2018 (12) TMI 1741 - AT - Income Tax

TP Adjustment - no conformity with the directions issued by the Hon ble DRP u/s 144C(5) - assessee pointed out that final order of assessment does not incorporate the directions of the DRP and was a verbatim repetition of the draft order of assessment dated 29.3.2016 - HELD THAT - As decided in M/S SOFTWARE PARADIGMS INFOTECH PVT. LTD 2018 (1) TMI 1550 - ITAT BANGALORE instead of passing the final order of assessment as required by law, the AO passed the impugned final order of assessment dated 17/1/2014 u/s 143(3) r.w.s 92CA of the Act; which, as contended by the id AR, is identical to the draft order of assessment passed on 14/3/2013 by only incorporating this TPO's proposals and , thereby evidently giving the DRP's mandatory directions issued u/s 144C(5) of the Act a complete go-by. It is factually established that the AO in the final order of assessment dated 17/1/2014 has not given effect to or carried out the binding directions of the DRP as required u/s 144C(10) within the time specified u/s 144C(13) of the Act; which is a clear violation of the binding provisions of sec. 144C(10) and (13) of the Act. Therefore, in our considered opinion, the conduct of the AO/TPO in passing the impugned final order of assessment dated is a clear case of defiance and disregard to the binding directions of the higher authorities, i.e, the DRP in the case on hand. Order of assessment is quashed on the ground that the same is not in conformity with the provisions of section 144C of the Act and further on the ground that the time for passing the final order of assessment is barred by time - Appeal of the assessee is allowed.

Summary

Issues:
- Delay in filing the appeal by the assessee.
- Compliance with the directions of the Dispute Resolution Panel (DRP) under section 144C(5) of the Income Tax Act.
- Validity of the final order of assessment passed by the Assessing Officer (AO) in relation to transfer pricing adjustments.

Analysis:
1. Delay in filing the appeal: The assessee appealed against the final order of assessment dated 31.01.2017 passed by the ACIT, Circle 3(1)(1), Bangalore for assessment year 2012-13. A delay of 7 days in filing the appeal was explained by the absence of the Managing Director. The Tribunal accepted the reasons for the delay and condoned it.

2. Compliance with DRP directions: The main issue revolved around ground No.2 raised by the assessee in its appeal, challenging the conformity of the AO's order with the directions of the DRP under section 144C(5) of the Act. The DRP had issued directions on 28.12.2016, but the final order of assessment dated 31.01.2017 did not incorporate these directions. The assessee argued that the final order should have been in accordance with the DRP's directions within the specified time frame, as per section 144C of the Act.

3. Validity of the final order: The Tribunal, citing a similar case, quashed the final order of assessment due to the AO's failure to comply with the DRP's binding directions within the specified time. The Tribunal emphasized that passing an order not in conformity with the DRP's directions is a violation of the Act. The Tribunal held that the impugned order was unsustainable in law and quashed it. The Tribunal also noted that other issues raised by both parties did not require consideration due to the nullity of the assessment order.

4. Precedent and Conclusion: The Tribunal rejected the argument that a decision based on concession by the Assessee in a different case could serve as a precedent. The Tribunal allowed the appeal of the assessee, emphasizing the nullity of the assessment order due to non-compliance with the DRP's directions. The decision was pronounced on December 31, 2018, in favor of the assessee.