Appeal Details
Counselvise Citation
[2020] 111 COUNSELVISE.COM (IT) 8855 (ITAT-COCHIN)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 month(s) 7 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
14-01-2020
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
DB
Next Hearing Date
13-01-2020
Assessment Year
2014-2015
Appeal Filed On
06-09-2019
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI CHANDRA POOJARI, AM & SHRI GEORGE GEORGE K, JM ITA NO. 518 /COCH/201 9 : ASST.YEAR 201 4 - 201 5 THE ASST.COMMISSIONER OF INCOME - TAX, CIRCLE - 1 KOLLAM. VS. M/S.OLAM AGRO INDIA PRIVATE LIMITED BISHOP JEROME NAGAR KOLLAM 691 001. PAN : AABCH6830P. (APPELLANT) (RESPONDENT) APPELLANT BY : SRI. MRITUNJAYA SHARMA, SR.DR RESPONDENT BY : SMT.SURABHI AGARWAL & SRI.UDAY AGARWAL, CAS DATE OF HEARING : 13 .01.2020 DATE OF PRONOUNCEMENT : 14 .01. 20 20 O R D E R PER GEORGE GEORGE K, JM : THIS APPEAL AT THE INSTANCE OF THE REVENUE IS DIRECTED AGAINST CIT(A) S ORDER DATED 11.07 .2019 . THE RELEVANT ASSESSMENT YEAR IS 201 4 - 201 5 . 2. THE GROUND RAISED READS AS FOLLOW: - THE LEARNED CIT(A) , HAS ERRED IN PARTLY ALLOWING THE AP PEA L FILED B Y THE ASSESSEE STATING THAT THERE HAS BEEN PROCEDURAL VIOLATION IN TERMS OF P R OV I SI ONS OF SECTION 144C BY THE AO AND THEREFORE TRANSFER PRICING ADJUSTMENT MADE B Y T HE TPO CANNOT BE ACTED UPON. EVEN THOUGH A DRAFT ASSESSMENT ORDER WAS NOT SER V E D ON THE ASSESSEE BY THE ASSESSING OFFICER , ASSESSEE WAS GI V EN ENOUGH OPPORTUNITI E S T O REPRE S ENT IT S CASE AND WAS WELL INFORMED ABOUT THE UPWARD ADJUSTMENTS PROPOS E D BY THE TPO. THE TPO BEFORE FINALIZING ORDER U/S 92CA(3) OF THE INCOME TAX AC T H AS ISSUED THE ASSESSEE A SHOW CAUSE NOTICE DATED 14 . 09.2017 PROPOSING TO MAKE ADJU ST M ENT AND THE ASSESSEE HAS FILED ITS OBJECTIONS VIDE SUBMISSION DATED 04.10 . 2017 . TH I S F ACT IS MENTIONED IN THE ORDER OF THE TPO DATED 30 . 1 0 . 2 017. THE ASSESSING OFFICER H A S A LSO GI V EN OPPORTUNITY TO THE ASSESSEE AND THE ASSESSEE WAS ALSO INFORMED ABOUT THE T RA N SFER PRICIN G ADJUSTMENTS PROPOSED TO BE MADE IN THE ASSESSMENT . THE MATTER REGA RDIN G OBJECTION FILED BY THE ASSESSEE VIDE ITS LETTER DAT ED 29.11 . 2017 , HAS ALSO FOUND A M ENTION IN THE ASSESSMENT ORDER . AS OPPORTUNIT Y HA S BEEN GI V EN BY THE TPO BY PUT T IN G ACROSS THE ASSESSEE THE ADJUSTMENTS TO BE ITA NO. 518 / COCH /201 9 M/S. OLAM AGRO INDIA PVT.LTD . 2 MADE BY THE AO , FOR WHICH THE ASSE SS E E ALSO REPLIED AND AFTER CONSIDERING THE ASSES SEES R EPL Y ON L Y , THE TPO HAS FINALIZED TH E ORDE R . HENCE THERE IS NO PROCEDURAL LAPSE . FOR THI S AND OTHER GROUNDS THAT MA Y B E ADVANCED AT THE T I ME OF HEARING THE ORDER OF THE COMMISSIONER OF INCOME TAX (AP PE ALS) - II , KOCHI MAY BE SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER MAY BE RESTORE D . 3 . THE BRIEF FACTS OF THE CASE ARE AS FOLLOW: THE ASSESSEE IS A COMPANY ENGAGED IN TRADING AND PROCESSING OF AGRICULTURAL COMMODITIES. FOR THE ASSESSMENT YEAR 2014 - 2015, THE RETURN OF INCOME WAS FILED ON 28.11.2014 DECLARING TOT AL INCOME OF RS. ` NIL . THE ASSESSMENT WAS TAKEN UP FOR SCRUTINY BY ISSUANCE OF NOTICE U/S 143(2) OF THE I.T.ACT. DURING THE COURSE OF SCRUTINY ASSESSMENT SINCE THE ASSESSEE HAD ENTERED INTO AN INTERNATIONAL TRANSACTION AS DEFINED IN SECTION 92B OF THE I.T. ACT WITH ITS ASSOCIATED ENTERPRISES, THE MATTER WAS REFERRED TO THE TRANSFER PRICING OFFICER (TPO). THE TPO VIDE ITS ORDER DATED 30.10.2017 U/S 92CA(3) OF THE I.T.ACT, PROPOSED TRANSFER PRICING ADJUSTMENT OF RS.7,32,83,827. T HE ASSESSING OFFICER PASSED THE ORDER U/S 143(3) OF THE I.T.ACT (ORDER DATED 30.12.2017) INCORPORATING THE PROPOSED TRANSFER PRICING ADJUSTMENT MADE BY THE TPO. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE FILED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. BEFORE THE FIRST APPELLA TE AUTHORITY IT WAS CONTENDED THAT THE ASSESSEE WAS NOT ISSUED DRAFT ASSESSMENT ORDER . THEREFORE, IT WAS SUBMITTED THAT THE ASSESSEE WAS DENIED AN OPPORTUNITY TO APPROACH THE DISPUTE RESOLUTION PANEL (DRP). IT WAS STATED THAT THIS PROCEDURAL IRREGULARITY W OULD RENDER THE ASSESSMENT ORDER DATED 30.12.2017, NULL AND VOID. THE CIT(A) PLACING RELIANCE ON HIS PREDECESSORS ORDER FOR ASSESSMENT YEAR 2013 - ITA NO. 518 / COCH /201 9 M/S. OLAM AGRO INDIA PVT.LTD . 3 2014 IN ASSESSEES OWN CASE HELD THAT THE PROCEDURAL INFIRMITY IN NOT ISSUING THE DRAFT ASSESSMENT ORDER WOULD RENDER THE ASSESSMENT AS NULL AND VOID. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOW: - 5.3. I HAVE GON E T HR OUGH THE ASSESSMENT ORDER AND THE ORDER PASSED BY THE TPO U/S . 9 2 CA(3 ) O F T HE I . T . ACT . E I THER IN THE ASSESSMENT OR DER OR IN THE TPO ' S ORDER , IT I S N O T ME NT I ON E D THA T THE DRAFT ORDER HAS BEEN PREP AR ED AND GIVEN TO THE APPE LL ANT . T HE A PPE LL A NT HAS CO NT ENDED THAT HE WAS NO T SERVED W I TH A DRAFT ASSESSME NT ORDE R A N D , THEREFORE , HE HAS BEEN DENIE D THE OPPO RT UN I TY OF APPROACH ING THE D R P . THE AP PEL L ANT CONTENDED THAT IN T H E CASE O F A N ORDER U / S . 92CA BY A TP O , I T I S A STATUTORY REQU I REMENT AND MAN DA T ORY TO SE RV E UPON T HE ASSESS E E A DR AFT A S SESSMENT O R DER . ANY FA I LURE IN DO ING SO , SHAL L R ENDER THE ASSESSME NT SO M ADE A S NULL AND VOID . DECISION BY VARI OUS H I GH COU R TS ALSO ENDORSE T HI S VIEW A N D MANY SUCH DECISIONS HAVE BEEN R ELIED UPON BY THE APPELLANT I N I T S SU B MI S SI ON , REPRODUCED EARLIER . 5. THE REVENUE BEING AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A), HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE GROUND RAISED. THE LEARNED AR, ON THE OTHER HAND, HAD FILED A BRIEF WRITTEN SUBMISSION REITERATING THE SUBMISSIONS MADE BEFORE THE INCOME - TAX AUTHORITIES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. SECTION 144C OF THE I.T.ACT PROVIDES THAT NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THE ACT, THE A.O. IS REQUIRED TO FORWARD A DRAFT OF THE PROPOSED ORDER OF ASSESSMENT TO THE ELIGIBLE ASSESSEE IF THE A.O. PROPOS ES ANY VARIATION IN THE RETURNED INCOME WHICH IS PREJUDICIAL TO THE INTEREST OF SUCH ASSESSEE. THE TERM ELIGIBLE ASSESSEE HAS BEEN DEFINED TO MEAN A PERSON IN WHOSE CASE ADDITION IN THE ASSESSMENT ORDER IS MADE AS A RESULT OF ADJUSTMENT PROPOSED BY THE T PO IN THE ORDER PASSED U/S 92CA(3) OF THE I.T.ACT. IN THE INSTANT CASE, THE ASSESSING ITA NO. 518 / COCH /201 9 M/S. OLAM AGRO INDIA PVT.LTD . 4 OFFICER IN THE ASSESSMENT ORDER HAS MADE ADDITIONS ON ACCOUNT OF ADJUSTMENT PROPOSED BY THE TPO IN THE ORDER PASSED U/S 92CA(3) OF THE I.T.ACT. THUS, THE ASSESSEE CLEARLY FALL WITHIN THE MEANING OF ELIGIBLE ASSESSEE AS PER SECTION 144C OF THE I.T.ACT. THEREFORE, GOING BY THE PROVISIONS OF SECTION 144C OF THE I.T.ACT, THE ASSESSING OFFICER IS REQUIRED TO ISSUE DRAFT ASSESSMENT ORDER. WHEREAS, THE ASSESSING OFFICER IN THIS CASE HAS PASSED THE ASSESSMENT ORDER AND ISSUED NOTICE OF DEMAND U/S 156 WITHOUT SENDING A DRAFT ASSESSMENT ORDER TO THE ASSESSEE WITH REGARD TO THE ADJUSTMENT PROPOSED. THEREFORE, THE ASSESSING OFFICER HAS NOT FOLLOW ED THE MANDATORY PROVISIONS OF SECTION 144 OF THE I.T.ACT. IRREGULARITY IN PASSING THE ASSESSMENT ORDER BY THE ASSESSING OFFICER IS INCURABLE AS MANDATED AS PER THE PROVISIONS OF THE ACT AND THE SAME WAS HELD SO BY THE FOLLOWING JUDICIAL PRONOUNCEMENTS: - (I) ACIT V. APOLLO TYRES LTD. ITA NO.247, 302, 339, 268 AND 336/COCH/2018 (ORDER DATED 21 ST MARCH, 2019). IN THE ABOVE CASE, THE ITAT COCHIN BENCH OF THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING THAT WHEN THE FINAL ASSESSMENT ORDE R IS PASSED WITHOUT PASSING THE DRAFT ASSESSMENT ORDER, IT IS ILLEGAL AND WITHOUT JURISDICTION. THE TRIBUNAL HAS HELD AS UNDER: - IN VIEW OF THE ABOVE DECISIONS, THE FACTS OF THE PRESENT CASE BEING SIMILAR TO THAT CONSIDERED BY THE VARIOUS COURTS AND SUP REME COURT, WE HOLD THAT WHEN THE FINAL ASSESSMENT ORDER IS PASSED WITHOUT PASSING THE DRAFT ASSESSMENT ORDER, IT IS ILLEGAL AND WITHOUT JURISDICTION. ACCORDINGLY, WE QUASH THE ASSESSMENT ORDERS FOR BOTH THE ASSESSMENT YEARS. T HE TRIBUNAL HA D PLACED RELIANCE ON THE FOLLOWING CASE LAWS, WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE : - (A) JCB INDIA LTD. V. DCIT (2017) 398 ITR 189 (DELHI HIGH COURT) ITA NO. 518 / COCH /201 9 M/S. OLAM AGRO INDIA PVT.LTD . 5 (B) ADDL.CIT V. NOKIA INDIA (P) LTD. (259 TAXMAN 81 (SC) (C) ACIT V. VIJAY TELEVISION (P) LTD. (2018) 95 TAXMANN.COM 101 (MADRAS HIGH COURT) (II) JCB INDIA LTD. V. DCIT (2017) 398 ITR 189 (DELHI HIGH COURT) THE HONBLE COURT HAS HELD THAT THE IMPUGNED FINAL ASSESSMENT ORDER DATED 30 TH MARCH, 2016 PASSED BY THE AO FOR AYS 2006 - 07, 2007 - 08 AND 2008 - 09 ARE W ITHOUT JURISDICTION ON ACCOUNT OF THE FAILURE, BY THE AO, TO FIRST PASS A DRAFT ASSESSMENT ORDER AND THEREAFTER, SUBJECT TO THE OBJECTIONS FILED BEFORE THE DRP AND THE ORDERS OF THE DRP, TO PASS THE FINAL ASSESSMENT ORDER. THE COURT ALSO SETS ASIDE THE ORD ERS OF THE TPO DATED 30 TH MARCH, 2016 ISSUED PURSUANT TO THE REMAND BY THE ITAT. (III) NOKIA INDIA PRIVATE LIMITED V. ADDL.CIT (WP NO.3629/2017 DATED 07.09.2017. THE ISSUE INVOLVED IN THIS CASE IS THAT THE IMPUGNED FINAL ORDER OF THE AO HAS BEEN PASS ED IN VIOLATION OF SECTION 144C OF THE ACT IN AS MUCH AS IT WAS NOT PRECEDED BY A DRAFT ASSESSMENT ORDER AS WAS MANDATORY IN TERMS OF SECTION 144C(1) OF THE ACT. THE HONBLE DELHI HIGH COURT HAS FOLLOWED THE DECISION GIVEN IN JCB INDIA (SUPRA) AND HAS HE LD THE ORDER TO BE WITHOUT JURISDICTION. THE HONBLE SUPREME COURT HAS DISMISSED THE SPECIAL LEAVE PETITION FILED BY THE DEPARTMENT VIDE SLP (C) NO.7302 OF 2018. (IV) ACIT V. VIJAY TELEVISION (P.) LTD (2018) 95 TAXMANN.COM 101 (MADRAS HIGH COURT) THE HON'BLE HIGH COURT HAS HELD AS UNDER - 'IT IS UNAMBIGUOUSLY CLEAR THAT THE ASSESSING OFFICER IS DUTY BOUND TO ADHERE TO THE MANDATORY REQUIREMENT MANDATED UNDER SECTION 144C(1) BY FIRST PASSING A DRAFT ASSESSMENT ORDER, THE FAILURE OF WHICH WOULD INVAL IDATE THE FINAL ASSESSMENT ORDER AND THE CONSEQUENT DEMAND NOTICES AND PENALTY PROCEEDINGS. [PARA 39]' (V) TURNER INTERNATIONAL INDIA (P.) LTD. V. DCIT (2017) 398 ITR 177 (DELHI HIGH COURT) THE HON'BLE COURT HAS HELD THAT 'FAILURE BY THE AO TO ADHERE TO THE MANDATORY REQUIREMENT OF SECTION 144C (1) OF THE ACT ITA NO. 518 / COCH /201 9 M/S. OLAM AGRO INDIA PVT.LTD . 6 AND FIRST PASS A DRAFT ASSESSMENT ORDER WOULD RESULT IN INVALIDATION OF THE FINAL ASSESSMENT ORDER AND THE CONSEQUENT DEMAND NOTICES AN D PENALTY PROCEEDINGS.' (VI) CIT V. C - SAM (INDIA) (P.) LTD (2017) 398 ITR 182 (GUJARAT HIGH COURT) THE HIGH COURT DISMISSED THE APPEAL OBSERVING AS UNDER - 'THE STATUTORY PROVISIONS OF SECTION 144C MAKE IT ABUNDANTLY CLEAR THAT THE PROCEDURE LAID DOWN UNDER SECTION 144C IS OF GREAT IMPORTANCE AND IS MANDATORY. BEFORE THE ASSESSING OFFICER CAN MAKE VARIATIONS IN THE RETURNED INCOME OF AN ELIGIBLE ASSESSEE, AS NOTED, SUB - SECTION (1) OF SECTION 144C LAYS DOWN THE PROCEDURE TO BE FOLLOWED NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THE ACT. THIS NON OBSTANTE CLAUSE THUS GIVES AN OVERRIDING EFFECT TO THE PROCEDURE 'NOTWITHSTANDING ANYTHING TO THE CONTRAR Y CONTAINED IN THE ACT'. SUB - SECTION (5) OF SECTION 144C EMPOWERS THE DRP TO ISSUE DIRECTIONS TO THE ASSESSING OFFICER TO ENABLE HIM TO COMPLETE THE ASSESSMENT. SUB - SECTION (10) OF SECTION 144C MAKES SUCH DIRECTIONS BINDING ON THE ASSESSING OFFICER. AS PER SUB - SECTION (13) OF SECTION 144C, THE ASSESSING OFFICER IS REQUIRED TO PASS THE ORDER OF ASSESSMENT IN TERMS OF SUCH DIRECTIONS WITHOUT ANY FURTHER HEARING BEING GRANTED TO THE ASSESSEE. (VII) I N THE CASE OF M/S.ZUARI CEMENTS LTD. V. ACIT IN WP NO.5557/2012 ALSO, THE HONBLE SUPREME COURT HAS DISMISSED THE SLP FILED BY THE DEPARTMENT AGAINST THE JUDGMENT OF THE HONBLE ANDHRA PRADESH HIGH COURT . THE HIGH COURT IN THE SAID CASE VIDE JUDGMENT DATED 21.02.2013 HELD THAT THE ORDER PASSED IS CONTRARY TO THE MANDATORY PROVISIONS OF SECTION 144C OF THE ACT AND IS PASSED IN VIOLATION THEREOF. THEREFORE, IT IS DECLARED AS ONE WITHOUT JURISDICTION, NULL AND VOID AND UNENFORCEABLE. THE HONBLE SUPREME COUR T HAS DISMISSED THE SPECIAL LEAVE PETITION ON 27 TH SEPTEMBER, 2013 FILED BY DEPARTMENT VIDE (C) [CC NO.16694/2013]. 6.1 IN VIEW OF THE ABOVE SAID REASONING AND JUDICIAL PRONOUNCEMENTS CITED SUPRA , THE REVENUES APPEAL IS REJECTED. ITA NO. 518 / COCH /201 9 M/S. OLAM AGRO INDIA PVT.LTD . 7 7 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 14 TH DAY OF JANUARY, 2020 . SD/ - SD/ - (CHANDRA POOJARI) ( GEORGE GEORGE K. ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN ; DATED : 14 TH JANUARY , 2020 . DEV A DAS G * COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, COCHIN 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A) - II, KOCHI 4. THE PR.CIT , KOCHI . 5. DR, ITAT, COCHIN 6. GUARD FILE.
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