ADVANCE POWER DISPLAY SYSTEM LTD., MUMBAI V. COMMISSIONER OF (A)-55, MUMBAI

ITA 7360/MUM/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7962 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 21-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL DESH
• Assessee Lawyers: Y P TRIVEDINISHIT GANDHI AR S
• Keywords: Transfer pricing; International transaction; Set aside
• Section: 143(3); 144C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES K , MUMBAI BEFORE SHRI PRAMOD KUMAR , HONBLE VICE PRESIDENT AND SHRI SAKTIJIT DEY , HONBLE JUDICIAL MEMBER ITA NO. 7360/MUM/2018 ASSESSMENT Y EAR: 2008 - 09 ADVANCE POWER DISPLAY S YSTEMS LTD., UNIT NO. 6, MULTISTORIED BUILDING, SEEPZ - SEZ, ANDHERI (EAST) - MUMBAI - 400096 PAN: AAACA5970G VS. COMMISSIONER OF INCOME TAX (APPEALS) - 55, MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : S/ SHRI Y.P. TRIVEDI/NISHIT GANDHI (AR S ) R EVENUE BY : SHRI SUNIL DESHPANDE (DR ) DATE OF HEARING : 15 /07 /202 1 DATE OF PRONOUNCEMENT: 06 / 0 8 /202 1 O R D E R PER SAKTIJIT DEY , JM CAPTIONED APPEAL ARISES OUT OF ORDER DATED 15.10.2 018 OF LEARNED COMMISS IONER OF INCOME TAX (APPEALS) 55 , MUMBAI FO R THE ASSESSMENT YEAR 2008 - 09. 2. V IDE LETTER DATED 04.03.2021, T HE ASSESSEE HAS RAISED THE FOLLOWING ADDITIONAL GROUNDS: 1.1 IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX 9(1)(1), MUMBAI [THE AO FOR SHORT] U/S 143(3) RWS 254 OF THE ACT AND AS UPHELD BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 55, MUMBAI [THE CIT (A) FOR SHORT] IS BAD IN LAW AND VOID. 2 ITA NO. 7360 / MUM/2018 ASSESSMENT YEAR: 2008 - 09 1.2 W HILE SO UPHOLDING THE ORDER OF THE LD. AO, THE LD. CIT (A) ERRED IN NOT APPRECIATING THAT IT WAS MANDATORY ON THE PART OF THE LD. AO TO PASS A DRAFT ORDER AS CONTEMPLATED U/S 144C OF THE ACT IN THE FIRST INSTANCE AND ONLY THEN THE FINAL ORDER COULD HAVE BE EN PASSED FAILING WHICH THE FINAL ORDER PASSED IS BAD IN LAW AND VOID. 2.1 IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TRANSFER PRICING OFFICER [THE TPO] ERRED IN REJECTING THE COMPARABLE NAMELY BCC FUBA LTD. ON IRRELEVANT AND EX TRANEOUS CONSIDERATION AND IN STARK VIOLATION OF THE VERY ORDER OF THE HONBLE TRIBUNAL FOR AY 2003 - 04 IN THE CASE OF THE ASSESSEE RELIED ON BY HIM. 3. IN GROUND NO. 1.2, ASSESSEE HAS RAISED A LEGAL ISSUE CHALLENGING THE VALIDITY OF THE AS SESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 254 OF THE INCOME TAX ACT, 1961. SINCE, THE AFORESAID ISSUE RAISED BY THE ASSESSEE IS A PURELY LEGAL AND JURISD ICTIONAL ISSUE GOING TO THE ROOT OF THE MATTER AND CAN BE DECIDED BASED ON FACTS AVAILABLE ON RECORD WITHOUT REQUIRING INVESTIGATION INTO FRESH FACTS, W E ARE INCLINED TO ADMIT THE ADDITIONAL GROUND FOR ADJUDICATION. 4. BRIEFLY , THE FACTS NECESSARY FOR ADJUDICATING THIS ISSUE ARE , THE ASSESSEE IS A RESIDENT COMPANY. FOR THE ASSESSMENT YEAR UNDER DISPUTE, ASSESSEE FILED ITS RETURN OF INCOME ON 28.09.2008 DECLARING TOTAL INCOME OF RS. 3,92,20,450/ - . SINCE, DURI NG THE YEAR UNDER CONSIDERATION ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTION S WITH ITS ASSOCIATED ENTERPRISE (AE), THE ASSESSING OFFICER (AO) MADE A RE FERENCE TO THE TRANSFER PRICING OFFICER (TPO) FOR DETERMINING THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTION S. W HILE DETERMINING THE ALP , THE TPO PROPOSED AN ADJUSTMENT. THE ADJUSTMENT PROPOSED BY THE TPO WAS ADDED TO THE INCOME OF THE ASSES SEE IN THE D RAFT ASSESSMENT ORDER PASSED UNDER SECTION 144C(1) OF THE ACT. AGAINST THE DRAFT ASSESSMENT ORDER SO PASSED, ASSES SEE RAISED OBJECTION BEFORE LEARNED DISPUTE RESOLUTION PANEL (DRP) AND BEING UN SUCCESSFUL , PREFERRED FURTHER APPEAL BEFORE THE TRI BUNAL. WHILE DECIDING ASSESSEES APPEAL IN ITA NO. 6490/MUM/2012 DATED 29.11.2013, THE TRIBUNAL SET ASIDE THE ISSUE REL ATING TO THE TRANSFER PRICING A DJUSTMENT BACK TO THE AO FOR AFRESH ADJUDICATION. THE AO AGAIN REFERRED THE MATTER TO THE TPO TO CARRY OUT THE DIRECTION OF THE TRIBUNAL. 3 ITA NO. 7360 / MUM/2018 ASSESSMENT YEAR: 2008 - 09 THOUGH, THE TPO PARTIALLY REDUCED THE ADJUSTMENT MADE EARLIER , NONETHELESS, HE AGAIN PROPOSED AN ADJUSTMENT TO THE ALP. BASED ON THE ADJUSTMENT PROPOSED BY THE TPO, THE AO HAS PASSED THE IMPUGNED ASSESSMENT ORDER UNDER SECTI ON 143 (3) R.W.S. 254 OF THE ACT ADDING BACK THE ADJUSTMENT PROPOSED BY THE TPO. 5. SHRI Y.P. TRIVEDI, LEARNED SENIOR COUNSEL FOR THE ASSESSEE SUBMITTED , INSTEAD OF PROPOSING A DRAFT ASSESSMENT ORDER IN TERM S OF SECTION 144C(1) OF THE ACT, T HE AO HAS PASSE D A FINAL ASSESSMENT ORDER . T HUS , HE SUBMITTED , THE AO HAVING NOT FOLLOWED THE STATUTORY MANDATE OF SECTION 144C , THE ASSESSMENT ORDER IS INVALID. IN SUPPORT OF HIS CONTENTION , LEARNED SENIOR COUNSEL RELIED UPON THE FOLLOWING DECISIONS: 1. PR. CIT VS. M/S ANDREW TELECOMMUNICATION P. LTD. (2018) 96 TAXMANN.COM 613 (BOMBAY) 2. ACIT VS. VIJAY TELEVISION P. LTD. (2018) 95 TAXMANN.COM 101 (MADRAS). 3. DIMENSION DATA ASIA PACIFIC PTE. LTD. VS. DCIT (2019) 96 TAXMANN.COM 182 4. NOKIA INDIA P. LTD. VS. ADDITIONAL CIT (9) TMI 1838. 5. TURNER INTERNATIONAL INDIA (P) LTD. VS. D CIT (2017) 82 TAXMANN.COM 125 (DELHI) . 6 . LEARNED DEPARTMENTAL REPRESENTATIVE , THOUGH , AGREED THAT THE ISSUE RAISED IN T HE ADDITIONAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF TH E HONBLE JURISDICTIONAL HIGH COURT IN CASE OF DIMENSION DATA ASIA PACIFIC PTE. LTD. VS. DCIT (SUPRA), H OWEVER, HE RELIED UPON THE DECISION OF LEARNED COMMISSIONER (APPEALS). 7 . WE HAVE CONSIDERED RIVAL SUBMISSIONS IN THE LIGHT OF DECISIONS RELIED UPON AN D PERUSED THE MATERIAL ON RECORD. THE SHORT ISSUE ARISING FOR CONSIDERATION BEFORE US IS , WHETHER T HE IMPUGNED ASSESSMENT ORDER PASSED BY THE AO WITHOUT PROPOSING A DRAFT ASSESSMENT ORDER MAKES IT INVALID. UNDISPUTEDLY, DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTION WITH ITS AE . A S PER SUB SECTION ( 1 ) OF SECTION 144C OF THE ACT, IF THE AO PROPOSES TO MAKE ANY VARIATION TO THE INCOME OF THE ASSE SSEE WHICH IS PREJUDICIAL TO ASSESSEES INTEREST , THEN , HE HAS TO FOR WARD A 4 ITA NO. 7360 / MUM/2018 ASSESSMENT YEAR: 2008 - 09 DRAFT OF THE PROPOSED ORDER OF ASSESSMENT. IT IS TO BE NOTED THAT SUB - SECTION ( 1 ) OF SECTIO N 144C BEGINS WITH A NON - OBSTANTE CLAUSE, THEREBY, OVERRIDING ALL OTHER PROVISIONS OF THE ACT. UNDISPUTEDLY, THE CONDITIONS OF SECTION 144C (1) OF THE ACT ARE SATISFIED IN CASE OF THE PRESENT ASSESSEE , AS , THE ASSESSEE HAS ENTERED INTO INTERNATIONAL TRANSACTION WITH THE AE AND THERE IS A VARIATION TO THE INCOME WHICH IS PREJUDICIAL TO THE INTEREST OF ASSESSEE. IN FACT, INITIALLY , BASED ON THE ADJUSTMENT PROPOSED BY THE TPO, THE AO HAD FRAMED THE DRAFT ASSESSMENT ORDER AND ULTIMATELY THE TRIBUNAL RESTORED THE ISSUE BACK TO HIM. HOWEVER , THOUGH , THE TPO AGAIN PROPOSED ADJUSTMENT AND THERE IS A VARIATION TO THE INCOME OF THE ASSESSEE WHICH IS PREJU DICIAL TO ITS INTE REST, THE AO WITHOUT FOLLOWING THE MANDATORY PROVISIONS OF SECTION 144C(1) OF THE ACT HAS PROCEEDED TO PASS A FINAL ASSESSMENT ORDER MAKING THE ADDITION PROPOSED BY THE TPO. 8. THUS, THERE CANNOT BE ANY DOUBT THAT THE AO HAS NOT F OLLOWED THE STATUTORY MAN DATE CONTAIN ED UNDER SECTION 144C(1) OF THE ACT. KEEPING IN VIEW THE AFORESAID FACTUAL POSITION, IT HAS TO BE DECIDED WHETHER THE ASSESSMENT ORDER SO PASSED IS VALID IN THE EYE OF LAW. UNDOUBTEDLY, BY NOT PROPOSING A DRAFT ASSESSMENT ORDER, THE AO HAS EFFE CTIVELY DENIED THE ASSESSEE THE REMEDY AVAILABLE UNDER THE STATUTE OF RAISING OBJECTIONS BEFORE THE DRP. AS WE FIND , WHILE DECIDING IDENTICAL NATURE OF DISPUTE INVOLVING SIMILAR FACTS , THE HONBLE JURISDICTIONAL HIGH COURT IN CASE OF DIMENSION DATA ASIA P ACIFIC PTE. LTD. VS. DCIT (SUPRA) HAS HELD THAT ASSESSMENT ORDER PASSED IN VIOLATION OF SECTION 144C(1) IS INVALID. THE HONBLE DELHI HIGH COURT IN CASE OF TURNER INTERNATIONAL INDIA (P) LTD. VS. DCIT (SUPRA) HAS EXPRESSED SAME VIEW . THUS, RESPECTFULLY FOL LOWING THE BINDING RATIO LAID DOW N BY THE HONBLE JURISDICTIONAL HI GH COURT AND OTHER HIGH COURTS, AS REFERRED TO ABOVE, WE HOLD THAT THE IMPU GNED ASSESSMENT ORDER PASSED UNDER SECTION 143 (3) R.W.S. 254 OF THE ACT IS INVALID. ACCORDINGLY, WE QUASH IT. THI S GROUND IS ALLOWED. 9. IN VIEW OF OUR DECISION ABOVE , THE OTHER GROUNDS HAVING BEEN RENDERED ACADEMIC , DO NOT REQUIRE ADJUDICATION. 10. IN THE RESULT, APPEAL IS ALLOWED AS INDICATED ABOVE . 5 ITA NO. 7360 / MUM/2018 ASSESSMENT YEAR: 2008 - 09 ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH AUGUST , 2021 . SD/ - SD/ - ( PRAMOD KUMAR ) VICE PRESIDENT (SAKTIJIT DEY) JUDICIAL MEMBER MUMBAI ; DATED: 06 / 08 /2021 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI