M/s. Lexmark International (India) Private Limited, Kolkata V. DCIT, Circle - 14(1), Kolkata, Kolkata

ITA 2058/KOL/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 7217 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 18-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY PAUL
• Assessee Lawyers: MANONEET DALAL; S P SINGH; G P SRIVASTAVA LD ARS
• Keywords: Transfer pricing; International transaction; Working capital adjustments; Validity of assessment; Assessment record
• Section: 143(3); 142(1); 148

Judgement Text

1 ITA NOS. 268/KOL/2017, 72/KOL/2016, 235/KOL/2017 & 2058/KOL/2017 LEXMARK INTERNATIONAL (I) P. LTD. , AYS 2008-09 & 2011-12 TO 2013-14 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI SATBEER SINGH GODARA, JM & DR. A. L. S AINI, AM] I.T.A. NO. 268/KOL/2017 ASSESSMENT YEAR: 2008-09 M/S. LEXMARK INTERNATIONAL (INDIA) PVT. LTD. (PAN: AAACL6752B) VS. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-II, KOLKATA. APPELLANT RESPONDENT & I.T.A. NO. 72/KOL/2016 ASSESSMENT YEAR: 2011-12 M/S. LEXMARK INTERNATIONAL (INDIA) PVT. LTD. (PAN: AAACL6752B) VS. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-II, KOLKATA. APPELLANT RESPONDENT & I.T.A. NO. 235/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. LEXMARK INTERNATIONAL (INDIA) PVT. LTD. (PAN: AAACL6752B) VS. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-14(1), KOLKATA. APPELLANT RESPONDENT & I.T.A. NO. 2058/KOL/2017 ASSESSMENT YEAR: 2013-14 M/S. LEXMARK INTERNATIONAL (INDIA) PVT. LTD. (PAN: AAACL6752B) VS. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-14(1), KOLKATA. APPELLANT RESPONDENT DATE OF HEARING 12.07.2018 DATE OF PRONOUNCEMENT 28.09.2018 FOR THE APPELLANT S/SHRI S. P. SINGH & MANONEET DA LAL & G.P. SRIVASTAVA, LD. ARS. FOR THE RESPONDENT SHRI SANJAY PAUL, ADDL. CIT, SR. DR ORDER 2 ITA NOS. 268/KOL/2017, 72/KOL/2016, 235/KOL/2017 & 2058/KOL/2017 LEXMARK INTERNATIONAL (I) P. LTD. , AYS 2008-09 & 2011-12 TO 2013-14 PER SHRI SATBEER SINGH GODARA, JM THE ASSESSEE HAS FILED THE INSTANT FOUR APPEALS FOR AYS. 2008-09, 2011-12, 2012-13 AND 2013-14 AGAINST THE CIT(A)-10, KOLKATAS ORDER DATED 06.10.2016 IN FIRST ASSESSMENT YEAR AND AGAINST THE DCIT, CIRCLE-11, KOLKATAS ASS ESSMENT ORDERS DATED 16.11.2015, 30.12.2016 AND 18.07.2017 (IN LATTER THREE ASSESSME NT YEARS) INVOLVING PROCEEDINGS U/S. 143(3) READ WITH SECTION 144C OF THE INCOME-TAX ACT , 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. WE HAVE HEARD BOTH THE PARTIES. CASE FILES PERU SED. WE PROCEED ASSESSMENT YEAR WISE FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NO. 268/KOL/2017 AY 2008-09 3. THE ASSESSEES SOLE SUBSTANTIVE GROUND RAISED IN THE INSTANT APPEAL CHALLENGES THE LOWER AUTHORITIES ACTION MAKING ARMS LENGTH PRICE A DJUSTMENT OF RS.2,50,45,534/- RELATING TO ITS INTERNATIONAL TRANSACTIONS IN THE NATURE OF PRO VISION OF SOFTWARE SERVICES TO ITS ASSOCIATE EENTERPRISES (AE). THE ASSESSEE-COMPANY ENGAGED IN PRINTERS, ACCESSORIES AND SOFTWARE DEVELOPMENT SERVICES. IT RENDERED PROVISION FOR SO FTWARE DEVELOPMENT SERVICES OF RS.34,42,19,850/- TO ITS OVERSEAS AE IN THE RELEVAN T PREVIOUS YEAR. THE TRANSFER PRICING OFFICER (TPO), THE ASSESSING OFFICER (AO) AND THE L D. CIT(A) ARE UNANIMOUS IN MAKING THE IMPUGNED ALP ADJUSTMENT REGARDING THE ABOVE PRO VISION MADE FOR SOFTWARE DEVELOPMENT SERVICE INVOLVING ALP ADJUSTMENT OF RS. 2,50,45,534/-. THE ASSESSEES ONLY SUBSTANTIVE ARGUMENT DURING THE COURSE OF HEARING I S THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DENYING WORKING CAPITAL ADJUSTMENT REBATE WHICH HAS TO BE MANDATORILY ALLOWED AS PER VARIOUS TRIBUNALS DECISIONS IN PHILLIPS INDIA LTD. VS. DCIT, ITA NOS. 863 & 539/KOL/2016, ACUSIS SOFTWARE INDIA PVT. LTD. VS. I TO TS-940-ITAT-2016 (BANGALORE) AND GLOBAL E-BUSINESS OPERATION PVT. LTD. VS. DCIT TS-654-ITAT-2017 (BANGLAORE). LEARNED COUNSEL HAS FILED AN ELABORATE CHART OF ALL THE EIGHT COMPARABLE ENTITIES INDICATING THAT SUCH A WORKING CAPITAL ADJUSTMENT WOULD BRING AN ARITHMETIC WLAN OF THE SAID ENTITIES TO 9.32% AS AGAINST THE TPOS ARMS LENGTH PRICE DETER MINED IN THIS CASE @ 12.25% IN ISSUE. 4. LEARNED CIT-DR VEHEMENTLY SUPPORTS THE LD. CIT(A )S FINDINGS DENYING THE ASSESSEE THE IMPUGNED WORKING CAPITAL ADJUSTMENT RE LIEF AS UNDER: 3 ITA NOS. 268/KOL/2017, 72/KOL/2016, 235/KOL/2017 & 2058/KOL/2017 LEXMARK INTERNATIONAL (I) P. LTD. , AYS 2008-09 & 2011-12 TO 2013-14 9. REGARDING THE GROUNDS AND ISSUES RELATING TO THE WORKING CAPITAL ADJUSTMENT, I FIND THAT THE LD. TPO HAS RECORDED AS UNDER: 'AS EVIDENT FROM THE ABOVE SEQUENCE OF EVENTS, THE NEED FOR MAKING WORKING CAPITAL ADJUSTMENTS TO THE COMPARABLE COMPANIES BY THE ASSE SSEE AROSE UPON THE REALIZATION THAT POSSIBLE ADJUSTMENTS COULD BE MADE IN ITS CASE IN R ESPECT OF ITS INTERNATIONAL TRANSACTIONS ON 'PROVISION OF SOFTWARE DEVELOPMENT SERVICES'. IT MU ST BE MENTIONED THAT THE ASSESSEE-COMPANY ITSELF HAS PROVIDED THE UPDATED MA RGIN OF THE SELECTED COMPARABLE COMPANIES OF THE ASSESSEE FOR THE F. Y 2007-08, WHE REIN THE ARITHMETIC MEAN AS COMPUTED BY THE ASSESSEE CAME TO 17.01%. BASED ON THE SEARCH ANALYSIS AND THE DATA OF THE ASSESSEE, THE TPO HAS PROPOSED ADJUSTMENT. DURING THE COURSE OF THE TRANSFER PRICING PROCEEDINGS, THE ISSUE OF MAKING CAPITAL ADJUSTMENT TO THE COMPA RABLE COMPANIES WAS NEVER BROUGHT UP BEFORE THE TPO UNTIL TOWARDS THE CLOSE FO THE PROCE EDINGS WHEREIN, THE ASSESSEE SUO MOTTU MADE SUCH SUBMISSION ALONG WITH THE DETAILS REQUISI TIONED BY THE TPO. IN ITS LETTER DATED 24.10.2011 REPRODUCED BELOW, THE ASSESSEE STATED TH AT: 'THE ASSESSEE HAS IN ITS TRANSFER PRICING DOCUMENTA TION DISCUSSED THIS ASPECT OF WORKING CAPITAL EVEN THOUGH THE CAPITAL ADJUSTED OP ERATING MARGINS WERE NOT CALCULATED ..... AS THE ASSESSEE DOES NOT EMPLOY SIGNIFICANT FINDS I N WORKING CAPITAL IN COMPARISON TO COMPARABLE COMPANIES, TO HAVE A BETTER COMPARABI LITY, THE ASSESSEE PROPOSES TO ADJUST THE RETURN OF THE COMPARABLE COMPANIES FROM THEIR RETURN ON WORKING CAPITAL. THIS HAS BEEN DONE IN ORDER TO ENSURE THAT THE COMP ARISON BETWEEN THE ASSESSEE AND THE COMPARABLES WAS ON A LIKE TO BASIS .' WITHOUT PREJUDICE TO THE ASSESSEE'S SUBMISSION, ON EXAMINATION OF THE TRANSFER PRICING DOCUMENTATION SUBMITTED BY THE ASSESSEE ON 18.03.20 11, IT WAS FOUND THAT THE ASSESSEE HAS SIMPLY GIVEN THE WORKING DEFINITION OF 'CAPITAL ADJUSTED O PERATING MARGIN AS IT HAS DONE IN THE CASE OF 'COST COVER RATIO'. IN ADDITION, THE ASSESSEE HAS N EITHER BROUGHT ON RECORD ANY EVIDENCE / DOCUMENT, NOR CONDUCTED ANY ANALYSIS / STUDY TO PROVE THAT IT 'DOES NOT EMPLOY SIGNIFICANT FUNDS IN WORKING CAPITAL IN COMPARISON TO COMPARABLE COMPANIES'. THU S IT WOULD NOT BE MISPLACED TO ARRIVE AT THE CONCLUSION THAT THE WORKING CAPITAL ADJUSTMENT PROP OSED BY THE ASSESSEE IS AN AFTERTHOUGHT, CONSIDERED BY THE ASSESSEE IN PURSUANCE TO THE PROP OSED ADJUSTMENT MADE BY THE TPO BASED ON THE ASSESSEE'S COMPUTED MARGINS OF ITS SELECTED COMPARA BLES FOR THE F. Y 2007-08. THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE JUDGME NT OF THE HON'BLE ITAT IN THE CASE OF A M TODD COMPANY PVT. VS INCOME TAX OFFICER ITA NO / MUM/ 20 06. ON EXAMINATION OF THE SAID JUDGMENT, IT IS FOUND THAT THE DECISION OF THE HON'BLE ITAT RELA TES TO THE ALLOWANCE OF FRESH CLAIM BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS ON AN AMOUNT ERRO NEOUSLY OFFERED BY IT FOR TAXATION, WHICH WAS OTHERWISE LIABLE FOR EXEMPTION. THE FACTS AND CIRCU MSTANCES OF THE CASE ARE CLEARLY DIFFERENT FROM THAT THE ASSESSEE'S AND WOULD NOT BE APPLICABLE IN THE ASSESSEE'S CASE. IN VIEW OF THE FOREGOING, THE WORKING CAPITAL ADJUSTMENTS MADE TO THE COMPARABLE COMPANIES BY THE ASSESSEE IS REJECTED. THE ARITHMETIC MEAN OF THE COMPARABLE COMPANIES SUB MITTED BY THE ASSESSEE ON 27.09.2011 FOR THE F. Y 2007-08 OF 17.01%, HOWEVER ON EXAMINATION OF T HE FINANCIALS OF THE COMPARABLE COMPANIES SUBMITTED BY THE ASSESSEE, IT IS SEEN THAT THE ASSE SSEE HAS CONSIDERED COMPARABLE COMPANIES HAVING TURNOVER AS HIGH AS ABOVE RS.1, 000 CR (PRITHVI INFORMATION SOLUTIONS LTD J AND LOW AS BELOW RS.10 CRORES IN THE CASE OF VJIL CONSULTING LTD. IN VIEW OF THE SAME, THE COMPARABLE COMPANIES HAVING EXTREMELY HIGH SALES / TURNOVER AND EXCEEDINGLY LOW TURNOVER ARE THUS, REJECTED TO JUSTIFY THE SCALE O F BUSINESS OF THE ASSESSEE AS WELL AS TO ARRIVE AT A MORE COMPARABLE SCENARIO WITH THAT THE ASSESSEE. THUS THE ARITHMETIC MEAN OF THE COMPARABLE COMPANIE S AFTER REJECTION OF THE ABOVE COMPANIES COMES TO 19.34.' 10. HAVING EXAMINED THE ISSUE AND THE ACTION OF THE LD. AO I TPO, AND THE SUBMISSIONS MADE BY THE APPELLANT, I FIND MYSELF IN AGREEMENT WITH THE LD. TPO, THAT THE ISSUE OF WORKING CAPITAL WAS INTRODUCED BY THE APPELLANT AS AN AFTERTHOUGHT, IN ANY CASE, THE APPELLANT BY ITS OWN ADMISSION EMPLOYS A VERY MEAGER WORKING CAPITAL, AND THE SAME DOES NOT WEIGHT FOR CONSIDERATION OF 4 ITA NOS. 268/KOL/2017, 72/KOL/2016, 235/KOL/2017 & 2058/KOL/2017 LEXMARK INTERNATIONAL (I) P. LTD. , AYS 2008-09 & 2011-12 TO 2013-14 COMPARABLES. A REGARDS THE FILTER, I FIND THAT THE LD TRP HAS STATISTICALLY TRIES TO BALANCE AND MAKE RATIONAL THE EXERCISE, BY TAKING OUT THE EXTREMES O F VERY HIGH TURNOVERS AND VERY LOW TURNOVERS WHEN TAKING THE COMPARABLES. THE LD A.R HAS GIVEN VERY G ENERAL AND NON-SPECIFIC REASONS AS TO WHY THERE OUGHT TO BE A NEED TO MAKE ANY ADJUSTMENTS PERTAINI NG TO THE WORKING CAPITAL IN ITS CASE. I AM NOT INCLINED TO SEE A NEED FOR SUCH ADJUSTMENTS, AND DO NOT FIND THE THEORY OF 'ECONOMY OF SCALES' RELIED UPON BY THE APPELLANT AS PERTINENT TO ITS CASE. WIT H THAT VIEW OF THE MATTER, I FIND NO REQUIREMENT TO INTERFERE IN THE ADJUSTMENTS MADE BY THE LD. TPO, A ND SUSTAIN THE SAME. THE GROUNDS TAKEN BY THE APPELLANT THEREFORE STAND DISMISSED. 5. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL CONTENTIONS. WE FIND THAT THE VERY ISSUE OF WORKING CAPITAL ADJUSTMENT AROSE IN A Y 2014-15 AS WELL WHEREIN THE DRPS RECENT DIRECTION DATED 21.03.2018 ASKED THE AO TO G IVE A SIMILAR ADJUSTMENT IN THE FOLLOWING TERMS: A) COMPUTE THE AVERAGE OF OPENING AND CLOSING BAL ANCES OF INVENTORIES, TRADE DEBTORS/RECEIVABLES, TRADE CREDITORS/PAYABLES OF BO TH THE TESTED PARTY AND THE COMPARABLES, ON REVENUE ACCOUNT ONLY. B) WORK OUT THE NET WORKING CAPITAL RATIO (IN PERCE NTAGE) AFTER DIVIDING THE NET WORKING CAPITAL BY OPERATING COST/SALES OR SUCH DENOMINATOR (AS IS USED IN THE PLI) BOTH FOR THE TESTED PARTY AND THE COMPARABLES. C) DETERMINE THE DIFFERENCE BETWEEN THE TESTED PART YS RATIO WITH THAT OF EACH COMPARABLES. D) THEREAFTER MULTIPLY THE ABOVE DIFFERENCE BY INTE REST RATE I.E. SBI PRIME LENDING RATE AS ON 30 TH JUNE OF THE RELEVANT FINANCIAL YEAR. E) LASTLY, THESE ADJUSTMENTS ARE TO BE ADDED TO THE PROFIT MARGIN OF COMPARABLE COMPANIES A FINALLY DETERMINED IN ACCORDANCE WITH THE DIRECTION S OF THIS PANEL. F) BESIDES, CREDITS RECEIVED FROM VARIOUS GROUP CON CERNS OR LOANS ETC. SHOULD NOT BE TAKEN INTO ACCOUNT. 6. LEARNED DRP HAS MADE IT CLEAR THAT THE ASSESSING OFFICER WOULD APPLY SBIS PRIME LENDING RATE AS ON 30 TH JUNE OF THE RELEVANT PREVIOUS YEAR AS THE INTEREST RATE QUA THE ISSUE BEFORE US. THE REVENUE FAILS TO DISPUTE ALL THESE INTERVENING DEVELOPMENTS. COUPLED WITH THIS, THE ABOVE CO-ORDINATE BENCHS DECISIONS (SUPR A) HAVE ALSO ACCEPTED SIMILAR WORKING CAPITAL ADJUSTMENT CONTENTIONS AGAINST THE REVENUE. WE THEREFORE RESTORE THE INSTANT LIS BACK TO THE TPO FOR AFRESH PROCEEDINGS QUA THE INSTANT WORKING CAPITAL ADJUSTMENT TO BE CONSIDERED / GRANTED AS PER LAW . 7. LEARNED COUNSEL REPRESENTING ASSESSEE AT THIS ST AGE RAISES AN ALTERNATIVE PLEA OF APPLICATION OF RULE 10B(2) OF THE I. T. RULES, 1962 THAT COMPARABILITY IN TRANSFER PRICING 5 ITA NOS. 268/KOL/2017, 72/KOL/2016, 235/KOL/2017 & 2058/KOL/2017 LEXMARK INTERNATIONAL (I) P. LTD. , AYS 2008-09 & 2011-12 TO 2013-14 PROCEEDING NEEDS TO BE SEEN AS PER FUNCTIONS, ASPEC TS AND RISKS ASSUMED (FAR ANALYSIS) AND THE TURNOVER OR PROFITS/LOSS IPSO FACTO DOES NOT LEAD TO ACCEPTANCE OR REJECTION OF THE COMPARABLE ENTITIES. HIS CASE THEREFORE IS THAT TH E LOWER AUTHORITIES OUGHT TO HAVE INCLUDED M/S. PRITHVI AS WELL AS VJIL CONSULTING LTD. IN THE FINAL LIST OF COMPARABLES. WE ARE OF THE VIEW THAT SINCE THE FORMER PLEA OF WORKING CAPITAL ADJUSTMENT ALREADY STANDS RESTORED BACK TO THE TPO, NO FURTHER ADJUDICATION IS REQUIRED TO BE MADE AT THIS STAGE IN THE INSTANT APPEAL. WE ACCEPT ITA 268/KOL/2017 PARTLY FOR STATISTICAL P URPOSES. 8. WE NOW COME TO THE LATTER THREE ASSESSMENT YEARS CASES RAISING THE IDENTICAL SUBSTANTIVE GROUND(S) CHALLENGING VALIDITY OF ASSES SMENTS ON ACCOUNT OF THE ASSESSING OFFICERS FAILURE IN NOT ISSUING SEC. 143(2) NOTICE . WE MAKE IT CLEAR THAT ASSESSEES LATTER SUBSTANTIVE GROUND IDENTICAL IN ALL CASES CHALLENGE S CORRECTNESS OF THE LOWER AUTHORITIES ACTION MAKING ALP ADJUSTMENT IN RESPECT TO ITS PROV ISION MADE FOR SOFTWARE DEVELOPMENT SERVICES TO THE TUNE OF RS.6,90,26,873/-, RS.44,21, 06,869/- AND RS.49,96,24,564/-; RESPECTIVELY ON VARIOUS FACTUAL AND LEGAL ASPECTS. THE ASSESSEE RAISES ONLY THE FORMER LEGAL PLEA DURING THE COURSE OF HEARING BEFORE US. IT FIR ST OF ALL TAKES US TO VARIOUS JUDICIAL PRECEDENTS VIZ. ACIT VS. HOTEL BLUE MOON (2010) 188 TAXMAN 13 (SC) THAT AN ASSESSING OFFICER MUST NECESSARILY ISSUE SECTION 143(2) NOTIC E WITHIN THE TIME PRESCRIBED IN PROVISO THERETO AND ABSENCE OF SUCH A COMPLIANCE RENDERS TH E ENTIRE ASSESSMENT UNSUSTAINABLE. THIS TRIBUNALS DECISION IN KRISHNENDU CHOWDHURY VS. ITO (2017) 78 TAXMANN.COM 89 (KOL. TRIB.) HOLDS THAT SECTION 143(2) NOTICE HAS TO BE I SSUED BY THE COMPETENT ASSESSING OFFICER HAVING JURISDICTION AT THE RELEVANT POINT OF TIME. NEXT IS CHANAKYA FINVEST (P) LTD. VS. ITO (2013) 34 TAXMANN.COM 206 (KOL.TRIB.) THAT WHERE AN ASSESSMENT IS TRANSFERRED FROM ONE ASSESSING OFFICER TO ANOTHER, ALL PENDING PROCEEDIN GS HAVE TO BE COMMENCED AFTER SUCH A TRANSFER SIMULTANEOUSLY. ANOTHER DECISION IN ITO VS. NVS BUILDERS PVT LTD. (2018) 91 TAXMANN.COM 462 (DEL.TRIB.) THAT NON-SERVICE OF SEC TION 143(2) NOTICE WITHIN THE PRESCRIBED PERIOD RENDERS THE ENTIRE ASSESSMENT A I NVALID. LAST JUDICIAL PRECEDENT IS INDORAMA SOFTWARE SOLUTION LTD. VS. ITO (2013) 29 T AXMANN.COM 78 (MUM. TRIB.) THAT SECTION 148 NOTICE ISSUED BY AN ASSESSING OFFICER N OT HAVING JURISDICTION IS PATENTLY ILLEGAL AND ALL CONSEQUENTIAL PROCEEDINGS IN FURTHERANCE TH ERETO ARE LIABLE TO BE SET ASIDE. 6 ITA NOS. 268/KOL/2017, 72/KOL/2016, 235/KOL/2017 & 2058/KOL/2017 LEXMARK INTERNATIONAL (I) P. LTD. , AYS 2008-09 & 2011-12 TO 2013-14 WE KEEP IN MIND THE UNANIMOUS LEGAL PROPOSITION PR OPAGATED BY THE ABOVE JUDICIAL PRECEDENTS THAT ISSUANCE OF SECTION 143(2) NOTICE B Y THE COMPETENT ASSESSING OFFICER HAVING IS A MANDATORY CONDITION BEFORE FRAMING OF A SCRUTINY ASSESSMENT AND NON- COMPLIANCE THEREOF RENDERS THE ENTIRE CONSEQUENTIAL PROCEEDINGS TO BE NON-EST IN THE EYES OF LAW. 9. WE NOW ADVERT TO THE RELEVANT FACTS OF THE CASE. THERE IS NO DISPUTE THAT THE REGULAR ASSESSMENT IN ALL THESE THREE ASSESSMENT YEARS HAVE BEEN FRAMED ON 16.11.2015, 30.12.2016 AND 18.07.2017 BY THE DCIT/ACIT, CIR-14(1), KOLKATA IN FURTHERANCE TO CBDTS NOTIFICATION DATED 22.10.2014 AND THE CIT(A)-4, KOL KATAS ORDER DATED 15.11.2014. RELEVANT SEC 143(2) NOTICES DATED 13.09.2012, 20.08 .2013 AND 04.09.2014 (ASSESSMENT YEAR WISE) HAVE BEEN ISSUED TO THE ASSESSEE BY THE DCIT/ ACIT, CIRCLE-II(4), CHENNAI. WE AFFORDED AMPLE OPPORTUNITY TO THE CIT-DR TO FILE NE CESSARY STATUS REPORT ON RECORD. PAPER BOOK PAGES 5A AND 5B COMING FROM ASSESSING OFFICER S END TO THIS EFFECT VIDE LETTER DATED 09.04.2018 EXPLAIN THE RELEVANT FACTUAL POSITION AS UNDER: SUBMISSION OF REPORT IN THE CASE OF M/S LEXMARK INT ERNATIONAL (INDIA) PVT. LTD., PAN: AAACL6752B FOR THE AY 2011-12 TO 2013-14-REG. REF: NO.CIT(DR)/ITAT/C-BENCH/2017-18, DT. 27.03.201 8 PLEASE REFER TO THE ABOVE AS DESIRED, POINT WISE REPORT GIVEN BELOW. 1. WHETHER ANY NOTICE U/S 143(2) WAS ISSUED BY THE JURISDICTIONAL AO NOTICE U/S 143(2) ISSUED ON 04.09.2014 BY DCIT-II(4), CHENNAI, HOLDING THE PAN AT THAT POINT OF TIME. NO SUCH NOTICE WAS ISSUED BY THE DCIT, CIRCLE-14(1), KOLKATA 2. NO COPY OF NOTICE U/S. 143(1) IS THERE AS NO SUC H NOTICE WAS ISSUED BY DCIT, CIRCLE-14(1), KOL AS PER AVAILABLE RECORDS. 3. THE PRESENT JURISDICTIONAL AO I.E. DCIT, CIRCLE- 14(1) CONTINUED WITH THE NOTICE U/S. 143(2) ALREADY ISSUED BY THE DCIT-II(4), CHENNAI. THE FACT OF THE CASE IS THAT AN ORDER U/S. 127(2) W AS PASSED BY THE CIT-9, MUMBAI ON 03.05.2010 TRANSFERRING JURISDICTION FROM DCIT, CIRCLE-9(2), M UMBAI TO DCIT-11, KOL WHILE MENTIONING OF PAN LYING WITH THE ACIT CENTRAL CIRCLE-II(4), KOL. ONI CHECKING OF THE DATA BASE, IT HAS BEEN FOUND TH AT THE ASSESSEE WAS HAVING ITS ADDRESS AT APPEJAY BUSINESS CENTRE 12 HADDOWS ROAD, CHENNAI, TAMILNADU , PIN-600006 WITH ANOTHER PAN AAACL7642N SIMULTANEOUSLY WITH THE PRESENT PAN AAAC L6752B AT DLF IT PARK, BLOCK-I 5 TH FLOOR, 08 MAJOR ARTERIAL ROAD, NEW TOWN, P.S. RAJAR HAAT, NORTH 24 PARGANAS, KOLKATA, W.B. ALSO 7 ITA NOS. 268/KOL/2017, 72/KOL/2016, 235/KOL/2017 & 2058/KOL/2017 LEXMARK INTERNATIONAL (I) P. LTD. , AYS 2008-09 & 2011-12 TO 2013-14 CBN PAN BASED QUERY IN ITD REVEALS THAT PAN: AAACL7 642A WAS HAVING WITH OLD DCIT COY CIR-11(4) CN. THEREAFTER, THE PAN WAS DELETED IN DE -DUPLICATION PROCESS OR 08.02.2008 AND PAN AAACL6752B WAS RETAINED. FURTHER, JURISDICTION HIST ORY OF PAN SHOWS THAT THE PAN AAACL6752B WAS TRANSFERRED FROM OLD DCIT COY CIR-II(4) CN TO C ORPORAT WARD-4(4) CHE ON 30.12.2014 AND FINALLY GOT TRANSFERRED TO DCIT. CIR CLE-14(1). KOL FROM CORPORATE WARDD-4(4), CHE ON 11.03.2015. THUS, THE ASSESSEE WAS HAVING TWO PA NS WITH ADDRESS OF CHENNAI AND AS THE PAN WAS LYING WITH CIR II(4) CN AT THAT POINT OF TIME W HEN NOTICE U/S. 143(2) WAS ISSUED NOTICE U/S. 143(2) HAD ITS LIMITATION IN TERMS OF ISSUING WITHI N THE STIPULATED PERIOD. THE NOTICE GENERATED THROUGH SYSTEM AND ISSUED SUBS EQUENTLY TO THE ASSESSEE BY THE AO HOLDING JURISDICTION OVER THE ASSESSEE FOR LYING OF PAN JUR ISDICTION. ISSUE OF NOTICE AND SUBSEQUENT COMPLETION OF ASSESS MENT IS NOT IRREGULAR OR ILLEGAL. THE PAN JURISDICTION WAS TRANSFERRED ON 11.03.2015 AND THE PRESENT JURISDICTIONAL OFFICER HAD NO TIME TO ISSUE A NOTICE U/S. 143(2) OF THE IT ACT AGAIN AS N O NOTICE UNDER THIS SUB-SECTION SHALL BE SERVED ON THE ASSESSEE AFTER THE EXPIRY OF SIX MONTHS. OBVIOU SLY, THE AO ISSUED SUBSEQUENT NOTICES U/S. 142(1) AND PRECEDED ON COMPLETION OF THE ASSESSMENT PROCEE DINGS. THE MATTER GOT COMPLICATED DUE TO ASSESSEES HAVING TWO PANS WITH ADDRESS OF CHENNAI, THOUGH THE ASSESSEE NEVER POINTED TO THIS FACT WHILE QUESTIONI NG THE LEGALITY OF THE NOTICE U/S 142(2). SEC. 142(2) HAS STATED THAT THE ASSESSING OFFICER O R THE PRESCRIBED INCOME TAX AUTHORITY AS THE CASE MAY BE, SHALL SERVE ON THE ASSESSEE A NOTICE. THE P ROVISIONS OF THE ACT DOES NOT USE THE WORD JURISDICTION AS ASSESSING OFFICER AND FOR HOLDING O F PAN THE DCIT, CIR-II(4), CN WAS THE JURISDICTIONAL ASSESSING OFFICER AT THAT POINT OF T IME, MOREOVER, THE ASSESSMENT WAS DONE BY THE DCIT, CIR-14(1), KOL, FINALLY. THE QUESTION ON JURISDICTION FOR ISSUE OF NOTICE U/ S. 143(2) DOES NOT AFFECT THE PROCEEDINGS AS IT IS AMPLY CLEAR THAT DUE TO PAN JURISDICTION THE NOTICE WAS GENERATED AND SUBSEQUENTLY TRANSFERRED. NOTICE U/S. 142(10 IN SPIRIT ENSURES ESTABLISHING T HE JURISDICTION OVER THE ASSESSEE AND THE ASSESSING OFFICER HAD FOLLOWED THE SUBSEQUENT STEPS OF AN ASS ESSING OFFICER WITH DUE DILIGENCE TO COMPLETE THE ASSESSMENT PROCEEDINGS ON ISSUANCE OF NOTICE U/S. 1 43(2).SEC 142(1) PRECEDES THE ISSUANCE OF NOTICE U/S. 143(2) AND EMPOWERS THE ASSESSING OFFICER FOR CALLING OF RETURN OF INCOME WITH INQUIRY BEFORE ASSESSMENT. THE ASSESSEE DID NOT CHALLENGE THE VALI DITY OF NOTICE U/S 142(1) AD STATED THE NOTICE ISSUED U/S. 143(2) AS INVALID. MOREOVER, WHILE PASS ING OF OVER FOR THE AY 2006-07, 2007-08, 2008- 09 BY CIT, CIRCLE-11, KOL, THE PAN JURISDICTION REM AINED TO BE WITH CHENNAI OFFICE. THUS THE ASSESSEE AGREED TO THE ASSESSMENT OF EARLIER YEARS, THEREBY ACCEPTING DCIT, CIRCLE-11, AS THE ASSESSING OFFICER, THEREFORE, THE ASSESSEES MOVE I N THIS RESPECT FOR THE AY 2011-12, 2012-13, 2013- 14 IS NOT ACCEPTABLE. ISSUE OF NOTICE U/S 142(2) BY THE AO HOLDING PAN JU RISDICTION DOES NOT VITIATE THE PROCEEDINGS AS THE SAME IS SIMPLY A FORMAL TIMELY REQUIREMENT BEFO RE ENSURING THAT THE ASSESSEE HAS NOT UNDERSTATED THE INCOME OR HAS NOT COMPUTED EXCESSIV E LOSS OR HAS NOT UNDERPAID THE TAD IN ANY MANNER AS PER PROVISIONS OF THE ACT. ON GOING THROUGH THE SUBMISSIONS OF FACTS AND ARGUM ENT OF THE ASSESSEE IT IS FOUND THAT THE ASSESSEE HAS WRITTEN ON NON-ISSUE OF NOTICE BY THE DCIT, CIR -11, KOL AND THERE IS NO FORCE IN THE ARGUMENT EXCEPTING HIGHLIGHT OF THE ISSUANCE OF NOTICE AS IN VALID. EVEN RELEVANT CASE LAW CITED DOES NOT FIT INTO THE FACTS OF THE CASE. THE ASSESSEE IN ITS PRO FILE WRITTEN OF FOUNDATION IN 1991 AND THE PAN ALLOTMENT SHOWN ON 30.10.2001. HENCE, THE ENTIRE TH ING REVOLVES ON ISSUES CONNECTED TO THE CASES IN TOTALITY OF THEE FACTS AND NO WAY BAR THE AO TO COM PLETE THE PROCEEDINGS LAWFULLY. 8 ITA NOS. 268/KOL/2017, 72/KOL/2016, 235/KOL/2017 & 2058/KOL/2017 LEXMARK INTERNATIONAL (I) P. LTD. , AYS 2008-09 & 2011-12 TO 2013-14 AS REQUESTED, ASSESSMENT RECORDS FOR THE AYS 2012-1 3 & 2013-14 ARE FORWARDED TO YOUR OFFICE, HOWEVER, IT MAY PLEASE BE NOTED THE ASSESSMENT RECO RD FOR AY 2011-12 HAS NOT YET BEEN RECEIVED BY THIS OFFICE. 10. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO R IVAL CONTENTIONS QUA THE INSTANT LEGAL ISSUE. ALL THE ABOVE NARRATED FACTS AND CIRCUMSTAN CES MAKE IT SUFFICIENTLY CLEAR THAT THE DCIT/ACIT, CIRCLE-II(4), CHENNAI LACKED JURISDICTIO N TO ISSUE THE SEC.143(2) NOTICES. THE ASSESSEE DULY BROUGHT ON RECORD ITS OBJECTIONS TO T HIS EFFECT BEFORE THE ASSESSING OFFICER IN ITS LETTER DATED 08.10.2014 (PAGE 59 TO 60 OF THE P APER BOOK). ALL THIS PROVED TO BE A FUTILE EXERCISE AS THE ASSESSING OFFICER FRAMED ASSESSMEN T GOING BY THE EARLIER SCRUTINY NOTICE(S) ONLY AND REJECTED THE SAID JURISDICTIONAL PLEA. WE ACCORDINGLY CONCLUDE IN VIEW OF THE ABOVE STATED JUDICIAL PRECEDENTS AND FACTS ON RECOR D THAT ALL THE THREE IMPUGNED ASSESSMENTS ARE NON-EST IN THE EYES OF LAW SINCE THE DCIT/ACIT, CIRCLE-11(4), CHENNAI ISSUING THE SECTION 143(2) NOTICE(S) DID NOT HAVE JURISDICTION AND THE ASSESSING AUTHORITY IN KOLKATA DID NOT ISSUE SUCH SCRUTINY NOTICES. WE QUASH ALL THES E THREE ASSESSMENTS THEREFORE FOR THIS PRECISE REASON ALONE. THE ASSESSEE SUCCEEDS IN IDE NTICAL LEGAL GROUND CHALLENGING VALIDITY OF ASSESSMENTS IN THESE THREE ASSESSMENT YEARS. IT S LATTER SUBSTANTIVE ISSUE ON MERITS CHALLENGING CORRECTNESS OF ALP ADJUSTMENT (SUPRA) IS RENDERED ACADEMIC. THE ASSESSEES INSTANT LATER THREE APPEALS BEING ITA NOS. 72/KOL/2 016, 235 AND 2058/KOL/2017 ARE ACCEPTED THEREFORE. 11. ASSESSEES FIRST APPEAL IN ITA NO. 268/KOL/2017 IS PARTLY ACCEPTED FOR STATISTICAL PURPOSES IN ABOVE TERMS WHEREAS LATTER THREE APPEAL S IN ITA NO. 72/KOL/2016 AND ITA NO.235 & 2058/KOL/2017 ARE ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER, 2018. SD/- SD/- (DR. A. L. SAINI) (SATBEER SINGH GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28 TH SEPTEMBER, 2018 JD.(SR.P.S.) 9 ITA NOS. 268/KOL/2017, 72/KOL/2016, 235/KOL/2017 & 2058/KOL/2017 LEXMARK INTERNATIONAL (I) P. LTD. , AYS 2008-09 & 2011-12 TO 2013-14 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT M/S. LEXMARK INTERNATIONAL (INDIA) P VT. LTD., DLF IT PARK, BLOCK-1, 5 TH FLOOR, 8, MAJOR ARLTERIAL ROAD, KOLKATA-700 156.. 2 RESPONDENT DCIT, CIRCLE-11 & CIRCLE-14(1), KOL KATA 3. 4. CIT(A)-10, KOLKATA. ) CIT , KOLKATA 5. DR, ITAT, KOLKATA. / TRUE COPY, BY ORDER, SR. PVT. SECRETARY