IPG DXTRA India Private Limited, Bangalore V. National Faceless Assessment Centre, Delhi

ITTPA 967/BANG/2022

AI Insights

M/s. IPG DXTRA India Pvt. Ltd. appealed against the final assessment order for the assessment year 2017-18, which included a significant transfer pricing adjustment. The primary contention was that the final assessment order was passed beyond the statutory time limit prescribed under section 144C(13) of the Income-tax Act, 1961. The Tribunal examined the timelines of the DRP order and the subsequent final assessment order, finding that the latter was indeed passed beyond the permissible period. Consequently, the Tribunal did not address the substantive issues related to transfer pricing adjustments, as the procedural error was sufficient to annul the assessment order.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 302924 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 18-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 05-12-2022
• Assessment Year: misc
• Appeal Filed On: 28-09-2022
• Other Referred Cases: Adobe Systems India Pvt. Ltd. Vs. Deputy Commissioner of Income-tax Circle 5(1)(1) \\u2013 Delhi ITAT, M/s. Dentsply India (P) Ltd. Vs. ITO Ward 10(1) \\u2013 Delhi ITAT, IHG IT Services (India) Pvt. Ltd. Vs. Deputy Commissioner of Income-tax Circl-2 \\u2013 Delhi ITAT, Dabur Pharma Ltd. (now known as Fresenius Kabi Oncology Ltd.) Vs. Deputy Commissioner of Income-tax, Circle -10(1) \\u2013 Delhi ITAT, M/s. Envestnet Asset Management (India) Pvt. Ltd. Vs. ACIT Circle-1(1) \\u2013 Cochin ITAT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Competent authority
• Section: 154; 143(3); 153; 92CA

Judgement Text

IT(TP)A No.967/Bang/2022 M/s. IPG DXTRA India Pvt. Ltd., Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “C’’ BENCH: BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER IT(TP)A No.967/Bang/2022 Assessment Year: 2017-18 IPG DXTRA India Pvt. Ltd. Indiquebe The Leela Galerie 6 th Floor, 23, Old Airport Road Kodihalli Bangalore Bangalore North Bangalore 560 008 PAN No.AAACC6873A Vs. Deputy Commissioner of Income-tax Circle-3(1)(1) Bangalore APPELLANT RESPONDENT Appellant by : Shri Ajit Jain, A.R. Respondent by : Shri Arun Kumar, D.R. Date of Hearing : 06.12.2022 Date of Pronouncement : 19.12.2022 O R D E R PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER: This is an appeal filed by the assessee against assessment order passed u/s 143(3) r.w.s. 144C(13) r.w.s. 144B of the Act dated 31.3.2022 on the following grounds of appeal:- The grounds stated here under are independent of, and without prejudice to one another.- IT(TP)A No.967/Bang/2022 M/s. IPG DXTRA India Pvt. Ltd., Bangalore Page 2 of 8 General 1. On the facts and in the circumstances of the case and in law, the learned Transfer Pricing Officer (`TP0') and the learned Assessing Officer (`A0') under the directions of the Hon'ble Dispute Resolution Panel (`DRP') erred in making an adjustment of INR 10,90,51,224 to the Appellant's total income based on the provisions of Chapter X of the Income-tax Act, 1961 (`the Act'). Legal Grounds - Final Assessment Order barred by limitation: 2. On the facts and in the circumstances of the case and in law, the final assessment order dated 31" March 2022 (received by the Appellant on 17th August 2022) passed by the Ld. AO under section 143(3) read with section 144C(13) read with section 144B of the Act is barred by limitation since it is passed/issued beyond the maximum time limit prescribed under section 144C(13) of the Act and hence is liable to be quashed/annulled as time barred. 3. On the facts and in the circumstances of the case and in law, the final assessment order dated 31 Mar 2022 (received by the Appellant on 17th August 2022) passed by the Id. assessing officer (AO) under section 143(3) read with section 144C(13) read with section 144B of the Act is not in accordance with section 144C(13) of the Act and hence is liable to be quashed/annulled 4. On the facts and in the circumstances of the case and in law, the final assessment order dated 31 Mar 2022 (received by the Appellant on 17th August 2022) passed by the Id. assessing officer (AO) under section 143(3) read with section 144C(13) read with section 144B of the Act is bad in law as the same is passed as a draft assessment order. Assistance in Public Relations (`PR') — INR 10,90,51,224. Henceforth all the grounds below are without prejudice to Ground no. 2 above: • 5. On facts and circumstances of the case and in law, the learned TPO and the learned AO under the directions of Hon'ble DRP have erred in rejecting the benchmarking analysis undertaken by the Appellant using Comparable Uncontrolled Price (CUP) method, as the most appropriate method without giving any cogent reason and adopting Transactional Net Margin Method (TNMM) to determine the arm's length price (ALP). 6. On facts and circumstances of the case and in law, the learned TPO and the learned AO under the directions of Hon'ble DRP have erred in considering the public relations (PR) service rendered by the Appellant to its associated enterprises (AEs) to be in the nature of marketing support services (MSS) 7. On facts and circumstances of the case and in law, the learned TPO and the learned AO under the directions of Hon'ble DRP have erred in selecting companies as comparables, without considering the fact that their business, and functions IT(TP)A No.967/Bang/2022 M/s. IPG DXTRA India Pvt. Ltd., Bangalore Page 3 of 8 undertaken, asset employed and risks assumed i.e., FAR profile, is not comparable to that of the Appellant, thereby leading to inappropriate henchmarking analysis 8. On the facts and circumstances of the case and in law, the learned TPO and the learned AO under the directions of Hon'ble DRP erred in calculating Transfer Pricing addition by considering the entity level Operating Profit / Operating cost (OP/OC) margins of the Appellant and not restricting the Transfer Pricing adjustment to the value of internaitional transactions of Assistance in PR Services. 9. On facts and circumstances of the case and in law, the learned TPO and the learned AO under the directions of Hon'ble DRP have erred in inappropriately characterizing the Appellant to be a captive / risk insulated service provider, even though the Appellant's characterization as described in the transfer pricing study report (TPSR) is that of a normal risk service provider. 10. On the facts and circumstances of the case and in law, the learned AO crrcd in not giving effect in the Final Assessment Order with respect to the rectified Transfer Pricing Order dated 31 January 2022 passed by the learned TPO under section 154 of the Act and thereby reducing the Transfer Pricing addition made from INR 10,90,51,224 to INR 5,24,53,139. 11. On facts and circumstances of the case and in law, the learned TPO, Hon'ble DRP and the Id. AO have erred in not appreciating the corroborative analysis undertaken by the Appellant whereby audited segmental working is submitted under the TNMM analysis. Other Grounds 12. On the facts and circumstances of the case and in law, the learned AO has erred in initiating penalty proceedings u/s. 270A of the Act. 1.1 The assessee has raised as many as 12 grounds of appeal but he argued only on the ground Nos.2 to 4 which are legal in nature and are reproduced as under: Legal Grounds - Final Assessment Order barred by limitation: 2. On the facts and in the circumstances of the case and in law, the final assessment order dated 31" March 2022 (received by the Appellant on 17th August 2022) passed by the Ld. AO under section 143(3) read with section 144C(13) read with section 144B of the Act is barred by limitation since it is passed/issued beyond the maximum time limit prescribed under section 144C(13) of the Act and hence is liable to be quashed/annulled as time barred. 3. On the facts and in the circumstances of the case and in law, the final assessment order dated 31 Mar 2022 (received by the Appellant on 17th IT(TP)A No.967/Bang/2022 M/s. IPG DXTRA India Pvt. Ltd., Bangalore Page 4 of 8 August 2022) passed by the Id. assessing officer (AO) under section 143(3) read with section 144C(13) read with section 144B of the Act is not in accordance with section 144C(13) of the Act and hence is liable to be quashed/annulled 4. On the facts and in the circumstances of the case and in law, the final assessment order dated 31 Mar 2022 (received by the Appellant on 17th August 2022) passed by the Id. assessing officer (AO) under section 143(3) read with section 144C(13) read with section 144B of the Act is bad in law as the same is passed as a draft assessment order. 2. The brief facts of the case are that the assessee company is engaged in public relation consultancy. It has filed its return of income on 8.11.2018 declaring nil income. The case was selected for scrutiny and statutory invoices were issued to the assessee. From the response submitted by the assessee, it was noticed that the assessee has entered into international transactions with its associated enterprises for Rs.11,79,02,059. Thereafter, after taking approval from the competent authority, the case was referred to the Transfer Pricing Officer. The Ld. TPO passed his order on 13.1.2021 for proposing the assessment u/s 92CA of the Act of Rs.10,90,51,224/-. The AO passed a draft assessment order u/s 144C of the Act on 26.3.2021 and computed the income at Rs.10,92,51,880/-. The assessee filed objection before the Ld. DRP. The Ld. DRP after considering the draft assessment order as well as objection filed by the assessee, they passed order on 28.12.2021. The assessee also filed application u/s 154 of the Act which was disposed of on 31.1.2022. the AO passed order u/s 143(3) r.w.s. 144C(13) r.w.s. 144B of the Act on 31.3.2022. The AO after accepting the rectification application u/s 154 of the Act dated 9.1.2022 rectified the mistake and relief was granted to the assessee to the tune of Rs.5,65,98,085/- and finally the addition u/s 92CA of the Act stands at Rs.5,24,53,139/-. Aggrieved from the order of the above, the assessee filed an appeal before us. IT(TP)A No.967/Bang/2022 M/s. IPG DXTRA India Pvt. Ltd., Bangalore Page 5 of 8 2.1 At the outset of hearing, the Ld. A.R. submitted that the order passed by the AO u/s 144C(13) r.w.s. 144B of the Act is barred by limitation because it was not passed within the due date as per section 144C(13) of the Act. He submitted that a letter has been received regarding furnishing of date of despatch of DRP directions issued u/s 144(C5) of the Act dated 23.11.2022. He referred to the letter which is as under: IT(TP)A No.967/Bang/2022 M/s. IPG DXTRA India Pvt. Ltd., Bangalore Page 6 of 8 2.2 He further submitted that at paper book page 3, it was sent through e-mail address “[e-mail]” and sent time to the recipient is 28.12.2021 at 8.34.33 PM which was delivered on 28.12.2021 at 8.34.49 PM. It clearly shows that the order was received by the jurisdictional AO before 31.12.2012 and accordingly, the order should have been passed by 31.1.2022, whereas the order has been passed by the AO on 31.3.2022, which is barred by limitation. Therefore, the order passed by the AO is Non-est in the eyes of law. In this regard, he relied on the following case laws in support of his claim: 1. Adobe Systems India Pvt. Ltd. Vs. Deputy Commissioner of Income-tax Circle 5(1)(1) – Delhi ITAT – (SA No.121/Del/2022 ( in ITA No.928/Del/2022) 2. M/s. Dentsply India (P) Ltd. Vs. ITO Ward 10(1) – Delhi ITAT - (ITA No.4387/Del/2010) 3. IHG IT Services (India) Pvt. Ltd. Vs. Deputy Commissioner of Income-tax Circl-2 – Delhi ITAT – (ITA No.1019/Del/2015) 4. Dabur Pharma Ltd. (now known as Fresenius Kabi Oncology Ltd.) Vs. Deputy Commissioner of Income-tax, Circle -10(1) – Delhi ITAT – (ITA No.5326/Del/2013) 5. M/s. Envestnet Asset Management (India) Pvt. Ltd. Vs. ACIT Circle-1(1) – Cochin ITAT (IT(TP)A No.244/Coch/2014) 3. The Ld. D.R. relied on the order of lower authorities. 4. We have heard the rival submissions and perused the materials available on record. After hearing both the sides perused the entire materials available on records and order of the authorities below. We observe from the document submitted by the Ld. A.R. that the order was passed by the Ld. DRP on 28.12.2021, which was sent through speed post also as cited (supra) and it was also sent through IT(TP)A No.967/Bang/2022 M/s. IPG DXTRA India Pvt. Ltd., Bangalore Page 7 of 8 e-mail to the recipient on 28.12.2021 at 3.34.33 PM, which was also delivered to the recipient on 28.12.2021 at 3.34.49 PM. The order has been passed under the National Faceless Scheme. Accordingly, we uphold that the order was delivered to the concerned AO before 31.12.2021. Therefore, as per the provisions of the Act, the AO should have been passed order within one month from the end of the month in which the order has been received as per section 144C(13) of the Act. Since in this case the AO has passed order on 31.3.2022, which is beyond the period prescribed as per the Act. Therefore, the order passed by the AO is non-est in the eyes of law. A similar issue has been decided by the coordinate bench of the Tribunal in the case of IT(TP)A No.977/Bang/2022 dated 5.12.2022. The AO should have passed finial assessment order, notwithstanding anything to the contrary contained in section 153 or 153B of the Act. Accordingly, grounds raised by the assessee are allowed. 5. Since the ld. AR did not argue other grounds on merits, the same are kept open and not adjudicated. 6. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 19 th Dec, 2022 Sd/- (George George K.) Judicial Member Sd/- (Laxmi Prasad Sahu) Accountant Member Bangalore, Dated 19 th Dec, 2022. VG/SPS IT(TP)A No.967/Bang/2022 M/s. IPG DXTRA India Pvt. Ltd., Bangalore Page 8 of 8 Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.