Gagabyte Technological (India) P. Ltd., V. Asst. Commissioner of Income tax, Margao

ITA 51/PAN/2012

• Counselvise Citation: 5124114 RSA 2012
• Duration Of Justice: 2 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 23-09-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 04-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Transfer pricing; Opportunity of being heard; Principle of natural justice; International transaction; Period of limitation; Procedural lapse; Time period of passing order; Condonation of delay; Reason to believe
• Section: 143(3); 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 51/PNJ/2012 : (ASST. YEAR : 2006 - 07) GIGABYTE TECHNOLOGY (INDIA) PVT. LTD., B - 411, BSEL TECH PARK, SECTOR 30A, VASHI, MAHARASHTRA 400 705 (APPELLANT) PAN : AABCD7556N VS. COMMISSIONER OF INCOME TAX, PLOT NO. 5, PATTO, AAYAKARBHAVAN, PANAJI, GOA (RESPONDENT) ITA NO. 52/PNJ/2012 : (ASST. YEAR : 2006 - 07) GIGABYTE TECHNOLOGY (INDIA) PVT. LTD., B - 411, BSEL TECH PARK, SECTOR 30A, VASHI, MAHARASHTRA 400 705 (APPELLANT) PAN : AABCD7556N VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1, MARGAO, GOA (RESPONDENT) ASSESSEE BY : VISHAL KALRA, ADV. REVENUE BY : SMT. ASHA DESAI , DR DATE OF HEARING : 2 3 /0 9 /2014 DATE OF PRONOUNCEMENT : 3 1 / 10 /2014 O R D E R PER P.K. BANSAL 1. ITA NO. 51/PNJ/2012 HAS BEEN FILED AGAINST THE ORDER OF CIT DT. 20.3.2012 PASSED U/S 263 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, GIGABYTE TECHNOLOGY (INDIA) PRIVATE LIMITED; (HEREINAFTER REFERRED TO AS THE APPELLANT), RESPECTFULLY SUBMITS APPEAL ON THE FOLLOWING GROUNDS, WITH RESPECT TO THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME - TAX, PANAJI - GOA (CIT) UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT): 2 ITA NOS. 51 & 52/PNJ/2012 (ASST. YEAR : 2006 - 07) 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE IMPUGNED ORDER DATED MARCH 20, 2012 PASSED BY THE CIT UNDER SECTION 263 OF THE ACT IS BEYOND JURISDICTION, BAD IN LAW AND VOID AB INITIO. 2. THAT THE CIT ERRED ON FACT AND IN LAW IN EXERCISING REVISIONARY POWERS UNDER SECTION 263 HOLDING THAT THE ASSESSMENT ORDER DATED DECEMBER 18, 2009, PASSED UNDER SECTION 143(3) OF THE ACT WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE WITHOUT ASSUMING PROPER JURISDICTION AND WITHOUT SATISFYING THE PREREQUISITE CONDITIONS OF THAT SECTION. 3. THAT THE CIT ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE ASSESSMENT O RDER WAS PASSED AFTER DETAILED EXAMINATION/ENQUIRIES AND PROPER APPLICATION OF MIND BY THE ASSESSING OFFICER, THUS THE CIT EXCEEDED HIS JURISDICTION IN REVISING THE ASSESSMENT ORDER DATED DECEMBER 18, 2009. 4. THAT THE CIT ERRED ON FACTS AND IN LAW AND EX CEEDED HIS JURISDICTION IN CANCELLING THE ENTIRE ASSESSMENT ORDER AND DIRECTING THE ASSESSING OFFICER TO MAKE DE - NOVO ASSESSMENT. THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO EACH OTHER. 2. ITA NO. 5 2 /PNJ/2012 HAS BEEN FILED AGAINST THE ORDER OF CIT(A) DT. 30.3.2012 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 1. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN DISMISSING THE APPEAL FILED BY THE APPELLANT AS INFRUCTUOUS, ON THE GROUND THAT THE ASSESSMENT UNDER APPEAL HAS BEEN SET ASIDE BY THE CIT UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (ACT). 2. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN NOT ADJUDICATING ON MERITS THE FOLLOWING ISSUES RAISED IN APPEAL : A. THE LEARNED TPO ERRED BY PASSING AN O RDER UNDER SECTION 92CA OF THE ACT WITHOUT PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE APPELLANT. THIS WAS ESPECIALLY IN VIEW OF THE FACT THAT THE TPO FOR THE CASE I.E. MR.NARENDRA KUMAR HAD BEEN TRANSFERRED. THE APPELLANT WAS NOT OFFICIALLY INFORMED OF SUCH TRANSFER OF CASE TO ANOTHER TPO I.E. MR. D. PRABHAKAR REDDY WHO WAS THE JOINT DIRECTOR OF INCOME TAX (TRANSFER PRICING) 1, BANGALORE. THE SAID ORDER WAS PASSED WITHOUT AFFORDING ANY FURTHER OPPORTUNITY OF HEARING TO THE APPELLANT BY THE NEW TPO. B. THE LEARNED AO/TPO ERRED IN REJECTING TWO OUT OF THE THREE COMPARABLES SELECTED BY THE APPELLANT ON GROUNDS OF DIFFERENT FINANCIAL YEAR ENDING AND FUNCTIONAL INCOMPARABILITY. 3 ITA NOS. 51 & 52/PNJ/2012 (ASST. YEAR : 2006 - 07) C. THE LEARNED AO/TPO ERRED IN INCLUDING ADDITIONAL COMPANIES, WHICH WERE F UNCTIONALLY DISSIMILAR TO THE ACTIVITIES UNDERTAKEN BY THE APPELLANT. D. THE LEARNED AO/TPO ERRED IN COMPUTING INCORRECT MARGINS OF COMPARABLE COMPANIES. E. THE LEARNED AO/TPO ERRED IN REJECTING USAGE OF MULTIPLE YEAR DATA BY THE APPELLANT AND USING ONLY THE CURRENT YEAR (IE FINANCIAL YEAR 2005 - 06) DATA FOR COMPUTATION OF ARMS LENGTH PRICE. F. THE LEARNED AO ERRED IN NOT ACCEPTING THE ARMS LENGTH PRICE DETERMINED BY THE APPELLANT, AND IN CHOOSING TO DETERMINE THE ARMS LENGTH PRICE BY MAKING REFERENCE TO THE TPO EVEN THOUGH NONE OF THE CONDITIONS LAID DOWN UNDER SECTION 92C(3) OF THE ACT, WERE SATISFIED. THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO EACH OTHER. 3. SINCE BOTH THE APPEALS RELATE TO THE SAME ASSESSEE, FOR THE SAKE OF CONVENIENCE BOTH THESE APPEALS ARE DECIDED BY THIS COMMON ORDER. ITA NO. 51/PNJ/2012 : 4. THERE IS DELAY OF 8 DAYS IN FILING THIS APPEAL. THE ASSESSEE HAS FILED APPLICATION FOR CONDONATION OF DELAY RELYING ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF COLLECTOR, LAND ACQUISITION VS. MST. KATIJI , 167 ITR 471 (SC). AFTER HEARING THE RIVAL SUBMISSIONS , WE ARE OF THE VIEW THAT THE ASSESSEE HAS BEEN PREVENTED BY SUFFICIENT CAUSE TO FILE THE APPEAL WITHIN THE STIPULATED TIME. T HERE IS DELAY OF ONLY 7 DAYS. WE, THEREFORE, CONDONE THE SAME. 4.1 THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT PASSED U/S 263. THE ASSESSEE HAS CHALLENGED THE ORDER ON LEGALITY. THE BRIEF FACTS RELATING TO THIS CASE ARE THAT T HE CIT NOTED AFTER CALLING FOR THE RECORDS THAT THE AO MADE ADDITION TOWARDS TPO ADJUSTMENT U/S 92CA AMOUNTING TO RS.7,30,40,428/ - PURSUANT TO THE ORDER PASSED U/S 92CA DT.29.10.2009 WHICH 4 ITA NOS. 51 & 52/PNJ/2012 (ASST. YEAR : 2006 - 07) WAS RECEIVED BY HIM ON 30.11.2009. THE AO AFTER RECEIPT OF TPOS OR DER HAS GIVEN OPPORTUNITY TO THE ASSESSEE VIDE LETTER DT. 10.12.2009 AND AFTER HEARING AND CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DT. 17.12.2009, THE AO PASSED ORDER U/S 143(3) ON 18.12.2009. THE CIT NOTED THAT THE AO BEFORE PASSING THE ORDER U/S 143(3) HAS NOT SENT ANY DRAFT ASSESSMENT ORDER TO THE ASSESSEE AS IS REQUIRED U/S 144C OF THE INCOME TAX ACT INSERTED BY THE FINANCE ACT, 200 9 W.E.F. 1.4.2009 SO THAT THE ASSESSEE COULD HAVE RAISED ITS OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL. THE CIT WAS OF THE OPINION THAT THE ORDER U/S 143(3) HAS NOT BEEN PASSED IN ACCORDANCE WITH THE PROVISIONS OF SEC. 144C AND ACCORDINGLY INVOKED JU RISDICTION U/S 263 AS HE WAS OF THE OPINION THAT THE ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDINGLY, NOTICE U/S 263(1) DT. 23.2.2012 HAS BEEN ISSUED TO THE ASSESSEE STATING THEREIN THAT SINCE THE AO HAS FAILED TO PROVIDE T HE DRAFT ASSESSMENT ORDER BEFORE PASSING ORDER U/S 143(3) OF THE INCOME TAX ACT, THE AO HAS VIOLATED THE PRINCIPLES OF NATURAL JUSTICE AND, THEREFORE, THE ORDER PASSED IS ERRONEOUS AND THEREFORE HE PROPOSED TO PASS APPROPRIATE ORDER U/S 263 OF THE INCOME T AX ACT FOR SETTING ASIDE THE ASSESSMENT. OPPORTUNITY WAS GIVEN TO THE ASSESSEE IN THIS REGARD VIDE NOTICE DT. 23.2.2012. BEFORE CIT THE ASSESSEE SUBMITTED WRITTEN SUBMISSION S VIDE LETTER DT.19.3.2012 STATING THEREIN THAT THE ORDER PASSED BY THE AO CANNOT BE TERMED AS ERRONEOUS OR PREJUDICIAL REQUIRING REVISIONARY JURISDICTION U/S 263. THE AO HAS COMPLETED THE ASSESSMENT AFTER PROTRACTED HEARING CALLING FOR INFORMATION FROM THE ASSESSEE, CONSIDERING THE EXPLANATION FILED BY THE ASSESSEE AND AFTER DUE APPLI CATION OF MIND. THE ASSESSEE ALSO FILED DETAILS IN RELATION TO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES. RELIANCE WAS PLACED IN THIS REGARD ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT, 243 ITR 83 AS WELL AS THAT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF HARI IRON TRADING CO. V S . CI T, 263 ITR 437 (P&H). IT WAS ALSO CONTENDED THAT THE JURISDICTION U/S 263 IS NOT TO SET ASIDE UNFAVOURABLE ORDER. IT WAS ALSO CONTENDED THAT THE PROVISIONS OF 5 ITA NOS. 51 & 52/PNJ/2012 (ASST. YEAR : 2006 - 07) SEC. 144C ARE SIMILAR TO THE PROVISIONS OF ERSTWHILE PROVISIONS OF SEC. 144B. COURTS IN THE CONTEXT OF SEC. 144B OF THE ACT HAVE HELD THAT MERELY BECAUSE THE PROCEDURE LAID DOWN IN SEC. 144B OF THE ACT HAS NOT BEEN FOLLOWED, THE SAME WOULD NOT SUFFICE TO EXERCISE REVISIONARY POWERS AVAILABLE TO THE CIT U/S 263 OF THE ACT. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS : I) KRISHNAMURTHY (V.G.) VS. CIT, 152 ITR 683 (KAR) II) MAHARAJA RAJA PAWERDEWAS (H.H.) VS. CIT, 138 ITR 518 (MP) III) NANDLALBHANDARI AND SONS VS. CIT, 147 ITR 710 (MP) CIT AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE NOTED THAT RECORDS SHOWED THAT THE AO HAS NOT PROVIDED DRAFT ASSESSMENT ORDER TO THE ASSESSEE BEFORE PASSING ORDER U/S 143(3). AS PER PROVISIONS OF SEC. 144C OF THE INCOME TAX ACT AS ENACTED AND INSERTED BY THE FINANCE ACT, 2009 W.E.F. 1.4.2009 THE DRAFT ASSESSMENT ORDER HAS TO BE MANDATORILY PROVIDED TO THE ASSESSEE BEFORE PASSING ORDER U/S 143(3) OF THE INCOME TAX ACT FOR RAISING ITS OBJECTIONS BEFORE THE DISPUTE RE SOLUTION PANEL AND THEREFORE HE WAS OF THE OPINION THAT THE ORDER PASSED U/S 143(3) IS NOT IN ACCORDANCE WITH THE PROVISIONS OF SEC. 144C AND THE AO VIOLATED THE PRINCIPLES OF NATURAL JUSTICE WHICH MAY AFFECT THE LEGALITY OF THE ORDER. SINCE THE AO HAS NO T GIVEN THE DRAFT ASSESSMENT ORDER TO THE ASSESSEE, THE ASSESSEE HAS LOST THE OPPORTUNITY TO RAISE ITS OBJECTIONS AGAINST THE DRAFT ASSESSMENT ORDER BEFORE THE DISPUTE RESOLUTION PANEL AND THEREFORE THE ASSESSMENT ORDER U/S 143(3) IS NOT ONLY ERRONEOUS BUT IS NOT LIKELY TO STAND THE TEST OF APPEAL AND IN THAT SENSE THE ORDER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND ACCORDINGLY, THE CIT SET ASIDE THE ASSESSMENT ORDER WITH THE DIRECTION THAT THE AO TO PASS A SPEAKING DRAFT ASSESSMENT ORDER AND PROVID E COPY OF THE SAME TO THE ASSESSEE. THE ASSESSEE SHOULD BE GIVEN OPPORTUNITY S O AS TO ENABLE IT TO APPROACH THE DISPUTE RESOLUTION PANEL RELATING TO ADJUSTMENT 6 ITA NOS. 51 & 52/PNJ/2012 (ASST. YEAR : 2006 - 07) U/S 92CA. THE ASSESSEE HAS NOT COME IN APPEAL BEFORE US ABOUT THE VALIDITY OF THE ASSESSMENT . 4.2 THE LD. AR HAS TAKEN MAINLY 3 CONTENTIONS BEFORE US; FIRSTLY, HE SUBMITTED THAT THE TPO PASSED ORDER U/S 92CA ON 29.10.2009 AND DETERMINED THE ADJUSTMENT IN RESPECT OF ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTIONS PERTAINING TO THE PURCHASES MADE F ROM ASSOCIATED ENTERPRISES AT RS. 7,30,40,428/ - . THE ASSESSMENT ORDER HAS BEEN PASSED AFTER 1.10.2009 AND THEREFORE AO WAS BOUND AS PER PROVISIONS OF SEC. 144C TO FORWARD THE DRAFT OF THE PROPOSED ORDER OF ASSESSMENT TO THE ASSESSEE BEFORE PASSING THE ORD ER U/S 143(3). THE ASSESSEE U/S 144C(2) HAS BEEN GIVEN TIME OF 30 DAYS FROM THE RECEIPT OF THE ORDER TO FILE ITS OBJECTIONS WITH THE DISPUTE RESOLUTION PANEL AND IN CASE THE ASSESSEE DID NOT FILE THE OBJECTIONS, THE AO COULD HAVE COMPLETED THE ASSESSMENT U/S 143(3) WITHIN ONE MONTH FROM THE END OF THE MONTH IN WHICH THE PERIOD OF FILING OF OBJECTION U/S 144C(2) WOULD HAVE EXPIRED. THE AO HAS NOT SERVED ANY DRAFT ORDER ON THE ASSESSEE AND THEREFORE THE ASSESSMENT ORDER PASSED BY THE AO IS VOID AB INITIO . RELIANCE WAS PLACED IN THIS REGARD ON THE DECISION OF HON'BLE KERALA HIGH COURT IN P. ABDUL KADAR HAMZA VS. CIT, 246 ITR 14 WHEREIN IT WAS OBSERVED THAT WHERE THE ASSESSMENT ORDER ITSELF WAS NULL AND VOID AND PASSED WITHOUT JURISDICTION, THERE IS NO SCOP E FOR SETTING ASIDE THE ORDER BY INVOKING SEC. 263 OF THE INCOME TAX ACT. FOR THE PROPOSITION OF LAW THAT THE ORDER PASSED BY THE AO WAS ILLEGAL AND WITHOUT JURISDICTION, RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE ANDHRA PRADESH HIGH COURT IN W.P NO. 5557 OF 2012 IN THE CASE OF ZUARI CEMENT LTD. VS. ACIT. RELIANCE WAS ALSO PLACED IN THIS REGARD ON THE ORDER PASSED IN W.P NO. 1526 & 1527 BY THE HON'BLE MADRAS HIGH COURT IN THE CASE OF VIJAY TELEVISION PVT. LTD. VS. ACIT. IT WAS ALSO POINTED THAT TH E SPECIAL LEAVE PETITION HAS BEEN DISMISSED BY THE HON'BLE SUPREME COURT VIDE ORDER DT. 27.9.2013 IN THE CASE OF ACIT VS. ZUARI CEMENT LTD. ARISING OUT OF W.P NO. 5557 OF 2012 OF THE HON'BLE ANDHRA 7 ITA NOS. 51 & 52/PNJ/2012 (ASST. YEAR : 2006 - 07) PRADESH HIGH COURT. IT WAS CONTENDED THAT THE ASSESSEE HA S FILED AN APPEAL BEFORE THE CIT AGAINST THE ASSESSMENT ORDER ON 31.3.2011 AND THE CIT IMMEDIATELY INVOKED THE JURISDICTION U/S 263 BY ISSUING NOTICE DT.23.2.2012 TO THE ASSESSEE. FOR EXERCISING JURISDICTION U/S 263 BOTH THE CONDITIONS THAT THE ORDER IS E RRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE MUST BE SATISFIED. IN THIS CASE, THE ORDER WAS NOT PREJUDICIAL. UNLESS AND UNTIL BOTH THE CONDITIONS ARE SATISFIED, CIT COULD HAVE NOT EXERCISED JURISDICTION U/S 263. RELIANCE WAS PLACED IN THIS RE GARD ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT, 243 ITR 83 ( SUPRA ). IT WAS ALSO CONTENDED THAT SINCE THE ORDER PASSED BY THE AO U/S 143(3) WAS ITSELF VOID , THEREFORE, CIT U/S 263 COULD HAVE NOT EXERCIS ED JURISDICTION U/S 263 AGAINST AN INVALID ORDER. RELIANCE WAS PLACED IN THIS REGARD ON THE DECISION OF THE LUCKNOW BENCH OF THIS TRIBUNAL IN THE CASE OF INDER KUMAR BACHANI (HUF) V S . ITO, 99 ITD 621. SECONDLY, IT WAS CONTENDED THAT THE PROVISIONS OF ERSTWHILE SEC. 144B OF THE ACT AS IT STOOD BEFORE BEING OMITTED BY THE FINANCE ACT, 1989 WERE SIMILAR TO THE NEWLY INSERTED PROVISION U/S 144C. BOTH THE SECTIONS REQUIRE THE AO TO PASS D RAFT ASSESSMENT ORDER BEFORE PASSING THE FINAL ASSESSMENT ORDER. IT WAS CONTENDED THAT IN A CASE WHERE THE PROCEDURE LAID DOWN U/S 144B WAS NOT FOLLOWED, IT WAS HELD THAT CIT COULD NOT EXERCISE THE REVISIONARY POWERS U/S 263. IN THIS REGARD, RELIANCE WAS PLACED ON THE FOLLOWING CASES : I) KRISHNAMURTHY (V.G.) VS. CIT, [1985] 152 ITR 683 (KAR) II) MAHARAJA RAJA PAWERDEWAS (H.H.) VS. CIT, [1982] 138 ITR 518 (MP) III) NANDLALBHANDARI AND SONS VS. CIT, [1983] 147 ITR 710 (MP) IV) CIT VS. DAMOH CO - OPERATIVE MARKETING SOCIETY LTD. [1983] 145 ITR 572 (MP) 8 ITA NOS. 51 & 52/PNJ/2012 (ASST. YEAR : 2006 - 07) IN THE CASE OF THE ASSESSEE SINCE THE ORDER U/S 143(3) WAS PASSED IN COMPLETE DISREGARD TO THE PROCEDURE PRESCRIBED U/S 144C, THEREFORE, THE ORDER IS NULL AND VOID AND CIT COULD HAVE NOT EXERCISED JURISDICTION U/S 263 AGAINST SUCH ORDER. LASTLY, IT WAS CONTENDED THAT THE DIRECTION OF THE CIT TO MAKE DE NOVO ASSESSMENT WOULD RESULT IN AUTHORISING THE AO TO PASS ASSESSMENT ORDER EVEN AFTER THE PERIOD OF LIMITATION. CIT U/S 263 SET ASIDE THE IMPUGNED ORDER AND HAS DIRECTED THE AO TO PASS A SPEAKING DRAFT ASSESSMENT ORDER AFTER GIVING OPPORTUNITY TO THE ASSESSEE. THE AO HAS PASSED THE FINAL ASSESSMENT ORDER ON 17.10.2013 WHICH IS BEYOND THE PRESCRIBED TIME LIMIT UNDER THE ACT. ACCORDING TO HIM, THE TIME LIMIT FOR COMPLETION OF THE ASSESSMENT PROCEEDINGS BY THE AO AS STATED U/S 153 ARE AS UNDER : PARTICULARS TIMELINES IF THE AO HAD INITIALLY ISSUED DRAFT ASSESSMENT ORDER ACTUAL DATE FOR ISSUING ORDER POST DIRECTIONS UNDER SECTION 263 DRAFT ASSESSMENT ORDER ON OR BEFORE DECEMBER 31, 2009 DECEMBER 21, 2012 DRP DIRECTIONS ON OR BEFORE OCTOBER 30, 2010 SEPTEMBER 23, 2013 FINAL ASSESSMENT ORDER ON OR BEFORE DECEMBER 30, 2010 OCTOBER 17, 2013 THUS, IT WAS CONTENDED THAT THE SOLE PURPOSE OF INVOKING THE PROVISIONS OF SEC. 263 IS TO EXTEND THE TIME LIMIT FOR PASSING ORDER. CIT DOES NOT HAVE ANY POWER TO EXTEND THE TIME LIMIT. RELIANCE WAS PLACED IN THIS REGARD ON THE DECISION OF THE CHENNAI BEN CH OF THIS TRIBUNAL IN THE CASE OF SHRI V NARAYANAN VS. ACIT [2010] 2 ITD 446 (CHENNAI) AND IT WAS VEHEMENTLY CONTENDED THAT THERE CANNOT BE ANY PREJUDICE TO THE REVENUE AS THE AO COMPLETED THE ASSESSMENT PROCEEDINGS AFTER APPLYING HIS MIND AND ASSESSED TH E INCOME OF THE ASSESSEE AT AN AMOUNT WHICH WAS MUCH HIGHER THAN RETURNED INCOME. THUS, THERE WAS NO ACTION OF THE AO THAT CAUSED ANY PREJUDICE TO THE INTEREST OF THE REVENUE. 4.3 WE NOTED THAT THE CIT IN THIS CASE HAS CALLED FOR THE RECORDS AND NOTED TH AT THE AO BEFORE PASSING THE ORDER U/S 143(3) HAS NOT SENT ANY DRAFT 9 ITA NOS. 51 & 52/PNJ/2012 (ASST. YEAR : 2006 - 07) ASSESSMENT ORDER TO THE ASSESSEE AS IS REQUIRED U/S 144C OF THE INCOME TAX ACT AS INSERTED BY THE FINANCE ACT, 2009 W.E.F. 1.4.2009 SO THAT THE ASSESSEE COULD HAVE RAISED ITS OBJECTIONS B EFORE THE DISPUTE RESOLUTION PANEL. THE CIT WAS OF THE OPINION THAT THE ORDER U/S 143(3) HAS NOT BEEN PASSED IN ACCORDANCE WITH THE PROVISIONS OF SEC. 144C AND ACCORDINGLY HE INVOKED THE JURISDICTION U/S 263 AS, IN HIS OPINION, THE ORDER PASSED BY THE AO WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND ACCORDINGLY NOTICE U/S 263(1) DT. 23.2.2012 HAS BEEN ISSUED TO THE ASSESSEE STATING THEREIN THAT SINCE THE AO HAS FAILED TO PROVIDE THE DRAFT ASSESSMENT ORDER BEFORE PASSING THE ORDER U/S 143(3) OF THE INCOME TAX ACT, THE AO THEREFORE VIOLATED THE PRINCIPLES OF NATURAL JUSTICE AND ACCORDINGLY THE ORDER PASSED IS ERRONEOUS. CIT, THEREFORE, PROPOSED TO PASS APPROPRIATE ORDER U/S 263 AFTER GIVING OPPORTUNITY TO THE ASSESSEE. AFTER GIVING OPPORTUNITY TO THE ASSESSEE, THE CIT SET ASIDE THE ASSESSMENT ORDER WITH THE DIRECTION TO THE AO TO PASS A SPEAKING DRAFT ASSESSMENT ORDER AFTER PROVIDING OPPORTUNITY TO THE ASSESSEE SO THAT HE COULD APPROACH THE DISPUTE RESOLUTION PANEL RELATING TO THE AD JUSTMENT MADE U/S 92CA. 4.4 BEFORE DECIDING THE ISSUE WHETHER THE ORDER PASSED U/S 263 IS VALID OR NOT, IT IS ESSENTIAL TO REFER TO THE RELEVANT PROVISIONS OF SEC. 263. SECTION 263 LAYS DOWN AS UNDER: - 263. (1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MA Y, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT , OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. EXPLANATION. - FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT, FOR THE PURPOSES OF THIS SUB - SECTION, - 10 ITA NOS. 51 & 52/PNJ/2012 (ASST. YEAR : 2006 - 07) (A) AN ORDER PASSED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988 BY THE ASSESS ING OFFICER SHALL INCLUDE - (I) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT COMMISSIONER OR DEPUTY DIRECTOR OR THE INCOME - TAX OFFICER ON THE BASIS OF THE DIRECTIONS ISSUED BY THE JOINT COMMISSIONER UNDER SECTION 144A; (II) AN ORDER MADE BY THE JOINT COM MISSIONER IN EXERCISE OF THE POWER OR IN THE PERFORMANCE OF THE FUNCTIONS OF AN ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO, HIM UNDER THE ORDERS OR DIRECTIONS ISSUED BY THE BOARD OR BY THE CHIEF COMMISSIONER OR DIRECTOR GENERAL OR COMMISSIONER AUTHORIS ED BY THE BOARD IN THIS BEHALF UNDER SECTION 120; (B) 'RECORD' SHALL INCLUDE AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDING UNDER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER; (C) WHERE ANY ORDER REF ERRED TO IN THIS SUB - SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF ANY APPEAL FILED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988, THE POWERS OF THE COMMISSIONER UNDER THIS SUB - SECTION SHALL EXTEND AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. (2) NO ORDER SHALL BE MADE UNDER SUB - SECTION (1) AFTER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE REVISED WAS PASSED. ( 3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB - SECTION (2), AN ORDER IN REVISION UNDER THIS SECTION MAY BE PASSED AT ANY TIME IN THE CASE OF AN ORDER WHICH HAS BEEN PASSED IN CONSEQUENCE OF OR TO GIVE EFFECT TO, ANY FINDING OR DIRECTION CONTAINED IN AN ORDER OF THE APPELLATE TRIBUNAL, THE HIGH COURT OR THE SUPREME COURT. EXPLANATION. - IN COMPUTING THE PERIOD OF LIMITATION FOR THE PURPOSES OF SUB - SECTION (2), THE TIME TAKEN IN GIVING AN OPPORTUNITY TO THE ASSESSEE TO BE REHEARD UNDER THE PROVISO TO SECTION 129 AND ANY PERIOD DURING WHICH ANY PROCEEDING UNDER THIS SECTION IS STAYED BY AN ORDER OR INJUNCTION OF ANY COURT SHALL BE EXCLUDED. 4 . 5 FROM THE PERUSAL OF THE AFORESAID SECTION, IT IS APPARENT THAT THERE ARE FOUR MAIN FEATURES OF THE POWER OF REVISION TO BE EXERCISED U/S 263 BY THE COMMISSIONER OF INCOME - TAX. FIRSTLY, THE COMMISSIONER MAY CALL FOR AND 11 ITA NOS. 51 & 52/PNJ/2012 (ASST. YEAR : 2006 - 07) EXAMINE THE RECORDS OF ANY PROCEEDINGS UNDER THE ACT AND FOR THIS PURPOSE HE NEED NOT TO SHOW ANY REASON OR RECORD ANY REASON TO BELIEVE. IT IS A PART OF HIS ADMINISTRATIVE POWER TO CALL FOR THE RECORD AND EXAMINE THEM RELATING TO ANY ASSESSEE. SECONDLY, HE MAY CONSIDER ANY ORDER PASSED BY THE ASSESSING OFFICER AS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THIS IS EXERCISED BY CALLING FOR AND EXAMINING THE RECORD AVAILABLE AT THIS STAGE. THERE IS NO QUESTION OF THE ASSESSEE TO APPEAR AND MAKE SUBMISSION AT THIS STAGE. THIRDLY, IF AFTER CALLING FOR AND EXAMINING THE RECORDS THE COMMISSIONER CONSIDERS THAT THE ORDER OF THE ASSESSING OFF ICER IS ERRONEOUS IN SO FAR IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE IS BOUND TO GIVE AN OPPORTUNITY TO THE ASSESSEE OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH ENQUIRY AS HE MAY DEEM FIT, PASS SUCH ORDER THEREON AS THE CIRCUMSTA NCES OF THE CASE MAY JUSTIFY INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELLING ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. THIS EMPOWERS THE CIT TO CAUSE OR MAKE SUCH ENQUIRIES AS HE DEEMS NECESSARY. FOURTHLY, THE CIT U/S 263 CAN EN HANCE OR MODIFY THE ASSESSMENT AS A RESULT OF ENQUIRY CONDUCTED AND HEARING OF THE ASSESSEE. 4 . 6 FOR INVOKING THE PROVISIONS OF SECTION 263, WE DO AGREE WITH THE LD. A.R BOTH THE CONDITIONS THAT THE ORDER PASSED BY THE A.O. IS ERRONEOUS AND ALSO THAT IT IS PREJUDICIAL TO THE INTEREST OF REVENUE MUST BE SATISFIED. IF ONE OF THEM IS ABSENT, THE PROVISIONS OF SECTION 263 CANNOT BE INVOKED. THE TERM ERRONEOUS HAS NOT BEEN DEFINED UNDER THE INCOME - T AX ACT BUT IT IS WELL SETTLED THAT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE A.O. CANNOT BE SAID TO BE AN ERROR. AN ORDER CAN BE SAID TO BE ERRONEOUS IF THERE IS INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW IN THE ORDER BY T HE A.O. IF THE A.O. AFTER MAKING THE ENQUIRIES AND EXAMINING THE RECORDS TAKEN ONE OF THE POSSIBLE VIEW, IT CANNOT BE SAID THAT THE ORDER PASSED BY THE A.O. WAS ERRONEOUS. THIS VIEW HAS 12 ITA NOS. 51 & 52/PNJ/2012 (ASST. YEAR : 2006 - 07) BEEN TAKEN BY HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. 243ITR83(SC). 4.7 NOW, THE LD. AR BEFORE US NO DOUBT VEHEMENTLY ARGUED THAT IN THE ABSENCE OF COMPLIANCE OF THE PROVISIONS OF SEC. 144C(2), WHICH IS UNDISPUTED IN THIS CASE, BY THE AO BY NOT PROVIDING TIME TO THE ASSESSEE TO FILE ITS OBJECTION WITH THE DISPUTE RESOLUTION PANEL MAKES THE ORDER PASSED BY THE AO TO BE ILLEGAL AND VOID AB INITIO AND IN THIS REGARD HE PLACED RELIANCE ON THE DECISION OF HON'BLE KERALA HIGH COURT IN THE CASE OF P. ABDUL KADAR HAMZA VS. CIT, 246 I TR 14 (SUPRA) AND HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF ZUARI CEMENT LTD. AS WELL AS HON'BLE MADRAS HIGH COURT IN THE CASE OF VIJAY TELEVISIONS PVT. LTD. VS. ACIT (SUPRA). WE HAVE GONE THROUGH THESE DECISIONS. WE NOTED THAT IN THESE DECISIONS, THE RESPECTIVE ASSESSEES HAVE FILED WRIT PETITIONS BEFORE THE HIGH COURT AS THE AO HAS PASSED ORDER WITHOUT GIVING OPPORTUNITY TO THE ASSESSEE AS ENVISAGED U/S 144C SO THAT THE ASSESSEE COULD HAVE FILED THE OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL. SINCE THE AO HAS NOT FOLLOWED THE MANDATORY PROVISIONS, THEREFORE, THE HON'BLE HIGH COURTS QUASHED THE ASSESSMENT ORDER. IN THE CASE BEFORE US WE NOTED THAT THE ASSESSEE HAS NOT FILED ANY WRIT PETITION BEFORE THE HIGH COURT SO THAT THE ASSESSMENT ORDER PA SSED BY THE AO U/S 143(3) COULD HAVE BEEN QUASHED. EVEN THE ASSESSEE HAS NOT FILED ANY APPEAL BEFORE US IN THIS REGARD SO THAT THE ASSESSMENT ORDER COULD HAVE BEEN QUASHED. AS ON TODAY, THE ASSESSMENT ORDER IS VERY MUCH IN EXISTENCE. EVEN THE ASSESSMENT ORDER WAS IN EXISTENCE WHEN THE CIT INVOKED THE JURISDICTION U/S 263 . WHEN THE ASSESSMENT ORDER IS VERY MUCH IN EXISTENCE AND THE ASSESSEE HAS COME IN APPEAL AGAINST THE ORDER PASSED U/S 263, THIS TRIBUNAL, IN OUR OPINION, DOES NOT HAVE JURISDICTION TO E XAMINE AND HOLD THAT THE ASSESSMENT ORDER PASSED BY THE AO IN VIOLATION OF SEC. 144C(2) IS ILLEGAL AND VOID. THE JURISDICTION OF THIS TRIBUNAL U/S 254 IS LIMITED TO THE GROUNDS OF APPEAL BEFORE THE TRIBUNAL. THE SUBJECT MATTER OF THE APPEAL BEFORE THE TR IBUNAL 13 ITA NOS. 51 & 52/PNJ/2012 (ASST. YEAR : 2006 - 07) IS WHETHER THE ORDER PASSED BY THE CIT BY INVOKING PROVISIONS OF SEC. 263 IS VALID OR NOT. SEC. 263, AS WE HAVE ALREADY HELD IN THE PRECEDING PARAGRAPHS, EMPOWERS THE CIT TO EXERCISE POWER OF REVISION U/S 263 IF BOTH THE CONDITIONS THAT THE ORDER I S ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ARE SATISFIED. CIT NOTED WHILE EXERCISING THE POWER THAT THE AO HAS NOT COMPLIED WITH THE PROVISIONS OF SEC. 144C(2) AND THEREFORE HE TOOK THE VIEW THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE I NTEREST OF THE REVENUE. THE DECISIONS AS CITED BY THE LD. AR, IN OUR OPINION, WILL NOT ASSIST THE ASSESSEE. THE LD. AR BEFORE US ALSO RELIED VEHEMENTLY ON THE DECISIONS OF LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF INDER KUMAR BACHANI (HUF) VS. ITO, 99 ITD 621 WHILE COMPARING PROVISIONS OF SEC. 144B, AS WAS IN EXISTENCE EARLIER, AS WELL AS SEC. 144C. WE HAVE GONE THROUGH THE DECISION OF THE LUCKNOW BENCH IN THE CASE OF INDER KUMAR BACHANI (HUF) VS. ITO, 99 ITD 621 (SUPRA). WE NOTED THAT IN THAT CASE N O DOUBT THE TRIBUNAL HAS TAKEN A VIEW THAT SINCE THE REOPENING WAS NOT