Deputy Commissioner of Income-tax, V. Fiat India Automobiles Ltd., Pune

ITA 853/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9605 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 03-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S B MOREY
• Keywords: Transfer pricing; International transaction; Revised return
• Section: 143(3); 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , ! ' # , $% &' #' , ' # '( BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWAS THY, JM '%. / ITA NO. 853/PUN/2015 * +* / ASSESSMENT YEAR : 2007-08 DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(2), PUNE ....... / APPELLANT /VS. FIAT INDIA AUTOMOBILES LIMITED, PLOT NO. B-19, MIDC INDUSTRIAL AREA, TALUKA : SHIRUR, RANJANGAON, PUNE 412210 PAN : AAACF1716D / RESPONDENT ASSESSEE BY : SHRI NIRAJ SHETH REVENUE BY : SHRI S.B. MOREY / DATE OF HEARING : 13-04-2017 / DATE OF PRONOUNCEMENT : 13-04-2017 , / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-13, PUNE DATED 09-03 -2015 FOR THE ASSESSMENT YEAR 2007-08. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING AND SELLING OF 2 ITA NO. 853/PUN/2015, A.Y. 2007-08 PASSENGER CARS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 30-10-2007 DECLARING NIL INCO ME. THE RETURN OF THE ASSESSEE WAS PROCESSED U/S. 143(1) OF THE I NCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). THEREAFTER, THE ASSE SSEE FILED REVISED RETURN OF INCOME ON 26-09-2008 DECLARING TOTAL INC OME AS NIL. THE ASSESSEE FILED SECOND REVISED RETURN OF INCOME ON 30- 03-2009 DECLARING TOTAL INCOME AS NIL. THE CASE OF THE ASSESSEE WA S SELECTED FOR SCRUTINY, ACCORDINGLY STATUTORY NOTICE U/S. 143(2) OF THE A CT WAS ISSUED TO THE ASSESSEE ON 06-08-2008. DURING THE PERIOD RELE VANT TO THE ASSESSMENT YEAR 2007-08, THE ASSESSEE HAD ENTERED INT O VARIOUS INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES (AE). REFERENCE U/S. 92CA OF THE ACT WAS MADE TO TRANSFER PRIC ING OFFICER (TPO) BY THE ASSESSING OFFICER FOR DETERMINING ARMS LENGT H PRICE (ALP) OF THE INTERNATIONAL TRANSACTIONS WITH AE. THE TPO VIDE O RDER DATED 26-10-2010 MADE ADJUSTMENT OF ` 73,59,782/- IN RESPECT OF INTERNATIONAL TRANSACTIONS. THE ASSESSING OFFICER AFTER TAKIN G INTO CONSIDERATION THE ORDER OF TPO PASSED U/S. 92CA(3) OF THE ACT FRAMED THE FINAL ASSESSMENT AND PASSED THE ASSESSMENT ORDER U /S. 143(3) ON 08-12-2010. AGGRIEVED BY THE SAID ASSESSMENT ORDER, THE ASSESSEE FILE D AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) CHALLE NGING THE VALIDITY OF THE ASSESSMENT ORDER, AS WELL AS ASSAILING TH E ADDITIONS ON MERIT. THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE IMPU GNED ORDER QUASHED THE ASSESSMENT ORDER HOLDING IT TO BE BA D IN LAW. THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE A SSESSING OFFICER IN THE FIRST INSTANCE SHOULD HAVE PASSED DRAFT ASSES SMENT ORDER U/S. 144C(1), INSTEAD OF FINAL ASSESSMENT ORDER U/S. 143(3) O F THE ACT. 3 ITA NO. 853/PUN/2015, A.Y. 2007-08 AGAINST THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS), T HE DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL. 3. SHRI NIRAJ SHETH APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF COMMISSIONER OF INCOME TAX (APPE ALS). THE LD. AR SUBMITTED, THAT THE ASSESSING OFFICER HAS ERRED IN STR AIGHTAWAY PASSING THE FINAL ASSESSMENT ORDER U/S. 143(3) WHERE THE V ARIATION WAS MADE IN THE INCOME BY THE TPO IN AN ORDER PASSED U/S. 9 2CA(3) OF THE ACT. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAD EN TERED INTO INTERNATIONAL TRANSACTIONS AND REFERENCE WAS MADE TO TPO U/S. 92CA(1) OF THE ACT. THE TPO MADE UPWARD ADJUSTMENT OF ` 73,59,782/-. THE ASSESSING OFFICER INSTEAD OF PASSING DRAFT ASSESSMENT ORDE R HAS STRAIGHTAWAY PASSED THE FINAL ASSESSMENT ORDER. THE ASS ESSEE WAS DEPRIVED OF THE OPPORTUNITY TO FILE OBJECTIONS BEFORE THE D ISPUTE RESOLUTION PANEL (DRP) AGAINST THE ORDER OF TPO. PROVISIONS OF SECTION 144C(1) MANDATES THAT THE ASSESSING OFFICER SHOULD PASS D RAFT ASSESSMENT ORDER WHERE HE PROPOSES TO MAKE ANY VARIA TION IN ANY INCOME OR LOSS RETURNED, WHICH IS PREJUDICIAL TO THE INTERES T OF THE ASSESSEE. THE LD. AR IN SUPPORT OF HIS SUBMISSIONS PLACED R ELIANCE ON THE FOLLOWING DECISIONS : I. INTERNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT, 68 TAXMANN.COM 246 (BOMBAY HIGH COURT); II. M/S. ZUARI CEMENT LTD. VS. ACIT, WRIT PETITION NO. 5557 OF 20 12, DATED 21-02-2013 (ANDHRA PRADESH HIGH COURT); III. VIJAY TELEVISION PVT. LTD. VS. DRP AND OTHERS, 369 ITR 113 (MADRAS HIGH COURT); IV. SOKTAS INDIA (P.) LTD. VS. ACIT, 162 ITD 366 (PUNE TRIBUNAL); AND V. AGFA INDIA (P.) LTD. VS. ACIT, 64 TAXMANN.COM 429 (PUNE TRIBUNAL). 4 ITA NO. 853/PUN/2015, A.Y. 2007-08 4. SHRI S.B. MOREY REPRESENTING THE DEPARTMENT FAIRLY ADM ITTED THAT THE ASSESSING OFFICER HAS PASSED FINAL ASSESSMENT ORDER WIT HOUT PASSING DRAFT ASSESSMENT ORDER IN THE PRESENT CASE. 5. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BELOW PER USED. DOCUMENTS ON RECORD REVEAL THAT THE ASSESSEE HAD ENT ERED INTO INTERNATIONAL TRANSACTIONS WITH ITS AE. DURING THE PERIOD R ELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL REFERENCE U/S. 92CA(1) WAS MADE TO TPO TO DETERMINE ALP OF THE SAID TRANSACTIONS. THE TPO MADE UPWARD ADJUSTMENT OF ` 73,59,782/-. THEREAFTER, THE ASSESSING OFFICER INSTEAD OF PASSING DRAFT ASSESSMENT ORDER AS MANDATED U/S. 144C (1) PASSED THE FINAL ASSESSMENT ORDER U/S. 143(3) OF THE ACT. AS PER THE PROVISIONS OF SECTION 144C(1), THE ASSESSING OFFICER IN THE FIRST INSTANCE WAS REQUIRED TO FORWARD A DRAFT OF THE PROPOSED ASSESSMENT ORDER TO THE ELIGIBLE ASSESSEE, IF HE PROPOSES TO MAKE ANY VARIATION IN ANY INCOME OR LOSS RETURNED WHICH IS PREJUDICIAL TO THE INTEREST OF AS SESSEE. THE TERM ELIGIBLE ASSESSEE HAS BEEN DEFINED IN SUB-SECTION 15 (B) OF SECTION 144C OF THE ACT. UNDISPUTEDLY, THE ASSESSEE IN THE PRESENT APPEAL IS AN ELIGIBLE ASSESSEE AS DEFINED UNDER SUB-SECTION 15(B)(I) OF SE CTION 144C OF THE ACT. 6. AS PER PROCEDURE LAID DOWN U/S. 144C OF THE ACT, AGAIN ST DRAFT ASSESSMENT ORDER, THE ASSESSEE WAS ENTITLED TO FILE OBJEC TIONS WITHIN A PERIOD OF 30 DAYS BEFORE THE DRP. IT IS ONLY AFTER THE OBJECTIONS ARE DECIDED BY DRP, THAT THE ASSESSING OFFICER PROCEEDS WITH T HE FINAL ASSESSMENT. IN THE PRESENT CASE FINAL ASSESSMENT ORDER WAS PASSED BY THE ASSESSING OFFICER IN THE FIRST INSTANCE ITSELF, THUS, DEPRIVIN G THE ASSESSEE OF THE OPPORTUNITY TO FILE OBJECTIONS BEFORE THE DRP. THE ASSESSMENT ORDER PASSED U/S. 143(3) IS IN VIOLATION OF PROV ISIONS OF 5 ITA NO. 853/PUN/2015, A.Y. 2007-08 SECTION 144C OF THE ACT AND HENCE, HAS BEEN RIGHTLY QUA SHED BY THE FIRST APPELLATE AUTHORITY. 7. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF INT ERNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT (SUPRA) HAS HELD : 5. . A DRAFT ASSESSMENT ORDER UNDER SECTION 144C(1) OF T HE ACT IS MANDATED BEFORE THE ASSESSING OFFICER PASSES A F INAL ORDER UNDER SECTION 143(3) OF THE ACT IN CASE OF ELIGIBLE ASSES SEE. A DRAFT ASSESSMENT ORDER PASSED UNDER SECTION 144C(1) OF THE ACT BESTO WS CERTAIN RIGHTS UPON AN ELIGIBLE ASSESSEE SUCH AS TO APPROACH THE D RP WITH ITS OBJECTIONS TO SUCH A DRAFT ASSESSMENT ORDER. THIS I S FOR THE REASON THAT AN ELIGIBLE ASSESSEE'S GRIEVANCE CAN BE ADDRESSED B EFORE A FINAL ASSESSMENT ORDER IS PASSED AND APPELLATE PROCEEDING S INVOKED BY IT. HOWEVER, THESE SPECIAL RIGHTS MADE AVAILABLE TO ELI GIBLE ASSESSEE UNDER SECTION 144C OF THE ACT ARC RENDERED FUTILE, IF DIR ECTLY A FINAL ORDER UNDER SECTION 143(3) OF THE ACT IS PASSED WITHOUT BEING P RECEDED BY DRAFT ASSESSMENT ORDER. 6. IN THE ABOVE VIEW, THE ASSESSMENT ORDER DATED 23 RD MARCH, 2015 PASSED BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2012-13 IS COMPLETELY WITHOUT JURISDICTION. THIS IS SO AS IT H AS NOT BEEN PRECEDED BY A DRAFT ASSESSMENT ORDER. HENCE, THE FOUNDATION/BAS IC ORDER VIZ. THE ASSESSMENT ORDER DATED 23 RD MARCH. 2015 IS SET ASIDE AND QUASHED AS BEING WITHOUT JURISDICTION. CONSEQUENT ORDERS PASSE D ON RECTIFICATION APPLICATION AS WELL AS ON PENALTY ARE ALSO QUASHED AND SET ASIDE BEING UNSUSTAINABLE. 8. THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF M/S. ZUAR I CEMENT LTD. VS. ACIT (SUPRA) UNDER SIMILAR CIRCUMSTANCES, W HERE THE ASSESSING OFFICER HAD PASSED THE FINAL ASSESSMENT ORDER IN VIOLATION OF PROVISIONS OF SECTION 144C WITHOUT PASSING THE DRAFT ASSE SSMENT ORDER HELD THE ORDER WITHOUT JURISDICTION, NULL, VOID AND UNENFORCEABLE. 6 ITA NO. 853/PUN/2015, A.Y. 2007-08 SIMILAR VIEW HAS BEEN TAKEN BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASES OF SOKTAS INDIA (P.) LTD. VS. ACIT (SUP RA) AND AGFA INDIA (P.) LTD. VS. ACIT (SUPRA). 9. THUS, WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER . ACCORDINGLY, THE SAME IS UPHELD AND THE APPEAL OF THE DEP ARTMENT IS DISMISSED BEING DEVOID OF ANY MERIT. 10. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 13 TH DAY OF APRIL, 2017. SD/- SD/- ( / ANIL CHATURVEDI) ( ! / VIKAS AWASTHY) ' ! / ACCOUNTANT MEMBER # ! / JUDICIAL MEMBER ' / PUNE; $% / DATED : 13 TH APRIL, 2017 RK , - ./& 0&+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. & & ' () / THE CIT(A)-13, PUNE 4. & & ' / THE CIT-1, PUNE 5. *+ ,- , & ,- , . ./ , ' / DR, ITAT, B BENCH, PUNE. 6. +01 23 / GUARD FILE // // TRUE COPY// &'4 / BY ORDER, 5 %6 / ASSISTANT REGISTRAR, & ,- , ' / ITAT, PUNE