2011 (2) TMI 1238 - HC - Income Tax

Whether the petitioner is an eligible assessee - assessee is engaged in the business of manufacture of Aluminium Profiles. The details of international transactions in terms of section 92B of the Act between the assessee and its Associate Enterprise are given in Form 3CEB. Relevant details regarding international transactions were produced by the assessee and are kept on record. After discussion and based on records produced, no adjustment is being made to the arm s length price of the transactions Held that - Plain reading of clause (b) of sub-section (15) of section 144C would show that an assessee can be stated to be an eligible assessee as referred to in sub-section (1) of section 144C in whose case variation referred to in the said sub-section arises as a consequence of order of Transfer Pricing Officer passed under sub-section (3) of section 92CA. Petitioner cannot be stated to be an eligible assessee as defined in clause (b) of sub-section (15) of section 144C of the Act. Procedure for issuance of draft order calling for his objection and taking further steps as laid down under section 144C therefore, would not apply, petition is disposed of

Issues:
Challenge to communication regarding draft assessment order under section 143(3) read with section 92CA(3) of the Income-tax Act for assessment year 2007-08. Main challenge based on petitioner not being an "eligible assessee" as defined in section 144C(15) of the Income-tax Act, questioning the jurisdiction of issuance of draft order and inviting objections. Determination of whether the petitioner qualifies as an "eligible assessee" under section 144C.

Analysis:

The petitioner challenged a communication dated 30-12-2010 containing a draft assessment order under section 143(3) read with section 92CA(3) of the Income-tax Act for the assessment year 2007-08. The petitioner argued that as a non-"eligible assessee" under section 144C(15), the procedure for issuing the draft order and inviting objections should not apply. The petitioner contended that the provisions of section 92C and various clauses of section 144C were not applicable to the case, thus questioning the jurisdiction of the notice and draft order. However, the department's counsel argued that the petitioner did not raise objections to the communication, emphasizing that the opportunity under section 144C was an additional chance for representation against a draft order. The central issue was whether the petitioner qualified as an "eligible assessee" under the law.

Section 144C of the Income-tax Act outlines a specific procedure to be followed in cases where there is a variation in the income or loss returned that is prejudicial to the assessee's interests due to a reference made in section 92CA of the Act. The definition of "eligible assessee" under section 144C(15) includes a person in whose case the variation arises as a consequence of the Transfer Pricing Officer's order under section 92CA(3) or any foreign company. The court examined the order passed by the Assistant Commissioner of Income-tax, which indicated that for the relevant assessment year, no income variation occurred due to the Transfer Pricing Officer's order under section 92CA(3). Consequently, the petitioner did not meet the criteria to be classified as an "eligible assessee" under section 144C(15), and thus, the procedure for issuing the draft order and inviting objections would not be applicable.

In light of the above findings, the court concluded that the petitioner did not qualify as an "eligible assessee" as defined in section 144C(15) of the Income-tax Act. Therefore, the procedure for issuing the draft order and inviting objections under section 144C did not apply to the petitioner's case. The court held that the petition could be closed based on this determination. The court did not address the contentions regarding the extended time-limit provided in section 153 for cases under section 92CA, leaving it open for the parties to pursue remedies available under the law. Ultimately, the petition was disposed of with these observations.

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