M/s. Capstone Securities Analysis Pvt Ltd, Pune V. Deputy Commissioner of Income tax, Pune

ITA 251/PUN/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2483 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 29-08-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 31-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVRAJ MORE
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Procedural lapse; Set aside
• Section: 144; 144C; 251

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH C, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER . / ITA NO.251/PUN/2017 / ASSESSMENT YEAR : 2012-13 M/S. CAPSTONE SECURITIES ANALYSIS PVT. LTD., UNIT NO.201, BUILDING NO.4, COMMERZONE, SAMRAT ASHOK PATH, OFF AIRPORT ROAD, YERWADA, PUNE 411 006 PAN : AABCV9569K VS. DCIT, CIRCLE-1(1), PUNE (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE FINAL ASSESSMENT ORDER DATED 28-11-2016 PASSED BY THE ASSESS ING OFFICER (AO) U/S.143(3) R.W.S.144C(13) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) IN RELATION TO THE ASSESSMENT YE AR 2012-13. ASSESSEE BY SHRI KISHOR PHADKE REVENUE BY SHRI SHIVRAJ MORE DATE OF HEARING 03-09-2019 DATE OF PRONOUNCEMENT 04-09-2019 ITA NO.251/PUN/2017 M/S. CAPSTONE SECURITIES ANALYSIS PVT. LTD., 2 2. THE FIRST LEGAL ISSUE RAISED IN THIS APPEAL IS AGAINST NON-PA SSING OF SEPARATE DRAFT ORDER PURSUANT TO RESTORATION BY THE DIS PUTE RESOLUTION PANEL (DRP). 3. BRIEFLY STATED, THE FACTUAL PANORAMA OF THE CASE IS THAT TH E ASSESSEE FILED ITS RETURN DECLARING TOTAL INCOME OF RS.1,68,43 ,110/-. CERTAIN INTERNATIONAL TRANSACTIONS WERE REPORTED BY THE ASSESSE E IN FORM NO. 3CEB. THE AO REFERRED THE MATTER OF DETERMINATIO N OF THE ARMS LENGTH PRICE (ALP) OF SUCH TRANSACTIONS TO THE TRAN SFER PRICING OFFICER (TPO). VIDE ORDER DATED 18-01-2016, THE T PO RECOMMENDED TRANSFER PRICING ADJUSTMENT OF RS.5,35,19,469 /-. THE AO PASSED THE DRAFT ORDER ON 04-02-2016 PROPOSING, INTER ALIA, VARIATION IN THE DECLARED INCOME TO THE EXTENT RECOMMENDED BY THE TPO. THE ASSESSEE RAISED OBJECTIONS BEFORE THE DRP, WHO VIDE ITS ORDER DATED 16-09-2016 DIRECTED THE AO/TPO TO CARRY OUT FRE SH SEARCH FOR COMPARABLE COMPANIES ENGAGED IN KPO SERVICES PROVIDERS LIST AS AGAINST THE ORIGINAL BENCHMARKING DONE BY THE AUTHORITIES BY CONSIDERING THE ASSESSEE AS A BPO SERVICE PR OVIDER. IN ADDITION, THE DRP ALSO GAVE CERTAIN SPECIFIC DIRECTIONS QUA FEW COMPARABLES AS OBJECTED TO BEFORE IT. PURSUANT TO THE DIRECTION GIVEN BY THE DRP, THE AO VIDE HIS REFERENCE DATED 07-10-2016 RE QUIRED THE TPO TO DO A FRESH BENCHMARKING. THE TPO VIDE HIS OR DER DATED ITA NO.251/PUN/2017 M/S. CAPSTONE SECURITIES ANALYSIS PVT. LTD., 3 21-11-2016 PROPOSED A FRESH TRANSFER PRICING ADJUSTMEN T OF RS.5,21,84,250/-. THE AO IN HIS FINAL ORDER DATED 28-11 -2016 HAS MADE TRANSFER PRICING ADDITION OF RS.5.21 CRORE AND ODD, AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIB UNAL. 4. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELE VANT MATERIAL ON RECORD. THE LEGAL ARGUMENT PUT FORTH ON BEHALF OF THE ASSESSEE IS THAT THE PROCEDURE ADOPTED BY THE AUTHORITIES BELO W IN NOT PASSING DRAFT ORDER PURSUANT TO THE DIRECTION GIVEN BY THE DRP HAS VITIATED THE ASSESSMENT. THIS ARGUMENT CAN BE BETTER APPR ECIATED BY HAVING AN INSIGHT INTO THE PROVISIONS OF SECTION 144C OF TH E ACT WITH THE CAPTION REFERENCE TO DISPUTE RESOLUTION PANEL. SUB- SECTION (1) OF SECTION 144C STATES THAT: THE ASSESSING OFFIC ER SHALL, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS ACT, IN THE FIRST INSTANCE, FORWARD A DRAFT OF THE PROPOSED ORDER OF ASSESSMENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE DR AFT ORDER) TO THE ELIGIBLE ASSESSEE IF HE PROPOSES TO MAKE, ON OR AFTER THE 1ST DAY OF OCTOBER, 2009, ANY VARIATION IN THE INCOME OR LOSS RETURN ED WHICH IS PREJUDICIAL TO THE INTEREST OF SUCH ASSESSEE. SUB-SECTION ( 2) OF SECTION 144C STATES THAT THE ASSESSEE SHALL EITHER FILE HIS ACCE PTANCE TO THE AO ON THE VARIATIONS PROPOSED IN THE DRAFT ORDER OR F ILE HIS OBJECTIONS, IF ANY, WITH THE DRP. IN CASE, THE ASSESSEE AC CEPTS THE ITA NO.251/PUN/2017 M/S. CAPSTONE SECURITIES ANALYSIS PVT. LTD., 4 VARIATION IN THE DRAFT ORDER OR NO OBJECTIONS ARE RECEIVED WITHIN 30 DAYS, THEN SUB-SECTION (3) STATES THAT: `THE ASSESSING OFFIC ER SHALL COMPLETE THE ASSESSMENT ON THE BASIS OF THE DRAFT ORDER. I N CASE, THE ASSESSEE DOES NOT AGREE WITH THE DRAFT ORDER, IT CAN, INTER ALIA, RAISE OBJECTIONS BEFORE THE DRP, WHICH SHALL ISSUE DIRECTIONS UNDER S UB- SECTION (5) OF SECTION 144C. UPON RECEIPT OF THE DIRECTION S FROM THE DRP, THE AO COMPLETES THE ASSESSMENT UNDER SUB-SECTION (13 ) IN CONFORMITY WITH THE DIRECTIONS GIVEN BY THE DRP. 5. SCOPE OF DIRECTIONS BY THE DRP HAS BEEN SET OUT IN S UB-SECTION (8) WHICH STATES THAT THE DRP MAY CONFIRM, REDUCE OR ENHAN CE THE VARIATIONS PROPOSED IN DRAFT ORDER SO, HOWEVER, THAT IT SHALL NOT SET ASIDE ANY PROPOSED VARIATION OR ISSUE ANY DIRECTION UNDER S UB- SECTION (5) FOR FURTHER ENQUIRY AND PASSING OF THE ASSESSME NT ORDER . IT IS MANIFEST FROM THE PRESCRIPTION OF SUB-SECTION (8) THAT THE DRP HAS BEEN EMPOWERED TO CONFIRM, REDUCE OR ENHANCE THE V ARIATIONS PROPOSED IN DRAFT ORDER. THERE IS SPECIFIC PROHIBITION CONTA INED IN THE PROVISION TO THE EFFECT THAT THE DRP CANNOT SET-ASIDE ANY PROPOSED VARIATION OR ISSUE ANY DIRECTION FOR FURTHER ENQUIR Y AND PASSING OF THE ASSESSMENT ORDER. 6. AT THIS JUNCTURE, IT WOULD BE RELEVANT TO NOTE THE LANGUA GE OF SECTION 251 OF THE ACT, WHICH DEALS WITH THE POWERS OF THE CI T(A) ITA NO.251/PUN/2017 M/S. CAPSTONE SECURITIES ANALYSIS PVT. LTD., 5 IN DISPOSING APPEALS. SUB-SECTION (1)(A) PROVIDES THAT IN DIS POSING OF AN APPEAL AGAINST AN ORDER OF ASSESSMENT, THE COMMISS IONER (APPEALS) SHALL HAVE THE POWER TO : ` CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT. PRIOR TO AN AMENDMENT TO SECTION 251(1) BY THE FINANCE ACT, 2001 W.E.F. 01-06-2001, THE CIT(A) WAS EMPOWERED TO : ` SET-ASIDE THE ASSESSMENT AND REFER THE CASE BACK TO THE ASSESSING OFFICER FOR MAKING A FRESH ASSESSMENT IN ACCO RDANCE WITH THE DIRECTIONS GIVEN BY THE COMMISSIONER (APPEALS) AND AFTE R MAKING SUCH FURTHER INQUIRY AS MAY BE NECESSARY, AND THE ASSESSING OFFICER SHALL THEREUPON PROCEED TO MAKE SUCH FRESH ASSESSME NT AND DETERMINE, WHERE NECESSARY, THE AMOUNT OF TAX PAYABLE ON THE BASIS OF SUCH FRESH ASSESSMENT . THE HITHERTO POWER GIVEN TO THE CIT(A) REFERRING THE CASE BACK TO THE AO FOR MAKING FRESH ASSES SMENT HAS BEEN TAKEN AWAY BY THE FINANCE ACT, 2001. THE EFFECT OF THIS AMENDMENT IS THAT NOW THE CIT(A) CAN ONLY CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT BUT CANNOT RESTORE THE M ATTER TO THE AO FOR A FRESH DETERMINATION. IN THE PRE-AMENDMENT ERA WHEN THE CIT(A) COULD RESTORE THE MATTER TO THE AO, THE AO WAS OBLIG ED TO PASS A SEPARATE ORDER WHICH WAS FURTHER APPEALABLE TO THE FIRST APPELLATE AUTHORITY BEFORE MOVING THE TRIBUNAL. IN THE POST- AMENDMENT PERIOD, THE POWER OF THE CIT(A) TO RESTORE HAS BEEN ITA NO.251/PUN/2017 M/S. CAPSTONE SECURITIES ANALYSIS PVT. LTD., 6 TAKEN AWAY AND NOW THE ASSESSEE OR THE REVENUE CAN DIRE CTLY APPROACH THE TRIBUNAL. THE REASON FOR THE AMENDMENT IS TO ERODE DELAY IN THE PROCESS OF COMPLETION OF ASSESSMENT. 7. WHEN WE CLOSELY EXAMINE THE PROVISIONS OF SECTION 144 C(8) IN JUXTAPOSITION TO SECTION 251(1), IT CAN BE EASILY ASCERTAINED THAT THERE IS A GREAT SIMILARITY BETWEEN THE TWO. BOTH THE AUTHORITIES OPERATE BETWEEN THE AO AND THE TRIBUNAL. PURPOSE BEHIND GI VING ONE MORE AUTHORITY TO THE ASSESSEE IN THE SHAPE OF THE DR P OR THE CIT(A) BEFORE COMING TO THE TRIBUNAL IS TO ENSURE THAT THE ASSESSMENT ORDER PASSED BY THE AO IS PROPERLY SCRUTINIZED AND VETTED BY THE LOWER AUTHORITIES. ONCE THE ASSESSMENT ORDER H AS BEEN EXAMINED BY THEM FINALLY, THE AO IN THE CASE OF SECTION 251(1 ) HAS NOTHING TO DO EXCEPT FOR FILING AN APPEAL BEFORE THE TRIBUNAL , IF AGGRIEVED; AND IN THE CASE OF SECTION 144C(8) TO PERFORM TH E RITUAL OF PASSING A FINAL ASSESSMENT ORDER IN CONFORMITY WITH THE D IRECTION GIVEN BY THE DRP EVEN WITHOUT HEARING THE ASSESSEE AS HAS BEEN PROVIDED IN SUB-SECTION (13), WHICH STATES THAT: `UPON RECEIPT OF THE DIRECTIONS ISSUED UNDER SUB-SECTION (5), THE ASSESSING OFFIC ER SHALL, IN CONFORMITY WITH THE DIRECTIONS, COMPLETE. THE ASSESSMENT WITHOUT PROVIDING ANY FURTHER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, WITHIN ONE MONTH FROM THE END OF THE MONTH IN WHIC H SUCH ITA NO.251/PUN/2017 M/S. CAPSTONE SECURITIES ANALYSIS PVT. LTD., 7 DIRECTION IS RECEIVED. ONCE THE ORDER IS PASSED BY THE CIT(A) OR THE DRP, IT PAVES THE WAY FOR THE ASSESSEE TO DIRECTLY KNOC K AT THE DOOR OF THE TRIBUNAL. FURTHER, IN LINE WITH THE EXISTING BAR PLA CED ON THE POWER GIVEN TO THE CIT(A), THE DRP UNDER SUB-SECTION ( 8) IS ALSO DEBARRED FROM SETTING ASIDE ANY PROPOSED VARIATION O R ISSUE ANY DIRECTION UNDER SUB-SECTION (5) FOR FURTHER ENQUIRY AND PA SSING OF THE ASSESSMENT ORDER. IN OTHER WORDS, THE DRP, SIMILAR TO THE CURRENT POWERS OF THE CIT(A) U/S.251(1), CAN CONFIRM, R EDUCE OR ENHANCE THE VARIATIONS BUT IN NO CASE SET-ASIDE THE ISSUE F OR A FRESH REDO. 8. ADVERTING TO THE FACTS OF THE INSTANT CASE, IT IS SEEN THAT THE TPO IN HIS FIRST ORDER DATED 18-01-2016 TREATED THE ASSESSEE AS A BPO SERVICE PROVIDER AND ACCORDINGLY DEALT WITH THE COMPARAB LES. THE ASSESSEE OBJECTED BEFORE THE DRP QUA THE COMPARABLES CHOSEN BY THE TPO. THE DRP, VIDE ITS DIRECTION DATED 16-09-2016, HAS HELD IN PARA 9.2 THAT ACCORDINGLY, THE ASSESSEE IS HELD TO B E A KPO SERVICE PROVIDER ENGAGED IN THE FINANCIAL SECTOR, AND NOT A ROUTINE ITES PROVIDER, WHILE DECIDING ITS COMPARABILITY WITH THE OTHER COMPANIES. THEREAFTER, IT OBSERVED THAT: BOTH THE ASSESS EE AS WELL AS THE TPO HAD CARRIED OUT SEARCH OF COMPARABLES BY TREATIN G THE ASSESSEE AS A ROUTINE ITES PROVIDER, WHICH IS NOT CORRECT CONSIDERING ITA NO.251/PUN/2017 M/S. CAPSTONE SECURITIES ANALYSIS PVT. LTD., 8 THAT THE ASSESSEE IS A KPO SERVICE PROVIDER. DUE TO THIS ER ROR COMMITTED, MOST OF THE COMPARABLES IDENTIFIED BY THE ASSESSE E AS WELL AS THE TPO ARE VERY LIKELY TO BE REJECTED BY THIS PANE L ON GROUNDS OF FUNCTIONALITY........... THE TPO IS, THEREFORE, DIRECTED TO CARRY OUT A FRESH SEARCH FOR COMPARABLE COMPANIES WHO AR E KPO SERVICE PROVIDERS OF THE FINANCIAL SECTOR. THE FINAL LIST OF COMPARABLES SHOULD BE FORMALIZED BY THE TPO AFTER USING APPROPRIATE FILTERS, BUT ONLY AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IT IS MANIFEST FROM THE ABOV E THAT THE DRP TRANSGRESSED ITS POWER GIVEN UNDER SUB-SECTION (8) BY RESTORING THE MATTER TO THE AO/TPO FOR CARRYING OUT A FRESH BENCHMARK ING EXERCISE OF THE INTERNATIONAL TRANSACTION CHANGING THE VERY FOUNDATION OF THE ASSESSEE, BEING, A KPO SERVICE PROVIDER AS AGAINST THE BPO SERVICE PROVIDER TREATED BY THE TPO IN THE FIRST ROUND. IT IS NOT A CASE OF A LIMITED DIRECTION GIVEN BY THE DRP TO EXCLUDE OR INCLUDE PARTICULAR COMPARABLE(S) AFTER FIRST ADJUDICATING ITSELF ON THE COMPARABILITY OR CARRY OUT SOME AMENDMENT IN THE CALCULATION O F THE PLI AS PER ITS OWN VERSION. AU CONTRAIRE, IT IS A CASE OF DIRECTION OF THE DRP TO THE AO/TPO FOR DOING A DE NOVO DETERMINATION OF THE ALP, WHICH IS EXPRESSLY PROHIBITED UNDER THE ACT. ITA NO.251/PUN/2017 M/S. CAPSTONE SECURITIES ANALYSIS PVT. LTD., 9 9. WE HAVE NOTED ABOVE THE SCHEME OF SECTION 144C O F THE ACT, WHICH DELINEATES THAT A DRAFT ORDER PASSED UNDER SUB-SECTION (1) IS ONLY A TENTATIVE ORDER. IN CASE VARIATIONS TO THE INCOME IN TH E DRAFT ORDER ARE ACCEPTED BY THE ASSESSEE OR NO OBJECTIONS ARE RECEIVED WITHIN 30 DAYS, THE AO COMPLETES THE ASSESSMENT UNDER SECTION 144C(3) ON THE BASIS OF DRAFT ORDER AND THE MATTER ENDS. IN CASE THE ASSESSEE OBJECTS TO THE VARIATIONS IN THE INCOME AS PROPOSED IN THE DRAFT ORDER AND APPROACHES THE DRP, THE FINAL ASSESSMENT O RDER IS PASSED BY THE AO U/S.144C (13) GIVING EFFECT TO THE DIREC TIONS GIVEN BY THE DRP UNDER SUB-SECTION (5). IN CASE THE ASSESSEE S EEKS TO TAKE THE ROUTE OF SEEKING REDRESSAL OF ITS GRIEVANCES THROUGH THE CHANNEL OF CIT(A), IN THAT CASE, AGAIN THE AO HAS TO PASS A SEPAR ATE ASSESSMENT ORDER, WHICH IS OBVIOUSLY DISTINCT FROM THE DRAFT ORDER. SO, IT IS ONLY ON THE FINALIZATION OF THE VARIATION IN THE INCOME AS PER THE DRAFT ORDER, TO THE EXTENT SPECIFIED IN THE PROVISION, TH AT THE AO IS OBLIGED TO PASS AN ASSESSMENT ORDER, EITHER UNDER SUB- SECTION (3) OR (13) OF SECTION 144C OF THE ACT. THUS IT FOLLOWS THAT, IRR ESPECTIVE OF THE COURSE OF ACTION FOLLOWED BY THE ASSESSEE, WHETHER OR NOT ACCEPTING THE VARIATION IN THE DRAFT ORDER OR CHOOSING THE ROU TE OF THE DRP OR THE CIT(A), PASSING OF A DRAFT ORDER IS A SINE QUA NON FOR PASSING THE FINAL ASSESSMENT ORDER. ITA NO.251/PUN/2017 M/S. CAPSTONE SECURITIES ANALYSIS PVT. LTD., 10 10. COMING BACK TO THE FACTUAL SCENARIO, IT IS SEEN THAT P URSUANT TO THE DIRECTION OF THE DRP, THE AO MADE A REFERENCE TO THE TP O FOR CARRYING OUT A FRESH BENCHMARKING. THE TPO VIDE HIS SECO ND ORDER DATED 21-11-2016 RECOMPUTED THE ALP BY CONSIDERING 4 COMP ANIES AS COMPARABLE, VIZ., INFORMED TECHNOLOGIES LTD., ICRA ONLINE LTD., ECLERX LTD. AND CALIBER POINT BUSINESS SOLUTIONS LTD. OUT O F THESE FOUR COMPARABLES, THE FIRST ONE, NAMELY, INFORMED TECHNOLOGIES LTD. WAS THE ONE WHICH WAS DIRECTED BY THE DRP TO BE INCLUDED IN THE LIST OF COMPARABLES. ICRA ONLINE LTD. WAS NO T CONSIDERED BY THE TPO EARLIER AS IT WAS A KPO SERVICE PROV IDER AS AGAINST THE ASSESSEE PERCEIVED TO BE A BPO SERVICE PROVIDER . PURSUANT TO THE DIRECTION GIVEN BY THE DRP, THE TPO CONSIDERE D ICRA ONLINE LTD. AS COMPARABLE. ECLERX LTD., NAMELY, THE TH IRD COMPARABLE WAS NOT AT ALL PART OF ANY BENCHMARKING IN THE FIR ST ROUND. THE TPO CONSIDERED THIS COMPANY AS COMPARABLE FO R THE FIRST TIME AND INCLUDED IT IN THE FINAL TALLY. THE LAST COMPARA BLE, NAMELY, CALIBER POINT BUSINESS SOLUTIONS LTD. WAS DEALT WITH BY THE DRP IN ITS ORDER BY HOLDING THAT; THE ASSESSEE AS WELL AS THE TPO HAVE WRONGLY CLASSIFIED THE ASSESSEE AS A ITES PROVIDE R, INSTEAD OF KPO SERVICE PROVIDER. THEREFORE, THE TPO HAS BEE N DIRECTED TO CARRY OUT A FRESH SEARCH. IF SUFFICIENT NUMBER OF ITA NO.251/PUN/2017 M/S. CAPSTONE SECURITIES ANALYSIS PVT. LTD., 11 COMPARABLES UPTO 5 OR MORE ARE AVAILABLE AFTER THIS FRESH SEARCH, THE TPO SHOULD NOT INCLUDE THIS COMPANY AS A COMPARABLE. IT IS THUS PALPABLE THAT THE TPO IN THE SECOND ROUND CARRIED OUT THE BENCHMARKING EXERCISE ALL AFRESH TREATING THE ASSESSEE AS K PO SERVICE PROVIDER AS AGAINST HIS EARLIER VIEW OF A BPO SERVICE PROVIDER IN THE FIRST ROUND. AFTER PASSING OF THE ORDER B Y THE TPO ON 21.11.2016, THE AO PROCEEDED TO STRAIGHTAWAY PASS THE FINAL ASSESSMENT ORDER U/S.143(3) R.W.S. 144C(13) OF THE AC T ON 28-11-2016. IT IS, ERGO, OVERT THAT PURSUANT TO THE FRE SH BENCHMARKING DONE BY THE TPO IN HIS SECOND ORDER, THE AO OMITTED TO PASS A DRAFT ORDER WHICH COULD HAVE BEEN CHALLENGED BY THE ASSESSEE BEFORE THE DRP OR THE CIT(A). WHILE CONSIDERING THE PROVISIONS OF SECTION 144C (SUPRA), WE HAVE NOTICED THAT THE LAW ENJOINS THE PASSING OF A DRAFT ORDER AFTER THE TPOS ORDER AGAINST WHICH THE ASSESSEE CAN RAISE OBJECTION BEFORE THE DRP BEFOR E FINALLY COMING TO THE TRIBUNAL AS WAS DONE IN THE FIRST ROUND OF PROCEEDINGS. ONCE THE DRP SET ASIDE THE EXERCISE OF BENCH MARKING BY THE TPO AND DIRECTED TO DETERMINE THE ALP ALTOGETHER AFRESH, THE EARLIER ROUND OF THE PROCEEDINGS CAME TO AN END AND A FR ESH ROUND OF PROCEEDINGS STARTED WITH THE AO MAKING A REFERENCE TO THE T PO FOR FRESH BENCHMARKING ON 7.10.2016. THE ENTIRE PROCEDURE WAS ONCE ITA NO.251/PUN/2017 M/S. CAPSTONE SECURITIES ANALYSIS PVT. LTD., 12 AGAIN REQUIRED TO BE ADHERED TO STARTING WITH THE PASSING OF TH E ORDER BY THE TPO; PASSING OF THE DRAFT ORDER; OBJECTIONS TO BE RAIS ED BY THE ASSESSEE BEFORE THE DRP; AND PASSING OF A FINAL ASSES SMENT ORDER. HOWEVER, THE AO IN THE SECOND ROUND, ON RECEIPT O F THE ORDER FROM THE TPO, PROCEEDED TO PASS A FINAL ASSESSMENT ORDER , THEREBY OMITTING TO PASS A DRAFT ORDER AND EVENTUALLY DENYING THE ASS ESSEE AN OPPORTUNITY TO RAISE OBJECTIONS BEFORE THE DRP AS ENSHRINED UN DER SUB-SECTION (4) OF SECTION 144C OF THE ACT. 11. THE HONBLE MADRAS HIGH COURT IN VIJAY TELEVISION (P) LTD. VS. DRP (2014) 369 ITR 113 (MAD.) WAS CONFRONTED WITH A SITUATION SIMILAR TO WHICH IS INSTANTLY PREVAILING INASMUCH AS THE AO IN THAT CASE, PURSUANT TO THE ORDER OF THE TPO, PASSED A FINAL ASSESSMENT ORDER INSTEAD OF A DRAFT ORDER. A QUESTION AROSE AS TO W HETHER THE ORDER SO PASSED COULD BE TREATED AS A VALID ORDER. ACCE PTING THE CONTENTION OF THE ASSESSEE, THE HONBLE HIGH COURT SET ASIDE THE ORDER PASSED BY THE AO BY OBSERVING THAT: WHERE THERE WAS OMISSION ON THE PART OF THE AO TO FOLLOW THE MANDATORY PROCEDU RES PRESCRIBED IN THE ACT, SUCH OMISSION CANNOT BE TERMED AS A MERE PROCEDURAL IRREGULARITY AND IT CANNOT BE CURED . RESULTANTLY, THE ASSESSMENT ORDER WAS QUASHED. ALMOST SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE HONBLE JURISDICTIONAL HIGH COURT IN PR. ITA NO.251/PUN/2017 M/S. CAPSTONE SECURITIES ANALYSIS PVT. LTD., 13 CIT VS. LIONBRIDGE TECHNOLOGIES PVT. LT. (2019) 260 TAXMAN 27 3 (BOM.) IN WHICH THE TRIBUNAL IN THE FIRST ROUND RESTORED THE MATTE R TO THE AO ON THE GROUND THAT THE DRP FAILED TO DEAL WITH THE ASSES SEES OBJECTIONS. DURING THE REMAND PROCEEDINGS, A REFERENCE WA S MADE TO THE TPO. ON RECEIPT OF THE TPOS ORDER, THE AO STRAIGHTAWAY PASSED AN ORDER U/S.143(3) R.W.S. 144C(13), WHICH AC TION CAME TO BE DISAPPROVED BY THE HONBLE HIGH COURT. 12. IT, THEREFORE, FOLLOWS THAT THE STATUTORILY MANDATED PRO CEDURE MUST BE ADHERED TO BY THE AUTHORITIES, NON-OBSERVANCE OF WHICH RENDERS THE ASSESSMENT ORDER NULL AND VOID. IN VIEW OF THE FACT THAT THE STATUTORILY MANDATED PROCEDURE HAS NOT BEEN FOLLOWED IN TH E INSTANT CASE IN AS MUCH AS NEITHER ANY DRAFT ORDER WAS PAS SED IN THE SECOND ROUND NOR THE ASSESSEE COULD RAISE OBJECTION BEF ORE THE DRP, THE EDIFICE OF THE FINAL ASSESSMENT ORDER, BEING DEVOID OF A LEGAL BEDROCK, STANDS SHAKED, THEREBY FRUSTRATING THE LEGALITY OF THE ORDER. 13. TO SUM UP, THE INSTANT ASSESSMENT IS A NULLITY FOR TWO REASONS, VIZ., FIRST FOR THE DRP EXCEEDING ITS JURISDICTION IN RESTORING THE MATTER TO THE AO/TPO FOR UNDERTAKING A FRESH BENCHMARKING ALTOGETHER AFRESH; AND TWO, THE AO NOT FOLLOWING THE STATUTORILY PRESCRIBED PROCEDURE OF FIRST PASSING A DRAFT ORDER AND SNATCHING AWAY A FORUM FROM THE ASSESSEE FOR ASSAILING THE VARIATION IN THE ITA NO.251/PUN/2017 M/S. CAPSTONE SECURITIES ANALYSIS PVT. LTD., 14 INCOME PURSUANT TO THE ORDER OF THE TPO BEFORE APPROACHIN G THE TRIBUNAL. EX CONSEQUENTI, WE SET ASIDE THE IMPUGNED ORDER AS NULL AND VOID. 14. IN VIEW OF OUR DECISION IN DECLARING THE ASSESSMENT OR DER AS A NULLITY, THERE IS NO NEED TO GO INTO THE GROUNDS RAISED BY THE ASSESSEE CHALLENGING THE MERITS OF THE ADDITIONS. 15. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH SEPTEMBER, 2019. SD/- SD/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VIC E PRESIDENT PUNE; DATED : 04 TH SEPTEMBER, 2019 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-13, PUNE 4. 5. 6. THE PR.CIT-V, PUNE , , / DR C, ITAT, PUNE; / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR P RIVATE SECRETARY , / ITAT, PUNE ITA NO.251/PUN/2017 M/S. CAPSTONE SECURITIES ANALYSIS PVT. LTD., 15 DATE 1. DRAFT DICTATED ON 03-09-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 03-09-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *