Walter Tools India Private Limited, Pune V. Assistant Commissioner of Income-tax,

ITA 419/PUN/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9401 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-01-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 05-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIRUPAMA KOTRU
• Keywords: Transfer pricing; International transaction; Initiation of penalty proceedings
• Section: 143(3); 234B; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 419 /P U N/201 4 / ASSESSMENT YEAR : 20 09 - 1 0 WALTER TOOLS INDIA PVT. LTD., MUMBAI - PUNE ROAD, DAPODI, PUNE 411012 . / APPELLANT PAN: AA ACW4857C VS. THE ASST . COMMISSIONER OF INCOME TAX, CIRCLE 1 0 , PUNE . / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : MS. NIRUPAMA KOTRU , CIT / DATE OF HEARING : 1 7 . 0 1 . 201 8 / DATE OF PRONOUNCEMENT: 23 . 0 1 .201 8 / ORDER PER SUSHMA CHOWLA, J M : TH E APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF A CIT , CIRCLE - 10, PUNE , DATED 27 . 0 1 .201 4 RELATING TO ASSESSMENT YEAR 20 09 - 10 PASSED UNDER SECTION 143(3) R.W.S. 144C(13) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE LEARNED AUTHORIZED R EPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE JURISDICTIONAL ISSUE RAISED IN THE PRESENT APPEAL IS VIDE GROUND OF APPEAL NO.1, WHICH READS AS UNDER: - ITA NO. 419 /P U N/20 1 4 WALTER TOOLS INDIA P LTD. 2 1. THE LEARNED AO HAS ERRED IN PASSING THE IMPUGNED ORDER WHICH WAS NOT IN ACCORDANCE WITH LAW, THE STATUTORY PROVISIONS, AND WHICH IS VOID AND OF NO LEGAL EFFECT. 3. FURTHER, DURING THE COURSE OF ARGUMENTS, THE ASSESSEE FURNISHED ADDITIONAL GROUNDS OF APPEAL ELABORATING THE ISSUE VIDE GROUNDS OF APPEAL NO.1 & 2 WHICH ARE AS UNDER: - 1. TH E APPELLANT SUBMITS THAT AS THE ASSESSMENT ORDER HAS BEEN ISSUED WITHOUT FOLLOWING THE PROCEDURE LAID DOWN IN SECTION 144 C OF THE INCOME - TAX ACT, 1961 (THE ACT), THE SAID ASSESSMENT ORDER ISSUED BE DECLARED NULL AND VOID. 2. THE APPELLANT SUBMITS THAT THE LEARNED ASSESSING OFFICER (LD. AO), ERRED IN ISSUING NOTICE OF DEMAND UNDER SECTION 156 AND NOTICE UNDER SECTION 274 READ WITH SECTION 27 1 ( 1 )(C) OF THE ACT ALONG WITH THE DRAFT ASSESSMENT ORDER AND HENCE, SINCE THE PROCEDURE LAID DOWN IN SECTION 144 C WAS NOT FOLLOWED BY THE LEARNED AO, THE ASSESSMENT ORDER ISSUED BE HELD INVALID IN LAW. 4. THE OTHER GROUNDS OF APPEAL ARE AGAINST MERITS OF THE ADDITION, WHICH WE SHALL DEAL WITH AFTER DECIDING THE JURISDICTIONAL ISSUE. 5. THE LEARNED AUTHORIZED REPRESEN TATIVE FOR THE ASSESSEE POINTED OUT THAT THE ASSESSING OFFICER HAS ERRED IN COMPLETING PROCEEDINGS UNDER SECTION 143(3) R.W.S. 144C OF THE ACT. HE POINTED OUT THAT REFERENCE WAS MADE TO THE TRANSFER PRICING OFFICER (TPO) UNDER SECTION 92CA(1) OF THE ACT A ND THE TPO PASSED THE ORDER UNDER SECTION 92CA(3) OF THE ACT, DATED 23.01.2013, WHEREIN HE PROPOSED AN UPWARD ADJUSTMENT OF RS.14,15,04,078/ - ON ACCOUNT OF ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS PERTAINING TO MANUFACTURING ACTIVITY AT RS.12,44,58 ,028/ - AND TOWARDS IT SERVICES AVAILED AT RS.1,70,46,050/ - . REFERRING TO THE DRAFT ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) R.W.S. 144C(1) OF THE ACT, DATED 28.03.2013, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE PO INTED OUT THAT ALONG WITH DRAFT ASSESSMENT ORDER, DEMAND NOTICE UNDER SECTION 156 OF THE ACT WAS ISSUED TO THE ASSESSEE AGAINST CRYSTALLIZATION OF DEMAND AT RS.1.48 CRORES. FURTHER, THE ITA NO. 419 /P U N/20 1 4 WALTER TOOLS INDIA P LTD. 3 ASSESSING OFFICER ALSO ISSUED NOTICE UNDER SECTION 274 R.W.S. 271(1)( C) OF THE ACT. HE FURTHER POINTED OUT THAT OBJECTIONS WERE RAISED BEFORE THE DISPUTE RESOLUTION PANEL (DRP) BUT NO SUCH ISSUE WAS RAISED AND THE SAID OBJECTIONS WERE DISMISSED. THE ASSESSING OFFICER THEREAFTER, PASSED ORDER UNDER SECTION 143(3) R.W.S. 14 4C(13) OF THE ACT, DATED 27.01.2014, WHEREIN THE SAID ADJUSTMENT ON ACCOUNT OF ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS WAS MADE IN THE HANDS OF ASSESSEE. HE POINTED OUT THAT DRAFT ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER, WHEREIN THE DEMA ND NOTICE WAS ISSUED ALONG WITH NOTICE FOR INITIATION OF PENALTY PROCEEDINGS IS IN FACT ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER DETERMINING THE DEMAND PAYABLE. HE STATED THAT JURISDICTIONAL ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED B Y THE ORDER OF TRIBUNAL IN THE CASE OF DCIT VS. M/S. REHAU POLYMERS PVT. LTD. IN ITA NO.566/PUN/2015, RELATING TO ASSESSMENT YEAR 2010 - 11 WITH CO NO.27/PUN/2017, ORDER DATED 14.06.2017. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OT HER HAND, PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ADDITIONAL GROUNDS OF APPEAL RAISED BY THE ASSESSEE DO NOT REQUIRE ANY INVESTIGATION OF FACTS AND HENCE, THE SAME ARE ADMITTE D. THE ISSUE WHICH IS RAISED IN THE PRESENT APPEAL IS WHETHER THE DRAFT ASSESSMENT ORDER PASSED IN THE CASE ALONG WITH ISSUE OF DEMAND NOTICE IS CORRECT START OF PROCEEDINGS AGAINST THE ASSESSEE. THE REQUIREMENT OF THE ACT IS THAT IN THE DRAFT ASSESSMENT ORDER PROPOSED, ADDITIONS ARE TO BE MADE AND SHOW CAUSE NOTICE IS TO BE ISSUED TO THE ASSESSEE EITHER ACCEPTING THE SAME OR FILE OBJECTIONS BEFORE THE DRP. HOWEVER, IN THE FACTS OF THE PRESENT CASE, THERE WAS NO PROPOSAL FOR MAKING ADDITION BUT THE FINAL ASSESSMENT ORDER WAS PASSED THOUGH ITA NO. 419 /P U N/20 1 4 WALTER TOOLS INDIA P LTD. 4 THE ASSESSING OFFICER CALLS IT A DRAFT ASSESSMENT ORDER AND ALSO OBSERVED THAT THE ASSESSEE WAS AT LIBERTY TO FILE OBJECTIONS BEFORE THE DRP OR ACCEPT THE SAME, BUT ALONG WITH THE SAID ORDER, HE ALSO ISSUED DEMAND NOTICE AND ALSO INITIATED PENALTY PROCEEDINGS. 8. WE FIND SIMILAR ISSUE AROSE BEFORE TRIBUNAL IN THE CASE OF DCIT VS. M/S. REHAU POLYMERS PVT. LTD. (SUPRA), WHEREIN IT WAS HELD AS UNDER: - 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE I SSUE WHICH ARISES IN THE PRESENT APPEAL IS IN RELATION TO THE DRAFT ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) R.W.S. 144C(1) OF THE ACT. AFTER RECEIPT OF THE ORDER UNDER SECTION 92CA(3) OF THE ACT FROM THE TPO, THE ASSESSING OF FICER WAS SUPPOSED TO ISSUE DRAFT ASSESSMENT ORDER PROPOSING TO MAKE THE ADDITION. HOWEVER, THE ASSESSING OFFICER CALLED THE SAID ORDER TO BE DRAFT ASSESSMENT ORDER BUT ASSESSED INCOME IN THE HANDS OF ASSESSEE AND FURTHER ISSUED DEMAND NOTICE ALONG ITNS - 1 50, AFTER CHARGING INTEREST UNDER SECTIONS 234A, 234B & 234C, ETC. HE ALSO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. UNDOUBTEDLY, THE ASSESSEE ON UNDERSTANDING THAT THE SAME WAS DRAFT ASSESSMENT ORDER, MADE OBJECTIONS TO THE DRP, WHO GAVE CERTAIN DIRECTIONS AND THEREAFTER, THE ASSESSING OFFICER PASSED AN ORDER UNDER SECTION 143(3) R.W.S. 144C(13) OF THE ACT. HOWEVER, IN ORDER TO ADJUDICATE THE ISSUE RAISED, WE NEED TO MAKE REFERENCE TO THE PROVISIONS OF SECTION 144C OF THE ACT. 11. WE FIND THAT SIMILAR ISSUE OF ASSESSMENT TO BE FRAMED UNDER SECTION 143(3) R.W.S. 144C OF THE ACT AROSE BEFORE THE PUNE BENCH OF TRIBUNAL IN SOKTAS INDIA (P) LTD. VS. ACIT (SUPRA). 12. THE TRIBUNAL AFTER NOTING THE FACTS THAT THE ASSESSING OFFICER HA D PASSED THE ORDER UNDER SECTION 143(3) R.W.S 92CA(3) AND 144C OF THE ACT AND HAD ALSO ISSUED DEMAND NOTICE UNDER SECTION 156 OF THE ACT AND HAD ALSO ISSUED NOTICE UNDER SECTION 274 R.W.S. 271(1)(C) OF THE ACT. HOWEVER, THE COVERING LETTER SAID THAT IT WA S DRAFT ASSESSMENT ORDER, AGAINST WHICH THE ASSESSEE WAS EITHER TO FILE OBJECTIONS BEFORE THE DRP OR ACCEPT THE SAME. THE ASSESSEE FILED THE OBJECTIONS BEFORE THE DRP, WHO DISMISSED THE SAME ON THE SURMISE THAT THE ORDER PASSED BY THE ASSESSING OFFICER WA S FINAL ASSESSMENT ORDER, SINCE THE ASSESSING OFFICER HAD ALSO ISSUED THE DEMAND NOTICE AND HAD ALSO ISSUED SHOW CAUSE NOTICE UNDER SECTION 274 R.W.S. 271(1)(C) OF THE ACT FOR LEVY OF PENALTY. IN VIEW OF THE SAID FACTS, THE TRIBUNAL OBSERVED AS UNDER: - 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSING OFFICER HAD MADE REFERENCE TO THE TPO VIS - - VIS TO DETERMINE THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTION ENTERED INTO BY THE ASSESSEE W ITH ITS ASSOCIATE ENTERPRISES. THE TPO VIDE ORDER DATED 28.01.2014 UNDER SECTION 92CA(3) OF THE ACT HAD PROPOSED THE ADJUSTMENT TO ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTION AND HAD PASSED THE SAID ORDER. THE ASSESSING OFFICER ON RECEIPT OF SAID ORD ER PASSED ORDER UNDER SECTION 143(3) R.W.S. 92C(4) AND 144C OF THE ACT. THE SAID ORDER OF ASSESSING OFFICER WAS FORWARDED TO THE ASSESSEE ALONG WITH LETTER DATED 28.02.2014, WHEREIN THE ASSESSING OFFICER CATEGORICALLY SAID THAT THE DRAFT ASSESSMENT ORDER WAS BEING FORWARDED FOR NECESSARY ACTION AT THE END OF ASSESSEE. IT WAS CLEARLY MENTIONED IN THE SAID LETTER THAT ON RECEIPT OF DRAFT ORDER, THE ITA NO. 419 /P U N/20 1 4 WALTER TOOLS INDIA P LTD. 5 ASSESSEE MAY WITHIN 30 DAYS OF THE RECEIPT OF DRAFT ORDER EITHER FILE ACCEPTANCE OF VARIATION AS PROPOSED IN T HE ORDER OR FILE OBJECTIONS TO THE VARIATION TO THE DRP OR TO THE UNDERSIGNED. HOWEVER, THE ASSESSING OFFICER ALSO ISSUED DEMAND NOTICE UNDER SECTION 156 OF THE ACT DATED 28.02.2014 AND ALSO ISSUED NOTICE UNDER SECTION 274 R.W.S. 271 OF THE ACT. THE ASSE SSEE ON UNDERSTANDING THAT IT WAS DRAFT ASSESSMENT ORDER FILED OBJECTIONS BEFORE THE DRP ON 07.04.2014 I.E. WITHIN THE TIME ALLOWED UNDER THE STATUTE. HOWEVER, THE SAID OBJECTIONS OF ASSESSEE WERE NOT CONSIDERED BY THE DRP AND THE SAME WERE REJECTED ON TH E SURMISE THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS FINAL ASSESSMENT ORDER SINCE THE ASSESSING OFFICER HAD ALSO ISSUED DEMAND NOTICE UNDER SECTION 156 OF THE ACT AND SHOW CAUSE NOTICE UNDER SECTION 274 R.W.S. 271 OF THE ACT FOR LEVY OF PENALTY. T HE DRP OBSERVED THAT SINCE THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS FINAL ASSESSMENT ORDER, IT DID NOT HAVE ANY JURISDICTION TO ISSUE ANY DIRECTIONS ON SUCH FINAL ASSESSMENT ORDER. AFTER RECEIVING THE DRPS ORDER, THE ASSESSEE FILED AN APP LICATION BEFORE THE ASSESSING OFFICER FOR NECESSARY ACTION. THE ASSESSING OFFICER IN REPLY, VIDE LETTER DATED 30.01.2015 STATED THAT THE DRP HAD CLEARLY MENTIONED THAT THE ORDER PASSED ON 28.02.2014 WAS FINAL ORDER AND NOT DRAFT ORDER, SO THE ASSESSING OF FICER DOES NOT HAVE ANY JURISDICTION OVER THE CASE. 7. IN ORDER TO ADJUDICATE THE ISSUE, REFERENCE NEEDS TO BE MADE TO THE PROVISIONS OF SECTION 144C OF THE ACT. UNDER THE PROVISIONS OF SECTION 144C OF THE ACT, IT IS PROVIDED THAT WHERE THE ASSESSING O FFICER PROPOSES TO MAKE, ON OR AFTER 01.10.2009, ANY VARIATION IN THE INCOME OR LOSS RETURNED, WHICH IS PREJUDICIAL TO THE INTEREST OF ASSESSEE, THEN THE ASSESSING OFFICER SHALL IN THE FIRST INSTANCE FORWARD THE DRAFT OF THE PROPOSED ORDER OF ASSESSMENT TO THE ELIGIBLE ASSESSEE. UNDER SUB - SECTION (2) OF SECTION 144C OF THE ACT ON RECEIPT OF THE DRAFT ORDER, THE ELIGIBLE ASSESSEE SHALL WITHIN 30 DAYS OF THE RECEIPT, FILE HIS ACCEPTANCE OF THE VARIATION TO THE ASSESSING OFFICER OR FILE HIS OBJECTIONS, IF ANY , TO SUCH VARIATION WITH THE DISPUTE RESOLUTION PANEL AND THE ASSESSING OFFICER. UNDER SUB - SECTION (3) OF SECTION 144C OF THE ACT, THE ASSESSING OFFICER SHALL COMPLETE THE ASSESSMENT ON THE BASIS OF DRAFT ORDER IF THE ASSESSEE INTIMATES TO THE ASSESSING O FFICER THE ACCEPTANCE OF THE VARIATION OR NO OBJECTIONS ARE RECEIVED WITHIN PERIOD SPECIFIED IN SUB - SECTION (2) OF SECTION 144C OF THE ACT. THEREAFTER, THE ASSESSING OFFICER IS EMPOWERED TO PASS THE ASSESSMENT ORDER WITHIN ONE MONTH FROM THE END OF MONTH, IN WHICH THE ACCEPTANCE IS RECEIVED OR THE PERIOD OF FILING OBJECTIONS UNDER SUB - SECTION (2) OF SECTION 144C OF THE ACT EXPIRES. UNDER SUB - SECTION (5) OF SECTION 144C OF THE ACT, IT IS PROVIDED THAT THE DISPUTE RESOLUTION PANEL SHALL IN CASE WHERE OBJECT ION IS RECEIVED UNDER SUB - SECTION (2) ISSUE SUCH DIRECTIONS AS IT THINKS FIT FOR THE GUIDANCE OF THE ASSESSING OFFICER TO ENABLE HIM TO COMPLETE THE ASSESSMENT. UPON RECEIPT OF THE SAID DIRECTIONS, THE ASSESSING OFFICER SHALL IN CONFORMITY WITH THE SAME, COMPLETE THE ASSESSMENT WITHOUT PROVIDING ANY FURTHER OPPORTUNITY OF BEING HEARING TO THE ASSESSEE WITHIN ONE MONTH FROM THE END OF THE MONTH IN WHICH SUCH DIRECTION IS RECEIVED, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 153 OR 153B OF THE ACT, AS PER SUB - SECTION (13) TO SECTION 144C OF THE ACT. IN VIEW OF THE PROVISIONS OF SECTION 144C OF THE ACT IMPLIEDLY WHERE THE TPO PROPOSES ANY VARIATION IN THE INCOME OR LOSS RETURNED BY THE ASSESSEE, WHICH IS PREJUDICIAL TO THE INTEREST OF ASSESS EE, THE ASSESSING OFFICER SHALL IN THE FIRST INSTANCE FORWARD THE DRAFT OF THE PROPOSED ASSESSMENT ORDER TO THE ASSESSEE AND THEREAFTER, IF NO OBJECTIONS ARE RECEIVED AND / OR THE ASSESSEE FILES HIS ACCEPTANCE TO THE VARIATION TO THE ASSESSING OFFICER, THE N THE ASSESSING OFFICER IS EMPOWERED TO COMPLETE THE ASSESSMENT WITHIN ONE MONTH FROM THE END OF THE MONTH THEREOF. IN CASE, THE ASSESSEE FILES HIS OBJECTION BEFORE THE DRP AND ITA NO. 419 /P U N/20 1 4 WALTER TOOLS INDIA P LTD. 6 WHERE THE SAID PANEL ISSUES DIRECTIONS AS IT THINKS FIT, THEN THE ASSESSING OF FICER ON RECEIPT OF SUCH DIRECTIONS SHALL COMPLETE THE ASSESSMENT IN CONFORMITY WITH SUCH DIRECTIONS. IN VIEW OF THE SAID PROVISIONS OF THE ACT, THE COMPLIANCE TO SECTION 144C OF THE ACT IS MANDATORY IN ALL SUCH CASES, WHERE THE TPO PROPOSES VARIATION IN THE INCOME OR LOSS RETURNED, WHICH IS PREJUDICIAL TO THE INTERESTS OF ASSESSEE. ONLY AFTER COMPLYING WITH THE CONDITIONS LAID DOWN IN SECTION 144C OF THE ACT, THE ASSESSING OFFICER IS EMPOWERED TO PASS THE ORDER UNDER SECTION 143(3) R.W.S. 144C OF THE ACT COMPLETING THE ASSESSMENT ON SUCH ENHANCED INCOME OR VARIATION IN THE LOSS RETURNED BY THE ASSESSEE. 8. THE HONBLE MADRAS HIGH COURT IN THE CASE OF VIJAY TELEVISION WRIT PETITION NOS.1526 AND 1527 OF 2014 & M.P. NOS.1 AND 1 OF 2014, IT WAS HELD THAT NON - PASSING OF DRAFT ASSESSMENT ORDER AFTER ADJUSTMENT MADE BY THE TPO RENDERS PROCEEDINGS NULL & VOID BY OBSERVING AS UNDER: - UNDER SECTION 144C(1) OF THE ACT, WITH EFFECT FROM 1 ST OCTOBER 2009, THE ASSESSING OFFICER HAS TO MANDATORILY ISSUE A DRAFT ASSESS MENT ORDER IF THERE IS A PROPOSED VARIATION TO THE RETURN WHICH ARE PREJUDICIAL TO THE ELIGIBLE ASSESSEE. THE FACT THAT THE PETITIONER IS AN ELIGIBLE ASSESSEE IS NOT IN DISPUTE. WHILE SO, UNDER SECTION 144C(2) OF THE ACT, THE ELIGIBLE ASSESSEE HAS THE OP TION, EITHER TO ACCEPT THE VARIATION OR TO FILE THEIR OBJECTIONS BEFORE THE DRP AND SUCH OPTION HAS TO BE EXERCISED WITHIN 30 DAYS. ON SUCH OBJECTIONS FILED BY THE ASSESSEE, THE DRP SHALL ISSUE APPROPRIATE DIRECTION FOR THE GUIDANCE OF THE ASSESSING OFFIC ER UNDER SECTION 144C(5) OF THE ACT. IT IS ONLY THEREAFTER, THE AO IS BOUND TO PASS A FINAL ORDER OF ASSESSMENT IN COMPLIANCE WITH THE DIRECTIONS ISSUED BY THE DRP UNDER SECTION 144C(3) OF THE ACT. IN THE PRESENT CASE, WITHOUT FOLLOWING THE ABOVE MANDATO RY PROCEDURE, THE AO HAS PASSED THE ORDER OF ASSESSMENT ON 26.03.2013 AND SUBSEQUENTLY ISSUED A CORRIGENDUM ON 15.04.2014 TO RECTIFY THE MISTAKE COMMITTED IN PASSING THE FINAL ORDER OF ASSESSMENT INTER ALIA TO TREAT IT AS A DRAFT ASSESSMENT ORDER. THIS CO URSE OF ACTION ADOPTED BY THE SECOND RESPONDENT IS CONTRARY TO THE MANDATORY PROVISIONS CONTAINED IN THE ACT AND THE CORRIGENDUM ISSUED BY THE AO COULD NOT CURE THE DEFECT. THE VERY FACT THAT THE ASSESSING OFFICER HAS SIGNED THE ORDER OF ASSESSMENT AND AL SO ASSESSED THE AMOUNT PAYABLE BY THE ASSESSEE HAS BECOME COMPLETE AND IT CANNOT BE SIMPLY TREATED AS A DRAFT ASSESSMENT ORDER OR IT CAN BE RECTIFIED BY ISSUING THE CORRIGENDUM. IN FACT, PURSUANT TO THE ORDER OF ASSESSMENT UNDER SECTION 143C, DEMAND WAS A LSO MADE FOR PAYMENT OF THE AMOUNT AND SUCH DEMAND HAS NOT BEEN WITHDRAWN BY THE SECOND RESPONDENT EVEN AFTER ISSUING THE CORRIGENDUM. EVEN AS PER THE WEBSITE OF THE DEPARTMENT, THE DEMAND MADE TO THE PETITIONER COMPANY CONTINUES TILL DATE AND THEREFORE, THE FINAL ORDER AS WELL AS THE THE CORRIGENDUM ISSUED BY THE SECOND RESPONDENT ARE VITIATED BY ERRORS APPARENT ON THE FACE OF THE RECORD AND THEY ARE LEGALLY NOT SUSTAINABLE. 9. THE SIMILAR ISSUE HAD ARISEN BEFORE THE PUNE BENCH OF TRIBUNAL IN AGFA INDIA PVT. LTD. VS. ACIT IN ITA NOS.341/PN/2014 AND 1072/PN/2014, RELATING TO ASSESSMENT YEAR 2008 - 09, ORDER DATED 28.10.2015 AND REFERENCE WAS MADE TO THE DECISION OF THE HONBLE HIGH COURT OF ANDHRA PRADESH AT HYDERABAD IN M/S. ZUARI CEMENTS LTD. VS. ACIT IN WP NO.5557/2012, VIDE JUDGMENT DATED 21.02.2013 AND THE HONBLE SUPREME COURT IN ACIT VS. M/S. ZUARI CEMENT LTD. VIDE SPECIAL ITA NO. 419 /P U N/20 1 4 WALTER TOOLS INDIA P LTD. 7 LEAVE PETITION CC NO.16694/2013, JUDGMENT DATED 27.09.2013 AND IT WAS HELD AS UNDER: - 20. THE HONBLE HIGH COURT OF ANDHRA PRADE SH AT HYDERABAD IN M/S. ZUARI CEMENTS LTD. VS. ACIT (SUPRA) ON SIMILAR ISSUE WHERE AFTER RECEIPT OF THE ORDER PASSED BY THE TPO UNDER SECTION 92CA(3) OF THE ACT, THE ASSESSING OFFICER HAD PASSED THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT RAISING A DEMAND OF RS.27,40,71,913/ - WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSEE UNDER SECTION 144C OF THE ACT, OBSERVED THAT WHERE THE ASSESSING OFFICER PROPOSES TO MAKE ON OR AFTER 01.10.2009, ANY VARIATION IN THE INCOME OR LOSS RETURNED BY THE ASSESSEE, THE N NOTWITHSTANDING TO THE CONTRARY CONTAINED IN THE ACT, HE SHALL FIRST PASS THE DRAFT ASSESSMENT ORDER, FORWARD THE SAME TO THE ASSESSEE AND AFTER ASSESSEE FILES HIS OBJECTIONS, IF ANY, THE ASSESSING OFFICER SHALL COMPLETE THE ASSESSMENT WITHIN ONE MONTH, IN VIEW OF THE PROVISIONS OF SECTION 144C OF THE ACT. IT WAS FURTHER OBSERVED THAT THE ASSESSEE IS ALSO GIVEN AN OPTION TO FILE AN OBJECTION BEFORE THE DRP, IN WHICH THE LATTER CAN ISSUE DIRECTIONS FOR THE GUIDANCE OF ASSESSING OFFICER TO ENABLE HIM TO CO MPLETE ASSESSMENT. WHERE THE ASSESSING OFFICER ACCEPTED THE VARIATION SUBMITTED BY THE TPO WITHOUT GIVING THE PETITIONER ANY OPPORTUNITY TO OBJECT TO IT AND PASS THE ASSESSMENT ORDER, IT WAS HELD BY THE HONBLE HIGH COURT OF A.P THAT THE IMPUGNED ORDER OF ASSESSMENT WAS CLEARLY CONTRARY TO SECTION 144C OF THE ACT AND WAS WITHOUT JURISDICTION, NULL AND VOID. THE OBJECTION OF THE REVENUE THAT THE CIRCULAR NO.5/2010 OF THE CBDT WHICH LAID DOWN THAT THE PROVISIONS OF SECTION 144C OF THE ACT SHALL NOT APPLY FO R THE ASSESSMENT YEAR 2008 - 09 AND WOULD ONLY APPLY FROM ASSESSMENT YEAR 2010 - 11 AND LATER YEARS WAS HELD TO BE NOT TENABLE WHERE THE LANGUAGE OF SUB - SECTION (1) OF SECTION 144C OF THE ACT REFERRED TO THE CUTOFF DATE OF 01.10.2009 INDICATES THE INTENTION OF LEGISLATURE TO MAKE IT APPLICABLE. THE HONBLE HIGH COURT OF A.P FURTHER HELD THAT THE CIRCULAR NO.5/2010 ISSUED BY THE CBDT STATING THAT SECTION 144C(1) OF THE ACT WOULD APPLY ONLY FROM ASSESSMENT YEAR 2010 - 11 AND SUBSEQUENT YEARS AND NOT FROM ASSESSMEN T YEAR 2008 - 09 WAS CONTRARY TO THE EXPRESSED LANGUAGE OF THE SECTION AND THE SAID VIEW OF THE REVENUE WAS HELD TO BE NOT ACCEPTABLE. THE HONBLE HIGH COURT OF A.P THEREAFTER HELD THAT THE IMPUGNED ORDER OF ASSESSMENT DATED 23.12.2011 PASSED BY THE RESPOND ENT WAS CONTRARY TO THE MANDATORY PROVISIONS OF SECTION 144C OF THE ACT IS DECLARED AS ONE WITHOUT JURISDICTION, NULL AND VOID AND UNENFORCEABLE. THE HONBLE HIGH COURT OF ANDHRA PRADESH HELD AS UNDER: - IN THIS VIEW OF THE MATTER WE ARE OF THE VIEW THAT THE IMPUGNED ORDER OF ASSESSMENT DT. 23.12.2011 PASSED BY THE RESPONDENT IS CONTRARY TO THE MANDATORY PROVISIONS OF S.144C OF THE ACT AND IS PASSED IN VIOLATION THEREOF. THEREFORE, IT IS DECLARED AS ONE WITHOUT JURISDICTION, NULL AND VOID AND UNENFORCEAB LE. CONSEQUENTLY, THE DEMAND NOTICE DATED 23.12.2011 ISSUED BY THE RESPONDENT IS SET ASIDE. 21. THE HONBLE SUPREME COURT (SUPRA) IN ACIT VS. ZUARI CEMENTS LTD. (SUPRA) HAD DISMISSED THE SPECIAL LEAVE PETITION FILED BY THE DEPARTMENT UPON HEARING THE CO UNSEL. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE CONTENDED THAT ITA NO. 419 /P U N/20 1 4 WALTER TOOLS INDIA P LTD. 8 SINCE THE SAID SPECIAL LEAVE PETITION WAS DISMISSED AFTER HEARING THE COUNSEL AND THE VIEW TAKEN BY THE HONBLE HIGH COURT OF ANDHRA PRADESH AT HYDERABAD HAS BEEN APPROVED BY THE APEX COURT AND ANY ORDER CONTRADICTING THE CONDITIONS LAID DOWN IN SECTION 144C OF THE ACT IS NULL AND VOID AND UNENFORCEABLE IN LAW. 22. FURTHER, THE DELHI BENCH OF TRIBUNAL IN THE CASE OF CAPSUGEL HEALTHCARE LIMITED IN ITA NO.1356/DEL/2012, VIDE ORDE R DATED 30.09.2014 HAVE UPHELD THE SIMILAR VIEW THAT FAILURE TO PASS DRAFT ASSESSMENT ORDER AFTER TPOS ORDER RENDERS PROCEEDINGS VOID. SHOW CAUSE NOTICE CANNOT BE QUOTED WITH DRAFT ASSESSMENT ORDER. 10. FURTHER, THE HONBLE BOMBAY HIGH COURT IN INTERN ATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT (SUPRA) HAVE ALSO DOWN THE SIMILAR PROPOSITION AND HELD AS UNDER: - 4. THE PETITIONER HAD CONSEQUENT TO THE ASSESSMENT ORDER DATED 23 RD MARCH 2015 FILED ITS OBJECTION IN TERMS OF SECTION 144C(2) OF THE ACT TO THE DISPUTE RESOLUTION PANEL (DRP). BY AN ORDER DATED 7 TH OCTOBER, 2015, THE DRP REFUSED TO PASS ANY DIRECTION ON THE OBJECTIONS BECAUSE THE OBJECTIONS HAD BEEN FILED IN RESPECT OF A FINAL ORDER UNDER SECTION 143(3) OF THE ACT AND NOT IN RESPECT OF THE DRA FT ASSESSMENT ORDER PASSED UNDER SECTION 144C(1) OF THE ACT. THE ORDER DATED 7 TH OCTOBER, 2015 OF THE DRP HOLDS THAT ITS JURISDICTION IS ONLY TO ENTERTAIN OBJECTIONS WITH REGARD TO DRAFT ASSESSMENT ORDER PASSED UNDER SECTION 144C(1) OF THE ACT. 5. HOWEVE R, IT IS PERTINENT TO NOTE THAT THE ORDER DATED 7 TH OCTOBER, 2015 OF THE DRP IN PARAGRAPH (3) THEREOF RECORDS THAT THERE IS NO DISPUTE THAT THE ASSESSEE IS A FOREIGN COMPANY. THIS POSITION IS UNDISPUTED EVEN BEFORE US. THEREFORE, IN VIEW OF SECTION 144 C(15) OF THE ACT WHICH DEFINES ELIGIBLE ASSESSEE TO WHOM SECTION 144C(1) OF THE ACT APPLIES TO INTER ALIA MEAN ANY FOREIGN COMPANY. THEREFORE, A DRAFT ASSESSMENT ORDER UNDER SECTION 144C(1) OF THE ACT IS MANDATED BEFORE THE ASSESSING OFFICER PASSES A FINA L ORDER UNDER SECTION 143(3) OF THE ACT IN CASE OF ELIGIBLE ASSESSEE. AN DRAFT ASSESSMENT ORDER PASSED UNDER SECTION 144C(1) OF THE ACT BESTOWS CERTAIN RIGHTS UPON AN ELIGIBLE ASSESSEE SUCH AS TO APPROACH THE DRP WITH ITS OBJECTIONS TO SUCH A DRAFT ASSESS MENT ORDER. THIS IS FOR THE REASON THAT AN ELIGIBLE ASSESSEES GRIEVANCE CAN BE ADDRESSED BEFORE A FINAL ASSESSMENT ORDER IS PASSED AND APPELLATE PROCEEDINGS INVOKED BY IT. HOWEVER, THESE SPECIAL RIGHTS MADE AVAILABLE TO ELIGIBLE ASSESSEE UNDER SECTION 1 44C OF THE ACT ARE RENDERED FUTILE, IF DIRECTLY A FINAL ORDER UNDER SECTION 143(3) OF THE ACT IS PASSED WITHOUT BEING PRECEDED BY DRAFT ASSESSMENT ORDER. 6. IN THE ABOVE VIEW, THE ASSESSMENT ORDER DATED 23 RD MARCH, 2015 PASSED BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2012 - 13 IS COMPLETELY WITHOUT JURISDICTION. THIS IS SO AS IT HAS NOT BEEN PRECEDED BY A DRAFT ASSESSMENT ORDER. HENCE, THE FOUNDATIONAL/BASIC ORDER VIZ. THE ASSESSMENT ORDER DATED 23 RD MARCH, 2015 IS SET ASIDE AND QUASHED AS BEING WI THOUT JURISDICTION. CONSEQUENT ORDERS PASSED ON RECTIFICATION APPLICATION AS WELL AS ON PENALTY ARE ALSO QUASHED AND SET ASIDE BEING UNSUSTAINABLE. ITA NO. 419 /P U N/20 1 4 WALTER TOOLS INDIA P LTD. 9 11. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS PLACED RELIANCE ON THE RATIO LAID DOWN BY THE INTERNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT (SUPRA) AND THE HONBLE MADRAS HIGH COURT IN THE CASE OF VIJAY TELEVISION WRIT PETITION NOS.1526 AND 1527 OF 2014 & M.P. NOS.1 AND 1 OF 2014 VIS - - VIS. WHEREAS THE LEARNED DEPARTMENTAL REPRESENTATIVE FO R THE REVENUE STRONGLY OPPOSED AND POINTED OUT THAT THE ASSESSING OFFICER HAS SENT THE DRAFT ASSESSMENT ORDER WHEREIN THE LETTER CLEARLY SAYS THAT IT IS DRAFT ASSESSMENT ORDER. HE POINTED OUT THAT THE DRP HAD MIS - INTERPRETED AND THE ISSUE MAY BE SENT BACK TO THE FILE OF DRP. HE ALSO POINTED OUT THAT THE FACTS BEFORE THE HONBLE BOMBAY HIGH COURT WERE DIFFERENT AND THE SAID PROPOSITION IS NOT APPLICABLE. WE FIND NO MERIT IN THE PLEA OF LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. THE ASSESSING OF FICER PASSED THE ORDER ON 28.02.2014 ALONG WITH WHICH IT ALSO ISSUED THE DEMAND NOTICE AND SHOW CAUSE NOTICE FOR LEVY OF PENALTY. IN OTHER WORDS, THE ASSESSING OFFICER HAS CRYSTALLIZED THE DEMAND IN THE CASE OF ASSESSEE. WHEREAS, AS PER THE PROVISIONS OF THE ACT WHERE THE ASSESSING OFFICER PROPOSES TO VARY THE INCOME IN THE HANDS OF ASSESSEE, THERE WAS REQUIREMENT TO ISSUE SHOW CAUSE NOTICE TO THE ASSESSEE TO THE SAID ADDITIONS, BY WAY OF DRAFT ASSESSMENT ORDER. THE DEMAND DOES NOT GET CRYSTALLIZED IN DR AFT ASSESSMENT ORDER. UNDOUBTEDLY, THE ASSESSING OFFICER HAD ISSUED COVERING LETTER WHERE IT SAYS THAT IT IS DRAFT ASSESSMENT ORDER BUT IN SPIRIT, IT HAD FINALIZED THE ASSESSMENT, WHEREIN THE DEMAND WAS CRYSTALLIZED AND DEMAND NOTICE WAS ISSUED TO THE ASS ESSEE. THE ASSESSING OFFICER HAS NOT FOLLOWED THE CORRECT PROCEDURE AS PROVIDED IN THE STATUTE AND HAS PASSED FINAL ASSESSMENT ORDER WITHOUT PASSING DRAFT ASSESSMENT ORDER WHICH IS AGAINST THE PROVISIONS OF THE ACT AND HENCE, THE SAME IS INVALID IN LAW. RELIANCE IS PLACED ON THE 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 THE HONBLE HIGH COURT OF AN DHRA PRADESH IN M/S. ZUARI CEMENTS LTD. VS. ACIT (SUPRA). WE HOLD THAT THE ASSESSMENT ORDER PASSED IN THE CASE IS INVALID AND THE SAME IS SET ASIDE. SINCE WE HAVE DECIDED THE PRELIMINARY ISSUE IN FAVOUR OF ASSESSEE, THE OTHER GROUNDS OF APPEAL AGAINST TH E ADDITIONS MADE BECOME ACADEMIC AND THE SAME ARE DISMISSED. 13. THE FACTS BEFORE US ARE SIMILAR TO THE FACTS BEFORE THE TRIBUNAL IN SOKTAS INDIA (P) LTD. VS. ACIT (SUPRA). IN THE FACTS OF PRESENT CASE ALSO, THE DEMAND GOT CRYSTALLIZED ON PASSING OF TH E DRAFT ASSESSMENT ORDER, WHEREIN THE ASSESSING OFFICER HAD ISSUED DEMAND NOTICE IN ITNS - 150 AND HAD ALSO INITIATED PENALTY PROCEEDINGS. UNDOUBTEDLY, THE SAID ASSESSMENT WAS FRAMED AS DRAFT ASSESSMENT BUT IN ACTUAL FACT, THE ASSESSING OFFICER HAD MADE THE ASSESSMENT IN THE HANDS OF ASSESSEE BY NOT ONLY ASSESSING THE INCOME BUT ALSO DETERMINING THE DEMAND PAYABLE. IN THE CASE OF DRAFT ASSESSMENT ORDER, PROPOSED ADDITIONS ARE TO BE MADE AND THE ASSESSEE IS SHOW CAUSED EITHER TO ACCEPT THE SAME OR FILE THE O BJECTIONS BEFORE THE DRP. HOWEVER, IN THE PRESENT FACTS, THERE WAS NOT A PROPOSAL FOR MAKING ADDITION BUT FINAL ASSESSMENT ORDER WAS PASSED. UNDOUBTEDLY, THE ASSESSING OFFICER SAID THAT HE IS PASSING DRAFT ASSESSMENT ORDER AND THE ASSESSEE WAS ALSO AT LI BERTY TO FILE THE OBJECTIONS BEFORE THE DRP OR ACCEPT THE SAME, BUT IN ACTUAL FACT, THE ORDER PASSED BY THE ASSESSING OFFICER WAS COMPLETE ASSESSMENT ORDER WHICH IS NOT ENVISAGED UNDER SECTION 143(3) R.W.S. 144C OF THE ACT. ACCORDINGLY, WE HOLD THAT DRAFT ASSESSMENT ORDER PASSED IN THE CASE IS INVALID IN LAW. ITA NO. 419 /P U N/20 1 4 WALTER TOOLS INDIA P LTD. 10 9. THE ISSUE ARISING BEFORE US IS IDENTICAL TO THE ISSUE BEFORE TRIBUNAL IN DCIT VS. M/S. REHAU POLYMERS PVT. LTD. (SUPRA). HENCE, THE DRAFT ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS COM PLETE ASSESSMENT ORDER WHICH IS NOT ENVISAGED UNDER SECTION 143(3) R.W.S. 144C OF THE ACT. ACCORDINGLY, WE HOLD THAT THE DRAFT ASSESSMENT ORDER PASSED IN THE CASE IS INVALID IN LAW. IN VIEW OF OUR DECIDING THE JURISDICTIONAL ISSUE IN FAVOUR OF ASSESSEE, WE DO NOT ADDRESS THE ISSUES ON MERITS. THE ADDITIONAL GROUNDS OF APPEAL NO.1 AND 2 RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 10 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 23 RD DAY OF JANUARY , 201 8 . SD/ - SD/ - (ANIL CHATURVEDI ) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 23 RD JANUARY , 201 8 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT ; 2. THE RESPONDENT; 3. THE DRP, PUNE ; 4. THE DIT (TP/IT), PUNE ; 5. THE DR B , ITAT, PUNE; 6. GUARD FILE. / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE