Sandvik Mining and Construction Tools AB, Pune V. ACIT(IT), Cir- 2, Pune

ITA 29/PUN/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3650 (ITAT-PUNE)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2016-2017
• Appeal Filed On: 11-02-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Transfer pricing; TDS
• Section: 144; 143(3); 144C; 246A; 13

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.29/PUN/2021 / ASSESSMENT YEAR : 2016-17 SANDVIK MINING AND CONSTRUCTION TOOLS AB, C/O. SANDVIK ASIA PRIVATE LIMITED, MUMBAI- PUNE ROAD, DAPODI, PUNE 411 012 PAN : AAKCS4432P VS. ACIT (INTERNATIONAL TAXATION), CIRCLE-2, PUNE APPELLANT RESPONDENT / ORDER PER R.S. SYAL, VP : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PA SSED BY THE LD. CIT(A)-13, PUNE ON 15-12-2020 IN RELATION TO THE ASSESSMENT YEAR 2016-17. 2. THE LIS INVOLVED IN THE APPEAL IS WHETHER THE LD. CIT(A) W AS JUSTIFIED IN DECLARING THE APPEAL AS `DEFECTIVE AND HENCE NO T MAINTAINABLE? PITHILY STATED, THE FACTUAL MATRIX OF THE CASE IS THA T THE ASSESSEE IS A NON RESIDENT COMPANY BASED IN SWEDEN. A R ETURN OF INCOME WAS FILED WITH NIL INCOME BUT WITH TOTAL RECEIPTS OF RS.2,34,98,700/-, THEREBY CLAIMING REFUND OF THE ENTIRE TDS AMOUNTING TO RS.23,49,870/-. THE AO MADE A REFERENCE TO THE ASSESSEE BY SHRI NIKHIL PATHAK REVENUE BY SHRI PIYUSH KAMAL SINGH YADAV DATE OF HEARING 12-10-2021 DATE OF PRONOUNCEMENT 13-10-2021 ITA NO.29/PUN/2021 SANDVIK MINING AND CONSTRUCTION TOOLS AB 2 TRANSFER PRICING OFFICER (TPO), WHO PASSED THE ORDER U/S .92CA(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED THE A CT), NOT PROPOSING ANY TRANSFER PRICING ADJUSTMENT. THE AO OPINED THAT THE RECEIPT OF RS.2.34 CRORE TOWARDS I.T. SUPPORT SERVICES FR OM SANDVIK ASIA PRIVATE LIMITED WAS CHARGEABLE TO TAX AS ROYALTY/FEES FOR TECHNICAL SERVICES (FTS). IN THE DRAFT ORDER U/S.144C OF THE INCOME-TAX ACT, 1961 DT.18-12-2019, THE AO INCLUDED SUCH AMOUNT IN THE TOTAL INCOME BY NOTING IN THE LAST PARA OF HIS ORDER THA T: THE ASSESSMENT IS COMPLETED U/S.144C(13) R.W.S. 143(3) OF THE INCOME-TAX ACT, 1961 . THE ASSESSEE PREFERRED AN APPEAL AGAINST SUCH DRAFT ORDER BEFORE THE LD. CIT(A), WHO OBSERVED THAT THE ASSESSEE FILED APPEAL ON 17-01-2020 AGAINST THE DRAFT ORDER DATED 18-12- 2019. HE FURTHER NOTICED THAT THE FINAL ASSESSMENT ORDER IN THE CASE OF THE ASSESSEE WAS PASSED U/S.143(3) R.W.S. 144C(3) OF THE ACT ON 23-01- 2020. HE, THEREFORE, HELD THE APPEAL AGAINST THE DRAFT OR DER AS NOT MAINTAINABLE WHICH WAS DISMISSED AS DEFECTIVE . AGGRIEVED THEREBY, THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE T RIBUNAL. 3. WE HAVE COGITATED OVER THE RIVAL SUBMISSIONS AND SCAN NED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE IS ADMITTEDLY A NON- RESIDENT, WHO FILED ITS RETURN WITH NIL INCOME. SECTION 144C(15) DEFINES AN ELIGIBLE ASSESSEE TO MEAN, INTER ALIA, `(II) ANY NON- RESIDENT NOT BEING A COMPANY OR ANY FOREIGN COMPANY . THUS THE ITA NO.29/PUN/2021 SANDVIK MINING AND CONSTRUCTION TOOLS AB 3 ASSESSEE, BEING A NON-RESIDENT, QUALIFIES AS AN ELIGIBLE ASSE SSEE. SECTION 144C(1) STIPULATES THAT THE ASSESSING OFFICER SHALL, IN THE FIRST INSTANCE, FORWARD A DRAFT ORDER TO THE ELIGIBLE ASSESSEE IF HE PROPOSES TO MAKE ANY VARIATION IN THE TOTAL INCOME WHICH IS PREJUDICIAL TO THE INTEREST OF SUCH ASSESSEE. WE HAVE NOTIC ED ABOVE THAT A SUM OF RS.2.34 CRORE WAS CLAIMED BY THE ASSESSEE AS NOT CHARGEABLE TO TAX, WHICH THE AO WANTED TO BRING TO TAX. THUS , THE CONDITION PRECEDENT IN SUB-SECTION (1) OF SECTION 144C, BEING , ANY VARIATION WHICH IS PREJUDICIAL TO THE INTEREST OF SUCH ASSESSEE IS SATISFIED. GIVEN THE FACT THAT THE ASSESSEE IS AN ELIGIBLE ASSE SSEE AND IN WHOSE CASE VARIATION IS PROPOSED IN ITS INCOME, A DRAFT OR DER WAS REQUIRED TO BE PASSED U/S.144C(1). IN THE INSTANT CASE, T HE AO PASSED THE DRAFT ORDER ON 18-12-2019 U/S.144C(13) OF THE INCOME-TAX ACT PROPOSING VARIATION IN THE TOTAL INCOME TO THE TUNE OF RS.2.34 CRORE. ALBEIT ON THE FIRST PAGE OF THE DRAFT ORDER, THE AO REFER RED TO THE SECTION UNDER WHICH THE ASSESSMENT IS MADE AS SECTION 143(3 ), HOWEVER, AT THE END OF THE ORDER IN PARA 11, HE CONCLUDE D THAT THE ASSESSMENT IS COMPLETED U/.S.144C(13) R.W.S. 143(3) OF THE INCOME- TAX ACT, 1961 . COMPLETELY UNBEKNOWNST THAT ANOTHER ASSESSMENT ORDER U/S 143(3) WAS IN THE OFFING, THE ASSESSEE PREFERR ED AN APPEAL BEFORE THE LD. CIT(A) ON 17-01-2020 AGAINST THE `DRAFT O RDER HAVING BEEN PASSED U/S 144C(13) OF THE ACT, WHICH IS WITHIN 30 DA YS FROM ITA NO.29/PUN/2021 SANDVIK MINING AND CONSTRUCTION TOOLS AB 4 THE DATE OF THIS ORDER PASSED ON 18-12-2019. IN THE ME ANTIME, THE AO PASSED THE FINAL ASSESSMENT ORDER U/S.143(3) R.W.S. 1 44C(3) ON 23-01-2020, MAKING THE ADDITION OF RS.2.34 CRORE. REALIZ ING THAT THE AO PASSED ANOTHER ORDER U/S.144C(3) ON 23-01-2020, THE ASSESSEE ATTEMPTED TO FILE ANOTHER APPEAL AGAINST THIS ORDER BEFORE THE LD . CIT(A) ON 18-02-2020, WHICH WAS REFUSED BY THE E-PORTA L WITH THE COMMENTS ONLY ONE ORIGINAL APPEAL CAN BE FILED . A COPY OF SCREENSHOT OF SUCH REFUSAL IS AVAILABLE AT PAGE 122 OF THE PAPER BOOK. IT WAS PROBABLY ON THE RAISON D`ETRE THAT THE ASSESSEES EARLIER APPEAL FILED ON 17.01.2020 FOR THE YEAR UNDER CONSIDERATION WAS ALREADY PENDING WITH THE LD. CIT(A). THEREAFTER, THE ASSESSEE FILED ITS GRIEVANCE IN THIS REGARD ON THE INCOME-TAX PORTAL ON 20-02- 2020. IT WAS ONLY AFTER THE PASSING OF THE IMPUGNED ORDER BY THE LD . CIT(A) THAT THE ASSESSEE SUCCEEDED IN FILING ANOTHER E-APPEAL BELATE DLY BEFORE HIM ON 11-02-2021 AGAINST THE FINAL ORDER PASSED BY THE AO ON 23-01-2020 U/S.143(3) R.W.S. 144C(3), WHICH IS STATED TO BE STILL PENDING ADJUDICATION. 4. REVERTING TO THE FACTUAL PANORAMA, INSOFAR IT IS RELEVAN T FOR THE PRESENT APPEAL, IT IS SEEN THAT THE AO WAS SUPPOSED TO PASS THE `DRAFT ORDER WHICH HE ACTUALLY DID ON 18-12-2019 THOUGH WRONGLY DESCRIBED THE SAME AS HAVING BEEN PASSED U/S.144C(13) R .W.S. 143(3) OF THE ACT. THIS ORDER OUGHT TO HAVE BEEN PASSED U/S.144 C(1). SUB- ITA NO.29/PUN/2021 SANDVIK MINING AND CONSTRUCTION TOOLS AB 5 SECTION (2) OF SECTION 144C PROVIDES THAT: `ON RECEIPT OF THE DRAFT ORDER, THE ELIGIBLE ASSESSEE SHALL, WITHIN A PERIOD OF THIRTY DA YS OF THE RECEIPT BY HIM OF THE DRAFT ORDER, INTER ALIA, ` FILE HIS OBJECTIONS, IF ANY, WITH THE DISPUTE RESOLUTION PANEL . SUB-SECTION (3) MANDATES THAT THE AO SHALL COMPLETE THE ASSESSMENT ON THE BASIS OF THE DRAFT ORDER, IF THE ASSESSEE EITHER INTIMATES TO HIM OF HAVING AC CEPTED THE VARIATION OR `NO OBJECTIONS ARE RECEIVED WITHIN THE PERIOD SPEC IFIED IN SUB-SECTION (2). SUB-SECTION (4) SETS OUT THE TIME LIMIT FOR PASSING OF THE ORDER U/S.144C(3), BEING ONE MONTH FROM THE END OF THE MONTH IN WHICH EITHER THE ACCEPTANCE IS RECEIVED OR THE PERIOD OF FILING OBJECTIONS UNDER SUB-SECTION (2) EXPIRES. IN THE EXTANT CAS E, IF THE DRAFT ORDER HAD BEEN PASSED UNDER THE CORRECT SECTION BY THE AO ON 18-12-2019 AND THE ASSESSEE HAD NOT FILED ANY OBJECTIONS BEFORE THE DRP AS IS THE CASE HERE, THEN THE AO WAS REQUIRED TO COMP LETE THE ORDER U/S.143(3) R.W.S. 144C(3) WITHIN A MAXIMUM OF 60 DAYS [30 DAYS FOR FILING OF OBJECTIONS BEFORE THE DRP AS PER SUB-SEC TION (2) AND FURTHER ONE MONTH FROM THE END OF THE MONTH IN WHICH NO OBJECTIONS ARE RECEIVED AS PER SUB-SECTION (4)]. IN THE IN STANT CASE, THE AO PASSED THE ASSESSMENT ORDER U/S.143(3) R.W.S. 14 4C(3) ON 23- 01-2020, WHICH IS OTHERWISE WITHIN THE STIPULATED TIME. 5. NOW WE ESPOUSE THE CORE QUESTION AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DISMISSING THE APPEAL OF THE ASSESSEE AGAIN ST THE DRAFT ITA NO.29/PUN/2021 SANDVIK MINING AND CONSTRUCTION TOOLS AB 6 ORDER AS NOT MAINTAINABLE? SECTION 246A ENLISTS THE ORDERS APPEALABLE BEFORE THE CIT(A), WHICH INCLUDES `ANY ORDER O F ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143. SECTION 1 43(3) PROVIDES THAT THE AO: `SHALL, BY AN ORDER IN WRITING, MAKE AN ASSESSMENT OF THE TOTAL INCOME OR LOSS OF THE ASSESSEE, AND DETERMINE THE SUM PAYABLE BY HIM OR REFUND OF ANY AMOUNT DUE TO HIM ON THE BASIS OF SUCH ASSESSMENT. THUS IT IS PELLUCID, THAT IN THE PR ESENT CONTEXT, AN APPEAL LIES TO CIT(A) AGAINST AN ORDER OF ASSE SSMENT. SECTION 144C(1) TALKS OF FORWARDING TO THE ELIGIBLE ASSESS ` A DRAFT OF THE PROPOSED ORDER OF ASSESSMENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE DRAFT ORDER ). AN ORDER U/S 144C(1) IS ONLY A DRAFT OF THE PROPOSED ORDER OF ASSESSMENT AND NOT AN ORDER OF ASSE SSMENT ITSELF. IT DOES NOT FINALLY DETERMINE THE TOTAL INCOME OF THE ASSESSEE AN D THE AMOUNT PAYABLE OR REFUNDABLE ON THE BASIS OF SUCH ASSESS MENT. ON THE OTHER HAND, SECTION 144C(3) MANDATES THAT THE : `THE AS SESSING OFFICER SHALL COMPLETE THE ASSESSMENT ON THE BASIS OF THE DRAFT ORDER. SIMILAR IS THE POSITION WITH THE ORDER PASSED U/S 144C(13), PU RSUANT TO THE DIRECTIONS OF THE DRP GIVEN U/S 144C(5), WHICH UNAMBIGUOUSLY PROVIDES THAT : ` THE ASSESSING OFFICER SHA LL, COMPLETETHE ASSESSMENT . THUS, IT IS OSTENSIBLE THAT WHEREAS AN ORDER U/S 144C(3) OR 144C(13) IS AN ORDER OF ASSESSME NT WHICH IS PASSED READ WITH SECTION 143(3), AN ORDER PASSED U/S 144 C(1) IS ONLY ITA NO.29/PUN/2021 SANDVIK MINING AND CONSTRUCTION TOOLS AB 7 `A DRAFT OF THE PROPOSED ORDER OF ASSESSMENT WHICH IS TE CHNICALLY NOT PASSED READ WITH SECTION 143(3) OF THE ACT. AS AN APPEA LABLE ORDER BEFORE THE CIT(A) IS `ANY ORDER OF ASSESSMENT UNDER SU B-SECTION (3) OF SECTION 143, OBVIOUSLY NO APPEAL LIES AGAINST THE DRAFT OR DER. THERE IS NO OTHER EXPRESS PROVISION IN SECTION 246A OF TH E ACT MANDATING THE FILING OF APPEAL AGAINST THE DRAFT ORDER, AS SUC H, BEFORE THE LD. CIT(A) UNTIL THE ASSESSEE CHOOSES NOT TO FILE OBJECTIONS BEFORE THE DRP AND CONSEQUENTLY, THE AO COMPLETES THE ASSESSMENT U/S.143(3) R.W.S. 144C(3) ENABLING THE ASSESSEE TO TAKE RECOURSE TO THE APPELLATE ROUTE OF THE CIT(A) AGAINST SUCH AN ORDER PA SSED U/S 144C(3). THE CRUX OF THE DISCUSSION IS THAT A DRAFT ORD ER CANNOT BE ASSAILED BEFORE CIT(A). AS THE ASSESSEE PREFERRED APP EAL AGAINST THE DRAFT ORDER, IN OUR CONSIDERED OPINION, THE LD. CIT(A) WAS FULLY JUSTIFIED IN DISMISSING THE SAME AS NOT MAINTAINABLE. IT IS AN ALTOGETHER DIFFERENT MATTER THAT THERE WAS A MISTAKE ON THE PAR T OF THE AO IN PASSING DRAFT ORDER BY WRONGLY MENTIONING IT AS THE COMPLETION OF ASSESSMENT U/S.144C(13), WHICH GAVE AN IMPR ESSION TO ASSESSEE THAT THE ORDER PASSED BY THE AO WAS NOT A DRAFT ORDER BUT FINAL APPEALABLE ORDER. THE CONSEQUENCES FLOWING FROM THE WRONG MENTIONING OF SECTION 144C(13) IN THE DRAFT ORDER, INCLUDING TH E ASSESSEE LATER ON UNSUCCESSFULLY ATTEMPTING TO FILE APPEAL AGAIN ST THE FINAL ORDER U/S.143(3) R.W.S. 144C(3) DURING THE PENDENC Y OF APPEAL ITA NO.29/PUN/2021 SANDVIK MINING AND CONSTRUCTION TOOLS AB 8 FILED AGAINST THE DRAFT ORDER, THOUGH MAY CONSTITUTE A BONA FIDE REASON FOR THE BELATED FILING OF APPEAL BEFORE THE LD. CIT(A) AGAIN ST THE ORDER PASSED U/S.143(3) R.W.S. 144C(3), BUT CANNOT LEGALLY VALID ATE THE APPEAL FILED AGAINST THE DRAFT ORDER SO AS TO WARRANT ITS ADJU DICATION ON MERITS BY THE LD. FIRST APPELLATE AUTHORITY. IT IS ONLY THE APP EAL FILED BY THE ASSESSEE AGAINST THE ORDER U/S 144C(3) PASSED BY THE AO ON 23.01.2020 THAT AN EFFECTIVE AND LEGALLY TENABLE APPEAL WOULD CALL FOR DECISION. IN OUR CONSIDERED OPINION, THE LD. CIT(A) TO OK AN UNIMPEACHABLE VIEW IN TREATING THE APPEAL AGAINST THE DRAFT ORD ER AS DEFECTIVE AND THUS NOT MAINTAINABLE . 6. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH OCTOBER, 2021. SD/- SD/- ( PARTHA SARATHI CHAUDHURY ) (R.S.SYAL) JUDICIAL MEMBER VIC E PRESIDENT PUNE; DATED : 13 TH OCTOBER, 2021 ITA NO.29/PUN/2021 SANDVIK MINING AND CONSTRUCTION TOOLS AB 9 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE CIT(A)-13, PUNE 3. THE PCIT-5, PUNE 4. 5. DR, ITAT, C BENCH, PUNE / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR P RIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 12-10-2021 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 13-10-2021 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. *