9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (8) TMI 1157 - AT - Income TaxCapacity Utilization Adjustment - HELD THAT - As relying on own case 2019 (6) TMI 663 - ITAT PUNE we set aside this issue to the file of the Assessing Officer/ Transfer Pricing Officer and direct that the procedure led out in the order of the Tribunal be applied in working out the adjustment on account of capacity utilization. Comparable selection - HELD THAT - We have already examined and directed regarding issue of capacity utilization to be done by the TPO/AO after following the decision of the Co-ordinate Bench of the Tribunal, Pune in assessee s own case. Therefore, that issue is set aside to the file of Assessing Officer/ TPO. In view of the matter, we upheld the TPO s observation in excluding three comparables i.e. Force Motors Limited, Hindustan Motors Limited and Kerala Automobiles Limited and accepting only Mahindra Mahindra Limited and Tata Motors Limited. Violation of Section 144C - along with this draft assessment order, the AO had issued notice of demand u/s.156 and penalty notice u/s.274 r.w.s.271(1)(c) - HELD THAT - As decided in REHAU POLYMERS PVT. LTD. AND VICE-VERSA 2017 (8) TMI 1294 - ITAT PUNE undoubtedly, the said assessment was framed as draft assessment but in actual fact, the Assessing Officer had made the assessment in the hands of assessee by not only assessing the income but also determining the demand payable. In the case of draft assessment order, proposed additions are to be made and the assessee is show caused either to accept the same or file the objections before the DRP. However, in the present facts, there was not a proposal for making addition but final assessment order was passed. Undoubtedly, the AO said that he is passing draft assessment order and the assessee was also at liberty to file the objections before the DRP or accept the same, but in actual fact, the order passed by the AO was complete assessment order which is not envisaged under section 143(3) r.w.s. 144C. Accordingly, we hold that draft assessment order passed in the case is invalid in law. Thus, the Cross Objection No.2 raised by the assessee is allowed.
Issues Involved:
1. Capacity Utilization Adjustment 2. Inclusion of Comparables 3. Validity of Assessment Order under Section 144C Issue-Wise Detailed Analysis: 1. Capacity Utilization Adjustment: The assessee argued that the Ld. Commissioner of Income Tax (Appeals) had correctly allowed the "Capacity Utilization Adjustment." The assessee's capacity utilization during the financial year 2004-05 was 49.53%, compared to the average 69.41% of its comparables, leading to a lower net profit due to under-absorption of fixed costs. The assessee proposed an adjustment to the operating profit to account for this under-absorption. The Ld. Commissioner of Income Tax (Appeals) referenced several rulings, including Global Vantedge (P) Ltd. Vs. DCIT and E-Gain Communications Pvt. Ltd., supporting the need for adjustments to ensure comparability. The Tribunal upheld this view, directing the Assessing Officer/Transfer Pricing Officer to follow the procedure outlined in the assessee's own case for the assessment year 2004-05, as per Rule 10B(1)(e)(iii) of the Income Tax Rules. 2. Inclusion of Comparables: The second issue involved the inclusion of three comparables: Force Motors Limited, Hindustan Motors Limited, and Kerala Automobiles Limited. The TPO had excluded these comparables, but the Ld. Commissioner of Income Tax (Appeals) directed their inclusion. The Tribunal noted that the TPO had provided detailed reasoning for their exclusion, while the Ld. Commissioner of Income Tax (Appeals) had given detailed findings for their inclusion. However, the Tribunal upheld the TPO’s decision to exclude these comparables, based on the assessee's submission that even if the comparables were excluded, the capacity utilization adjustment would mitigate any impact on the assessee. 3. Validity of Assessment Order under Section 144C: The assessee challenged the assessment order dated 12.03.2013 as void ab initio for violating Section 144C of the Income Tax Act. The contention was that the Assessing Officer issued a notice of demand and penalty notice along with the draft assessment order, which contravened the mandatory procedure under Section 144C. The Tribunal referenced several cases, including DCIT Vs. Rehau Polymers (P) Ltd., Soktas India (P) Ltd. Vs. ACIT, and the Hon’ble Madras High Court in Vijay Television, which held that such procedural violations rendered the assessment order null and void. The Tribunal concluded that the draft assessment order was invalid, thereby allowing the additional ground of appeal. Consequently, all other grounds in the appeal became academic in nature. Conclusion: - The appeal of the Revenue in ITA No.714/PUN/2011 is partly allowed for statistical purposes. - The cross-objection of the assessee in CO. No.41/PUN/2011 becomes academic in nature. - The appeal of the assessee in ITA No.546/PUN/2014 is allowed. Order Pronounced on 02nd day of July, 2019.
|
