPY ENCLOSED AT PAGE NO 6 TO 8) APPELLANT DID NOT FILE ANY REPLY IN RESPECT OF T HE SAID DRAFT ASSESSMENT ORDER (WITHIN 30 DAYS FROM THE DATE OF RECEIPT OF DRAFT O RDER). HENCE, THE LD. AO PASSED THE FINAL ASSESSMENT ORDER ON 13.05.2013. (C OPY ENCLOSED AT PAGE NO 9 TO 10) AS PER THE 3 RD PROVISO TO SECTION 153(1), THE ASSESSING OFFICER O UGHT TO HAVE PASSED THE ASSESSMENT ORDER WITHIN 36 MONTHS FROM T HE END OF THE RELEVANT ASSESSMENT YEAR. ACCORDINGLY, THE ASSESSING OFFICER OUGHT TO HAVE PASSED THE FINAL ASSESSMENT ORDER BY 31.03.2013. THE LD. AO HAS PASSED FINAL ORDER, ON 13.05.2013 WHICH STOOD TIME BARRED ON 31.3.2013 IN THE LIGHT OF SECTION 153(1). 4 ITA NO.1949/MUM/2015 (A.Y.2009-10) WITH REFERENCE TO NON-APPLICABILITY OF PROVISION S OF SECTION 144C, WE RELY UPON THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CA SE OF VEDANTA LIMITED (WRIT PETITION NO. 1729 OF 2011) WHEREIN IT HAS BEE N HELD THAT SECTION 144C INSERTED BY FINANCE ACT, 2009 IS APPLICABLE FOR ASS ESSMENT YEAR A.Y 2010-11 & ONWARDS ONLY AND NOT APPLICABLE FOR ASSESSMENT A.Y 2009-10 OR ANY EARLIER YEAR. (COPY ENCLOSED AT PAGE NO 11 TO 29). AS PER OUR KNOWLEDGE AND ON PUBLIC DOMAIN, THERE IS NO DECISION OF BOMBAY HIGH COURT CONSIDERING THIS ASPECT OF THE MATTER. IN THE PRESENT CASE, THE LD. AO HAS PASSED FINAL OR DER ON 13.05.2013 WHICH IS TIME BARRED IN THE LIGHT OF SECTION 153(1), ACCORDI NGLY, BAD IN LAW. 3. ON THE OTHER HAND SH. A. MOHAN REPRESENTING THE DEPARTMENT VEHEMENTLY OPPOSED THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. THE LD. DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON CBDT CIRCULAR NO.5 OF 2010 DATED 03/06/2010 TO COUNTER THE ARGUMENT MADE ON BE HALF OF THE ASSESSEE/APPELLANT. 4. BOTH SIDES HEARD AND ORDERS OF AUTHORITIES BELOW PERUSED. THE ASSESSEE IN APPEAL HAS RAISED 10 GROUNDS ASSAILING THE ADDIT ION/DISALLOWANCES ON MERIT. THE ASSESSEE HAS ALSO FILED ADDITIONAL GROUND OF AP PEAL CHALLENGING THE VALIDITY OF ASSESSMENT ORDER. THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS PURELY LEGAL IN NATURE, WHICH GOES TO THE ROOT OF ASCERTAI NING VALIDITY OF THE ASSESSMENT ORDER. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE AT THIS STAGE HAS CONFINED HIS SUBMISSIONS ONLY TO THE LEGA L ISSUE RAISED IN ADDITIONAL GROUND. NO ARGUMENTS WERE ADVANCED ON THE MERITS OF THE ADDITION. SINCE, THE ADDITIONAL GROUND RAISED IS PURELY LEGAL IN NATURE AND REQUIRED NO FRESH EVIDENCE, WE HAVE NO HESITATION IN ADMITTING THE SA ME. 5. FROM THE ORAL AS WELL AS WRITTEN SUBMISSIONS OF LD. AR, IT IS QUITE EVIDENT THAT THE ASSESSEE HAS CHALLENGED VALIDITY OF THE AS SESSMENT ORDER DATED 5 ITA NO.1949/MUM/2015 (A.Y.2009-10) 13/05/2013 ON THE GROUND THAT IT HAS BEEN PASSED BE YOND THE PERIOD OF LIMITATION AS PRESCRIBED UNDER 3 RD PROVISO TO SECTION 153 (1) OF THE ACT AS WAS APPLICABLE TO ASSESSMENT YEAR 2009-10. THE RELEVANT EXTRACT OF THE PROVISIONS (AS APPLICABLE TO AY 2009-10) READS AS UNDER: - TIME LIMIT FOR COMPLETION OF ASSESSMENTS AND REASSE SSMENTS. 153. [(1) NO ORDER OF ASSESSMENT SHALL BE MADE UNDER SE CTION 143 OR SECTION 144 AT ANY TIME AFTER THE EXPIRY OF ( A ) TWO YEARS FROM THE END OF THE ASSESSMENT YEAR IN WHICH THE INCOME WAS FIRST ASSESSABLE ; OR ( B ) ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WH ICH A RETURN OR A REVISED RETURN RELATING TO THE ASSESSMENT YEAR COMMENCING O N THE 1ST DAY OF APRIL, 1988, OR ANY EARLIER ASSESSMENT YEAR, IS FILED UNDE R SUB-SECTION (4) OR SUB- SECTION (5) OF SECTION 139 , WHICHEVER IS LATER :] ******** ******** PROVIDED ALSO THAT IN CASE THE ASSESSMENT YEAR IN WHICH THE INCOM E WAS FIRST ASSESSABLE IS THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 2009 OR ANY SUBSEQUENT ASSESSMENT YEAR AND DURING THE COURSE OF THE PROCEEDING FOR THE ASSESSMENT OF TOTAL INCOME, A REFERENCE UNDER SUB-S ECTION (1) OF SECTION 92CA ( I ) IS MADE BEFORE THE 1ST DAY OF JULY, 2012, BUT AN ORDER UNDER SUB-SECTION (3) OF THAT SECTION HAS NOT BEEN MADE BEFORE SUCH DATE; OR ( II ) IS MADE ON OR AFTER THE 1ST DAY OF JULY, 2012, THE PROVISIONS OF CLAUSE ( A ) SHALL, NOTWITHSTANDING ANYTHING CONTAINED IN THE FIRST PROVISO, HAVE EFFECT AS IF FOR THE WORDS 'TWO YEARS ', THE WORDS 'THREE YEARS' HAD BEEN SUBSTITUTED. ] THE THIRD PROVISO PROVIDING REVISED TIME LIMIT FOR COMPLETION OF ASSESSMENT IN CERTAIN CASES HAS BEEN INSERTED BY THE FINANCE ACT, 2012 WITH EFFECT FROM 01/07/2012. THIS PROVISO PROVIDES AN OUTER LIMIT OF THREE YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR FOR COMPLETION OF ASSESSME NT IN CASE A REFERENCE HAS BEEN MADE U/S 92CA(1). THE ASSESSEES CASE IS COVER ED BY THIS THIRD PROVISO. 