M/S.APOLLO TYRES LTD,COCHIN V. THE PRINCIPAL COMMISSIONER OF INCOMETAX, COCHIN

ITTPA 44/COCH/2018

AI Insights

The case involves Appollo Tyres Ltd. appealing against an assessment order issued by the DCIT, Corporate Circle 1(1), Kochi, for the assessment year 2011-12. The primary legal issue was the validity of the assessment order dated 28.12.2017, which was challenged on the grounds that it was not preceded by a draft assessment order as required under Section 144C(1) of the Income Tax Act, 1961. The Tribunal referenced a series of precedents where similar procedural omissions led to the quashing of assessment orders. The Tribunal's decision was influenced by the mandatory procedural requirements under Section 144C and the judicial interpretations that such omissions are incurable defects.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 474682 (ITAT-COCHIN)
• Duration Of Justice: 6 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 23-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 14-02-2018
• Other Referred Cases: Nokia India v CIT, JCB India Ltd. V Deputy Commissioner of Income Tax, Asst.Commissioner of Income Tax v Vijay Television Pvt. Ltd., Turner International India Pvt. Ltd. V Deputy Commissioner of Income Tax, Commissioner of Income Tax v C-Sam (India) Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S. PANDIAN
• Assessee Lawyers: JOSEPH MARKOS
• Keywords: Set aside; Transfer pricing; Period of limitation; Initiation of penalty proceedings
• Section: 143(3); 153; 92CA; 144C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN Before Shri Satbeer Singh Godara, Judicial Member and Shri Amarjit Singh, Accountant Member IT(TP)A No. 44/Coch/2018 (Assessment Year: 2011-12) Appollo Tyres Ltd. 3rd Floor, Areekal Mansion Nr. Manorama Junction Panampilly Nagar Kochi 682036 [PAN: AAACA6990Q] vs. DCIT, Corporate Circle 1(1) Kochi (Appellant) (Respondent) Appellant by: Shri Joseph Markos, Advocate Respondent by: Dr. S. Pandian, CIT-DR Date of Hearing: 23.08.2024 Date of Pronouncement: 23.10.2024 O R D E R Per Bench This assessee’s appeal, for the assessment year 2011-2012, arise against the order of the Disputes Resolution Panel-2 [“DRP’’], Bengaluru, Bengaluru’s directions F.No.23/Setaside/DRP-2/BANG/2017-18, dated 27.12.2017 u/sec.144C(5) of the Income Tax Act, 1961 (in short the \"Act\"). Heard both the parties. Case file perused. 2. It emerges at the outset that the first and foremost issue which arises for our apt adjudication herein is that of validity of the impugned section 143(3) r.w.s. 144C r.w.s. 147 r.w.s. 254 assessment dated 28.12.2017 itself once the learned 2 ITA No. 44/Coch/2018 Appollo Tyres Ltd. Assessing Officer had not fianlised the same by passing a “draft” assessment order, in compliance of the tribunal’s remand directions dated 10.01.2017. This clinching aspect stands un-rebutted by the department side. That being the case, we find that the hon'ble jurisdictional high court’s detailed judgement in assessee’s case itself for AY 2009-10 has decided the very issue against the department as under: - 6. In the first round the assessee followed the legal procedure and challenged before the Tribunal the final assessment order dated 31.12.2013 (Annexure-C). The Tribunal remitted a few issues to the Assessing Officer through Annexure-D order. The order made by the Tribunal to the procedure required to be followed is draft assessment order on the proposed variation and receive objections, if any, of the assessee and subject to the directives the Dispute Resolution Panel may issue in this behalf issue revised final assessment order in matters covering Section 92B; 92CA etc. Admittedly the assessment is to be made under Section 144C of the Act. The Assessing Officer does not have jurisdiction to make revised final assessment order without recourse to DRP. The omission in re- doing the procedure under Section 144C is not a curable defect. The omission is completely illegal, without jurisdiction and an incurable defect, and resultantly there is no waiver of the legal objections available to the assessee against the order in Annexure E dated 2.3.2016. He explains by arguing that the remedy under Section 253(1)(d) of appeal before the Tribunal is available only when the assessment order is made in compliance with the directions issued by DRT. The filing of appeal before the Commissioner (CIT) Appeals does not bar the grounds raised before the Tribunal in C.O.No.57/Coch/2018. He relies on the following citations: Nokia India v CIT4, SLP order of Supreme Court dismissing SLP5 , JCB India Ltd. V Deputy Commissioner of Income Tax6 Asst.Commissioner of Income Tax v Vijay Television Pvt. Ltd.7 , Turner International India Pvt. Ltd. V Deputy Commissioner of Income Tax8 Commissioner of Income Tax v C-Sam (India) Pvt. Ltd.9 He prays for answering the issue in favour of assessee and against revenue. 7. This Court has referred to the admitted dates in the orders made by the Assessing Officer in the first round etc. and also the revised final assessment order made in Annexure-E for the purpose of appreciating the legal objection raised by the assessee and now the grounds canvassed by the revenue. The citations relied on by the assessee are to the effect that with the interdiction of assessment order made under Section 143(3) read with Section 144C(5) & (13) of the Act by the Tribunal, the matter is remitted to A.O. The issues revisit the table of Assessing Officer for a decision in the same manner in which the first final assessment order was made by the Assessing Officer. In cases to which Section 92CA is attracted, the assessment could be completed only by following the procedure under Section 144C of the Act. We do not prefer to burden our judgment with reproducing all the portions relied on by the assessee from the decisions cited at the Bar, except the view taken by the Delhi High Court in Nokia India (P) 2021:KER:36435 ITA No.248 of 2019 12 Ltd. v Additional Commissioner of Income Tax and the Special Leave Petition filed against the said decision in SLP (Civil) Diary No. 7302/2018: ---------------------------- 4 (2018) 98 Taxmann.com 373 (Delhi) 5 (2018) 295 Taxmann 91 (SC) 6 (2017) 398 ITR 189 (Del) 7 (2018) 407 ITR 642 (Mad) 3 ITA No. 44/Coch/2018 Appollo Tyres Ltd. 8 (2017) 398 ITR 177 (Del) 9 (2017) 398 ITR 182 (Guj) 2021 i) Nokia India Pvt. Ltd. V Addl. Commissioner of Income Tax \"By the order dated 30th August 2013, the Assessee's appeal was allowed by the Income Tax Appellate Tribunal (ITAT). The matter concerning transfer pricing addition on account of Advertising, Marketing and Promotion ('AMP') expenses was remanded to the TPO/AO. The TPO then passed a fresh order on remand on 28th October 2016. When the matter went before the AO thereafter, the petitioner, by the letter dated 7th December 2016, informed the AO that the assessment proceedings had become time-barred by virtue of Section 153 (2A) of the Act. However, without disposing of that objection, the AO passed the impugned final assessment order dated 28th March 2017. The principal ground of challenge by the petitioner is that the impugned final order of the AO has been passed in violation of Section 144C of the Act inasmuch as it was not preceded by a draft assessment order as was mandatory in terms of Section 144C(1) of the Act. The second ground is that the impugned order was passed beyond the period of limitation. The principal ground of challenge should succeed as it is squarely covered in favour of the Assessee and against the Revenue by the decision dated 17th May 2017 passed by this Court in Turner International India (P) Ltd. V Dy.CIT [2017] 82 Taxmann.com 125 (Delhi). There, the Court categorically held that the mandatory requirements under Section 144C(1) of the Act had to be met even where the TPO had passed the order int he second round on remand by the ITAT. This is also the view of the Gujarat High Court in CIT v C-Sam (India) (P) Ltd. [2017] 84 Taxmann.com 261. By a separate order passed in JCB India Ltd. V Dy.CIT [2017] 85 Taxmann.com 155/251 Taxman 143 (Delhi), the Court followed its decision in Turner International India (P) Ltd. (supra) and quashed the final assessment order which was challenged in those cases. Once there is a clear order of setting aside of an assessment order with the requirement of the AO/TPO to undertake a fresh exercise of determining the arm's length price, the failure to pass a draft assessment order, would violate Section 144C(1) of the Act result. This is not a curable defect in terms of Section 292B of the Act as held by this Court in its decision dated 17th July, 2015 in ITA No.275/2015 Pr.CIT v Citi Financial Consumer Finance India Pvt. Ltd. In view of the fact that the Court is accepting the first ground of challenge raised by the Assessee as regards violation of Section 144C, the Court is not examining the ground of limitation. For all of the aforementioned reasons, the writ petition is allowed and the impugned final assessment order dated 28th March 2017 passed by the AO/TPO and the consequent orders passed thereafter, including initiation of penalty proceedings and penalty orders, are hereby set aside. The application is disposed of.\" ii. Additional Commissioner of Income Tax v Nokia India (P) Ltd. \"Once there is a clear order of setting aside of an assessment order with the requirement of the AO/TPO to undertake a fresh exercise of determining the arm's length price, the failure to pass a draft assessment order, would violate Section 144C(1) of the Act result. This is not a curable defect in terms of Section 292B of the Act as held by this Court in its decision dated 17th July 2015 in ITA No.275/2015 Pr.CIT v Citi Financial Consumer Finance India Pvt. Ltd. In view of the fact that the Court is accepting the first ground of challenge raised by the assessee as regards violation of Section 144C, the Court is not examining the ground of limitation. 4 ITA No. 44/Coch/2018 Appollo Tyres Ltd. For all of the aforementioned reasons, the writ petition is allowed and the impugned final assessment order dated 28th March 2017 passed by the AO/TPO and the consequent orders passed thereafter, including initiation of penalty proceedings and penalty orders are hereby set aside. The application is disposed of.\" 8. The decisions relied on by the revenue are completely distinguishable. The nature of objection and the timing of objection considered in the reported decisions are completely distinguishable. 9. On the contrary, the decisions relied on by the assessee deal with circumstances similar to the case on hand and the ratio laid down arises under Section 143(3) read with Section 144C of the Act. Hence we do not propose to undertake the narrative of explaining how the decisions relied on by the revenue are distinguishable, both in fact and law. It is suffice to note that the decisions are nowhere near the point. 10. The requirement of re-doing the same procedure upon remand to the Assessing Officer under Section 144C is held to be mandatory and omission in following the procedure is held to be an incurable defect. The revenue does not dispute the omissions pointed out in this behalf by the Tribunal. The filing of appeal before the Commissioner of Income Tax (Appeals) cannot be treated as a waiver of an objection available to the assessee in this behalf under Sec.144C etc. Section 253(1)(d) provides for appeal only when order has been made under Section 143(3) read with Section 144C of the Act. Annexure-E order is an order made under Section 143(3) of the Act and not a final revised assessment order made in compliance with the directions issued by DRP. The assessee, hence was justified in moving the CIT(Appeals). This Court has difficulty in accepting the argument of the revenue to sustain the order in Annexure-E. The arguments have been confined to the points considered above and we are of the view that the Tribunal has correctly considered the objections of assessee against Annexure-E order and recorded the findings which resulted in the order under appeal. The order of Tribunal is to be understood in the background of what is considered by the Assessing Officer in Annexure-E and what was not the subject matter before the Assessing Officer, upon the remand in the first round of litigation cannot and could not be understood as made by the Tribunal. We are in agreement with the argument of Mr.Joseph Markos that Annexure-E is limited only to the issues remitted by the Tribunal in Annexure D order dated 21.11.2014. For the above reasons and the discussion the questions are answered in favour of the assessee and against the revenue. IT Appeal fails and accordingly dismissed.” 3. We thus see no reason to adopt a different view so far as validity of the impugned assessment is concerned in the assessment year before us, i.e. AY 2011- 12. The assessee succeeds in its instant appeal IT(TP)A 44/Coch/1218 in very terms as the impugned assessment dated 28.12.2017 stands quashed. All other pleadings on merits stand rendered academic. 5 ITA No. 44/Coch/2018 Appollo Tyres Ltd. 4. This assessee’s appeal is allowed. Order pronounced in the open court on 23rd October, 2024 under Rule 34 of The Income Tax (Appellate Tribunal) Rules, 1963. Sd/- Sd/- (Amarjit Singh) Accountant Member (Satbeer Singh Godara) Judicial Member Cochin, Dated: 23rd October, 2024 n.p. Copy to: 1. The Appellant 2. The Respondent 3. The Pr. CIT concerned 4. The Sr. DR, ITAT, Cochin 5. Guard File By Order Assistant Registrar ITAT, Cochin "