The ACIT, Circle-1, Kollam V. M/s.Olam Agro India P. Ltd, Kollam

ITA 560/COCH/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2477 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 02-03-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 30-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRITUNJAYA SHARMA
• Assessee Lawyers: UDAY AGARWAL; NISHA BHUTANI CAS
• Keywords: Transfer pricing; Set aside
• Section: 143(3); 144C; 92CA; 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFOR E S/ SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., J M ITA NO. 560 /COCH/ 2019 ASSESSMENT YEAR: 2013 - 14 THE ASSISTANT COMMISSIONER OF INCOME - TAX, CIRCLE - 1, KOLLAM. VS. M/S. OLAM AGRO INDIA PVT. LTD., BISHOP JEROME NAGAR, KOLLAM - 691 001. [PAN:AABCH 6830P] ( REVENUE - APPELLANT) ( ASSESSEE - RESPONDENT) REVENUE BY SHRI MRITUNJAYA SHARMA, SR. DR ASSESSEE BY SHRI UDAY AGARWAL AND MS. NISHA BHUTANI, CAS D ATE OF HEARING 02/03/2020 DATE OF PRONOUNCEMENT 02 / 0 3 /20 20 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - I, KOCHI DATED 07/03/2019 FOR THE ASSESSMENT YEAR 2013 - 14. 2. THE REVENUE HAS RAISED THE FOLLOWING G ROUNDS OF APPEAL: THE ORDER OF THE CIT(A), PARTLY ALLOWING THE APPEAL FILE BY THE ASSESSEE STATING THAT THERE HAS BEEN PROCEDURAL VIOLATION IN TERMS OF PROVISIONS OF SECTION 144C BY THE ASSESSING OFFICER AND THEREFORE TRANSFER PRICING ADJUSTMENT MADE BY TH E TPO CANNOT BE ACTED UPON, WAS WRONG. EVEN THOUGH A DRAFT ASSESSMENT ORDER WAS NOT SERVED ON THE ASSESSEE, ASSESSEE WAS GIVEN ENOUGH OPPORTUNITIES TO REPRESENT ITS CA S E AND WAS WELL INFORMED ABOUT TH E UPWARD ADJUSTMENTS PROPOSED BY THE TPO. T HE T PO BEFOR E FINALIZING ORDER U/S. 92CA(3) OF THE INCOME TAX A CT HA S ISSUED I.T.A. NO . 560/ COC H/ 2019 2 THE ASSESSEE A SHOW CAUSE NOTICE DATED 06/10/2016 PROPOSING TO MAKE ADJUSTMENT AN D THE ASSESSEE HAS FILED ITS OBJECTIONS VIDE SUBMISSION DATED 13.10.2016. THE FACT IS MENTIONED IN THE ORDER OF THE TPO DATED 19/10/2016. THE ASSESSING OFFICER HAS ALSO GIVEN OPPORTUNITIES TO THE ASSESSEE AND THE ASSESSEE WAS WELL INFORMED ABOUT THE TRANSFER PRICING ADJUSTMENTS PROPOSED TO BE MADE IN THE ASSESSMENT. FROM THE ABOVE FACTS, IT IS EVIDENT THAT THE ASSESSEE WAS WELL INFORMED ABOUT THE TRANSFER PRICING ADJUSTMENTS AND ALSO PROVIDED AMPLE OPPORTUNITIES TO REPRESENT ITSELF. FOR THIS AND OTHER GROUNDS THAT MAY BE ADVANCED AT THE TIME OF HEARING THE ORDER OF THE COMMISSIONER OF INCOME - TAX(APPEALS) - II, KO CHI MAY BE SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER MAY BE RESTORED. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER HAD PASSED ORDER U/S. 143(3) R.W.S. 92CA OF THE I.T. ACT, PROPOSING VARIOUS ADDITIONS/DISALLOWANCES INCLUDING TRANSFER P RICING ADJUSTMENTS. 3. ON APPEAL, THE CIT(A) OBSERVED THAT AS PER THE PROVISIONS OF THE ACT, THE ASSESSING OFFICER IS LEGALLY BOUND TO PROVIDE THE ASSESSEE WITH A COPY OF DRAFT ASSESSMENT ORDER IN TERMS OF TRANSFER PRICING ADJUSTMENT MADE BY THE TPO. ACCORDING TO THE CIT(A), THE ADDITIONS MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENTS MADE BY THE ASSESSING OFFICER CANNOT BE ACTED UPON DUE TO PROCEDURAL VIOLATION IN TERMS OF PROVISIONS OF SECTION 144C OF THE I.T. ACT. HENCE, THE CIT(A) DELETED THE ADD ITIONS MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENTS. 4. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. THE REVENUE HAS RELIED ON THE GROUNDS RAISED. I.T.A. NO . 560/ COC H/ 2019 3 5. THE LD. AR SUBMITTED THAT THE ASSESSMENT WAS BAD IN LAW AS NO DRAFT ASSESSMENT ORDER WAS G IVEN TO THE ASSESSEE IN VIOLATION OF PROVISIONS CONTAINED IN SECTION 144C OF THE I.T. ACT AND, THEREFORE, THE ASSESSMENT IS NULL AND VOID AB - INITIO. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IN OUR OPINION, THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE IN ITA NO.518/ C OCH/2019 DATED 14/01/2020 WHEREIN THE TRIBUNAL HELD AS FOLLOWS: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. SECTION 144C OF THE I.T.ACT PROVIDES THAT N OTWITHSTANDING 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. PROPOSES ANY VARIATION IN THE RETURNED INCOME WHICH IS PREJUDICIAL TO THE INTER EST 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 TPO IN THE ORDER PASSED U/S 92CA(3) OF THE I.T.ACT. IN THE INSTANT CASE, T HE ASSESSING 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 TH E 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 FOLLOWED 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). I.T.A. NO . 560/ COC H/ 2019 4 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 ORDER IS PASSED WITHOUT PASSING THE DRAFT ASSESSMENT ORDER, IT IS ILLEGAL AND WITHOUT JURISDICTION. THE TRIBUNAL HA S 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 SUPREME COURT, WE HOLD THAT WHEN THE FINAL ASSESSMENT ORDER IS PASSED WITHOUT PASSING THE DRAFT ASSESSMENT ORDER, I T IS ILLEGAL AND WITHOUT JURISDICTION. ACCORDINGLY, WE QUASH THE ASSESSMENT ORDERS FOR BOTH THE ASSESSMENT YEARS. THE TRIBUNAL HAD PLACED RELIANCE ON THE FOLLOWING CASE LAWS, WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE : - (A) JCB INDIA LTD. V. DC IT (2017) 398 ITR 189 (DELHI HIGH COURT) (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 H ONBLE COURT HAS HELD THAT THE IMPUGNED FINAL ASSESSMENT ORDER DATED 30 TH MARCH, 2016 PASSED BY THE ASSESSING OFFICER FOR AYS 2006 - 07, 2007 - 08 AND 2008 - 09 ARE WITHOUT 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 ORDERS OF THE TPO DATED 30 TH MARCH, 2016 ISSUED PURSUANT TO THE REMAND BY THE ITAT. (III) NOKIA IN DIA 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 PASSED 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 HELD 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. I.T.A. NO . 560/ COC H/ 2019 5 (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 INVALIDATE 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 AND FIRST PASS A DRAFT ASSESSMENT ORDER WOULD R ESULT IN INVALIDATION OF THE FINAL ASSESSMENT ORDER AND THE CONSEQUENT DEMAND NOTICES AND 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 - T HE STATUT ORY 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 CONTRARY CONTAINED IN THE ACT'. SUB - SECTION (5) OF SECTION 144C EMPOWERS THE DRP TO ISSUE DIRECTIONS TO THE ASSESSING OFFICERTO 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) IN THE CASE OF M/S.ZUARI CEMENTS LTD. V. ACIT IN WP NO.5557/2012 ALSO, TH E 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 PROV ISIONS 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 COURT HAS DISMISSED THE SPECIAL LEAVE PETITION ON 27 TH SEPTEMBER, 2013 FILED B Y DEPARTMENT VIDE (C) [CC NO.16694/2013]. I.T.A. NO . 560/ COC H/ 2019 6 6.1 IN VIEW OF THE ABOVE SAID REASONING AND JUDICIAL PRONOUNCEMENTS CITED SUPRA, THE REVENUES APPEAL IS REJECTED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 6.1 RESPECTFULLY THE ABOVE ORD ER OF THE TRIBUNAL, WE ARE INCLINED TO DISMISS THE APPEAL OF THE REVENUE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND MARCH , 2020 . SD/ - SD/ - (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KO CHI DATED: 2 ND M ARCH 2020 GJ COPY TO: 1 . M/S. OLAM AGRO INDIA PVT. LTD., BISHOP JEROME NAGAR, KOLLAM - 691 001. 2. THE ASSISTANT COMMISSIONER OF INCOME - TAX, CIRCLE - 1, KOLLAM. 3. THE COMMISSIONER OF INCOME - TAX(APPEALS) - I, KOCHI. 3 . THE PR. COMMISSIONER O F INCOME - TAX - 1 , KO CHI. 4 . D. R., I.T.A.T., COCHIN BENCH, COCHIN. 5 . GUARD FILE. BY ORDER ( ASSISTANT REGISTRAR) I.T.A.T., COCHIN I.T.A. NO . 560/ COC H/ 2019 7