6 ITA NO.1949/MUM/2015 (A.Y.2009-10) 6. THE PROVISIONS OF SECTION 144C OF THE ACT VIDE W HICH THE ASSESSEE WAS GIVEN AN OPTION TO TAKE THE BENEFIT OF SPECIALISED DISPUTE RESOLUTION PANEL AS AN ALTERNATE MECHANISM FOR EXPEDITIOUS DISPOSAL OF DISPUTE WAS INSERTED BY THE FINANCE (NO.2) ACT, 2009 W.R.E.F. 01/4/2009. THE HO N'BLE MADRAS HIGH COURT IN THE CASE OF M/S. VEDANTA LTD. VS. ACIT (SUPRA) HAS CONSIDERED THE ISSUE OF APPLICABILITY OF NEWLY INSERTED PROVISIONS OF SECTI ON 144C AND HAS HELD THAT THE AMENDMENT BEING SUBSTANTIVE IN NATURE WOULD APPLY P ROSPECTIVELY FROM ASSESSMENT YEAR 2011-12 ONWARDS. FOR THE SAKE OF C OMPLETENESS THE RELEVANT EXTRACT OF THE JUDGMENT IS REPRODUCED AS UNDER:- 19. COMING TO THE ASPECT OF ASSUMPTION OF JURISDI CTION UNDER SECTION 144C, THE PROVISIONS OF SECTION 144C INSERTED BY FINANCE (NO. 2) ACT, 2009 SET OUT A NEW AND DISTINCT SCHEME OF ASSESSMENT SEPARATE FROM REGULAR ASSESSMENT. THE OBJECT OF INSERTION OF SECTION 144C HAS BEEN EXPLAINED IN THE EXPLANATORY NOTES TO FINANCE (NO.2) ACT, 2009 AS FOLLOWS: '45. PROVISION FOR CONSTITUTION OF ALTERNATE DISPUT E RESOLUTION MECHANISM 45.1 THE DISPUTE RESOLUTION MECHANISM PRESENTLY IN PLACE IS TIME CONSUMING AND FINALITY IN HIGH DEMAND CASES IS ATTAINED AFTER LONG DRAWN LITI GATION TILL SUPREME COURT. IN ORDER TO ADDRESS THE CONCERN OF THE MULTI- NATIONAL COMPA NIES AND TO PROVIDE MECHANISM FOR SPEEDY DISPOSAL OF THEIR CASES SO AS TO ATTAIN FINALITY, A NEW SECTION 144C IS INSERTED IN THE INCOME- TAX ACT TO FACILITATE EXPED ITIOUS RESOLUTION OF DISPUTES. 45.2 THE SALIENT FEATURES OF THE ALTERNATE DISPUTE RESOL UTION MECHANISM ARE AS UNDER:- ..... 45.5 APPLICABILITY - THESE AMENDMENTS HAVE BEEN MAD E APPLICABLE WITH EFFECT FROM 1ST OCTOBER, 2009, AND WILL ACCORDINGLY APPLY IN RE LATION TO ASSESSMENT YEAR 2010-11 AND SUBSEQUENT ASSESSMENT YEARS. THE DISPUTE RESOLU TION PANEL RULES HAVE BEEN NOTIFIED BY S.O. NO. 2958(E) DATED 20TH NOVEMBER, 2 009. ' 20. THE DISPUTE RESOLUTION PANEL (DRP) WAS CONSTITU TED AS AN ALTERNATE DISPUTE RESOLUTION MECHANISM, TO PROVIDE A SPECIALIZED FORU M FOR EXPEDITIOUS DISPOSAL OF DISPUTES. AN ASSESSMENT INVOLVING TRANSFER PRICING DISPUTES, IS THUS TAKEN OUT OF REGULAR TRACK AND A FAST TRACK DISPUTE MECHANISM EV OLVED BEFORE A PANEL OF THREE SENIOR COMMISSIONERS. THE EXPLANATORY CIRCULAR MAKE S IT CLEAR THAT THE SCHEME OF ASSESSMENT UNDER SECTION 144C WILL APPLY IN RELATIO N TO A.Y.2010-11 AND SUBSEQUENT ASSESSMENT YEARS ONLY. NO DOUBT, THIS COURT IS NOT BOUND BY THE EXPLANATORY CIRCULAR, THOUGH NECESSARY WEIGHTAGE WILL HAVE TO BE ACCORDED TO THE EXPLANATION SET FORTH BY 7 ITA NO.1949/MUM/2015 (A.Y.2009-10) THE BOARD, IMMEDIATE AND PROXIMATE TO THE INSERTION OF THE PROVISION ITSELF, IN ORDER TO UNDERSTAND THE APPLICABILITY, SCOPE AND WIDTH OF THE NEWLY INSERTED PROVISION. 21. EVEN OTHERWISE, THE SETTLED POSITION OF LAW AS SET OUT IN THE CASE OF KARIMTHARUVI (SUPRA) IS TO THE EFFECT THAT INCOME T AX ACT, AS IT STANDS AMENDED ON THE FIRST DAY OF APRIL OF ANY FINANCIAL YEAR, MUST APPLY TO THE ASSESSMENTS OF THAT YEAR. ANY AMENDMENT IN THE ACT WHICH COMES INTO FORCE AFT ER THE FIRST DAY OF APRIL OF A FINANCIAL YEAR WOULD NOT APPLY TO AN ASSESSMENT FOR THAT YEAR, EVEN IF THE ASSESSMENT WERE TO BE FINALIZED SUBSEQUENT TO THE COMING INTO FORCE OF THE AMENDMENT. (SEE PARAGRAH 6 OF KARIMTHARUVI (SUPRA)). 22. SECTION 144 C IS EXTRACTED BELOW TO THE EXTENT TO WHICH IT IS RELEVANT. REFERENCE TO DISPUTE RESOLUTION PANEL. 144C (1) THE ASSESSING OFFICER SHALL, NOTWITHSTANDING A NYTHING TO THE CONTRARY CONTAINED IN THIS ACT, IN THE FIRST INSTANCE, FORWA RD A DRAFT OF THE PROPOSED ORDER OF ASSESSMENT (HEREAFTER IN THIS SECTION REFERRED TO A S THE DRAFT ORDER) TO THE ELIGIBLE ASSESSEE IF HE PROPOSES TO MAKE, ON OR AFTER THE 1S T DAY OF OCTOBER, 2009, ANY VARIATION IN THE INCOME OR LOSS RETURNED WHICH IS P REJUDICIAL TO THE INTEREST OF SUCH ASSESSEE.' 23. SUB-SECTION (2) STATES THAT ON RECEIPT OF THE DRAFT ORDER, THE ASSESSEE SHALL, WITHIN 30 DAYS EITHER FILE ACCEPTANCE OF THE VARIAT IONS OR OBJECTIONS TO THE SAME BEFORE DRP. SUB-SECTION (3) STATES THAT THE ASSESSI NG OFFICER SHALL COMPLETE THE ASSESSMENT ON THE BASIS OF THE DRAFT ORDER, IF THE ASSESSEE INTIMATES ACCEPTANCE OF THE VARIATIONS TO HIM OR IF NO OBJECTIONS ARE RECEI VED WITHIN 30 DAYS. SUB-SECTION (4) STATES THAT, IN ANY EVENT, THE ASSESSING OFFICER SH ALL COMPLETE THE ASSESSMENT BY WAY OF FINAL ORDER OF ASSESSMENT TO BE PASSED WITHIN ON E MONTH FROM THE END OF THE MONTH IN WHICH EITHER ACCEPTANCE FROM THE ASSESSEE IS RECEIVED, OR THE PERIOD OF FILING OF OBJECTIONS EXPIRES. SUB-SECTION (5) ONWARDS DEAL WITH THE HEARING OF THE OBJECTIONS BEFORE THE DRP AND SUB-SECTION (10), STATES THAT EV ERY DIRECTION ISSUED BY THE DRP SHALL BE BINDING ON THE ASSESSING OFFICER. SUB-SECT ION (13) THEREAFTER STATES THAT UPON RECEIPT OF THE DIRECTIONS OF THE DRP, THE ASSESSING AUTHORITY SHALL PASS AN ORDER OF ASSESSMENT IN CONFORMITY WITH THE DIRECTIONS ISSUED . THUS BY VIRTUE OF INSERTION OF SECTION 144C, THE LEGISLATURE HAS PUT IN PLACE A DISTINCT, NEW SCHEME OF ASSESSMENT IN REGARD TO A SPECIFIED CLASS OF ASSESSEES. 24. THE QUESTION AS TO WHETHER THE AMENDMENT OR CH ANGE BROUGHT ABOUT BY SECTION 144C IS MERELY PROCEDURAL OR SUBSTANTIVE WOULD STAND ANSWERED BY THE NARRATION OF THE SCHEME OF ASSESSMENT, AS I HAVE NO TICED ABOVE. NO DOUBT, SECTION 144C PRESCRIBES A NEW PROCEDURE FOR ASSESSMENT. BUT CAN IT BE CALLED A MERE SHIFT IN PROCEDURE? I BELIEVE NOT AS THAT WOULD BE AN OVERSI MPLIFICATION OF THE MATTER. THE PROCEDURE INSERTED IS SUBSTANTIVE, IN THAT IT OFFER S A NEW SCHEME OF ASSESSMENT TO A DISTINCT CLASS OF ASSESSEES, THAT IS, THOSE ASSESSE E WHOSE ASSESSMENTS INVOLVE THE ISSUES OF TRANSFER PRICING AND DETERMINATION OF ARM S LENGTH PRICE. THE PROVISIONS OF SECTION 144C DO NOT, THUS MERELY PRESCRIBE PROCE DURE BUT A SUBSTANTIVE EXERCISE IN ASSESSMENT. 8 ITA NO.1949/MUM/2015 (A.Y.2009-10) 25. THE SUPREME COURT IN THE CASE OF R. SHARADAMMA (SUPRA) AFTER CONSIDERING AN EARLIER JUDGMENT OF THE SUPREME COURT IN THE CASE O F COMMISSIONER OF INCOME TAX V. DHADI SAHU (199 ITR 610), STATES AS FOLLOWS: '5. THE ASSESSEE FILED APPEALS BEFORE THE TRIBUNAL CONTENDING THAT BY VIRTUE OF THE AMENDMENT EFFECT BY TAXATION LAWS (AMENDMENT) ACT, 1970, THE INSPECTING ASSISTANT COMMISSIONER LOST JURISDICTION TO PROCEED WITH THE SAID PENALTY PROCEEDINGS WITH EFFECT FROM APRIL 1, 1971 INASMUCH AS IN THE S AID CASES, THE AMOUNT OF INCOME IN RESPECT OF WHICH THE PARTICULARS HAVE BEEN CONCEALE D, WAS LESS THAN RUPEES TWENTY FIVE THOUSAND, WITHIN THE MEANING OF SUB-SECTION (2 ) OF SECTION 274 AS AMENDED IN 1970 WITH EFFECT FROM APRIL 1, 1971. THE CONTENTION WAS THAT PENALTY PROCEEDINGS CANNOT CONTINUE BEFORE THE INSPECTING ASSISTANT COM MISSIONER BECAUSE THE ESSENTIAL REQUIREMENT OF AMENDED SUB-SECTION (2) WAS NOT SATI SFIED. THE TRIBUNAL ACCEPTED THE SAID PLEA AND ALLOWED THE APPEAL. AT THE INSTANCE O F THE REVENUE, THE TRIBUNAL STATED THE FOLLOWING QUESTION FOR THE OPINION OF THE ORISS A HIGH COURT UNDER SECTION 256(1) OF THE ACT : WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON A TRUE INTERPRETATION OF SECTION 274, AS AMENDED BY THE TAXATION LAWS (AM ENDMENT) ACT, 1970 THE INSPECTING ASSISTANT COMMISSIONER TO WHOM THE CASE WAS REFERRED PRIOR TO APRIL 1, 1971, HAD JURISDICTION TO IMPOSE PENALTY. 6. THE HIGH COURT ANSWERED THE QUESTION IN FAVOUR O F THE ASSESSEE WHEREUPON THE MATTER WAS BROUGHT TO THIS COURT. THIS COURT AT THE OUTSET STATED THE GENERAL PRINCIPLE APPLICABLE IN THIS BEHALF IN THE FOLLOWIN G WORDS: IT MAY BE STATED AT THE OUTSET THE GENERAL PRINCIPL E IS THAT A LAW WHICH BRINGS ABOUT A CHANGE IN THE FORUM DOES NOT AFFECT PENDING ACTIONS UNLESS AN INTENTION TO THE CONTRARY IS CLEARLY SHOWN. ONE OF THE MODES BY WHIC H SUCH AN INTENTION IS SHOWN IS BY MAKING A PROVISION FOR CHANGE OVER OF PROCEEDINGS FROM THE COURT OR THE TRIBUNAL WHERE THEY ARE PENDING TO THE COURT OR THE TRIBUNAL WHICH, UNDER THE NEW LAW, GETS JURISDICTION TO TRY THEM. 7. THE COURT THEN OBSERVED THAT ONCE A REFERENCE WA S VALIDLY MADE TO THE INSPECTING ASSISTANT COMMISSIONER HE DID NOT LOSE THE JURISDIC TION TO DEAL WITH THE MATTER ON ACCOUNT OF THE AFORESAID AMENDMENT ACT. IT POINTED OUT THAT THE AMENDING ACT DOES NOT DOES NOT CONTAIN ANY PROVISION THAT THE REFEREN CES VALIDLY PENDING BEFORE THE INSPECTING ASSISTANT COMMISSIONER SHOULD BE RETURNE D WITHOUT PASSING ANY FINAL ORDER IF THE AMOUNT OF INCOME IN RESPECT OF WHICH T HE PARTICULARS HAVE BEEN CONCEALED DID NOT EXCEED RUPEES TWENTY FIVE THOUSAN D. THE SAID CIRCUMSTANCE, IT HELD, SUPPORTED THE INFERENCE DRAWN BY THE COURT TH AT THE INSPECTING ASSISTANT COMMISSIONER CONTINUED TO HAVE JURISDICTION TO IMPO SE PENALTY. THE COURT OBSERVED : IT IS ALSO TRUE THAT NO LITIGANT HAS ANY VESTED RIG HT IN THE MATTER OF PROCEDURAL LAW BUT, WHERE THE QUESTION IS OF CHANGE OF FORUM, IT CEASES TO BE A QUESTION OF PROCEDURE ONLY. THE FORUM OF APPEAL OR PROCEEDIN GS IS A VESTED RIGHT AS OPPOSED TO PURE PROCEDURE TO BE FOLLOWED BEFORE A P ARTICULAR FORUM. THE RIGHT BECOMES VESTED WHEN THE PROCEEDINGS ARE INITI ATED IN THE TRIBUNAL OR THE COURT OF FIRST INSTANCE AND, UNLESS THE LEGISLA TURE HAS, BY EXPRESS WORDS OR BY NECESSARY IMPLICATION, CLEARLY SO INDICATED, THAT VESTED RIGHT WILL 9 ITA NO.1949/MUM/2015 (A.Y.2009-10) CONTINUE INSPITE OF THE CHANGE OF JURISDICTION OF T HE DIFFERENT TRIBUNALS OR FORUMS.' 26. THUS, WHERE THERE IS A CHANGE IN THE FORM OF A SSESSMENT ITSELF, SUCH CHANGE IS NOT A MERE DEVIATION IN PROCEDURE BUT A SUBSTANTIVE SHIFT IN THE MANNER OF FRAMING AN ASSESSMENT. A SUBSTANTIVE RIGHT HAS ENURED TO THE P ARTIES BY VIRTUE OF THE INTRODUCTION OF SECTION 144C, THAT, BEARING IN MIND THE SETTLED POSITION THAT THE LAW APPLICABLE ON THE FIRST DAY OF ASSESSMENT YEAR BE R ECKONED AS THE APPLICABLE LAW FOR ASSESSMENT FOR THAT YEAR, LEADS ONE TO THE INESCAPA BLE CONCLUSION THAT THE PROVISIONS OF SECTION 144C CAN BE HELD TO BE APPLICABLE ONLY P ROSPECTIVELY, FROM AY 2011-12 ONLY. [EMPHASISED BY US] 7. THE HONBLE HIGH COURT ALSO MADE IT CLEAR THAT T HE CIRCULAR ISSUED IN 2013 TO BRING THE ASSESSMENT YEAR 2009-10 IN THE FO LD OF NEWLY INSERTED PROVISIONS OF SECTION 144C WOULD HAVE NO APPLICATIO N. THE RELEVANT EXTRACT OF THE OBSERVATIONS OF THE HONBLE HIGH COURT ON CBDT CIRCULAR ON WHICH THE LD. DR HAS PLACED HEAVY RELIANCE IS AS UNDER: 28. IN THE CASE OF PRASAD PRODUCTIONS (P) LTD. (SU PRA), A DIVISION BENCH OF THIS COURT HAS ALSO CLARIFIED THE POSITION THAT WHERE A CIRCULAR HAS EXPLAINED A PROVISION TO BE APPLICABLE QUA A PARTICULAR ASSESSMENT YEAR, THE BENEFIT OF SUCH CIRCULAR CANNOT BE WITHDRAWN AT A LATER DATE, SO AS TO DENY THE ASSESS EE THE BENEFIT EXTENDED EARLIER. THOUGH IN THE PRESENT CASE THERE IS NO BENEFIT AS S UCH THAT IS IN QUESTION, THERE IS A SUBSTANTIVELY PROCEDURAL RIGHT THAT HAS ENURED TO B OTH PARTIES AS ON 01.04.2009 THAT RELATES TO ASSESSMENTS FOR A.Y.2010-11 ONWARDS. THE RELEVANT PORTION OF THE 2013 CIRCULAR READS THUS: 'PARA 45.5 OF THE CIRCULAR NO.5/2010 DATED 03.06.20 10 READS AS UNDER: 45.5 APPLICABILITY: THESE AMENDMENTS HAVE BEEN MADE APPL ICABLE WITH EFFECT FROM 1ST OCTOBER, 2009 AND WILL ACCORDINGLY APPLY IN RELATIO N TO ASSESSMENT YEAR 2010-11 AND SUBSEQUENT ASSESSMENT YEARS. THE DISPUTE RESOLUTION PANEL RULES HAVE BEEN NOTIFIED BY S.O. NO. 2958 (E) DATED 20TH NOVEMBER, 2009. IN THE ABOVE EXTRACTED PARA 45.5 THERE HAS BEEN AN INADVERTENT ERROR IN STATING THE APPLICABILITY OF THE PROVISIONS OF SECTION 144C INS ERTED VIDE FINANCE (NO.2) ACT, 2009 THAT AMENDMENTS WILL APPLY IN RELATION TO THE ASSES SMENT YEAR 2010- 11 AND SUBSEQUENT ASSESSMENT YEARS. ACCORDINGLY, PARA 45.5 IS REPLACED WITH THE FOLLOWING: 45.5. APPLICABILITY: SECTION 144C HAS BEEN INSERTE D WITH EFFECT FROM 1ST APRIL, 2009. ACCORDINGLY, THE ASSESSING OFFICER IS REQUIRED TO FORWARD A DRAFT ASSESSMENT ORDER TO THE ELIGIBLE ASSESSEE, IF HE PR OPOSES TO MAKE, ON OR AFTER THE 1ST DAY OF OCTOBER, 2009, ANY VARIATION IN THE INCOME OR LOSS RETURNED WHICH IS PREJUDICIAL TO THE INTEREST OF SUCH ASSESS EE. IN OTHER WORDS SECTION 10 ITA NO.1949/MUM/2015 (A.Y.2009-10) 144C IS APPLICABLE TO ANY ORDER WHICH PROPOSES TO M AKE VARIATION IN INCOME OR LOSS RETURNED BY AN ELIGIBLE ASSESSEE, ON OR AFT ER 1ST OCTOBER, 2009 IRRESPECTIVE OF THE ASSESSMENT YEAR TO WHICH IT PER TAINS. AMENDMENTS TO OTHER SECTIONS OF THE INCOME-TAX ACT REFERRED TO IN PARA 45.3 OF THE CIRCULAR 5/2010 DATED 3RD JUNE, 2010 SHALL ALSO APPLY FROM 1 ST OCTOBER, 2009 THE RIGHT THAT HAS ENURED TO THE PARTIES IN 2009 CA NNOT BE MODIFIED BY A CLARIFICATION ISSUED BY THE BOARD, THREE YEARS THER EAFTER. IT APPEARS TO ME QUITE POSSIBLE THAT THE LONG SILENCE OF THE BOARD FOLLOWE D BY THE SUDDEN CLARIFICATION ISSUED IN 2013 MIGHT ITSELF BE INSPIRED BY CHALLENGES SIMI LAR TO THE ONE BEFORE ME NOW, PERHAPS, EVEN THE PRESENT ONE. THOUGH THE CLARIFICA TORY CIRCULAR HAS NOT BEEN CHALLENGED, IN THE LIGHT OF THE DETAILED DISCUSSION AS ABOVE, I AM OF THE VIEW THAT THIS CIRCULAR WILL NOT BIND THE ASSESSING OFFICER, PARTI CULARLY WHEN IT DOES NOT LAY DOWN THE CORRECT POSITION OF LAW. [EMPHASISED BY US] 8. THE FACTS OF THE CASE, PROVISIONS OF SECTION 153 (1) OF THE ACT (AS THEY WERE APPLICABLE IN AY 2009-10) AND THE RATIO OF JUD GEMENT RENDERED IN THE CASE OF M/S. VEDANTA LIMITED (SUPRA) MAKES IT EXPLICITLY LUCID THAT THE PROVISIONS OF SECTION 144C WOULD NOT APPLY IN THE I MPUGNED ASSESSMENT YEAR AND HENCE, THE TIME PERIOD FOR PASSING THE ASSESSME NT ORDER WOULD NOT GET ENLARGED. ERGO, THE ASSESSING OFFICER WAS UNDER OBLIGATION TO PASS THE ASSESSMENT ORDER WITHIN THE TIME SPECIFIED UNDER 3 RD PROVISO TO SEC. 153(1) OF THE ACT I.E. ON OR BEFORE 31/03/2013. SINCE THE ORDER HAS BEEN PASSED BEYOND THE PERIOD OF LIMITATION THE SAME IS NULL AND VOID. THE ASSES SEE SUCCEEDS ON THE LEGAL GROUND RAISED AS ADDITIONAL GROUND OF APPEAL. THE A SSESSMENT ORDER IS QUASHED AND THE APPEAL OF ASSESSEE IS ALLOWED. 9. SINCE THE LEGAL GROUND RAISED IN THE APPEAL IS D ECIDED IN FAVOUR OF THE ASSESSEE, THE GROUNDS OF APPEAL RAISED ON MERITS OF THE ADDITION HAVE BECOME ACADEMIC AND HENCE, ARE NOT DELIBERATED. 11 ITA NO.1949/MUM/2015 (A.Y.2009-10) 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED ON WEDNESDAY THE 30 TH DAY OF SEPTEMBER, 2020. SD/- SD/- (MANOJ KUMAR AGGARWAL) (VIKAS AWAS THY) % / ACCOUNTANT MEMBER / JUDICIAL MEMBER / MUMBAI, 6 '/ DATED: 30/09/2020 VM , SR. PS (O/S) COPY OF THE ORDER FORWARDED TO : 1. . / THE APPELLANT , 2. /0 / THE RESPONDENT. 3. 70 ( )/ THE CIT(A)- 4. 70 CIT 5. 89/0' , . . . , / DR, ITAT, MUMBAI 6. 9:;<= / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI