Can-Pack India Private Ltd., Aurangabad V. Deputy Commissioner of Income-tax,

ITA 285/PUN/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6970 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 20-03-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHASHI B PRASAD
• Keywords: Transfer pricing; International transaction
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 285/PUN/2015 %' ( ')( / ASSESSMENT YEAR : 2010-11 CAN-PACK INDIA PRIVATE LIMITED, L-18/25 TO 18/28, L-19, MIDC WALUJ, AURANGABAD PAN : AADCC2125J ....... / APPELLANT ' /VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE -1, JEEVAN SUMAN, LIC BUILDING, 2 ND FLOOR, TOWN CENTRE, N-5, CIDCO, AURANGABAD 431003 / RESPONDENT / ITA NO. 2600/PUN/2016 %' ( ')( / ASSESSMENT YEAR : 2010-11 THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 1, AURANGABAD ....... / APPELLANT ' /VS. M/S. CAN-PACK INDIA PRIVATE LIMITED, L-18/25 TO 18/28, L-19, MIDC WALUJ, AURANGABAD PAN : AADCC2125J / RESPONDENT 2 ITA NOS. 285/PUN/2015, 2600/PUN/2016 & CO NO. 05/PUN/2017, A.Y. 2010-11 *+& / CO NO. 05/PUN/2017 %' ( ')( / ASSESSMENT YEAR : 2010-11 M/S. CAN-PACK INDIA PRIVATE LIMITED, L-18/25 TO 18/28, L-19, MIDC WALUJ, AURANGABAD PAN : AADCC2125J ....... / APPELLANT ' / V/S. THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 1, AURANGABAD / RESPONDENT ASSESSEE BY : SHRI M.P. LOHIA REVENUE BY : SHRI SHASHI B. PRASAD / DATE OF HEARING : 07-03-2017 / DATE OF PRONOUNCEMENT : 08-03-2017 , / ORDER PER VIKAS AWASTHY, JM : ITA NO. 285/PUN/2015 BY THE ASSESSEE IS DIRECTED AGAINS T THE ASSESSMENT ORDER DATED 23-01-2015 FOR ASSESSMENT YEA R 2010-11 PASSED U/S. 143(3) R.W.S. 92CA(1) AND 144C OF THE INCOME TA X ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). IN ITA NO. 2 600/PUN/2016 THE DEPARTMENT HAS ASSAILED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-13, PUNE DATED 08-08-2016 FOR THE ASSESSMENT YEAR 2010-11. THE ASSESSEE HAS FILED CROSS OBJECTIONS IN SUPPORT OF AFO RESAID ORDER OF 3 ITA NOS. 285/PUN/2015, 2600/PUN/2016 & CO NO. 05/PUN/2017, A.Y. 2010-11 COMMISSIONER OF INCOME TAX (APPEALS). SINCE, THE ISSUE INVOLV ED IN BOTH THE APPEALS AND CROSS OBJECTIONS ARE ARISING FROM S AME SET OF FACTS, THEREFORE, THESE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION AND ARE DECIDED BY THIS COMMON ORDER. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD ARE: THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING OF BEVERA GE CANS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEA R UNDER APPEAL ON 14-10-2010 DECLARING LOSS OF ` 51,69,26,146/-. THE CASE OF ASSESSEE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY THE FIRST NOTICE U/S. 143(2) WAS ISSUED TO THE ASSESSEE ON 19-09-2011. DURIN G THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2010-11 THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS FOR MORE THAN ` 15 CRORES WITH ITS ASSOCIATED ENTERPRISES (AE) AND HENCE, THE CASE WAS REFERRED TO TRA NSFER PRICING OFFICER (TPO) U/S. 92CA OF THE ACT FOR COMPUTING ARMS LENG TH PRICE (ALP) OF THE TRANSACTIONS WITH ITS AE. THE TPO VIDE ORDER DATED 24-01-2014 MADE UPWARD ADJUSTMENT OF ` 24,37,98,560/- IN RESPECT OF INTERNATIONAL TRANSACTIONS. ON THE BASIS OF THE ORDER OF TPO THE ASSESSING OFFICER PASSED DRAFT ASSESSMENT ORDER DATED 07 -02-2014 MAKING ADDITION OF ` 24,37,98,560/-. ALONG WITH THE ASSESSMENT ORDER THE ASSESSING OFFICER ISSUED NOTICE OF DEMAND U/S. 156 OF TH E ACT AND SHOW CAUSE NOTICE FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. 2.1 AGGRIEVED BY THE ADDITION, ISSUANCE OF DEMAND NOTICE AN D NOTICE FOR LEVY OF PENALTY U/S. 271(1)(C) THE ASSESSEE FILED OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL (DRP). THE DRP VIDE DIRECTIONS DAT ED 4 ITA NOS. 285/PUN/2015, 2600/PUN/2016 & CO NO. 05/PUN/2017, A.Y. 2010-11 27-11-2014 HELD THAT ALTHOUGH THE ASSESSMENT ORDER HA S BEEN NAMED AS DRAFT ASSESSMENT ORDER BUT FOR ALL INTENT AND PURPO SES IT IS FINAL ASSESSMENT ORDER AS ALONG WITH THE ORDER, THE ASSESSING OFFICER HAS ISSUED DEMAND NOTICE U/S. 156 AND ALSO SHOW CAUSE NOTICE U/S. 271(1)(C) FOR LEVY OF PENALTY. BOTH THESE NOTICES CAN ONLY B E ISSUED ON FINALIZATION OF ASSESSMENT. THUS, THE ASSESSMENT ORDER PAS SED BY THE ASSESSING OFFICER WAS TREATED AS FINAL ASSESSMENT ORDER BY THE DRP. THE DRP REFUSED TO EXERCISE ITS JURISDICTION ON THE ALLEG ED FINAL ASSESSMENT ORDER. ON THE BASIS OF DIRECTIONS OF THE DRP, THE ASSESSING OFFICER PASSED ASSESSMENT ORDER DATED 23-01-2015 WHICH IS UNDER CHALLENGE IN APPEAL FILED BY THE ASSESSEE. 2.2 THE ASSESSEE ENTANGLED IN THIS PECULIAR SITUATION FILED AP PEAL AGAINST THE ASSESSMENT ORDER DATED 07-02-2014 BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) CHALLENGING THE VALIDITY OF THE ASSESSMENT ORDER, AS WELL AS ASSAILING THE ADDITION ON MERIT S. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER PLACING RELIANCE ON CATENA OF JUDGMENTS HELD THAT THE ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER DATED 07-02-2014 IN VIOLATION OF THE PR OVISIONS OF SECTION 144C OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEALS) QUASHED THE SAID ASSESSMENT ORDER. AGAINST THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS), THE DEPARTMENT IS IN A PPEAL BEFORE TRIBUNAL. THE ASSESSEE HAS FILED CROSS OBJECTIONS IN SUPPORT OF THE ORDER OF FIRST APPELLATE AUTHORITY. 5 ITA NOS. 285/PUN/2015, 2600/PUN/2016 & CO NO. 05/PUN/2017, A.Y. 2010-11 3. SHRI M.P. LOHIA APPEARING ON BEHALF OF THE ASSESSEE SUBM ITTED THAT THE ASSESSING OFFICER HAS PASSED ASSESSMENT ORDER DATED 07-02-2014 IN UTTER VIOLATION OF PROVISIONS OF SECTION 144C OF THE ACT. ALTHOUGH, THE TITLE OF ASSESSMENT ORDER IS MENTIONED AS D RAFT ASSESSMENT ORDER BUT WHILE FRAMING THE ORDER THE ASSES SING OFFICER HAS RECORDED SATISFACTION FOR INITIATING PENALTY PROCEEDINGS U/S. 271(1)(C) R.W. EXPLANATION 7. ALONG WITH THE SAID ORDER, THE ASSESSING OFFICER H AS ISSUED NOTICE OF DEMAND U/S. 156 AND SHOW CAUSE NOTICE U /S. 271(1)(C) OF THE ACT. DEMAND NOTICE AND NOTICE FOR LEVY OF PENALTY CAN BE ISSUED ONLY WHEN TAX LIABILITY IS CRYSTALLIZED. PRECISELY FOR THIS RE ASON THE DRP HAS REFUSED TO EXERCISE ITS JURISDICTION. THE LD. AR SUBMIT TED THAT THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SOKTAS INDIA PVT . LTD. VS. THE ASSTT. COMMISSIONER OF INCOME TAX IN ITA NO. 206/PN/2015 FOR THE ASSESSMENT YEAR 2010-11 DECIDED ON 09-12-2016 UNDER IDENTICAL CIRCUMSTANCES HAS HELD THE ASSESSMENT ORDER TO BE INVA LID. THE LD. AR TO FURTHER STRENGTHEN HIS SUBMISSIONS PLACED RELIANCE ON T HE FOLLOWING DECISIONS : I. INTERNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT IN WRIT PE TITION (L) NO. 351 OF 2016, DECIDED ON 18-02-2016 (BOM-HC); II. ZUARI CEMENT LIMITED VS. ACIT IN WRIT PETITION NO. 5557 OF 20 12, DECIDED ON 21-02-2013 (AP-HC); III. VIJAY TELEVISION PRIVATE LIMITED VS. THE DISPUTE RESOLUTION P ANEL IN WRIT PETITION NOS. 1526 AND 1527 OF 2014, DECIDED ON 29-04-2014 (MAD-HC); IV. AGFA INDIA PVT. LTD. VS. ACIT IN ITA NOS. 341 & 1072/PN/2 014, DECIDED ON 28-10-2015 (PUNE-TRIB.). 6 ITA NOS. 285/PUN/2015, 2600/PUN/2016 & CO NO. 05/PUN/2017, A.Y. 2010-11 3.1 THE LD. AR POINTED THAT THE DEPARTMENT HAD FILED SLP B EFORE THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF ZUARI CEMEM NT LIMITED. THE HONBLE APEX COURT DISMISSED THE SAME VIDE ORDER DA TED 29-09-2013. THE LD. AR PRAYED FOR UPHOLDING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) AND DISMISSING THE APPE AL OF THE DEPARTMENT AND SETTING ASIDE OF ASSESSMENT ORDER DATED 23-01-2 015. 4. SHRI SHASHI B. PRASAD REPRESENTING THE DEPARTMENT VE HEMENTLY DEFENDED THE ASSESSMENT ORDER DATED 23-01-2015 PASSE D U/S. 143(3) R.W.S. 92CA(1) AND 144C OF THE ACT. HOWEVER, WHEN CONFRONTED WITH TH E DECISIONS OF HONBLE BOMBAY HIGH COURT IN THE CASE OF INTE RNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT (SUPRA) AND THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SOKTAS INDIA PVT. LTD . VS. THE ASSTT. COMMISSIONER OF INCOME TAX (SUPRA), THE LD. DR COULD NOT CONTROVERT OR DISTINGUISH THE SAME. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS ON WHICH THE LD . AR HAS PLACED RELIANCE TO SUPPORT HIS SUBMISSIONS. THE FACTS NAR RATED ABOVE HAVE NOT BEEN DISPUTED BY THE DEPARTMENT. THE ASSESSING OFFICER W HILE PASSING ASSESSMENT ORDER DATED 07-02-2014 HAS RECORD ED SATISFACTION FOR INITIATING PENALTY PROCEEDINGS U/S. 271(1)(C) R.W. EXPLANATION 7 AND HAS ISSUED DEMAND NOTICE U/S. 156 OF THE ACT AND ALSO N OTICE U/S. 271(1)(C) OF THE ACT THUS, GIVING THE COLOUR OF FINAL ASSESSME NT ORDER TO ITS DRAFT ASSESSMENT ORDER. AS PER PROVISIONS OF SECT ION 144C IT WAS 7 ITA NOS. 285/PUN/2015, 2600/PUN/2016 & CO NO. 05/PUN/2017, A.Y. 2010-11 INCUMBENT UPON THE ASSESSING OFFICER TO FORWARD A DRAFT AS SESSMENT ORDER TO THE ASSESSEE IN FIRST INSTANCE, TO ENABLE HIM TO FILE OBJECTIONS BEFORE THE DRP. IT WAS ONLY AFTER THE RECEIPT OF DIRECTIO NS FROM THE DRP THAT THE ASSESSING OFFICER COULD HAVE PASSED THE FINAL ASSE SSMENT ORDER. IT IS ONLY AT THE TIME OF PASSING OF FINAL ASSESSMEN T ORDER THAT THE ASSESSING OFFICER SHOULD HAVE RECORDED SATISFACTION FOR INITIATING PENALTY PROCEEDINGS. THE NOTICE OF DEMAND U/S. 156 IS ALSO TO BE ISSUED AFTER THE PASSING OF FINAL ASSESSMENT ORDER. IN THE PRESENT CASE, UNDISPUTEDLY, THE ASSESSING OFFICER HAS ISSUED DEMAND NOTIC E U/S. 156 AND SHOW CAUSE NOTICE FOR LEVY OF PENALTY U/S. 271(1)(C) WHILE PASSING THE DRAFT ASSESSMENT ORDER DATED 24-01-2014. THUS, IN SPRIT THE DRAFT ASSESSMENT ORDER WAS THE FINAL ASSESSMENT ORDER. 6. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SO KTAS INDIA PVT. LTD. VS. THE ASSTT. COMMISSIONER OF INCOME TAX (SUPRA) AFTER CONSIDERING VARIOUS DECISIONS INCLUDING THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VIJAY TELEVISION PRIVATE LIMITED V S. THE DISPUTE RESOLUTION PANEL (SUPRA), THE JUDGMENT OF HONBLE B OMBAY HIGH COURT IN THE CASE OF INTERNATIONAL AIR TRANSPORT AS SOCIATION VS. DCIT (SUPRA) HAS HELD AS UNDER : 11. .THE ASSESSING OFFICER PASSED THE ORDER ON 28.02.2014 ALONG WITH WHICH IT ALSO ISSUED THE DEMAND NOTICE A ND SHOW CAUSE NOTICE FOR LEVY OF PENALTY. IN OTHER WORDS, THE ASS ESSING OFFICER HAS CRYSTALLIZED THE DEMAND IN THE CASE OF ASSESSEE. WH EREAS, AS PER THE PROVISIONS OF THE ACT WHERE THE ASSESSING OFFICER P ROPOSES TO VARY THE INCOME IN THE HANDS OF ASSESSEE, THERE WAS REQUIREM ENT TO ISSUE SHOW CAUSE NOTICE TO THE ASSESSEE TO THE SAID ADDITIONS, BY WAY OF DRAFT ASSESSMENT ORDER. THE DEMAND DOES NOT GET CRYSTALLI ZED IN DRAFT ASSESSMENT ORDER. UNDOUBTEDLY, THE ASSESSING OFFICE R HAD ISSUED 8 ITA NOS. 285/PUN/2015, 2600/PUN/2016 & CO NO. 05/PUN/2017, A.Y. 2010-11 COVERING LETTER WHERE IT SAYS THAT IT IS DRAFT ASSE SSMENT ORDER BUT IN SPIRIT, IT HAD FINALIZED THE ASSESSMENT, WHEREIN TH E DEMAND WAS CRYSTALLIZED AND DEMAND NOTICE WAS ISSUED TO THE AS SESSEE. THE ASSESSING OFFICER HAS NOT FOLLOWED THE CORRECT PROC EDURE AS PROVIDED IN THE STATUTE AND HAS PASSED FINAL ASSESSMENT ORDER W ITHOUT PASSING DRAFT ASSESSMENT ORDER WHICH IS AGAINST THE PROVISIONS OF THE ACT AND HENCE, THE SAME IS INVALID IN LAW. RELIANCE IS PLACED ON T HE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN INTERNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT (SUPRA) AND THE HONBLE MADRAS HIGH COURT IN VIJAY TELEVISION PVT. LTD. VS. DRP & OTHERS (SUPRA) AND T HE HONBLE HIGH COURT OF ANDHRA PRADESH IN M/S. ZUARI CEMENTS LTD. VS. AC IT (SUPRA). WE HOLD THAT THE ASSESSMENT ORDER PASSED IN THE CASE IS INV ALID AND THE SAME IS SET ASIDE. SINCE WE HAVE DECIDED THE PRELIMINARY ISS UE IN FAVOUR OF ASSESSEE, THE OTHER GROUNDS OF APPEAL AGAINST THE A DDITIONS MADE BECOME ACADEMIC AND THE SAME ARE DISMISSED. 7. WE FIND THAT THE FACTS IN THE PRESENT CASE OF THE ASS ESSEE ARE SIMILAR. BY FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL, WE UPHOLD THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS ) IN QUASHING THE ASSESSMENT ORDER DATED 07-02-2014. ACCO RDINGLY, THE APPEAL OF THE DEPARTMENT IS DISMISSED. SINCE, THE APPEAL OF DEPARTMENT HAS BEEN DISMISSED, THE CROSS OBJECTIONS OF T HE ASSESSEE SUPPORTING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEA LS) HAVE BECOME INFRUCTUOUS AND ARE DISMISSED, AS SUCH. 8. SINCE, THE ALLEGED DRAFT ASSESSMENT ORDER DATED 07-02 -2014 HAS BEEN SET ASIDE, THE SUBSEQUENT PROCEEDINGS ARISING THERE FROM ARE VITIATED AND ARE NULL AND VOID. THEREFORE, THE FINAL ASSESSM ENT ORDER DATED 23-01-2015 WHICH HAS GERMINATED FROM THE PROCEED INGS SUBSEQUENT TO DRAFT ASSESSMENT ORDER IS NON-EST. THE APPEAL OF THE 9 ITA NOS. 285/PUN/2015, 2600/PUN/2016 & CO NO. 05/PUN/2017, A.Y. 2010-11 ASSESSEE AGAINST THE SAID ASSESSMENT ORDER DOES NOT S URVIVE. THUS, THE SAME IS DISMISSED AS INFRUCTUOUS. 9. IN THE RESULT, THE APPEALS OF THE ASSESSEE AND THE D EPARTMENT ARE DISMISSED AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE ALSO DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 08 TH DAY OF MARCH, 2017. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 08 TH MARCH, 2017 RK ,-*%./#0#). / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-2, NASHIK 4. ' / THE CIT-2, NASHIK 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, 5 6 / ASSISTANT REGISTRAR, ,- , / ITAT, PUNE