VALID, THEREFORE, CIT DOES NOT HAVE ANY JURISDICTION AGAINST SUCH INVALID ORDER. THIS DECISION, IN OUR OPINION, WILL NOT ASSIST THE ASSESSEE BECAUSE IN THAT CASE THE TRIBUNAL HAS HELD THAT THE ORDER PASSED U/S 147 WAS INVALID. WE FIND SUBSTANCE IN THE SUBMISSION OF THE LD. AR THAT BOTH THE PROVISIONS AS LAID DOWN U/S 144B AND AS ARE INSERTED U/S 144C BY THE FINANCE ACT, 2009 ARE HAVING SIMILAR LANGUAGE BUT WE NOTED THAT THE VARIOUS HIG H COURTS HAVE HELD THAT THE ASSESSMENT IS NOT INVALID AND VOID IF THE PROVISIONS OF SEC. 144B ARE NOT COMPLIED WITH. THE VARIOUS HIGH COURTS IN THE FOLLOWING DECISIONS HAVE TAKEN A VIEW THAT THE PROVISIONS OF SEC.144B ARE PROCEDURAL IN NATURE. I) ANGADBAI VS. CIT, 163 ITR 871 (MP) II) CIT VS. SHREE DIGVIJAY WOOLLEN MILLS LTD , 212 ITR 310 (GUJ) III) VISHWANATH PRASAD BHAGWATI PRASAD VS. CIT, 202 ITR 469 (ALL) IN THIS DECISION THE HON'BLE ALLAHABAD HIGH COURT UNDER WHICH THE INCOME TAX TRIBUNAL, ALLAHABAD BENCH JURIS DICTION FALLS HAS 14 ITA NOS. 51 & 52/PNJ/2012 (ASST. YEAR : 2006 - 07) CATEGORICALLY HELD THAT THE PROVISIONS OF SEC. 144B ARE PROCEDURAL IN NATURE AND NON - COMPLIANCE THEREOF WOULD BE A PROCEDURAL LAPSE AND IT WILL NOT MAKE THE ASSESSMENT TO BE VOID. IV) SARBJIT SINGH VS. CIT, 109 CTR 454 (DEL) V) G.R. STEEL AND AL LOYS PVT. LTD. V S . CIT, 152 ITR 220 (KAR) VI) JOSEPH KURUVILLA VS. CIT, 179 ITR 139 (KER) VII) MAHARAJA RAJA PAWERDEWAS (H.H.) VS. CIT, 138 ITR 518 (MP) VIII) DES RAJ KULBHUSHAN VS. CIT, 180 ITR 297 (P&H) IX) CIT VS. AMIN CHAND VIR CHAND , 179 ITR 51 (P&H ) 4.8 WE ALSO NOTED THAT U/S 144B(2) IT WAS NOT OBLIGATORY ON THE PART OF THE ASSESSEE TO FORWARD THE OBJECTION WITHIN 7 DAYS OF RECEIPT OF THE DRAFT ORDER TO THE IAC WHILE U/S 144C(2) IT IS MANDATORY ON THE PART OF THE ASSESSEE TO FILE THE OBJECTION WITHIN 30 D AYS OF THE RECEIPT OF THE DRAFT ORDER BY HIM AS U/S 144C(2) THE WORD USED IS SHALL WHILE U/S 144B THE WORD USED IS MAY. THE LD. AR AT THE LAST RELIED BEFORE US ON THE DECISION OF THE CHENNAI BENCH (TM) IN THE CASE OF V NARAYANAN VS. ACIT, 2 ITD 446 (S UPRA) FOR THE PROPOSITION OF THE LAW THAT BY INVOKING PROVISIONS OF SEC. 263 THE CIT HAS EXTENDED THE LIMITATION AS ENVISAGED U/S 153. WE HAVE GONE THROUGH THE DECISION OF THE CHENNAI BENCH (TM) IN THE ABOVE CASE. WE NOTED THAT THIS DECISION WILL NOT BE APPLICABLE IN THE INSTANT CASE AS IN THAT CASE THE RETURN FILED BY THE ASSESSEE WAS PROCESSED U/S 143(1)(A), THE AO COULD HAVE ISSUED NOTICE WITHIN THE LIMITATION PERIOD AS ENVISAGED U/S 143(2) IN CASE HE WANTED TO COMPLETE THE ASSESSMENT U/S 143(3). UNDE R THESE FACTS, THE CIT INVOKED JURISDICTION U/S 263 AND THEREFORE THE TRIBUNAL TOOK THE VIEW THAT THE DIRECTION OF THE CIT BY PASSING ORDER U/S 263 TO THE AO TO RE - DO THE ASSESSMENT WAS CONTRARY TO THE PROVISIONS OF SEC. 143(2), 143(3) AND SEC. 153(1)(A)(I II) AND THAT THE IMPUGNED REVISIONARY ORDER PASSED BY THE CIT WAS NOT SUSTAINABLE IN THE EYES OF THE LAW. IN THE IMPUGNED CASE BEFORE US, WE NOTED THAT THE AO HAS NOT GIVEN ANY OPPORTUNITY TO THE ASSESSEE 15 ITA NOS. 51 & 52/PNJ/2012 (ASST. YEAR : 2006 - 07) BEFORE PASSING THE ASSESSMENT U/S 143(3) BY SERVIN G THE DRAFT ORDER TO THE ASSESSEE IN PURSUANCE OF THE PROVISIONS OF SEC. 144C(III). IT IS NOT A CASE WHERE THE CIT IS EMPOWERING THE AO TO ISSUE NOTICE WHICH HE IS SUPPOSED TO ISSUE WITHIN A PARTICULAR PERIOD SO THAT HE COULD HAVE SCRUTINISED THE ASSESSMENT. IN THE INSTANT CASE, CIT BY REVISING THE ASSESSMENT PROVIDED OPPORTUNITY TO THE ASSESSEE WHICH WAS ENVISAGED U/S 144C(2). CIT, IN OUR OPINION, IS NOT EXTENDING THE TIME LIMIT AS IS AVAILABLE U/S 153. IT IS A CASE WHERE THE AO HAS THE POWER TO ISSUE NOTICE U/S 144C(2) BEFORE MAKING THE ASSESSMENT AS PER THE ORDER OF THE TPO. THEREFORE, IT CAN MERELY BE A PROCEDURAL LAPSE AND ONCE AN IRREGULARITY IS COMMITTED, IT HAS TO BE RE - DONE FROM THE STAGE AT WHICH TH E IRREGULARITY IS COMMITTED. WE, THEREFORE, DO NOT AGREE WITH THE LD. AR ON THIS CONTENTION. THE LD. AR EVEN THOUGH ALLEGED BEFORE US THAT THE CIT INVOKED JURISDICTION U/S 263 TO SET RIGHT THE MISTAKE AND TO SAFEGUARD THE INTEREST OF THE REVENUE ON THE B ASIS OF THE PROPOSAL SUBMITTED BY THE AO TO THE CIT AND CIT THEREFORE DID NOT APPLY HIS OWN MIND, WE DO NOT AGREE WITH THE LD. AR ON THIS COUNT. IN OUR OPINION, ONCE AN ALLEGATION IS ALLEGED, THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE JURISDICTION U/S 263 HAS BEEN INVOKED AT THE BEHEST OF THE AO. THE ONUS, IN OUR OPINION, LIES ON THE ASSESSEE TO PROVE THAT THE APPARENT IS NOT REAL AND JURISDICTION U/S 263 HAS BEEN INVOKED BY THE AO AND NOT IN REALITY BY THE CIT. WE NOTED THAT THE CIT HAS ISSUED NOTICE U/S 263(1) AND GIVEN DUE OPPORTUNITY TO THE ASSESSEE. IT IS THE CIT WHO HAS PASSED THE ORDER US/ 263, NOT THE AO. NON - COMPLIANCE OF THE PROVISIONS OF SEC. 144C(2) ITSELF, IN OUR OPINION, PROVES THAT AO HAS COMMITTED ERROR IN NOT COMPLYING WITH THE PROVI SIONS OF THE INCOME TAX ACT. IF THE ASSESSMENT IS HELD TO BE NON - EST IN THE ABSENCE OF NON - COMPLIANCE THERE WOULD BE PREJUDICE TO THE INTEREST OF THE REVENUE. PREJUDICE REFERS TO LAWFUL REVENUE BEING REALIZED. IN CASE THE ASSESSMENT IS HELD TO BE INVALI D IN THE ABSENCE OF COMPLIANCE OF THE PROVISIONS OF SEC. 144C(2), IT WILL TANTAMOUNT THAT THE REVENUE TO BE REALIZED WOULD NOT BE LAWFUL. WE NOTED THAT SOMEWHAT SIMILAR ISSUE HAS ARISEN IN THE CASE OF RANBAXY 16 ITA NOS. 51 & 52/PNJ/2012 (ASST. YEAR : 2006 - 07) LABORATOR IES LTD. VS. CIT, 345 ITR 193 (DEL) I N WHICH THE HON'BLE HIGH COURT DISMISSED THE APPEAL OF THE ASSESSEE AND TOOK THE VIEW THAT THE ORDER OF REVISION WAS VALID. THE FACTS OF THE CASE WAS AS UNDER : CIRCULAR NO. 3, DATED MAY 20, 2003, LAYS DOWN THAT WHEREVER THE AGGREGATE VALUE OF AN INTERNATIONAL TRANSACTION EXCEEDS RS. 5 CRORES, THE CASE SHOULD BE PICKED UP FOR SCRUTINY AND REFERENCE UNDER SECTION 92CA OF THE INCOME - TAX ACT, 1961, BE MADE TO THE TRA NSFER PRICING OFFICER. THE VALIDITY OF THE CIRCULAR WAS UPHELD IN SONY INDIA P. LTD. V. CBDT [2007] 288 ITR 52 (DELHI). WHEN A CIRCULAR IS ISSUED UNDER SECTION 119 OF THE ACT AND ITS VALIDITY IS UPHELD IT IS BINDING ON THE ASSESSING OFFICER. NOT TAKING REC OURSE THERETO AND PASSING ORDER WOULD AMOUNT TO MAKING ASSESSMENT WITHOUT CONDUCTING PROPER INQUIRY AND INVESTIGATION. THE ASSESSEE WAS A COMPANY ENGAGED IN THE MANUFACTURE AND SALE OF PHARMACEUTICAL PRODUCTS. IT ENTERED INTO CERTAIN INTERNATIONAL TRANSA CTIONS WITH ITS ASSOCIATED ENTERPRISES. IT SUBMITTED BEFORE THE ASSESSING OFFICER COMPLETE TRANSFER PRICING DOCUMENTATION ALONG WITH THE DETAILS AND AN ELABORATE NOTE JUSTIFYING THAT THE INTERNATIONAL TRANSACTIONS WERE AT ARM'S LENGTH HAVING REGARD TO THE TRANSFER PRICING PROVISIONS. THE ASSESSING OFFICER ACCEPTED THE TRANSFER PRICE OF THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE AS BEING AT ARM'S LENGTH. THE COMMISSIONER HELD THAT THE ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF T HE REVENUE ON ACCOUNT OF (I) NON - REFERENCE OF THE CASE TO THE TRANSFER PRICING OFFICER ; (II) TAKING OVERSEAS ASSOCIATED ENTERPRISES OF THE ASSESSEE AS TESTED PARTY ; AND (III) NON - CONSIDERATION OF FINDINGS OF AUDIT OF THE CENTRAL EXCISE DEPARTMENT. THIS W AS UPHELD BY THE TRIBUNAL. ON APPEAL TO THE HIGH COURT : HELD, DISMISSING THE APPEAL, THAT THE ORDER OF REVISION WAS VALID. MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 243 ITR 83 (SC) APPLIED. IN MUTHULAKSHMI TIMBER DEPOT V S. CIT, 246 ITR 481 THE HON'BLE MADRAS HIGH COURT IT WAS HELD AS UNDER : HELD,THAT THE INCOME - TAX OFFICER HAD PROCEEDED TO FINALISE THE ASSESSMENT INSTEAD OF SENDING THE PAPERS TO THE INSPECTING ASSISTANT COMMISSIONER IN TERMS OF SECTION 144B(4) AND WHAT WAS BREACHED WAS ONLY THE ASSESSEES STATUTORY RIGHT TO BE HEARD BY THE INSPECTING ASSISTANT COMMISSIONER AND THERE WAS NO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. SECTION 144B DEALT WITH THE PROCEDURE FOR ASSESSMENT AND THAT PROVISION DID NOT CONFER A SUBSTANTIVE RIGHT ON THE ASSESSEE TO TREAT THE ENTIRE ASSESSMENT PROCEEDING AS A NU LLITY BUT ON ACCOUNT OF THE INCOME - TAX OFFICER HAVING PROCEEDED TO MAKE THE ORDER WHICH WAS FOUND TO BE UNSUSTAINABLE ON ACCOUNT OF 17 ITA NOS. 51 & 52/PNJ/2012 (ASST. YEAR : 2006 - 07) LACK OF JURISDICTION IN THE OFFICER, THE ASSESSMENT COULD NOT BE FINALISED WITHIN THE PERIOD OF LIMITATION PRESCRIBED UNDER SECTION 153 AND IN VIEW OF LAPSE OF OVER SIXTEEN YEARS THE ASSESSMENT WAS BARRED BY LIMITATION. IN CIT VS. RATANABAI N.K. DUBHASH (MRS.) , 230 ITR 495 THE HON'BLE BOMBAY HIGH COURT HAS HELD AS UNDER : HELD , ACCORDINGLY, THAT THE ADMITTED POSITION WAS THAT ON RECEIPT OF THE DRAFT ORDER OF ASSESSMENT, THE ASSESSEE DID FILE OBJECTIONS AND THE INCOME - TAX OFFICER COMPLETED THE ASSESSMENT HIMSELF ON THE BASIS OF THE DRAFT ORDER WITHOUT FORWARDING THE DRAFT ORDER A ND THE OBJECTIONS TO THE INSPECTING ASSISTANT COMMISSIONER AND OBTAINING DIRECTIONS FROM HIM. SUCH AN ORDER, ON THE FACE OF IT, WAS BEYOND THE POWERS OF THE INCOME - TAX OFFICER UNDER SECTION 143 READ WITH SECTION 144B OF THE ACT AND, HENCE, WITHOUT JURISDIC TION. THE TRIBUNAL WAS, THEREFORE, JUSTIFIED IN ITS CONCLUSION THAT THE ASSESSMENT WAS LIABLE TO BE ANNULLED. THERE WAS A TIME - LIMIT FOR MAKING THE ASSESSMENT. IF THE ORIGINAL TIME - LIMIT WAS STILL AVAILABLE, THE INCOME - TAX OFFICER COULD PROCEED FROM THE ST AGE AT WHICH THE ILLEGALITY WHICH RESULTED IN THE ANNULMENT OF THE ASSESSMENT SUPERVENED AND TO MAKE THE ASSESSMENT AFRESH. IN BHAGWAT PRASAD VS. CIT, 232 ITR 480 THE HON'BLE ALLAHABAD HIGH COURT HAS HELD AS UNDER : HELD, (I) THAT, ON THE FACTS OF THE CASE, THE INSPECTING ASSISTANT COMMISSIONER HAD EVERY JURISDICTION TO ISSUE DIRECTIONS WITH REGARD TO DISALLOWANCE OF 'REDUCTION FOR PAST SAVINGS' STATED IN THE DRAFT ASSESSMENT ORDER IN EXERCISE OF HIS POWER UNDER SECTION 144A OF THE ACT, NOTWITHSTANDING THAT THE SAID MATTER WAS NOT COVERED BY THE REFERENCE MADE UNDER SECTION 144B OF THE ACT. (II) THAT THE APPELLATE TRIBUNAL WAS CORRECT IN UPHOLDING THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) IN NOT ANNULLING THE ASSESSMENT FRAMED AGAINST THE RU LES OF NATURAL JUSTICE AND IN CONTRAVENTION OF THE PROVISIONS OF SECTION 144B OF THE INCOME - TAX ACT, 1961, BUT IN ONLY SETTING IT ASIDE TO BE MADE AFRESH AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE IN ACCORDANCE WITH LAW. HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT [2000] 243 ITR 83, HAS CATEGORICALLY HELD THAT NON PROVIDING THE OPPORTUNITY ITSELF MEANS THE ORDER PASSED IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE BY HOLDING AS UNDER: 18 ITA NOS. 51 & 52/PNJ/2012 (ASST. YEAR : 2006 - 07) ' THE PRE - REQUISITE TO THE EXERCISE OF JURISDICTION BY THE COMMISSIONER UNDER SECTION 263 IS THAT THE ORDER OF THE AO IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT - IF THE ORDER OF THE ASSESSING OFFICE IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE - RECOURSE CANNOT BE HAD TO SECTION 263(1). THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRAS E 'PREJUDICIAL TO THE INTEREST OF THE REVENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF THE ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTER ESTS OF THE REVENUE. FOR EXAMPLE, IF THE ASSESSING OFFICER HAS ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DO ES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. WHERE A SUM NOT EARNED BY A PERSON IS ASSESSED AS INCOME IN HIS HANDS ON HIS SO OF FERING THE ORDER PASSED BY THE ASSESSING OFFICER ACCEPTING THE SAME WITHOUT APPLICATION OF MIND AS SUCH WILL BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE.' IN THE INSTANT CASE, THE COMMISSIONER NOTED THAT THE INCOME TAX OFFICER PASSED THE ORDER OF NIL ASSESSMENT WITHOUT APPLICATION OF MIND. INDEED, THE HIGH COURT RECORDED THE FINDING THAT THE INCOME TAX OFFICER FAILED TO APPLY HIS MIND TO THE CASE IN ALL PERSPECTIVE AND THE ORDER PASSED BY HIM WAS ERRONEOUS. IT APPEARS THAT THE RESOLUTION PASSED BY THE BOARD OF THE APPELLANT COMPANY WAS NOT PLACED BEFORE THE ASSESSING OFFICER. THUS, THERE WAS NO MATERIAL TO SUPPORT THE CLAIM OF THE APPELLANT THAT THE SAID AMOUNT REPRESENTED COMPENSATION FOR LOSS OF AGRICULTURAL INCOME. HE ACCEPTED THE 19 ITA NOS. 51 & 52/PNJ/2012 (ASST. YEAR : 2006 - 07) EN TRY IN THE STATEMENT OF THE ACCOUNT FILED BY THE APPELLANT IN THE ABSENCE OF ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY INQUIRY . ON THESE FACTS THE CONCLUSION THAT THE ORDER OF THE INCOME TAX OFFICER WAS ERRONEOUS IS IRRESISTIBLE. WE, ARE, THEREFORE OF THE OPINION THAT THE HIGH COURT HAS RIGHTLY HELD THAT THE EXERCISE OF THE JURISDICTION BY THE COMMISSIONER U/S 263(1) WAS JUSTIFIED. NON - COMPLIANCE OF THE PROVISIONS OF SEC. 144C I.E NON COMPLYING WITH THE NATURAL JUSTICE OF PROVIDING THE OPPORTUNITY TO THE ASSESSEE ITSELF PROVES THAT THERE IS ERROR IN THE ORDER PASSED BY ASSESSING OFFICER AND COMPLETING THE ASSESSMENT WITHOUT COMPLYING WITH THE PROVISION TANTAMOUNT S TO ORDER BEING ER RONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA) WHILE HOLDING SO HAS RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RAMPYARI DEVI SARAOGI VS. CIT, 67 ITR 84 (SC). THUS THE DECISION RELIED ON BY THE ASSESSEE IN THE CASE OF KRISHNAMURTHY (V.G.) VS. CIT, [1985] 152 ITR 683 (KAR),MAHARAJA RAJA PAWERDEWAS (H.H.) VS. CIT, [1982] 138 ITR 518 (MP),NANDLALBHANDARI AND SONS VS. CIT, [1983] 147 ITR 710 (MP) AND C IT VS. DAMOH CO - OPERATIVE MARKETING SOCIETY LTD. [1983] 145 ITR 572 (MP) GET OVER RULED BY THE AFORESAID FINDING AS REPRODUCED BY US GIVEN BY THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT [2000] 243 ITR 83 AS RELIED ON BY TH E ASSESSEE. THE ORDER PASSED U/S 263 THEREFORE HAS TO BE UPHELD AS, IN OUR OPINION, IT HAS PASSED THROUGH THE TEST OF FULFILMENT OF BOTH CONDITIONS BY THE CIT THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENU E. WE, THEREFORE, DISMISS THE APPEAL FILED BY THE ASSESSEE BY UPHOLDING THE ORDER PASSED U/S 263. ITA NO. 5 2 /PNJ/2012 : 5. AFTER HEARING THE RIVAL SUBMISSIONS AND GOING THROUGH THE GROUNDS OF APPEAL OF THE ASSESSEE , WE NOTED THAT THE ASSESSEE HAS TAKEN VARIOUS GROUNDS ON MERIT BEFORE THE CIT(A) AS PER FORM 35, COPY OF WHICH IS FILED BEFORE US, BUT THE 20 ITA NOS. 51 & 52/PNJ/2012 (ASST. YEAR : 2006 - 07) CIT(A), WE NOTED, AS ARGUED BY THE LD. AR, HAS NOT DECIDED THESE GROUNDS ON MERIT AS CIT(A) NOTED THAT THE ASSESSMENT FRAMED BY THE AO HAS ALREA DY BEEN SET ASIDE BY THE CIT BY INVOKING JURISDICTION U/S 263 AND THEREFORE HE TOOK THE VIEW THAT THE APPEAL FILED BY THE ASSESSEE ON THESE GROUNDS HAVE BECOME INFRUCTUOUS. WE HAVE ALREADY CONFIRMED THE ORDER OF CIT IN ITA NO. 5 1 /PNJ/2012 IN THE PRECEDING PARAGRAPHS. IN VIEW OF THIS, SINCE THE ASSESSMENT HAS ALREADY BEEN SET ASIDE AND THE AO HAS BEEN DIRECTED BY THE CIT TO RE - FRAME IT AFRESH AFTER GIVING OPPORTUNITY TO THE ASSESSEE AND AFTER CONSIDERING ASSESSEES EXPLANATION AND ALL RELEVANT MATERIAL IN ACCORDANCE WITH LAW, THEREFORE, WE AGREE WITH THE CIT(A) AND IN OUR OPINION NO INTERFERENCE IS CALLED FOR IN THE ORDER OF CIT(A). WE ACCORDINGLY DISMISS THE APPEAL FILED BY THE ASSESSEE AND CONFIRM THE ORDER OF CIT(A). 6. IN THE RESULT, BOTH THE APPEAL S FILED BY THE ASSESSEE STANDS DISMISSED. 7. ORDER PRONOUNCED IN THE OPEN COURT ON 3 1 /10/2014. S D / - (D.T.GARASIA) JUDICIAL MEMBER S D / - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI DATED : 3 1 /10/ 201 4 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER