ABACUS DISTRIBUTION SYSTEMS (I) P. LTD, MUMBAI V. DCIT 3(1), MUMBAI

ITA 8226/MUM/2010

• Counselvise Citation: 822619914 RSA 2010
• Duration Of Justice: 3 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Next Hearing Date: 21-11-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 26-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJIT KU MAR JAIN
• Assessee Lawyers: GIRISH DAVE; KETAN VED
• Keywords: Depreciation; Transfer pricing; Principle of natural justice; International transaction; Period of limitation; Question of law; Validity of assessment; Procedural lapse; Assessment record; Block assessment; Time period of passing order; Unabsorbed depreciation
• Section: 145; 27; 144; 92C; 143(3)

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNALK BENCH, MUMB AI . .. . . .. . , ,, , ! ! ! ! , ' ' ' ' # $ % # $ % # $ % # $ %, ,, , & ! & ! & ! & ! ' ' ' ' BEFORE SHRI P.M. JAGTAP, AM AND SHRI AMIT SHUKLA, J M ITA NO. 2199/MUM/2012 ASSESSMENT YEAR-2004-05 ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. 14 TH FLOOR, URMI ESTATE, 95 G.K.MARG, LOWER PAREL WEST MUMBAI-400013 ( ( ( ( / VS. DY. COMMISSIONER OF INCOME-TAX, CIRCLE3(1), ROOM NO.607 AAYKAR BHAVAN, MUMBAI-400020 !) ./ PAN :AAACA4836H ( )* / APPELLANT ) .. ( +,)* / RESPONDENT ) ITA NO.2173/MUM/2012 ASSESSMENT YEAR-2004-05 DY. COMMISSIONER OF INCOME-TAX, CIRCLE3(1), ROOM NO.607 AAYKAR BHAVAN, MUMBAI-400020 ( ( ( ( / VS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. 14 TH FLOOR, URMI ESTATE, 95 G.K.MARG, LOWER PAREL WEST MUMBAI-400013 !) ./ PAN : AAACA4836H ( )* / APPELLANT ) .. ( +,)* / RESPONDENT ) ITA NO.2177/MUM/2012 ASSESSMENT YEAR-2005-06 ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. 14 TH FLOOR, URMI ESTATE, 95 G.K.MARG, LOWER PAREL WEST MUMBAI-400013 ( ( ( ( / VS. DY. COMMISSIONER OF INCOME-TAX, CIRCLE3(1), ROOM NO.607 AAYKAR BHAVAN, MUMBAI-400020 !) ./ PAN : AAACA4836H ( )* / APPELLANT ) .. ( +,)* / RESPONDENT ) ITA NO.2174/MUM/2012 ASSESSMENT YEAR-2005-06 DY. COMMISSIONER OF INCOME-TAX, CIRCLE3(1), ROOM NO.607 AAYKAR BHAVAN, MUMBAI-400020 ( ( ( ( / VS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. 14 TH FLOOR, URMI ESTATE, 95 G.K.MARG, LOWER PAREL WEST MUMBAI-400013 !) ./ PAN : AAACA4836H ( )* / APPELLANT ) .. ( +,)* / RESPONDENT ) 2 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. ITA NO.8226/MUM/2010 ASSESSMENT YEAR-2006-07 ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. 14 TH FLOOR, URMI ESTATE, 95 G.K.MARG, LOWER PAREL WEST MUMBAI-400013 ( ( ( ( / VS. DY. COMMISSIONER OF INCOME-TAX, CIRCLE3(1), ROOM NO.607 AAYKAR BHAVAN, MUMBAI-400020 !) ./ PAN : AAACA4836H ( )* / APPELLANT ) .. ( +,)* / RESPONDENT ) ITA NO.7275/MUM/2012 ASSESSMENT YEAR-2008-09 ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. 14 TH FLOOR, URMI ESTATE, 95 G.K.MARG, LOWER PAREL WEST MUMBAI-400013 ( ( ( ( / VS. DY. COMMISSIONER OF INCOME-TAX, CIRCLE3(1), ROOM NO.607 AAYKAR BHAVAN, MUMBAI-400020 !) ./ PAN : AAACA4836H ( )* / APPELLANT ) .. ( +,)* / RESPONDENT ) )* - . / ASSESSEE BY : SHRI GIRISH DAVE & SHRI KETAN VED !' - . / REVENUE BY : SHRI AJI T KUMAR JAIN (' - / DATE OF HEARING : 21-11-2013 /01 - / DATE OF PRONOUNCEMENT : 06-12-2013 $ $ $ $ / ORDER # $ % # $ % # $ % # $ %, ,, , & ! & ! & ! & ! 2 2 2 2 / PER AMIT SHUKLA, J.M. THESE ARE BUNCH OF SIX APPEALS FILED BY THE ASSESSE E AS WELL BY THE DEPARTMENT FOR VARIOUS ASSESSMENT YEARS. SINCE, CO MMON ISSUES ARE INVOLVED THEREFORE, SAME WERE HEARD TOGETHER AND AR E BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE . ITA NO.2199/MUM/2012 AND ITA NO.2173/MUM/2012 2. WE WILL FIRST TAKE UP ITA NO.2199/MUM/2012 AND I TA NO.2173/MUM/2012 FOR THE ASSESSMENT YEAR 2004-05, W HICH ARE CROSS 3 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. APPEALS FILED AGAINST ORDER DATED 19.01.2012 PASSED BY CIT(A)15, MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED IN SECTION 143 (3). IN THE APPEAL FILED BY THE ASSESSEE, FOLLOWING GROUNDS HAVE RAISE D:- 1. THE LEARNED CIT-A ERRED IN RESTRICTING THE RELIEF T O RS.2,77,19,115/- AND CONFIRMING THE BALANCE TRANSFER PRICING ADJUSTMENT OF RS.2,10,05,539/- UNDER SECTION 92CA(3) OF THE ACT AS PROPOSED BY THE TRANSFER PRICING OFFICER/ASSESSING OFFICER, IN RESPECT OF THE INTERN ATIONAL TRANSACTIONS ENTERED INTO BY THE APPELLANT DURING THE YEAR ENDED 31 ST MARCH 2004. 2. I) THE LEARNED CIT-A ERRED IN REJECTING THE CONTENT ION OF THE APPELLANT THAT ANUSHA AIR TRAVEL LIMITED AND TRENT BRANDS LIMIT ED ARE VALID COMPARABLE COMPANIES TO BENCHMARK THE INTERNATIONAL TRANSACTIONS OF ENTERED INTO BY THE APPELLANT DURING THE ENDED 31 ST MARCH 2004. II) THE LEARNED CIT-A FURTHER ERRED IN REJECTING T RENT BRANDS LIMITED AS A VALID COMPARABLE COMPANY EVEN WHEN IT WAS ACCEPTE D AS A VALID COMPARABLE BY THE TRANSFER PRICING OFFICER IN THE EARLIER (I.E. AY 2003-04) AND THE SUBSEQUENT (I.E. AY 2006-07) ASSESSMENT YE ARS. III) THE LEARNED CIT-A ERRED IN REJECTING ANUSHA A IR TRAVEL LIMITED AS A VALID COMPARABLE COMPANY EVEN WHEN IT WAS ACCEPTED AS A VALID COMPARABLE BY THE TRANSFER PRICING OFFICER IN THE E ARLIER ASSESSMENT YEAR I.E. AY 2003-04. 3. THE LEARNED CIT-A ERRED IN REJECTING THE CONTENTI ON OF THE APPELLANT IN RESPECT OF THE USE OF CONTEMPORANEOUS DATA IN COMPU TING THE PROFIT LEVEL INDICATOR (PLI) (BERRY RATIO) OF THE COMPARABLE COM PANIES. 4. THE LEARNED CIT-A ERRED IN REJECTING THE CONTENTI ON OF THE APPELLANT ABOUT USE OF MULTIPLE YEAR DATA FOR COMPUTING THE PROFIT LEVEL INDICATOR (PLI) (BERRY RATIO) OF THE COMPARABLE COMPANIES. 5. WITHOUT PREJUDICE TO THE AFORESAID GROUNDS, THE L EARNED CIT-A ERRED IN NOT GRANTING THE BENEFIT OF THE VARIATION/REDUCTION OF 5% FROM THE ARITHMETIC MEAN WHILE DETERMINING THE ARMS LENGTH PRICE FOR T HE ADJUSTMENTS MADE TO THE INTERNATIONAL TRANSACTION OF THE APPELLANT A S PROVIDED IN THE PROVISO TO SECTION 92C(2) OF THE ACT PRIOR TO THE AMENDMENT BY THE FINANCE ACT (NO.2), 2009, EFFECTIVE 1 OCTOBER 2009. 6. THE ASSESSING OFFICER BE DIRECTED TO ALLOW DEPREC IATION AGGREGATING TO RS.19,22,011 ON THE BLOCK OF OTHER ASSETS COMPRIS ING OF OFFICE 4 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. EQUIPMENT, VEHICLES, FURNITURE & ELECTRICAL FITTIN GS AND LEASEHOLD IMPROVEMENT. 7. THE ASSESSING OFFICER BE DIRECTED TO DETERMINE TH E UNABSORBED DEPRECIATION AND BUSINESS LOSS FOR SET-OFF IN FUTUR E AGAINST THE TAXABLE INCOME IN FUTURE YEARS. 8. EACH ONE OF THE ABOVE GROUNDS IS WITHOUT PREJUDIC E TO THE OTHER. 9. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER OR AM END, ANY OF THE FOREGOING GROUNDS OF APPEAL, OF AND WHEN NECESSARY . 3. THE ASSESSEE HAS ALSO RAISED FOLLOWING AS ADDITI ONAL GROUND ALONGWITH PETITION DATED 18.11.2013 WHICH READS AS UNDER:- 1. THE ASSESSING OFFICER HAS ERRED IN MAKING THE ADDIT ION OF RS.4,90,75,706/- TO THE TOTAL INCOME OF THE APPELLA NT FOR THE YEAR UNDER CONSIDERATION, IN CONTRAVENTION OF THE PROVISIONS O F SUB-SECTION(4) OF SECTION 92CA OF THE INCOME-TAX ACT, 1961 AS IT STOOD AT THE RELEVANT POINT OF TIME. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER AMEND, SU BSTITUTE AND/OR MODIFY IN ANY MANNER WHATSOEVER MODIFY ALL OR ANY O F THE FOREGOING GROUND OF APPEAL AT OR BEFORE THE HEARING OF THE APPEAL. 4. WHEREAS, IN THE DEPARTMENTS APPEAL, FOLLOWING G ROUND HAS BEEN RAISED :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT FOREIGN EXCHANGE GA IN OF RS.2,77,19,115/- BE INCLUDED IN COMPUTING THE OPERATING INCOME OF T HE ASSESSEE FOLLOWING THE HONBLE SUPREME COURTS DECISION IN THE CASE OF WO ODWARD GOVERNOR INDIA PVT. LTD. (312 ITR 251), WITHOUT APPRECIATING THE F ACT THAT THE DECISION RELIED UPON IS DISTINGUISHABLE FROM THE FACTS IN THE ASSES SEES CASE AS THE ISSUE DECIDED IN THE CASE OF WOODWARD GOVERNOR INDIA PVT. LTD. WAS RELATING TO THE TAXABILITY OF FOREIGN EXCHANGE RECEIPTS AND IT HAS GOT NO BEARING ON WHETHER RECEIPTS FROM PART OF THE OPERATING INCOME OF THE A SSESSEE. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A ) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE R ESTORED. 5. AT THE TIME OF HEARING, THE LD. COUNSEL SHREE GI RISH DAVE SUBMITTED THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE G OES TO THE VERY ROOT OF THE ISSUES INVOLVED, IN AS MUCH AS THE ASSESSMENT O RDER WHICH HAS BEEN PASSED BY THE AO, IS IN VIOLATION OF SUB-SECTION-4 OF SECTION 92CA AS IT 5 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. STOOD AT THE RELEVANT POINT OF TIME. FAILURE TO AD HERE THE PROVISIONS OF SECTION 92CA(4), HAS RENDERED THE ENTIRE ASSESSMENT ORDER AS IRREGULAR AND IS IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. T HE LD. ASSESSING OFFICER HAS NOT GIVEN ANY OPPORTUNITY OF HEARING ON THE TRANSFE R PRICING ADJUSTMENT AND ARMS LENGTH PRICE AS DETERMINED BY THE TPO, WH ICH HE WAS REQUIRED TO DO SO AS PER THE LAW U/S 92CA(4) PREVAILING PRIO R TO 01.06.2007. THE WAS REQUIRED TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO GIVE EXPLANATION WITH REGARD TO THE ADJUSTMENT MADE BY THE TPO AS HE CANNOT SUO-MOTO ADOPT THE ARMS LENGTH PRICE AS DETERMINED BY THE TP O. THE AMENDMENT IN THE PROVISIONS OF SECTION 92CA(4) TO DO AWAY WITH S UCH A REQUIREMENT WAS BROUGHT IN THE STATUTE WITH FINANCE ACT 2007 WITH E FFECT FROM 01 ST JUNE 2007. HERE IN THIS CASE, REFERENCE WAS MADE TO THE TPO ON 21.09.2005 AND THEREFORE EARLIER PROVISIONS OF SECTION 92CA(4) WILL APPLY. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL STRONGLY RELIED UPON THE CBDT CIRCULAR NUMBER 3 OF 2008 DATED 12 TH MARCH 2008, WHEREIN IT HAS BEEN CLARIFIED THAT THE NEW PROVISION SHALL BE APPLICABLE ONLY WHE RE THE REFERENCE TO THE TPO HAS BEEN MADE AFTER 1 ST JUNE 2007 AND TPOS ORDER HAS NOT BEEN PASSED BEFORE THE SAID DATE UNDER SUB-SECTION 3 OF SECTION 92CA. PRIOR TO THE AMENDMENT, SUB-SECTION-4 REQUIRED THE ASSESSING OFFICER TO PROCEED AND COMPUTE THE INCOME OF THE ASSESSEE HAVING REGAR D TO THE ARMS LENGTH PRICE DETERMINED UNDER SUB-SECTION 3 OF SECTION 92C A BY THE TPO, WHICH MEANS THAT THE AO HAS TO APPLY HIS MIND AND THEN DE TERMINE THE ARMS LENGTH PRICE. THIS ALSO ENTAILS THAT THE ASSESSING OFFICER HAS TO GIVE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE ARMS LE NGTH PRICE SO DETERMINED BY THE TPO AND NOT OTHERWISE. IT IS ONLY AFTER THE AMENDMENT THAT TPOS ORDER ON DETERMINATION OF ARMS LENGTH PRICE HAS BE COME BINDING ON THE ASSESSING OFFICER. IN SUPPORT OF THIS CONTENTION, HE STRONGLY RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF SONY INDIA PVT. LTD. VS. CBDT REPORTED IN (2006) 157 TAXMAN 125 (DELHI) AND ITAT MUMBAI BENCH DECISION IN THE CASE OF DY. DIRECTOR OF INCO ME-TAX(INTERNATIONAL TAXATION) MUMBAI VS. COLUMBIA TRISTAR FILMS INDIA L TD. REPORTED IN THE 6 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. (2011) 10 TAXMAN.COM 245(MUMBAI). ACCORDINGLY, HE SUBMITTED THAT THE PRESENT ORDER PASSED BY THE ASSESSING OFFICER IS IN VIOLATION OF PROVISIONS OF THE LAW AND THE ENTIRE ORDER HAS TO BE SET-ASIDE . 6. ON THIS PRELIMINARY ISSUE, LD. CIT DR SUBMITTED THAT ALREADY EFFECTIVE OPPORTUNITY OF HEARING TO THE ASSESSEE HA S BEEN GIVEN BY THE TPO AND ALSO AT THE LEVEL OF THE CIT(A) AND, THEREFORE, THERE CANNOT BE ANY GRIEVANCE TO THE ASSESSEE FOR NOT EXPLAINING ITS CA SE. ALTERNATIVELY, HE SUBMITTED THAT THE ASSESSMENT ORDER CANNOT BE TERME D AS ILLEGAL BUT PROCEDURAL IRREGULARITY, WHICH CAN BE CURED BY SETT ING ASIDE TO THE FILE OF THE AO. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PER USED THE RELEVANT MATERIAL PLACED ON RECORD ON THE PRELIMINARY ISSUE AS RAISED IN THE ADDITIONAL GROUND OF APPEAL. IN THIS CASE, THE ISS UE OF TRANSFER PRICING WAS REFERRED TO THE TRANSFER PRICING OFFICER U/S 92CA(1 ) FOR THE COMPUTATION OF ARMS LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANSACTION REPORTED IN AUDIT REPORT IN FORM NUMBER 3CEB, ON 21.09.2005. I N PURSUANCE THEREOF, THE TPO HAS PASSED THE ORDER U/S 92CA(3) VIDE ORDER DATED 8 TH DECEMBER 2006 SUGGESTING THE ASSESSING OFFICER TO MAKE AN AD DITION OF RS.5,55,98,494/-ON ACCOUNT OF UPWARD ADJUSTMENT IN THE ARMS LENGTH PRICE ON THE INTERNATIONAL TRANSACTION WITH THE AE. THE MOOT QUESTION BEFORE US IS, WHETHER AFTER THE RECEIPT OF THE ORDE R PASSED BY THE TPO, THE AO IS REQUIRED TO GIVE FURTHER OPPORTUNITY TO THE A SSESSEE ON THE ALP DETERMINED BY THE TPO AND THEN COMPUTE THE TOTAL IN COME OF THE ASSESSEE. SUB-SECTION-4 TO SECTION 92CA AS IT STOOD AT THE RE LEVANT TIME I.E. PRIOR TO 01.06.2007 READ AS UNDER:- (4) ON RECEIPT OF THE ORDER UNDER SUB-SECTION (3), THE ASSESSING OFFICER SHALL PROCEED TO COMPUTE THE TOTAL INCOME OF THE ASSESSEE UNDER SUB-SECTION (4) OF SECTION 92C HAVING REGARD TO THE ARMS LENGTH PRICE DETERMINED UNDER SUB- SECTION(3) BY THE TRANSFER PRICING OFFICER. 7 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. 8. SECTION 92CA READ WITH VARIOUS SUB-SECTIONS PROV IDES THE MECHANISM FOR MAKING REFERENCE TO THE TPO FOR THE C OMPUTATION OF ARMS LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANS ACTIONS AND THE VARIOUS POWERS OF THE TPO FOR THE DETERMINATION OF ARMS LE NGTH PRICE. SUB-SECTION 4, PROVIDES THAT ON THE RECEIPT OF THE ORDER PASSED BY THE TPO, THE ASSESSING OFFICER HAS TO PROCEED TO COMPUTE THE TOT AL INCOME OF THE ASSESSEE U/S 92C(4) HAVING REGARD TO THE ALP SO DET ERMINED BY THE TPO. THE WORDS SHALL PROCEED TO COMPUTE THE TOTAL INCOM E OF THE ASSESSEE ENTAILS THAT THE ASSESSING OFFICER HAS TO APPLY HIS MIND AT THE TIME OF COMPUTATION OF TOTAL INCOME HAVING REGARD TO THE AL P DETERMINED BY THE TPO. ONCE THE MANDATE HAS BEEN GIVEN TO THE ASSESS ING OFFICER FOR COMPUTING THE ALP, IT IMPLIES THE RULE OF AUDI-ALTERAM-PARTEM , THAT IS, THE ASSESSING OFFICER HAS TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO OBJECT TO SUCH DETERMINATION OF ALP AFTER RECEIVING THE REPOR T/ORDER OF THE TPO BEFORE HE FINALIZES THE ASSESSMENT OF THE TOTAL INC OME. NOW WITH THE AMENDMENT BROUGHT IN THE STATUTE WITH EFFECT FROM 0 1.06.2007, SUCH A CONDITION HAS BEEN REMOVED AND NOW THE STATUTE PROV IDES THAT THE ASSESSING OFFICERS COMPUTATION OF THE TOTAL INCOME SHALL BE IN CONFORMITY WITH THE ALP DETERMINED BY THE TPO. THIS INTER-ALIA MEANS THAT THE TPOS ORDER IS BINDING ON THE AO ONLY AFTER 01.06.2007. THIS ASPECT OF THE MATTER HAS BEEN INTERPRETED BY THE HONBLE DELHI HI GH COURT IN THE CASE OF SONY INDIA PVT. LTD. (SUPRA), WHEREIN HONBLE HIGH COURT ANALYZED IN THE FOLLOWING MANNER. 19. THERE IS NOTHING IN SECTION 92CA ITSELF THAT REQUIR ES THE AO TO FIRST FORM A CONSIDERED OPINION IN THE MANNER INDICATED IN SECTI ON 92C(3) BEFORE HE CAN MAKE A REFERENCE TO THE TPO. IN OUR VIEW, IT IS NOT POSSIB LE TO READ SUCH A REQUIREMENT INTO SECTION 92CA(1). HOWEVER, IT WILL SUFFICE IF THE AO FORMS A PRIMA FACIE OPINION THAT IT IS NECESSARY AND EXPEDIENT TO MAKE SUCH A REFERENCE . ONE POSSIBLE REASON FOR THE ABSENCE OF SUCH A REQUIREMENT OF FORMATION OF A PRI OR CONSIDERED OPINION BY THE AO IS THAT THE TPO IS EXPECTED TO PERFORM THE SAME EXE RCISE AS ENVISAGED UNDER SECTION 92C(1) TO (3) WHILE DETERMINING THE ALP UNDER SECTIO N 92CA(3). THE LATTER PART OF SECTION 92CA(3) UNAMBIGUOUSLY STATES THAT THE AO SH ALL 'BY AN ORDER IN WRITING, 8 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. DETERMINE THE ARM'S LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANSACTION IN ACCORDANCE WITH SUB-SECTION (3) OF THE SECTION 92C. ' IT WILL BE POINTLESS TO HAVE A DUPLICATION OF THIS EXERCISE AT TWO STAGES ONE AFTE R THE OTHER. ON THE OTHER HAND, THE SCHEME IS THAT AFTER THE TPO DETERMINES THE ALP THE MATTER REVIVES BEFORE THE ALP AT THE SECTION 92C(4) STAGE WHERE, IN TERMS OF SECTION 92CA(4) THE AO WILL COMPUTE THE TOTAL INCOME 'HAVING REGARD TO' THE ALP DETERMINED BY THE TPO. 20. TWO ASPECTS REQUIRE TO BE TAKEN NOTE OF IN THIS CONTEXT. THE AO WILL NECESSARILY HAVE TO GIVE AN OPPORTUNITY TO THE ASSE SSEE AFTER RECEIVING THE REPORT OF THE TPO AND BEFORE HE FINALISES THE ASSESSMENT COMP UTING THE TOTAL INCOME. SECONDLY, THE PROVISIONS DO NOT MANDATE THAT THE AO IS BOUND TO ACCEPT THE ALP AS DETERMINED BY THE TPO. AND FOR GOOD REASON BECAUSE T HE AO HAS HIMSELF NOT MADE UP HIS MIND AT THE STAGE ABOUT THE ALP. HE HAS, IN A SENSE, ONLY 'OUTSOURCED' THIS EXERCISE TO THE TPO. HE CAN ALWAYS BE PERSUADED BY THE ASSESSEE AT THAT STAGE TO REJECT THE TPO'S REPORT AND PROCEED TO STILL DETERMI NE THE ALP HIMSELF. IT MUST BE RECALLED THAT IT IS THE AO WHO IS THE AUTHORITY TO F INALISE THE ASSESSMENT AND THAT POWER CANNOT BE USURPED, AS IT WERE, BY THE TPO OR ANY OTHER AUTHORITY CONTRARY TO THE SCHEME OF THE ACT. IF ON THE OTHER HAND ONE WERE TO INTERPRET THE PROVISIONS TO REQUIRE THE AO TO FIRST FORM A CONSIDERED OPINION O N THE ALP BEFORE REFERRING THE MATTER TO THE TPO, THEN THE AO WILL THEREAFTER HAVE NO OPTION BUT ACCEPT THE REPORT OF THE TPO AND TO THAT EXTENT THE AO'S FINAL SAY ON THE ALP WHILE COMPUTING THE TOTAL INCOME GETS DILUTED. BY PRESERVING THE POWER OF THE AO TO DETERMINE THE ALP EVEN AFTER THE DETERMINATION BY THE TPO, FULL EFFECT CAN BE GIVEN TO THE WORDS 'HAVING REGARD TO' OCCURRING IN BOTH SECTION 92C(4) AND 92C A(4). XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX X X 23. IN VIEW OF THE SETTLED LEGAL POSITION, WE ARE O F THE VIEW THAT THE EXPRESSION 'HAVING REGARD TO' IN SECTION 92C(4) AND 92CA(4) ENA BLES THE AO TO CONSIDER NOT ONLY THE REPORT OF THE TPO BUT ANY OTHER MATERIAL THAT M AY BE PLACED BEFORE HIM BY THE ASSESSEE TO ARRIVE AT A DIFFERENT CONCLUSION. THIS ALSO STRENGTHENS THE POSITION THAT THE REPORT OF THE TPO IS NOT BINDING ON THE AO. 24. THIS INTERPRETATION DOES NOT PREJUDICE THE ASSE SSED BECAUSE IN EFFECT THE ASSESSEE GETS TWO OPPORTUNITIES TO DEMONSTRATE THAT THE PRICE DECLARED BY IT REQUIRES ACCEPTANCE. THE FIRST IS BEFORE THE TPO IN TERMS OF SECTION 92CA(3) AND THE SECOND BEFORE THE AO UNDER SECTION 92C(4) AFTER THE RECEIP T OF THE REPORT OF THE TPO. ANY POSSIBLE PREJUDICE IS NEGATIVED BY THE PRINCIPLES O F NATURAL JUSTICE THAT ARE WRITTEN INTO THE PROVISIONS IN LARGE MEASURE. MOREOVER, A S PECIALIZED DETERMINATION OF THE ALP BY AN EXPERIENCED QUASI-JUDICIAL AUTHORITY EXERC ISING THE FUNCTION OF THE TPO 9 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. CAN ONLY MINIMIZE THE POSSIBILITY OF THE AO ACTING A RBITRARILY. AT THE SAME TIME THE TPO IS NOT THE FINAL AUTHORITY ON THE ISSUE. 25. THE SALIENT POINTS EMERGING FROM THE ABOVE DISC USSION MAY BE RECAPITULATED THUS: (A) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX. (B) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX. (C) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX (D) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX (E)THE AO IS NOT BOUND TO ACCEPT THE ALP AS DETERMIN ED BY THE TPO. HE CAN ALWAYS BE PERSUADED BY THE ASSESSEE AT THAT STAGE TO REJEC T THE TPO'S REPORT AND PROCEED TO STILL DETERMINE THE ALP HIMSELF. THIS IS HOW THE EXPRESSION 'HAVING REGARD TO' OCCURRING IN BOTH SECTIONS 92C(4) AND 92CA(4) CAN BE GIVEN FULL EFFECT. (F)THIS INTERPRETATION DOES NOT PREJUDICE THE ASSES SEE BECAUSE IN EFFECT THE ASSESSEE GETS TWO OPPORTUNITIES TO DEMONSTRATE THAT THE ALP D ECLARED BY IT REQUIRES ACCEPTANCE. THE FIRST IS BEFORE THE TPO IN TERMS OF SECTION 92CA(3) AND THE SECOND BEFORE THE AO UNDER SECTION 92C(4). 9. THUS, FROM THE ABOVE OBSERVATIONS AND THE INTERP RETATION BY THE HONBLE DELHI HIGH COURT, IT IS ABSOLUTELY CLEAR TH AT THE ASSESSING OFFICER IS NOT BOUND TO ACCEPT THE ALP AS DETERMINED BY THE TP O BUT HAS TO DETERMINE THE ALP, ONLY AFTER GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. IN THIS CASE, ADMITTEDLY NO SUCH OPPORTU NITY HAS BEEN GIVEN IN TERMS OF SUB-SECTION 4 OF SECTION 92C READ WITH SE CTION 92CA. ACCORDINGLY, WE ARE OF THE OPINION THAT THIS MATTER NEEDS TO BE RESTORED BACK TO THE STAGE OF THE ASSESSING OFFICER, AS THE IRREGULARITY HAS CREPT IN FROM THIS STAGE BY DENYING THE OPPORTUNITY TO THE A SSESSEE TO OBJECT TO THE ALP AS DETERMINED BY THE TPO. NOW THE ASSESSING OF FICER WILL DETERMINE THE COMPUTATION OF INCOME HAVING REGARD TO THE ALP AFTER GIVING DUE AND EFFECTIVE OPPORTUNITY OF HEARING TO THE ASSESSEE. IN THE RESULT THE ENTIRE TRANSFER PRICING ADJUSTMENT IS RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION. 10 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. 10. SINCE, THE ENTIRE TRANSFER PRICING ADJUSTMENT H AS BEEN SET-ASIDE TO THE AO, GROUND NO.1 TO 5 ARE ALSO SET-ASIDE TO THE FILE OF THE AO FOR FRESH DETERMINATION OF THE ALP. 11. GROUND NO.6 HAS NOT BEEN PRESSED THEREFORE, THE SAME IS BEING DISMISSED AS NOT PRESSED. 12. REGARDING GROUND NO.7, IT HAS BEEN SUBMITTED BE FORE US THAT ASSESSEE HAS FILED A PETITION FOR RECTIFICATION U/S 154, WHICH HAS NOT BEEN DISPOSED OF. ACCORDINGLY, WE DIRECT THE AO TO DEAL AND DISPOSE OFF THE ASSESSEES SAID PETITION IN ACCORDANCE WITH THE PRO VISIONS OF LAW. GROUND NO.8 AND 9 ARE GENERAL, HENCE NO ADJUDICATION IS RE QUIRED. 13. IN THE DEPARTMENTS APPEAL, THE ONLY ISSUE INVO LVED IS WITH REGARD TO THE ADDITION ON ACCOUNT OF TRANSFER PRICING ADJUSTM ENT. SINCE, THE ENTIRE MATTER OF TRANSFER PRICING ADJUSTMENT HAS BEEN SET- ASIDE TO THE FILE OF THE AO, THEREFORE, THE ISSUE RAISED IN THE DEPARTMENTS APPEAL IS ALSO SET-ASIDE TO THE FILE OF THE AO. 14. IN THE RESULT, ASSESSEES APPEAL AS WELL AS DEP ARTMENTS APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ITA NO.2177/MUM/2012 AND ITA NO.2174/MUM/2012 15. NOW WE TAKE UP CROSS APPEALS FOR THE ASSESSMENT YEAR 2005-06 FILED BY THE ASSESSEE BEING ITA NO.2177/MUM/2012 AND BY T HE DEPARTMENT BEING ITA NO.2174/MUM/2012 AGAINST THE IMPUGNED ORD ER DATED 02.01.2012 PASSED BY CIT(A)-15 FOR THE QUANTUM OF A SSESSMENT PASSED U/S 143(3). 16. IN THE GROUNDS OF APPEAL FILED BY THE ASSESSEE, THE ONLY ISSUE RAISED IS WITH REGARD TO THE TRANSFER PRICING ADJUSTMENT OF RS.12,08,15,268/-AS DONE BY THE TPO IN RESPECT OF INTERNATIONAL TRANS ACTIONS ENTERED BY THE 11 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. ASSESSEE WITH ITS AE. APART FROM THAT THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND OF APPEAL WHICH READS AS UNDER:- 1. THE TRANSFER PRICING OFFICER HAS ERRED IN PASSIN G THE ORDER DATED 31 OCTOBER 2008 PASSED U/S. 92CA(3) OF THE INCOME-TAX ACT, 1961 WITHOUT ANY APPLICATION OF MIND WHATSOEVER. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, SUBSTITUTE AND/OR MODIFY IN ANY MANNER WHATSOEVER MODIFY ALL OR ANY OF THE FORE GOING GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE APPEAL. 17. WHEREAS, IN THE DEPARTMENTS APPEAL, FOLLOWING GROUNDS HAVE BEEN RAISED:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE BENEFIT OF +/- 5% BE ALLO WED TO THE ASSESSEE AS PER THE PROVISO TO SECTION 92C(2) OF THE ACT, WITHOUT APPREC IATING THE FACT THAT THE SAID PROVISO WILL APPLY ONLY WHEN MORE THAN ONE PRICE IS DETERMINED BY THE MOST APPROPRIATE METHOD AND WHERE THE TRANSACTION HAS TA KENPLACE WITHIN THE 5% OF THE PRICE SO COMPUTED, WHEREAS IN THE CASE OF THE ASSES SEE ONLY ONE PRICE HAS BEEN DETERMINED BY THE ASSESSEE AND THE ACTUAL PRICE AT WHICH THE TRANSACTION WAS UNDER TAKEN IS BEYOND 5% MARGIN, AS SUCH, THE SAID PROVISO WILL NOT APPLY IN THE CASE OF THE ASSESSEE. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A ) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 18. THE LD. COUNSEL, SHRI GIRISH DAVE SUBMITTED TH AT IN THE ADDITIONAL GROUND THE ASSESSEE HAS RAISED A VERY IMPORTANT CON TENTION THAT THE ORDER PASSED BY THE TRANSFER PRICING OFFICER U/S 92CA(3) IS WITHOUT ANY APPLICATION OF MIND BECAUSE AS THE TPO HAS VERBATIM COPIED THE ORDER OF THE TPO FOR THE ASSESSMENT YEAR 2004-05 PASSED U/S 92CA(3). TO HIGHLIGHT THIS POINT, THAT THE TPO HAS MECHANICALLY COMPLETED THE PROCEEDINGS IN THIS YEAR, HE SUBMITTED A COMPARISON CHART OF THE O RDER PASSED BY THE TPO FOR THE ASSESSMENT YEAR 2004-05 AND FOR THE ASSESSM ENT YEAR 2005-06 AND FOR THAT HE SUBMITTED THAT EXCEPT FOR THE VARIATIO N OF FIGURES, THERE IS NO OTHER CHANGES AND EVEN THE ASSESSEES EXPLANATION A ND VARIOUS DOCUMENTS FILED FOR THE ASSESSMENT YEAR 2005-06 HAS NOT BEEN CONSIDERED AT ALL. THE LD. TPO HAS DUPLICATED THE ORDER IN SUCH A MANNER T HAT HE HAS EVEN GONE TO THE EXTENT OF TAKING THE FIGURE OF FOREIGN EXCHA NGE GAIN IN THIS ORDER WHICH WAS NOT AN INCOME IN THIS YEAR AND WHICH WAS ALSO NOT A MATTER OF 12 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. CONSIDERATION. THUS, THE ENTIRE ORDER OF THE TPO I S VITIATED ON ACCOUNT OF NON-APPLICATION OF MIND. HE FURTHER SUBMITTED THAT EVEN THE CIT(A) HAS IGNORED THIS ISSUE AND THE SAID OBJECTION OF THE AS SESSEE HAS NOT BEEN CONSIDERED AT ALL. THIS IS ALSO REFLECTED FROM THE FACT THAT FOREIGN EXCHANGE GAIN ISSUE HAS BEEN CONSIDERED BY HIM WHICH WAS NOT THERE IN THE ASSESSMENT YEAR 2005-06. THUS, THE ENTIRE ORDER OF THE CIT(A) AS WELL AS TPOS NEEDS TO BE SET-ASIDE. 19. ON THE OTHER HAND, THE LD. CIT DR, SHRI AJEET JAIN SUBMITTED THAT EVEN THOUGH THE TPO HAS COPIED THE ORDER FOR THE A. Y.2004-05, HOWEVER IT CANNOT BE SAID THAT THERE IS NO APPLICATION OF MIND AS THE TPO HAS LOOKED INTO THE FIGURES WHICH WERE PERTAINING TO THIS YEAR AND SINCE THE SIMILAR MATTER AND ISSUES WERE INVOLVE IN THIS YEAR ALSO, S O HE HAS PASSED THE SIMILAR ORDER. IN ANY CASE AND WITHOUT PREJUDICE, HE SUBMITTED THAT INSTEAD OF CANCELING THE ORDER, THE MATTER SHOULD B E REMANDED BACK TO THE FILE OF THE TPO TO PASS A FRESH ORDER. 20. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND ALSO PERUSED THE RELEVANT ORDER OF THE TPO AS WELL AS THE CIT(A) . FROM THE PERUSAL OF THE TPOS ORDER DATED 31.10.2008, IT IS OBSERVED TH AT THE TPO IN FACT HAS DUPLICATED THE SAME ORDER AS PASSED BY THE TPO VIDE ORDER DATED 8 TH DECEMBER 2006 U/S. 92CA(3). EXCEPT FOR THE VARIATIO N IN THE FIGURES OF A.Y.2005-06, THERE IS NO DIFFERENCE AT ALL AS POINT ED OUT BY THE LD. COUNSEL. IT IS ALSO NOTED THAT THE TPO HAS EVEN TAKEN INTO C ONSIDERATION THE FIGURE OF FOREIGN EXCHANGE GAIN, WHICH INCOME WAS NO THERE IN THE A.Y.2005-06. THE ASSESSEES EXPLANATIONS FOR THE A.Y. 2005-06 AN D ALL ITS OBJECTIONS AND DOCUMENTS HAVE NOT BEEN CONSIDERED AT ALL, WHICH WE RE SPECIFIC TO THE ISSUES INVOLVED IN A.Y.2005-06. THIS SHOWS THAT TH E LD. TPO HAS PASSED THE ORDER WITHOUT APPLICATION OF MIND, WHICH HE IS REQUIRED TO DO SO UNDER THE PROVISIONS OF LAW AND EQUITY. SUCH AN ORDER SH OWS AN UNPRECEDENTED BIAS AND PRE-DETERMINED MIND WITHOUT GOING INTO THE MERITS OF THE CASE. WE ARE OF THE OPINION THAT SUCH AN ORDER PASSED BY THE TPO AND CONFIRMED 13 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. BY THE LD. CIT(A) CANNOT STAND AND THE ENTIRE MATTE R NEEDS TO BE REMANDED BACK TO THE FILE OF THE TPO/AO FOR PASSING FRESH OR DER, IN ACCORDANCE WITH PROVISIONS OF LAW AND AFTER GIVING DUE AND EFFECTIV E OPPORTUNITY OF HEARING TO THE ASSESSEE AND ALSO CONSIDERING THE ENTIRE MAT ERIAL AND EVIDENCE INCLUDING EXPLANATION FILED BEFORE HIM. ACCORDINGL Y, THE IMPUGNED ORDER IS SET-ASIDE AND ENTIRE MATTER IS RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION. 21. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS TREATED IS ALLOWED FOR STATISTICAL PURPOSE. 22. THE ONLY ISSUE RAISED IN THE DEPARTMENTS APPEA L IS THAT THE LD. CIT(A) HAS ERRED IN LAW IN GIVING BENEFIT OF +/- 5% TO THE ASSESSEE AS PER THE PROVISO TO SECTION 92C(2) ON THE ALP SO DETERMI NED, AS A MATTER OF STANDARD DEDUCTION. SINCE, THE ENTIRE MATTER OF TR ANSFER PRICING ADJUSTMENT HAS BEEN RESTORED BACK TO THE FILE OF TH E TPO, THEREFORE, THIS ISSUE IS ALSO REMANDED BACK TO THE FILE OF THE TPO/ AO TO FOLLOW THE AMENDED PROVISIONS OF LAW AS GIVEN IN SECTION 92C, AS THE VIEW TAKEN BY THE CIT(A) IS LEGALLY NOT SUSTAINABLE. ACCORDINGLY, THE DEPARTMENTS APPEAL IS ALSO TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 23. IN THE RESULT, APPEAL OF THE ASSESSEE AS WELL A S THE DEPARTMENT IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ITA NO.8826/MUM/2010 24. NOW WE TAKE UP APPEAL FOR A.Y. 2006-07 IN ITA N O.8826/MUM/2010 FILED BY THE ASSESSEE, AGAINST FINAL ASSESSMENT ORD ER DATED 09.09.2010 PASSED BY THE DY. COMMISSIONER OF INCOME-TAX-3(1), MUMBAI, (HEREINAFTER CALLED AS AO) IN PURSUANCE OF DIRECTION GIVEN BY TH E DISPUTE RESOLUTION PANEL (HEREINAFTER CALLED AS DRP). 25. IN GROUND NO.1, THE ASSESSEE HAS RAISED A LEGAL ISSUE CHALLENGING THE VALIDITY OF THE ASSESSMENT ORDER PASSED BY THE AO O N THE GROUND THAT 14 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. NOTICE ISSUED U/S. 143(2) IS BARRED BY LIMITATION. THE RELEVANT GROUNDS READS AS UNDER:- THE LEARNED ASSESSING OFFICER (AO) UNDER THE INSTR UCTION OF DISPUTE RESOLUTION PANEL (DRP) HAS ERRED IN LAWN AND ON THE FACTS OF THE CASE IN PASSING THE ORDER UNDER SECTION 143(3) R.W.S. 14 4C(13) WITHOUT APPRECIATING THE FACT THAT THE NOTICE ISSUED BY HIM UNDER SECTION 143(2) IS TIME BARRED, BAD IN LAW AND NOT ENFORCEAB LE UNDER THE ACT. 26. BESIDES THIS VARIOUS GROUNDS HAS BEEN RAISED ON MERITS OF THE ADDITIONS MADE BY THE ASSESSING OFFICER IN THE ASSE SSMENT ORDER. 27. THE RELEVANT FACTS APROPOS, THE FIRST GROUND OF APPEAL ARE THAT ASSESSEE IS A COMPANY WHICH HAD FILED ITS RETURN OF INCOME ON 20.11.2006 FOR THE A.Y. 2006-07, DECLARING NIL INCOME AFTER CLAIMING SET OFF OF BROUGHT FORWARD LOSSES TO THE TUNE OF RS.2,28,40,52 0/-. THEREAFTER, THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND STATU TORY NOTICE U/S 143(2) DATED 28.11.2007 WAS ISSUED. AS PER THE 2 ND PROVISO TO SECTION 143(2), THE NOTICE U/S 143(2) HAS TO BE SERVED UPON THE ASSESSE E, BEFORE THE EXPIRY OF THE 12 MONTHS FROM THE END OF THE MONTH IN WHICH RE TURN IS FURNISHED, WHICH HERE IN THIS CASE WAS 30 TH NOVEMBER 2007. THE LD. COUNSEL SHRI GIRISH DAVE APPEARING ON BEHALF OF THE ASSESSEE SUB MITTED THAT THE NOTICE DATED 28 TH NOVEMBER 2007, COULD NOT BE SERVED UPON THE ASSES SEE WITHIN THE STATUTORY PERIOD OF 12 MONTHS FROM THE END OF T HE MONTH IN WHICH THE RETURNED IS FURNISHED, WHICH WAS 30 TH NOVEMBER 2007. HE SUBMITTED THAT THE SAID NOTICE DATED 28.11.2007 WAS SENT ON THE OL D ADDRESS OF THE ASSESSEE AND ADMITTEDLY THE NOTICE COULD NOT BE SER VED UPON THE ASSESSEE. IT WAS ONLY THE SECOND NOTICE DATED 11.12.2007 ISSU ED U/S 143(2) WAS RECEIVED BY THE APPELLANT WHICH WAS SENT ON THE NEW ADDRESS. THUS THE 15 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. 2 ND NOTICE WHICH WAS SERVED UPON THE ASSESSEE WAS CLE ARLY BARRED BY LIMITATION AS PER THE PROVISIONS OF THE LAW. HE AL SO BROUGHT ON RECORD BEFORE US THAT THE ASSESSEE, AS EARLY AS ON 23.11.2 006, HAS FILED A LETTER DATED 22.11.2006 BEFORE THE AO, INTIMATING THE CHAN GE OF ADDRESS. DESPITE THE AVAILABILITY OF CORRECT ADDRESS ON RECORD, THE DEPARTMENT HAS SENT THE NOTICE TO THE OLD ADDRESS FROM WHERE THE ASSESSEE H AS COMPLETELY WOUND UP ITS OFFICE A YEAR AGO. IN SUPPORT OF THIS CONTE NTION, HE HAS FILED A SEQUENCE OF EVENTS ALONGWITH THE RELEVANT DOCUMENTS AND LETTERS WHICH ARE AVAILABLE ON THE RECORD. HE SUBMITTED THAT BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS RAISED A SPECIFIC OBJECTION AT THE VERY FIRST INSTANCE, WHEREIN IT WAS SUBMITTED THAT THE NOTICE U/S.143(2) HAS NOT BEEN SERVED UPON THE ASSESSEE WITHIN THE STATUTORY TIME AND HE NCE IS BARRED BY LIMITATION. THEREAFTER, THE AO HAS NOT REBUTTED TH E ASSESSEES OBJECTION BUT HAS FALSELY STATED THAT THE NOTICE U/S143(2) DA TED 28.11.2007 HAS BEEN SERVED UPON THE ASSESSEE. THIS OBJECTION WAS ALSO R AISED BEFORE THE DRP, HOWEVER, THE DRP AFTER TAKING NOTE OF THESE FACTS, HAS HELD THAT AO HAS ISSUED THE NOTICE ON PROPER ADDRESS KNOWN TO HIM AT THE TIME OF ISSUANCE OF NOTICE WHICH WAS THE SAME AS MENTIONED IN THE RE TURN OF INCOME AND FURTHER THE NOTICE WAS ALSO DISPATCHED THROUGH SPEE D POST BEFORE THE LIMITATION PERIOD. THE LD. COUNSEL SUBMITTED THAT SUCH AN OBSERVATION AND FINDING IS COMPLETELY DIVORCED FROM THE MATERIA L ON RECORD AND HENCE THE ENTIRE ASSESSMENT ORDER SHOULD BE QUASHED. 28. BEFORE US, THE LD.CIT DR SHRI AJIT JAIN PRODUCE THE ASSESSMENT RECORDS, FROM WHICH RECORDS, HE SUBMITTED THAT IN T HE RETURN OF INCOME, THE ADDRESS OF THE ASSESSEE HAS BEEN MENTIONED 81- 83A MITTAL COURT, 8 TH FLOOR, A BING NARIMAN POINT, MUMBAI-400021. ON T HE SAID ADDRESS ITSELF, THE NOTICE U/S 143(2) DATED 28.11.2007 HAS BEEN ISS UED TO THE ASSESSEE BY THE AO. THE SAID NOTICE WAS SENT THROUGH SPEED POS T ON THE SAME ADDRESS. IN SUPPORT OF THE SAME, HE FILED A PHOTO- COPY OF THE SAID NOTICE ALONGWITH THE FRONT SIDE AND BACK SIDE OF THE ENVEL OP THROUGH WHICH THE 16 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. SAID NOTICE WAS SENT. HE ALSO SUBMITTED THAT THERE IS REPORT BY INCOME-TAX INSPECTOR DATED 29.11.2007 STATING THAT ITI VISITED THE OFFICE PREMISES OF THE ASSESSEE I.E. 81-83 A MITTAL COURT, 8 TH FLOOR, A WING NARIMAN POINT, MUMBAI 400021, FOR SERVING THE NOTICE U/S 143(2). HOWEVER, ON ENQUIRY IT REVEALED THAT NO SUCH COMPANY WAS FUNCTIONING IN TH E NAME OF THE ASSESSEE AND ON ENQUIRY ALSO NOBODY COULD HELP IN G IVING THE WHEREABOUT OF THE ASSESSEE. HENCE, THE NOTICE U/S 143(2) COUL D NOT BE SERVED. THEREAFTER, THE ASSESSING OFFICER ON 11.12.2007 ISS UED A FRESH NOTICE U/S 143(2) ON THE CHANGED ADDRESS WHICH WAS SERVED UPON THE ASSESSEE ON 12.12.2007. A PHOTO-COPY OF THE SAID NOTICE HAS AL SO BEEN FILED BEFORE US. HE FURTHER SUBMITTED THAT IN THE RECORD, THERE IS A PHOTO-COPY OF LETTER DATED 22.11.2006 ADDRESSED TO THE ASST. COMMISSIONE R OF INCOME-TAX, RANGE-3(1), INTIMATING THE CHANGE OF POSTAL ADDRESS OF THE ASSESSEE COMPANY. HE ALSO POINTED OUT THAT THE ASSESSING OF FICER HAS ALSO TRIED TO SERVE THE NOTICE THROUGH THE AFFIXTURE. THUS, THE ASSESSING OFFICER HAS MADE ALL THE POSSIBLE EFFORTS TO SERVE THE NOTICE U /S 143(2) AND IN FACT, NOTICE WAS ACTUALLY SERVED UPON THE ASSESSEE ON 11. 12.2007. ONCE THE NOTICE HAS BEEN SERVED UPON THE ASSESSEE THE ASSESS ING OFFICER ACQUIRES THE JURISDICTION TO SCRUTINIZE RETURN AND TO PASS T HE ASSESSMENT ORDER AS PER THE FACTS AND MATERIAL PLACED ON RECORD. THERE COULD NOT BE ANY GRIEVANCE TO THE ASSESSEE AS ALL THE OPPORTUNITY OF HEARING HAS BEEN PROVIDED TO THE ASSESSEE TO SUBMIT THE EVIDENCE IN SUPPORT OF THE CLAIM MADE IN THE RETURN OF INCOME AND IT WAS ONLY AFTER CONSIDERING ALL THE MATERIALS AND EVIDENCES PLACED BY THE ASSESSEE, THE ASSESSMENT ORDER HAS BEEN PASSED. EVEN IF THE NOTICE COULD NOT BE SERVE D WITHIN THE PERIOD OF TWELVE MONTHS, DESPITE ALL THE POSSIBLE EFFORTS BY THE ASSESSING OFFICER, THEN ALSO IT IS A PROCEDURAL IRREGULARITY WHICH CAN BE CURED EITHER BY SETTING-ASIDE THE ASSESSMENT TO THE FILE OF THE AO OR TO DECIDE THE MATTER AFTER HEARING THE ASSESSEE ON MERITS. 17 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. 29. BY WAY OF REJOINDER THE LD. COUNSEL SHRI GIRISH DAVE, SUBMITTED THAT FROM THE RECORDS IT IS CLEAR THAT THE NOTICE U/S 14 3(2) HAS NOT BEEN SERVED UPON THE ASSESSEE AT THE CORRECT ADDRESS WHICH WAS DULY INTIMATED TO THE DEPARTMENT JUST AFTER TWO DAYS OF THE FILING OF RET URN OF INCOME. REGARDING THE INTIMATION TO THE AO, WHICH IS AVAILABLE IN THE RECORDS IN THE FORM OF PHOTO-COPY, HE SUBMITTED THAT THERE IS CLEAR-CUT SE AL OF THE DEPARTMENT ACKNOWLEDGING THE SAID INTIMATION LETTER THAT IT HA S BEEN RECEIVED ON 23 RD NOVEMBER 2006. ONCE THE AO WAS DULY INTIMATED ABOU T THE CHANGE OF THE ADDRESS, THEN THE ASSESSING OFFICER WAS REQUIRED TO SERVE THE NOTICE WITHIN THE STATUTORY PERIOD PROVIDED IN THE SECTION 143(2) , AT THE CORRECT ADDRESS WHICH HAS NOT BEEN FULFILLED. LASTLY, HE SUBMITTED THAT LAW HAS NOW BEEN WELL SETTLED BY VARIOUS HIGH COURTS AND THE SUPREME COURT, THAT THE SERVICE OF NOTICE U/S 143(2) UPON THE ASSESSEE IS M ANDATORY AND IF SUCH A CONDITION OF SERVICE OF NOTICE IS NOT FULFILLED, TH EN THE ENTIRE ASSESSMENT ORDER PASSED IS VOID-AB-INITIO . HE ALSO RELIED UPON THE CERTAIN JUDICIAL PRONOUNCEMENT IN THIS REGARD. 30. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS QUA THE ISSUE RAISED IN GROUND NO.1 AND ALSO PERUSED THE RELEVANT MATERIAL PLACED ON RECORD BEFORE US. FROM SUCH RECORDS, THE FOLLOWING SEQUENCE OF EVENTS IS BEING DRAWN BY US TO APPRECIATE THE CORRECT FACTS O N THIS ISSUE: SR. NO. DATE EVENTS 1. 20 TH NOVEMBER 2006 RETURN OF INCOME WAS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 200607 WHEREIN THE ADDRESS MENTIONED WAS 8183A, MITTAL COURT, 8 TH FLOOR, A WING, NARIMAN POINT, MUMBAI 400 021 18 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. 2. 22 ND NOVEMBER 2006 AND 23 RD NOVEMBER 2006 THE ASSESSEE WROTE LETTER TO THE ACIT, RANGE3(1), ROOM NO.607, AAYAKAR BHAVAN, 101, M.K. ROAD, MUMBAI, INTIMATING THAT THE ADDRESS, W.E.F. 1 ST NOVEMBER 2006, HAS BEEN CHANGED TO RUBY HOUSE, FIRST FLOOR, J.K. SAVANT MARG, DADAR (W), MUMBAI 400 028 . THIS LETTER WAS FILED ON 23 RD NOVEMBER 2006 AS PER THE SEAL OF THE DCIT, CIRCLE3(1), MUMBAI. 3. 28 TH NOVEMBER 2007 NOTICE U/S 143(2) WAS ISSUED BY THE DCIT, CIRCLE3(1), MUMBAI (A.O) ADDRESS TO THE PRINCIPAL OFFICER, ABACUS DISTRIBUTION SYSTEMS CO. PVT. LTD., 8183A, MITTAL COURT, 8 TH FLOOR, A WING, NARIMAN POINT, MUMBAI 400 021. 4. 29 TH NOVEMBER 2007 REPORT OF INCOME TAX INSPECTOR THAT HE VISITED THE OFFICE PREMISES OF THE ASSESSEE AT 8183A, MITTAL COURT, 8 TH FLOOR, A WING, NARIMAN POINT, MUMBAI 400 021 TO SERVE THE NOTICE UNDER SECTION 143(2), HOWEVER, ON ENQUIRY, IT WAS FOUND THAT NO SUCH COMPANY IS IN EXISTENCE THERE IN THE NAME OF THE ASSESSEE. 5. 30 TH NOVEMBER 2007 THE LAST DATE FOR DATE FOR SERVICE OF NOTICE U/S 143(2) IN CASE OF THE ASSESSEE AS PER THE SECOND PROVISO TO SECTION 143(2) WHICH ENVISAGES THAT NO NOTICE SHALL BE SERVED ON THE ASSESSEE AFTER THE EXPIRY OF 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN OF INCOME IS FURNISHED. 19 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. 6. 30 TH NOVEMBER 2007 THE DATE MENTIONED AS PER THE SEAL OF POST OFFICE FOR SENDING THE NOTICE THROUGH SPEED POST AT THE ADDRESS MENTIONED IN THE NOTICE U/S 143(2). THE SAID SPEED POST RETURNED UNSERVED AS THE ASSESSEE WAS NOT FOUND ON THE ADDRESS AND THE SAID POST CAME BACK ON 1 ST DECEMBER 2007. 7. 5 TH DECEMBER 2007 AS PER THE RECORDS SUBMITTED BY THE D.R., THE NOTICE WAS ALSO SERVED THROUGH AFFIXTURE ON THE OLD ADDRESS, HOWEVER, THERE IS NO REPORT HOW THE PROCEDURE HAS BEEN FOLLOWED AS PER THE REQUIREMENTS OF THE CPC ORDERV. 8. 11 TH DECEMBER 2007 SECOND NOTICE WAS SENT BY THE A.O. TO THE ASSESSEE ON THE NEW ADDRESS I.E., RUBY HOUSE, FIRST FLOOR, J.K. SAVANT MARG, DADAR (W), MUMBAI 400 028. 9. 12 TH DECEMBER 2007 THE AFORESAID NOTICE DATED 11 TH DECEMBER 2007, WAS SERVED UPON THE ASSESSEE FIXING THE DATE OF HEARING FOR 17 TH DECEMBER 2007. 10. 13 TH DECEMBER 2007 THE ASSESSEE WROTE LETTER TO THE A.O. RAISING OBJECTION THAT NOTICE U/S 143(2) HAS NOT BEEN SERVED WITHIN THE STATUTORY TIME LIMIT OF 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN OF INCOME IS FURNISHED, WHICH HAD EXPIRED ON 30 TH NOVEMBER 2007 AND THE NOTICE DATED 11 TH DECEMBER 2007 IS BARRED BY LIMITATION AND NO ASSESSMENT PROCEEDINGS CAN BE INITIATED. 20 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. 11. 26 TH NOVEMBER 2009 DRAFT ASSESSMENT ORDER WAS PASSED U/S 144C BY THE A.O. WHEREIN THE ASSESSEES OBJECTIONS WERE NOT TAKEN INTO ACCOUNT. 12. JULY 2010 DIRECTIONS OF THE DRP WHEREIN THE ASSESSEES OBJECTIONS HAVE BEEN REJECTED AFTER OBSERVING AS UNDER: REGARDING THE VALIDITY OF ASSESSMENT PROCEEDINGS, THE DRP PERUSED THE ASSESSEE RECORDS AND IT HAS BEEN NOTICED THAT THE NOTICE U/S 143(2) DATED 28 TH NOVEMBER 2007, HAS BEEN ISSUED AND SENT THROUGH SPEED POST TO THE ASSESSEE ON THE ADDRESS MENTIONED IN THE RETURN OF INCOME. HOWEVER, THE SAME HAS BEEN RETURNED BACK AS UNSERVED. THEN THE A.O. HAS ISSUED A FRESH NOTICE AFTER ASCERTAINING THE CHANGED ADDRESS OF THE ASSESSEE, WHICH ACCORDING TO THE ASSESSEE WAS INTIMATED. HOWEVER, THE ORIGINAL INTIMATION OF THE ASSESSEE IS NOT ON RECORD AND ONLY PHOTO COPY OF THE INTIMATION OF THE CHANGE OF ADDRESS IN PLACED ON RECORD. IT APPEARS, ONCE THE ORIGINAL NOTICE WAS RETURNED BACK BY THE POSTAL AUTHORITIES, THE A.O. MADE EFFORTS TO TRACE THE ADDRESS OF THE ASSESSEE AND OBTAINED THE PHOTO COPY OF THE LETTER CLAIMED TO BE FILED BY THE ASSESSEE INTIMATING THE CHANGE OF ADDRESS. THUS, THE DRP IS OF THE CONSIDERED VIEW, THAT THE A.O HAS ISSUED THE NOTICE ON PROPER ADDRESS KNOWN TO THE A.O. AT THE TIME OF ISSUE OF NOTICE WHICH WAS THE SAME AS MENTIONED IN THE RETURN OF INCOME AND IT HAS 21 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. BEEN DISPATCHED THROUGH SPEED POST BEFORE THE LIMITATION PERIOD. THE ASSESSEES OBJECTION THAT THE NOTICE U/S 143(2) HAS NOT BEEN ISSUED WITHIN THE LIMITATION PERIOD CANNOT BE ACCEPTED, AND ACCORDINGLY, OBJECTION RAISED BY THE ASSESSEE IS REJECTED. 31. FROM THE ABOVE SEQUENCE OF EVENTS, THE FOLLOWIN G INFERENCES CAN BE DRAWN. I) THE ASSESSEE, AS EARLY AS ON 23 RD NOVEMBER 2006, HAS INTIMATED TO THE ASSESSING OFFICER ABOUT THE CHANGE OF OFFICIAL ADDRESS AND SUCH AN INTIMATION HAS ALSO BEEN ACKNOW LEDGED BY THE OFFICE OF THE ASSESSING OFFICER; II) DESPITE INTIMATION OF THE CHANGE OF ADDRESS, THE ASSESSING OFFICER HAD SENT THE NOTICE DATED 28 TH NOVEMBER 2007, ON THE OLD ADDRESS FROM WHERE THE ASSESSEE HA D ADMITTEDLY LEFT A YEAR AGO; III) THE SAID NOTICE DATED 28 TH NOVEMBER 2007 COULD NOT BE SERVED UPON THE ASSESSEE WITHIN THE STATUTORY TIME LIMIT AS PROVIDED UNDER SECTION 143(2) FOR SCRUTINIZING THE ASSESSEES RETURN OF INCOME AND INITIATING THE ASSESSMENT PROC EEDINGS; AND IV) THE SECOND NOTICE DATED 11 TH DECEMBER 2007, WHICH HAS BEEN SERVED UPON THE ASSESSEE IN ACCORDANCE WITH TH E LAW IS 22 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. CLEARLY BARRED BY THE LIMITATION IN VIEW OF THE PRO VISO TO SECTION 143(2). THE PROVISIONS OF SECTION 143(2) CLEARLY ENVISAGES THAT WHERE A RETURN HAS BEEN FURNISHED UNDER SECTION 13 9, OR IN RESPONSE TO A NOTICE UNDER SUB-SECTION (1) OF SECTION 142, T HE ASSESSING OFFICER SHALL:- (I) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX (II) NOTWITHSTANDING ANYTHING CONTAINED IN CLAUSE (I), I F HE CONSIDERS IT NECESSARY OR EXPEDIENT TO ENSOURE THAT THE ASSES SEE HAS NOT UNDERSTATED THE INCOME OR HAS NOT COMPUTED EXCESSIV E LOSS OR HAS NOT UNDER-PAID THE TAX IN ANY MANNER, SERVE ON THE ASSESSEE A NOTICE REQUIRING HIM, ON A DATE TO BE SP ECIFIED THEREIN, EITHER TO ATTEND HIS OFFICE OR TO PRODUCE, OR CAUSE TO BE PRODUCE, ANY EVIDENCE ON WHICH THE ASSESSEE MAY REL Y IN SUPPORT OF THE RETURN: PROVIDED THAT NO NOTICE UNDER CLAUSE (II) SHALL BE SERVED ON THE ASSESSEE AFTER THE EXPIRY OF TWELVE MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN IS FURNISHED. 33. ON A BARE PERUSAL OF THE AFORESAID SECTION, IT CAN BE SEEN THAT WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESS EE, IT IS MANDATORY FOR THE ASSESSING OFFICER TO SERVE A NOTICE UNDER THIS SUBSECTION IF HE CONSIDERS NECESSARY OR EXPEDIENT TO ENSURE THAT THE ASSESSEE HAS NOT UNDERSTATED THE INCOME OR HAS NOT COMPUTED EXCESSIV E LOSS OR HAS NOT UNDERPAID THE TAX IN ANY MANNER. IN OTHER WORDS, IF HE WANTS TO SCRUTINIZE THE RETURN OF INCOME FILED BY THE ASSESSEE, A NOTIC E HAS TO BE SERVED UPON THE ASSESSEE REQUIRING HIM TO SUBSTANTIATE ITS RETU RN OF INCOME AFTER PRODUCING RELEVANT EVIDENCE OR RECORDS. IF SUCH A S ERVICE IS NOT ISSUED AND 23 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. SERVED, THEN THE ASSESSING OFFICER CANNOT SCRUTINIZ E THE RETURN OF INCOME FILED BY THE ASSESSEE. THIS MANDATORY PROVISION ALS O GETS FORTIFIED BY THE PROVISO WHICH PUT FURTHER FETTER ON THE ASSESSING OFFICER TO SERVE THE NOTICE WITHIN THE STIPULATED PERIOD. THE WORD SHALL MAKES IT MANDATORY FOR THE ASSESSING OFFICER TO SERVE THE NOTICE WITHI N THE PERIOD OF 12 MONTHS FORM THE END OF THE MONTH IN WHICH THE RETURN OF IN COME IS FURNISHED. OTHERWISE, THE LAW PRESUMES THAT THE RETURN OF INCO ME HAS TO BE ACCEPTED AS SUCH. THE SAID PROPOSITION HAS ALSO BEEN ENDORSE D AND RATIFIED BY CATENA OF DECISIONS RENDERED BY THE VARIOUS HIGH CO URTS AND THE HON'BLE SUPREME COURT THAT THE ISSUANCE AND SERVICE NOTICE UNDER SECTION 143(2), WITHIN THE TIME PERIOD PRESCRIBED IN THE SECOND PRO VISO TO SECTION 143(2) IS MANDATORY AND NOT MERELY PROCEDURAL FORMALITY. IF S UCH REQUIREMENT OF SERVICE OF NOTICE UNDER SECTION 143(2) WITHIN THE T IME LIMIT HAS NOT BEEN FULFILLED THEN THE CONSEQUENT ASSESSMENT ORDER PASS ED BY THE ASSESSING OFFICER IS NULL AND VOID AND NO ADDITION CAN BE SUS TAINED. FEW OF SUCH DECISIONS ARE MENTIONED BELOW: I) VIPAN KHANNA V/S CIT, [2002] 255 ITR 220 (P&H) , WHEREIN THEIR LORDSHIPS, AFTER TAKING NOTE OF THE CIRCULAR NO.549 DATED 31 ST OCTOBER 1989, OBSERVED AND HELD AS UNDER:- THEREFORE, IN A CASE WHERE A RETURN IS FILED AND I S PROCESSED UNDER SECTION 143(1) (A) OF THE ACT AND NO NOTICE U NDER SUB- SECTION(2) OF SECTION 143 OF THE ACT THEREAFTER SER VED ON THE ASSESSEE WITHIN THE STIPULATED PERIOD OF 12 MONTHS THE ASSESSMENT PROCEEDINGS UNDER SECTION 143 COME TO AN END AND THE MATTER BECOMES FINAL. THUS, ALTHOUGH TECHNICAL LY NO ASSESSMENT IS FRAMED IN SUCH A CASE, YET THE PROCEE DINGS FOR ASSESSMENT STAND TERMINATED. THE CENTRAL BOARD OF DIRECT TAXES VIDE ITS CIRCULAR NO.549, DATED OCTOBER 31, 1989 [1 990] 182 ITR(ST.) 1, HAS EXPLAINED THE NEW PROCEDURE OF ASSE SSMENT IN PARAS 5.12 AND 5.13 AS UNDER (PAGE 24): 24 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. 5.12 SINCE, UNDER THE PROVISIONS OF SUB-SECTION (1 ) OF THE NEW SECTION 143, AN ASSESSMENT IS NOT TO BE MADE NOW, T HE PROVISIONS OF SUB-SECTIONS (2) AND (3) HAVE ALSO BEEN RECAST A ND ARE ENTIRELY DIFFERENT FROM THE OLD PROVISIONS. A NOTICE UNDER SUB-SECTION (2) WHICH WILL BE ISSUED ONLY IN CASES PICKED UP FOR SC RUTINY, IS NOW ISSUED ONLY TO ENSURE THAT THE ASSESSEE HAS NOT UND ERSTATED HIS INCOME OR HAS NOT COMPUTED EXCESSIVE LOSS OR HAS NO T UNDERPAID THE TAX IN ANY MANNER WHILE FURNISHING HIS RETURN O F INCOME. THIS MEANS THAT, UNDER THE NEW PROVISIONS, IN AN ASSESSM ENT ORDER PASSED UNDER SECTION 143(3) IN A SCRUTINY CASE, NEI THER THE INCOME CAN BE ASSESSED AT A FIGURE LOWER THAN THE RETURNED INCOME, NOR LOSS CAN BE ASSESSED AT A FIGURE HIGHER THAN THE RE TURNED LOSS, NOR A FURTHER REFUND CAN BE GIVEN EXCEPT WHAT WAS DUE O N THE BASIS OF THE RETURNED INCOME, AND WHICH WOULD HAVE ALREADY B EEN ALLOWED UNDER THE PROVISIONS OF SECTION 143(1)(A)(II). 5.13 A PROVISO TO SUB-SECTION (2) PROVIDES THAT A N OTICE UNDER THE SUB-SECTION CAN BE SERVED ON THE ASSESSEE ONLY DURI NG THE FINANCIAL YEAR IN WHICH THE RETURN IS FURNISHED OR WITHIN SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE RETUR N IS FURNISHED, WHICHEVER IS LATER. THIS MEANS THAT THE DEPARTMENT MUST SERVE THE SAID NOTICE ON THE ASSESSEE WITHIN THIS PERIOD, IF A CASE IS PICKED UP FOR SCRUTINY. IT FOLLOWS THAT IF AN ASSE SSEE, AFTER FURNISHING THE RETURN OF INCOME DOES NOT RECEIVE A NOTICE UNDER SECTION 143(2) FROM THE DEPARTMENT WITHIN THE AFORE SAID PERIOD, HE CAN TAKE IT THAT THE RETURN FILED BY HIM HAS BECOME FINAL AND NO SCRUTINY PROCEEDINGS ARE TO BE STARTED IN RESPECT O F THAT RETURN. THUS, IT IS EVIDENT THAT THE BOARD ITSELF CONCEDES THAT IF THE ASSESSEE AFTER FURNISHING THE RETURN OF INCOME DOES NOT RECEIVE A NOTICE UNDER SECTION 143(2) OF THE ACT WITHIN THE S TIPULATED PERIOD HE CAN TAKE IT THAT THE RETURN FILED BY HIM HAS BEC OME FINAL AND NO SCRUTINY PROCEEDINGS ARE TO BE STARTED IN RESPEC T OF THAT RETURN. 25 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. II) CIT V/S M. CHILLAPPAN, [2005] 281 ITR 444 (MAD. ) IN THE INSTANT CASE, ADMITTEDLY, NO NOTICES UNDER S. 143(2) OF THE ACT WERE SERVED ON THE ASSESSEES WITHIN THE STIPULATED PERIOD OF TWELVE MONTHS AND, THEREFORE, THE PROCEEDINGS UNDER S. 143 OF THE ACT COME TO AN END AND THE MATTER BECOMES FINAL. HENCE, APP LYING THE RATIO LAID DOWN BY THE PUNJAB & HARYANA HIGH COURT IN VIP AN KHANNA VS. CIT(SUPRA), WE ARE OF THE VIEW THAT NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDERATION IN THESE APPEALS. III) CIT V/S C. PALANIAPPAN, [2006] 284 ITR 257 (MA D.) , WHEREIN THEIR LORDSHIPS OBSERVED AND HELD AS UNDER :- IN RESPECT OF QUESTION NO.1, WE FIND THAT ON A SIM ILAR ISSUE WHICH CAME UP FOR CONSIDERATION IN CIT V. M. CHELLAPPAN [2006] 28 1 ITR 444, A DIVISION BENCH OF THIS COURT, IN WHICH ONE OF US WAS A PARTY (P.D. DINAKARAN J.) APPLYING THE RATIO LAID DOWN BY THE PUNJAB AND HARY ANA HIGH COURT IN VIPAN KHANNA V. CIT[2002] 255 ITR 220 (P&H), HELD AS FOLL OWS (PAGE 445): ...ADMITTEDLY, NO NOTICES UNDER SECTION 143(2) OF THE ACT WERE SERVED ON THE ASSESSEES WITHIN THE STIPULATED PERIOD OF TWELVE MO NTHS AND, THEREFORE, THE PROCEEDINGS UNDER SECTION 143 OF THE ACT COME TO AN END AND THE MATTER BECOMES FINAL. IN VIEW OF THE ABOVE, THE FIRST QUESTION NOW RAISED , THEREFORE, STANDS CONCLUDED IN FAVOUR OF THE ASSESSEE. IV) CIT V/S BHAN TEXTILES PVT. LTD., [2006] 287 ITR 370 (DEL.) THE SAID PROVISO LEAVES NO ROOM FOR DEBATE THAT TH E NOTICE MUST BE SERVED ON THE ASSESSEE. IN CIT V. LUNAR DIAMONDS LTD.[20 06] 281 ITR 1(DELHI) THE DIVISION BENCH HAD REJECTED THE CONTENTION THAT THE WORDS SERVED AND ISSUED ARE SYNONYMOUS AND ARE INTERCHANGEABLE. T HE BENCH DID NOT HAVE THE BENEFIT OF THE DECISION OF THE HONBLE SUPREME COURT IN R.K. UPADHYAYA V. SHANABHAI P. PATEL [1987] 166 ITR 163, WHICH IN FACT STRENGTHENS AND FORTIFIES THE POSITION THAT THERE IS A CLEAR DISTIN CTION BETWEEN ISSUANCE OF NOTICE AND SERVICE OF NOTICE. MS. BANSALS RELI ANCE ON TEA CONSULTANCY AND PLANTATION SERVICES (INDIA) P. LTD. V. UNION OF INDIA [2005] 278 ITR 356 (DELHI) IS OF NO AVAIL SINCE THE WORD THAT HAD TO B E CONSTRUED BY THE DIVISION BENCH IN THAT CASE WAS MADE AND NOT ISSUED OR SERVED. WE SEE NO REASON TO ADOPT AN APPROACH DIFFERENT TO THE ONE AD OPTED BY US IN CIT V. VARDHMAN ESTATE P. LTD.[2006] 287 ITR 368 (DELHI) ( ITA NO.1248 OF 2006) DECIDED BY US ON SEPTEMBER 25, 2006. 26 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. V) CIT VS. EQBAL SINGH SINDHANA, [2007] 162 TAXMAN 107(DEL.) 16. SO, FROM THE ENTIRE MATERIAL AVAILABLE ON RECO RD, WE HAVE NO HESITATION IN HOLDING THAT NO NOTICE UNDER SECTION 143(2) OF T HE ACT HAD BEEN SERVED UPON THE ASSESSEE WITHIN THE PRESCRIBED PERIOD AND, THEREFORE, THE ASSESSMENT MADE BY THE ASSESSING OFFICER, IS INVALI D. VI) DY CIT VS. MAHI VALLY HOTELS & RESORTS, [2006] 287 ITR 360 (GUJ.) WHEN THE PROVISION WAS FIRST INTRODUCED IN THE STA TUTE THE CENTRAL BOARD OF DIRECT TAXES ISSUED DEPARTMENTAL CIRCULAR NO.549 DA TED OCTOBER 31, 1989(SEE[1990] 182 ITR (ST.)1) AND THE NECESSITY OF THE PROVISO AS WELL AS THE CONSEQUENCES FLOWING ON FAILURE TO ISSUED NOTICE WI THIN THE LIMITATION HAVE BEEN EXPLAINED IN THE FOLLOWING WORDS (PAGE 24): 5.13 A PROVISO TO SUB-SECTION(2) PROVIDES THAT A NO TICE UNDER THE SUB-SECTION CAN BE SERVED ON THE ASSESSEE ONLY DURING THE FINAN CIAL YEAR IN WHICH THE RETURN IS FURNISHED OR WITHIN SIX MONTHS FROM THE E ND OF THE MONTH IN WHICH THE RETURN IS FURNISHED, WHICHEVER IS LATER. THIS MEANS THAT THE DEPARTMENT MUST SERVE THE SAID NOTICE ON THE ASSESSEE WITHIN T HIS PERIOD, IF A CASE IS PICKED UP FOR SCRUTINY. IT FOLLOWS THAT IF AN ASSE SSEE, AFTER FURNISHING THE RETURN OF INCOME DOES NOT RECEIVE A NOTICE UNDER SE CTION 143(2) FROM THE DEPARTMENT WITHIN THE AFORESAID PERIOD, HE CAN TAKE IT THAT THE RETURN FILED BY HIM HAS BECOME FINAL AND NO SCRUTINY PROCEEDINGS AR E TO BE STARTED IN RESPECT OF THAT RETURN. (REF: CENTRAL BOARD OF DIRECT TAXES CIRCULAR NO.549 , DATED 31 ST OCTOBER, 1989, CHATURVEDI AND PITHISARIAS INCOME-TAX LAW, FIFTH E DITION, VOL.3, PAGE 4737 AT PAGE 4742). XXX XXX XXX IT GOES WITHOUT SAYING THAT THE DEPARTMENTAL AUTHO RITIES ARE BOUND BY THE CIRCULARS ISSUED BY THE CENTRAL BOARD OF DIRECT TAX ES. IN THE CIRCUMSTANCES, IT IS NOT OPEN TO THE REVENUE TO CONTEND OTHERWISE. THESE CIRCULARS ARE EXPLANATORY. THEY GIVE CONTEMPORANEOUS EXPOSITION OF THE LEGAL POSITION. EVEN OTHERWISE, ON A PLAIN READING OF THE SECTION A ND THE PROVISO IT IS MORE THAN ABUNDANTLY CLEAR THAT THE PROVISO PRESCRIBES A MANDATORY PERIOD OF LIMITATION IN THE LIGHT OF THE SCHEME OF ASSESSMENT WHEREIN THE MAJORITY OF RETURNS ARE REQUIRED TO BE ACCEPTED WITHOUT SCRUTIN Y AND ONLY CERTAIN RETURNS ARE TAKEN UP FOR SCRUTINY. VII) ACIT V/S HOTEL BLUE MOON, [2010] 321 ITR 362 ( SC) SEC. 158BC PROVIDES FOR ENQUIRY AND ASSESSMENT. AF TER THE RETURN IS FILED, CLAUSE (B) OF SECTION 158BC PROVIDES THAT THE ASSES SING OFFICER SHALL PROCEED TO DETERMINE THE UNDISCLOSED INCOME OF THE BLOCK PE RIOD IN THE MANNER LAID DOWN IN SECTION 158BB AND THE PROVISIONS OF SECTIO N 142, SUB-SECTIONS (2) 27 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. AND (3) OF SECTION 143, SECTION 144 AND SECTION 145 SHALL, SO FAR AS MAY BE, APPLY. THIS INDICATES THAT THIS CLAUSE ENABLES THE ASSESSING OFFICER, AFTER THE RETURN IS FILED, TO COMPLETE THE ASSESSMENT UND ER SECTION 143(2) BY FOLLOWING THE PROCEDURE LIKE ISSUE OF NOTICE UNDER SECTION 143(2)/142. THIS DOES NOT PROVIDE ACCEPTING THE RETURN AS PROVIDED U NDER SECTION 143(1)(A) : THE OFFICER HAS TO COMPLETE THE ASSESSMENT UNDER SE CTION 143(3) ONLY. IF AN ASSESSMENT IS TO BE COMPLETED UNDER SECTION 143(3) READ WITH SECTION 158BC, NOTICE UNDER SECTION 143(2) SHOULD BE ISSUED WITHIN ONE YEAR FROM THE DATE OF FILING OF THE BLOCK RETURN. OMISSION ON THE PART OF THE ASSESSING AUTHORITY TO ISSUE NOTICE UNDER SECTION 143(2) CANN OT BE A PROCEDURAL IRREGULARITY AND IS NOT CURABLE. THEREFORE, THE REQ UIREMENT OF NOTICE UNDER SECTION 143(2) CANNOT BE DISPENSED WITH. XXXX XXXX XXXX THIS SECTION DOES NOT PROVIDE FOR ACCEPTING THE RE TURN AS PROVIDED UNDER SECTION 143(1)(A). THE ASSESSING OFFICER HAS TO CO MPLETE THE ASSESSMENT UNDER SECTION 143(3) ONLY. IN CASE OF DEFAULT IN N OT FILING THE RETURN OR NOT COMPLYING WITH THE NOTICE UNDER SECTION 143(2)/142, THE ASSESSING OFFICER IS AUTHORISED TO COMPLETE THE ASSESSMENT EX-PARTE UNDE R SECTION 144. CLAUSE (B) OF SECTION 158BC BY REFERRING TO SECTION 143(2) AND (3) WOULD APPEAL TO IMPLY THAT THE PROVISIONS OF SECTION 143(1) ARE EXC LUDED. BUT SECTION 143(2) ITSELF BECOMES NECESSARY ONLY WHERE IT BECOMES NECE SSARY TO CHECK THE RETURN, SO THAT WHERE BLOCK RETURN CONFORMS TO THE UNDISCLOSED INCOME INFERRED BY THE AUTHORITIES, THERE IS NO REASON, WH Y THE AUTHORITIES SHOULD ISSUE NOTICE UNDER SECTION 143(2). HOWEVER, IF AN ASSESSMENT IS TO BE COMPLETED UNDER SECTION 143(3) READ WITH SECTION 15 8BC, NOTICE UNDER SECTION 143(2) SHOULD BE ISSUED WITHIN ONE YEAR FRO M THE DAT4E OF FILING OF BLOCK RETURN. OMISSION ON THE PART OF THE ASSESSIN G AUTHORITY TO ISSUE NOTICE UNDER SECTION 143(2) CANNOT BE A PROCEDURAL IRREGUL ARITY AND THE SAME IS NOT CURABLE AND, THEREFORE, THE REQUIREMENT OF NOTICE U NDER SECTION 143(2) CANNOT BE DISPENSED WITH. THE OTHER IMPORTANT FEATURE THA T REQUIRES TO BE NOTICED IS THAT SECTION 158BC(B) SPECIFICALLY REFERS TO SOME O F THE PROVISIONS OF THE ACT WHICH REQUIRE TO BE FOLLOWED BY THE ASSESSING OFFIC ER WHILE COMPLETING THE BLOCK ASSESSMENTS UNDER CHAPTER XIVB OF THE ACT. T HIS LEGISLATION IS BY INCORPORATION. THIS SECTION EVEN SPEAKS OF SUB-SEC TIONS WHICH ARE TO BE FOLLOWED BY THE ASSESSING OFFICER. HAD THE INTENTI ON OF THE LEGISLATURE BEEN TO EXCLUDE THE PROVISIONS OF CHAPTER XIV OF THE ACT , THE LEGISLATURE WOULD HAVE OR COULD HAVE INDICATE THAT ALSO. A READING O F THE PROVISION WOULD CLEARLY INDICATE, IN OUR OPINION, IF THE ASSESSING OFFICER, IF FOR ANY REASON, REPUDIATES THE RETURN FILED BY THE ASSESSEE IN RESP ONSE TO NOTICE UNDER SECTION 158BC(A), THE ASSESSING OFFICER MUST NECESS ARILY ISSUE NOTICE UNDER SECTION 143(2) OF THE ACT WITHIN THE TIME PRESCRIBE D IN THE PROVISO TO SECTION 143(2) OF THE ACT. WHERE THE LEGISLATURE INTENDED TO EXCLUDE CERTAIN PROVISIONS FROM THE AMBIT OF SECTION 158BC(B) IT HA S DONE SO SPECIFICALLY. THUS, WHEN SECTION 158BC(B) SPECIFICALLY REFERS TO APPLICABILITY OF THE PROVISO THERETO IT CANNOT BE EXCLUDE. WE MAY ALSO NOTICE H ERE ITSELF THAT THE CLARIFICATION GIVEN BY THE CENTRAL BOARD OF DIRECT TAXES IN ITS CIRCULAR NO.717 DATED AUGUST 14, 1995, HAS A BINDING EFFECT ON THE DEPARTMENT, BUT NOT ON THE COURT. THIS CIRCULAR CLARIFIES THE REQUIREMENT OF LAW IN RESPECT OF SERVICE 28 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. NOTICE UNDER SUB-SECTION (2) OF SECTION 143 OF THE ACT. ACCORDINGLY, WE CONCLUDE THAT EVEN FOR THE PURPOSE OF CHAPTER XIV-B OF THE ACT, FOR THE DETERMINATION OF UNDISCLOSED INCOME FOR A BLOCK PER IOD UNDER THE PROVISIONS OF SECTION 158BC, THE PROVISIONS OF SECTION 142 AND SUB-SECTIONS (2) AND (3) OF SECTION 143 ARE APPLICABLE AND NO ASSESSMENT COU LD BE MADE WITHOUT ISSUING NOTICE UNDER SECTION 143(2) OF THE ACT. 34. IN VIEW OF THE MATERIAL PLACED ON RECORD AND V ARIOUS JUDICIAL PRECEDENCE, WE HOLD THAT THE IMPUGNED ASSESSMENT OR DER PASSED BY THE ASSESSING OFFICER IS VOID AB INITIO AS THE SAME HAS BEEN PASSED WITHOUT THE MANDATORY REQUIREMENT OF SERVING THE NOTICE UNDER S ECTION 143(2) UPON THE ASSESSEE WITHIN THE TIME PROVIDED IN THE SECOND PROVISO. THUS, THE ENTIRE ASSESSMENT AND CONSEQUENT ADDITIONS MADE BY THE ASSESSING OFFICER IS QUASHED AND THE GROUND RAISED BY THE ASS ESSEE IS TREATED AS ALLOWED. SINCE THE ENTIRE ASSESSMENT HAS BEEN QUASH ED, THE OTHER GROUNDS OF APPEAL DEALING WITH THE MERITS OF THE ADDITION H AVE BECOME INFRUCTUOUS. 35. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS ALLOWED. 36. WE NOW TAKE UP ASSESSEES APPEAL IN ITA NO.7275 /MUM./2012, FOR THE ASSESSMENT YEAR 200809. 37. THE MAIN ISSUE INVOLVED IN GROUND NO.1 AND 2 IS TRANSFER PRICING ADJUSTMENT OF RS.5,81,72,495 ON ACCOUNT OF MARKETIN G SERVICES PROVIDED BY THE ASSESSEE TO THE A.E. AND TRANSFER PRICING AD JUSTMENT OF RS.4.40 CRORES ON ACCOUNT OF SERVICE CHARGES PAID TO THE A. E. 38. THE ASSESSEE IS A SUBSIDIARY OF ABACUS INTERNAT IONAL PTE. LTD., SINGAPORE, WHICH IS ENGAGED IN THE BUSINESS OF COMP UTARISED RESERVATION SYSTEM. THIS SYSTEM PROVIDES TRAVEL INFORMATION AND RESERVATIONS AND ALSO FACILITATE AIR BOOKING, HOTEL, ETC., SPECIFICALLY T O THE ASIAN REGION. INSOFAR AS THE ASSESSEE IS CONCERNED, IT IS ENGAGED IN THE BUS INESS OF MARKETING AND DISTRIBUTION SYSTEM OF ABACUS SYSTEM IN INDIA AND A LSO TO PROVIDE HELP 29 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. DESK SERVICES AND SUPPORT INFRASTRUCTURE. DURING TH E YEAR, THE ASSESSEE HAS ENTERED INTO FOLLOWING INTERNATIONAL TRANSACTIO NS WITH ITS A.E. SR.N O. NATURE OF TRANSACTION VALUE OF TRANSACTIONS ( RS ) METHOD USED 1. PROVISION OF MARKETING SERVICES. 191,299,288 TNM M NOTE 2 MENTIONS THAT COMPANY HAS RECORDED A SUM OF RS. 24,672,486 AS MARKETING SERVICE FEE PURSUANT TO ADDENDUM ENTERED WITH THE HOLDING COMPANY ON 31 ST DECEMBER 2007 FOR MARKETING AND PROMOTION OF ABACUS SYSTEMS FOR THE YEAR ENDED 31 ST MARCH 2008. 2. AVAILING OF INTEREST FREE ECB LOAN OF INR RS.113,629,880. 3. REIMBURSEMENT OF EXPENSES: LINE CHARGES SERVICE CHARGES DEPUTATION COST OTHER EXPENSES 49,61,871 4,40,82,127 10,75,863 32,30,868 39. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE , AT THE OUT SET, SUBMITTED THAT THE TPOS ORDER IS VERY CRYPTIC FOR THE REASON THAT THE ASSESSEES DETAIL SUBMISSION AND MATERIAL PLACED ON RECORD, WHICH WERE MADE BEFORE HIM HAVE NOT BEEN CONSIDERED AND FROM T HE PERUSAL OF THE ENTIRE ORDER OF THE TPO, IT IS NOT CLEAR AS TO WHY THE ASSESSEES CONTENTIONS HAVE BEEN REJECTED AND HOW THE BENCH MARKING HAS BE EN ARRIVED AT. THE ASSESSEE, IN ITS TRANSFER PRICING STUDY REPORT HAS SUBMITTED A DETAIL ANALYSIS OF COMPARABLES FOR BENCH MARKING THE ALP O F VARIOUS TRANSACTIONS UNDERTAKING BY THE A.E. THE ASSESSEE HAS INITIALLY INCLUDED 18 COMPARABLES AND THEREAFTER SHORTLISTED FOUR COMPARA BLES AFTER FILTRATION. THE TPO, WITHOUT GIVING ANY PROPER REASON OR EXPLAN ATION FOR REJECTING THE SEARCH CRITERIA AND THE COMPARABLES, WENT ON TO MAK E ADJUSTMENT ON THE BASIS OF MARGIN OF HIS OWN COMPARABLES. THE DETAILS OF THESE COMPARABLES HAVE NOT BEEN PROVIDED AT ALL. IT HAS NOT BEEN DISC USSED IN THE ORDER ITSELF. THIS IS EVIDENT FROM THE NARRATION GIVEN IN PARA5 OF THE TPOS ORDER. ON 30 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. THE OTHER ADJUSTMENT OF RS. 4.40 CRORES, THE TPOS FINDING AND OBSERVATION ARE WITHOUT ANY PROPER REASONING AND EXPLANATION AS TO WHY ASSESSEES DETAIL EXPLANATION OR SUBMISSIONS WERE NOT PROPER O R ARE LIABLE TO BE REJECTED. HE FURTHER SUBMITTED THAT THE TPO HAS MIS SED A VERY CRUCIAL POINT THAT IN THIS YEAR DUE TO HEAVY INCONVENIENCE OF MARKETING EXPENDITURE, THE A.E. HAS REIMBURSED MORE THAN RS.2 4 CRORES TO THE ASSESSEE. THIS IS EVIDENT FROM ADDENDUM TO SUBDIST RIBUTION SYSTEM. THIS FACT ALONE CHANGES THE COLOUR OF THE TRANSFER PRICI NG ISSUE. HE SUBMITTED THAT IN THE INTEREST OF JUSTICE, THE ENTIRE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER / TPO SO THAT THE RE SHOULD BE PROPER REASONING AS TO WHY THE BENCH MARKING OF THE MARGIN DONE AND COMPARABLES SHORT LISTED BY THE ASSESSEE CANNOT BE TAKEN AS CORRECT AND HOW THE MARGIN HAS BEEN ARRIVED AT BY THE TPO. 40. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE SUBMITTED THAT ON A PERUSAL OF THE ASSESSEES RECOR D, IT IS NOT CLEAR AS TO HOW THE ASSESSEE ITSELF HAS BENCH MARKED ITS MARGIN VISAVIS THE COMPARABLES AND HOW THE OPERATING INCOME OF THE ASS ESSEE HAS BEEN ARRIVED AT. HE SUBMITTED THAT ONCE THE ASSESSEE ITS ELF HAS NOT MADE ANYTHING CLEAR THEN WHAT THE TPO HAS DONE IS ABSOLU TELY CORRECT. HE FURTHER SUBMITTED THAT WHAT IS THE PRINCIPAL AGREEM ENT BETWEEN THE ASSESSEE AND ITS A.E. HAS NOT BEEN EXAMINED AND IT IS ONLY WHEN THIS AGREEMENT IS EXAMINED THEN ONLY WHEN THE ADDENDUM T O SUBDISTRIBUTION AGREEMENT CAN BE UNDERSTOOD WHICH PROVIDES THAT HOW THE COST HAVE BEEN REAPPRAISED OR COMPENSATION HAS BEEN PAID BY THE A. E. TO THE ASSESSEE. ALTERNATIVELY, HE ALSO ADMITTED THAT THE ENTIRE MAT TER CAN BE RESTORED BACK TO THE FILE OF THE TPO FOR FRESH ADJUDICATION AND A FTER CONSIDERING ALL THE RELEVANT DOCUMENTS AND PRINCIPAL AGREEMENT. 31 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. 41. AFTER CAREFULLY CONSIDERING THE ENTIRE MATERIAL PLACED ON RECORD AND THE RELEVANT FINDINGS OF THE TPO, IT IS OBSERVED TH AT THE TPO HAS NOT EXAMINED PROPERLY THE ASSESSEES CONTENTION AND SUB MISSIONS MADE BEFORE HIM WITH REGARD TO THE BENCH MARKING OF ITS TRANSAC TION WITH THE A.E. AND DETERMINATION OF ALP. HOW THE COMPARABLES SELECTED BY THE ASSESSEE WERE FUNCTIONALLY DIFFERENT AND HOW THE TPO HAS SELECTED HIS OWN COMPARABLES AND BENCH MARKED THE MARGIN. THE CASE OF THE LEARNE D COUNSEL BEFORE US IS THAT THE TPO HAS NOT PROPERLY APPRECIATED THE EN TIRE MARKETING EXPENDITURE WHICH HAS BEEN REIMBURSED BY THE A.E. B ECAUSE THE ASSESSEE HAD TO INCUR HUGE EXPENDITURE ON BEHALF OF THE A.E. TOWARDS MARKETING EXPENDITURE IN THIS YEAR, WHICH HAS BEEN COMPENSATE D. HE HAS HEAVILY RELIED UPON THE ADDENDUM TO SUBDISTRIBUTION AGREEM ENT DATED 31 ST DECEMBER 2007. HOWEVER, THE PRINCIPAL AGREEMENT HAS NOT BEEN FILED BEFORE US. EVEN THE MANNER IN WHICH THE OPERATING I NCOME HAS BEEN SHOWN HAS NOT BEEN PROPERLY CLARIFIED AS TO WHETHER IT FORMS PART OF THE INCOME OR IT IS A COMPENSATION RECEIVED FROM THE A. E. LOOKING TO THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE OPINION THAT THE ENTIRE ISSUE OF TRANSFER PRICING NEEDS TO BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER / TPO FOR DENOVO ADJUDICAT ION AFTER TAKING INTO CONSIDERATION THE PRINCIPAL AGREEMENT AND OTHER REL EVANT DOCUMENTS AND THE ASSESSEES EXPLANATION REGARDING BENCH MARKING OF THE MARGIN VISA VIS THE COMPARABLES. THE TPO / ASSESSING OFFICER WI LL PROVIDE DUE AND EFFECTIVE OPPORTUNITY OF HEARING TO THE ASSESSEE AN D THEREAFTER WILL PASS SPEAKING ORDER ON MERITS, AFRESH. THUS, THE GROUND NO.1 AND 2 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 42. GROUND NO.3 RELATES TO THE DISALLOWANCE OF RS.1 ,81,526 ON ACCOUNT OF AIR INFORMATION. 32 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. 43. IT HAS BEEN SUBMITTED BY THE LEARNED COUNSEL TH AT NO SUCH INCOME WERE RECEIVED BY THE ASSESSEE EITHER IN THE YEAR UN DER CONSIDERATION OR ANY OF THE PRECEDING OR SUCCEEDING YEARS. MOREOVER THE DETAILS OF INFORMATION HAVE NOT BEEN PROVIDED TO THE ASSESSEE. THUS, THIS ISSUE ALSO NEEDS TO BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER / TPO SO THAT THE ASSESSEE SHOULD GET OPPORTUNITY TO EXAMINE THIS INFORMATION AND MAKE PROPER SUBMISSIONS. LEARNED DEPARTMENTAL REPRESENTATIVE CO NCURRED WITH THE SUBMISSIONS MADE BY THE LEARNED COUNSEL AND AGREED THAT THE MATTER CAN BE RESTORED TO THE FILE OF THE ASSESSING OFFICER. 44. IN VIEW OF THE ABOVE, WE HOLD THAT THE ISSUE OF DISALLOWANCE OF RS.1,81,526 WHICH IS BASED ON AIR INFORMATION IS RE STORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR DENOVO ADJUDICATION AF TER CONFRONTING ALL THE MATERIAL / INFORMATION TO THE ASSESSEE. THE ASSESSE E SHOULD BE GIVEN DUE AND EFFECTIVE OPPORTUNITY TO EXPLAIN ITS CASE. 45. IN GROUND NO.4, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF SET OFF OF BROUGHT FORWARD UNABSORBED BUSINESS LOSS. 46. ON THIS ISSUE, THE LEARNED COUNSEL SUBMITTED TH AT IN VIEW OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN GENER AL MOTORS INDIA PVT. LTD. V/S DICT, [2013] 354 ITR 244 (GUJ.), THE MATTE R SHOULD BE DECIDED AS THE HIGH COURT HAVE DISCUSSED THE ISSUE OF SETOFF UNABSORBED BUSINESS LOSS PERTAINING TO THE EARLIER ASSESSMENT YEARS. TH IS JUDGMENT HAS ALSO BEEN CONSIDERED BY THE COORDINATE BENCH OF TRIBUNA L, MUMBAI BENCH, IN ARCH FINE CHEMICALS V/S ACIT, ITA NO.2441 & 2445/ M UM./2012, WHEREIN THEY HAVE REITERATED THAT THE AMENDMENT IN SECTION 32 IS APPLICABLE FROM THE ASSESSMENT YEAR 200203 AND SUBSEQUENT YEARS AN D UNABSORBED DEPRECIATION AVAILABLE IN THE EARLIER YEARS WILL BE ALLOWED TO BE CARRIED FORWARD TO THE SUCCEEDING YEARS AND IF ANY UNABSORB ED DEPRECIATION OR PART THEREOF COULD NOT BE SETOFF TILL THE ASSESSME NT YEAR 200203, THEN IT WOULD BE CARRIED FORWARD TILL THE TIME IT IS SETOF F AGAINST THE PROFITS AND 33 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. GAINS OF SUBSEQUENT YEARS. THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO AGREED THAT THE MATTER CAN BE RESTORED BACK FOR DEC IDING THE ISSUE IN ACCORDANCE WITH LAW. 47. IN VIEW OF THE SUBMISSIONS MADE BY THE PARTIES, WE RESTORE THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THIS ISSUE AFRESH IN LINE WITH THE DECISION OF HONBLE GUJARAT HIGH COURT IN GENERAL MOTORS INDIA PVT. LTD. (SUPRA). WE ORDER ACCORDINGLY. THUS, GROU ND NO.4, IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 48. IN GROUND NO.5, THE ASSESSEE HAS CHALLENGED THE NON GRANTING OF CREDIT OF TDS AMOUNTING TO RS.21,368. 49. AS AGREED BY BOTH THE PARTIES, THIS ISSUE IS RE STORED BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE C REDIT OF THE TDS AS AVAILABLE IN RECORD. 50. IN GROUND NO.6, THE ASSESSEE HAS CHALLENGED LEV Y OF INTEREST UNDER SECTION 234D. 51. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS NOT RECEIVED ANY REFUND, THEREFORE, THERE IS NO QUESTION OF LEVY OF INTEREST UNDER SECTION 234D. 52. IN VIEW OF THE ABOVE CONTENTION OF THE ASSESSEE , WE DIRECT THE ASSESSING OFFICER TO VERIFY THE CONTENTION OF THE A SSESSEE AND ORDER ACCORDINGLY. 53. GROUND NO.7 RELATES TO LEVY OF INTEREST UNDER S ECTION 234B. 54. BOTH THE PARTIES AGREED BEFORE US THAT THIS GRO UND IS CONSEQUENTIAL IN NATURE. ACCORDINGLY, WE DIRECT THE ASSESSING OFF ICER TO GIVE CONSEQUENTIAL EFFECT IN ACCORDANCE WITH LAW. 34 ITA NO.2199/MUM/2012 & ORS. ABACUS DISTRIBUTION SYSTEMS (INDIA) PVT. LTD. 55. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 56. IN THE RESULT, APPEAL OF THE ASSESSEE FOR THE A SSESSMENT YEAR 2004- 05 IS ALLOWED FOR STATISTICAL PURPOSE AND DEPARTMEN TS APPEAL IS ALSO ALLOWED FOR STATISTICAL PURPOSE. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06 IS ALLOWED FOR STATISTICAL PURPOSE AND THE DEPARTMENTS APPEAL IS ALSO ALLOWED FOR STATISTICAL PURPOSE. APPEALS OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2006-07 IS ALLOWE D, WHEREAS APPEAL FOR 2008-09 IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 6 TH DECEMBER, 2013 SD/- SD/- P.M.JAGTAP AMIT SHUKLA ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI , 3 ( 3 ( 3 ( 3 ( DATED: 06.12.2013 F{X~{T? P.S. $ - + 541 / COPY OF THE ORDER FORWARDED TO : (1) &( 67 / THE ASSESSEE; (2) !' / THE REVENUE; (3) 8() / THE CIT(A); (4) 8 / THE CIT, MUMBAI CITY CONCERNED; (5) 4'; +&&( , , / THE DR, ITAT, MUMBAI; (6) <6 = / GUARD FILE. ,4 +& / TRUE COPY $( / BY ORDER > / ? / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI