9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (12) TMI 169 - AT - Income TaxDirectly passing the final assessment order under section 143(3) without passing the draft assessment order - HELD THAT - Assessing Officer while passing the order giving effect of ITAT order should follow the procedure as envisaged under Section 144C(1) of the Act and pass a draft assessment order and as against the draft assessment order the assessee has right to file objections to the DRP. But in the present case, the assessing Officer has passed the order dt. 8-8-2017 giving effect to ITAT order and raised the demand u/sec. 156 of the Act without passing Draft Assessment order, which cannot be sustained. Accordingly, we set aside the CIT(A) order and quashed the order passed by the Assessing Officer and allow the additional ground of appeal of the assessee.
Issues Involved:
1. Transfer pricing adjustment. 2. Non-allowance of capacity utilization adjustment. 3. Non-exclusion of abnormal expenditure. 4. Initiation of penalty proceedings under Section 274 read with Section 271(1)(c). 5. Direct passing of the final assessment order without a draft assessment order. Detailed Analysis: 1. Transfer Pricing Adjustment: The assessee contested the addition of INR 22,23,78,359 to its total income due to transfer pricing adjustments related to its Pune unit. The adjustment was initially determined by the Transfer Pricing Officer (TPO) and confirmed by the Assessing Officer (AO) and the Dispute Resolution Panel (DRP). The ITAT had previously provided relief, but the AO's order giving effect to the ITAT's directions was challenged by the assessee, leading to the present appeal. 2. Non-Allowance of Capacity Utilization Adjustment: The assessee argued that the AO erred by not allowing a capacity utilization adjustment, which was necessary to account for differences in the capacity utilized by the assessee and comparable companies. This adjustment was crucial given the initial years of the assessee's manufacturing operations. The AO's failure to comply with the ITAT's earlier order on this matter was also highlighted. 3. Non-Exclusion of Abnormal Expenditure: The assessee contended that the AO ignored its submissions regarding the exclusion of abnormal expenses while computing the margins of the Pune unit. This non-exclusion was argued to be incorrect both in law and on facts. 4. Initiation of Penalty Proceedings: The assessee challenged the initiation of penalty proceedings under Section 274 read with Section 271(1)(c) of the Act, arguing that it was unjustified. 5. Direct Passing of Final Assessment Order Without Draft Assessment Order: The primary focus of the hearing was on the additional ground that the AO directly passed the final assessment order without issuing a draft assessment order, as required for an 'eligible assessee' under Section 144C(1) of the Act. The assessee argued that this procedural lapse rendered the entire assessment order invalid. Judgment: On the Additional Ground of Appeal: The Tribunal found merit in the assessee's argument regarding the procedural lapse. It was emphasized that the AO was required to pass a draft assessment order before the final order, allowing the assessee to file objections with the DRP. This procedural requirement was supported by multiple judicial precedents, including decisions from the Hon'ble Delhi High Court, Madras High Court, Bombay High Court, and various ITAT benches. The Tribunal cited several cases where similar procedural lapses led to the quashing of the final assessment orders. For instance, in the case of Control Rigs India Pvt. Ltd. vs. DCIT, the Delhi High Court set aside the final assessment order for not issuing a draft order, emphasizing the mandatory nature of this requirement. Similar views were echoed in the cases of Vijay Television (P) Ltd. and Lionbridge Technologies Pvt. Ltd. Conclusion: The Tribunal concluded that the AO's failure to issue a draft assessment order before the final order was a significant procedural lapse. Consequently, the final assessment orders for both assessment years 2010-11 and 2011-12 were quashed. The additional ground of appeal was allowed, rendering the original grounds of appeal moot and unadjudicated. Result: Both appeals filed by the assessee were allowed, and the orders passed by the AO were quashed. The Tribunal's decision was pronounced in the open court.
|
