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2023 (9) TMI 595 - AT - Income TaxValidity of order passed u/s . 143(3) r.w.s. 92CA(3) - DRP directions passed u/s . 144C(5) - international transactions entered into by the assessee with its AE - limitation and assumption of jurisdiction by the A.O in passing assessment order giving effect to the order of DRP - DRP rejected the objections of the assessee and uphold the adjustment proposed by TPO u/s . 92CA (5) - whether the assessment order passed u/s . 143(3) r.w.s 92CA(3) is set aside by the Tribunal or it is not set aside? - HELD THAT - We are of the view that before tribunal there was issue relating to determination of ALP, which was remitted back to the file of DRP and assessee s appeal is partly allowed for statistical purposes, means that the matter is restored back to the file of A.O. Once, the assessment is partly allowed for statistical purposes means the matter is restored back to the file of A.O, who will follow procedure laid down u/s . 144C of the Act. The assessee s appeal before the Tribunal in first round 2016 (7) TMI 1682 - ITAT CHENNAI the issue was the assessment order passed by A.o u/s . 143(3) rw.s 92CA(3) r.w.s 144C(12) of the Act. Tribunal has set aside the assessment which was before it and the AO failed to understand the order of the Tribunal. We noticed from the observations made by DRP that the Tribunal cannot remit back directly the issue to the DRP and we also agree that before the Tribunal under challenge is the final assessment order passed u/s 143(3) r.w.s.92CA(3) r.w.s. 144C(5) of the Act and tribunal has not set aside the solitary action of the DRP and that also in vacum. Even by going through the findings of tribunal, we noted that the tribunal has not remitted the issue for verification of facts rather it is noted by Tribunal that the order of DRP is a non-speaking order even though, the assessee filed voluminous submissions before the DRP against the draft assessment order. Tribunal also noted that even though DRP accepted that it has to consider every point of dispute and pass a speaking order but contrary to this, the order passed by DRP is cryptic and addresses no issues raised therein and not properly adjudicated. The essence of the order of Tribunal is that it has set aside the assessment and the A.O has to restart the entire assessment process afresh in term of Section 144C of the Act. Hence, as per our understanding of this order of Tribunal and the provisions of the Act, the Tribunal in first round has set aside the assessment proceedings. Validity of the fresh directions issued by the DRP u/s . 144C(5) - As considering directions issued by the DRP u/s . 144C(5) and in consequent to the same, the order passed by A.O giving effect to the order of DRP dated 28.12.2017, the order is passed without understanding the interpretation of Tribunal s order and hence, the same is a curable defect. Accordingly, the matter has to go back to the file of A.O for fresh adjudication denovo. We set aside the DRP directions passed u/s . 144C(5) in pursuant to order of the ITAT and consequently, the order giving effect to the order of DRP passed by the A.O is also set aside and matter remanded to the file of the A.O to re-decide the adjustment to ALP in regard to international transactions entered into by the assessee with its AE. The A.O will adopt the procedure afresh as prescribed u/s . 144C of the Act. Appeal of the assessee is allowed for statistical purposes.
Issues Involved:
1. Limitation and assumption of jurisdiction by the Assessing Officer (AO) in passing the assessment order. 2. Validity of the assessment order dated 31.12.2017. 3. Clarification of the Tribunal's order dated 29.07.2016. 4. Validity of the directions issued by the Dispute Resolution Panel (DRP) and the subsequent order by the AO. Summary: Issue 1: Limitation and Assumption of Jurisdiction by the AO The appellant argued that the assessment order dated 31.12.2017 relied on an earlier assessment order dated 21.01.2016, which had been set aside by the ITAT. The appellant claimed that the new order was without legal authority as it was based on a nullified order. Issue 2: Validity of the Assessment Order Dated 31.12.2017 The appellant contended that the impugned order dated 31.12.2017 was not a valid assessment order under Section 143(3) read with Section 144C(13) of the Income Tax Act, 1961. They argued that it was a non-speaking order and lacked jurisdiction. Issue 3: Clarification of the Tribunal's Order Dated 29.07.2016 The Tribunal had previously remanded the issue of Arms Length Price (ALP) to the DRP, stating that the DRP's order was non-speaking and inconsistent with Section 144C of the Act. The Tribunal had directed the DRP to pass a speaking order on the disputed issues. Issue 4: Validity of Directions Issued by the DRP and Subsequent Order by the AO The DRP issued directions on 28.12.2017, stating that there was no provision under the Act for the ITAT to set aside an assessment order directly to the DRP. Consequently, the AO passed an order on 31.12.2017, which the appellant challenged as being without jurisdiction and based on a misinterpretation of the Tribunal's earlier order. Tribunal's Findings: Clarification of Tribunal's Order Dated 29.07.2016 The Tribunal clarified that its earlier order dated 29.07.2016 had indeed set aside the assessment proceedings, requiring the AO to restart the entire assessment process afresh in accordance with Section 144C of the Act. Validity of Fresh Directions by the DRP and Subsequent Order by the AO The Tribunal found that the fresh directions issued by the DRP on 28.12.2017 and the subsequent order by the AO on 31.12.2017 were based on a misinterpretation of the Tribunal's earlier order. Consequently, both the DRP's directions and the AO's order were set aside. Conclusion: The Tribunal remanded the matter back to the AO for fresh adjudication, directing the AO to follow the procedure prescribed under Section 144C of the Act. The appeal of the assessee was allowed for statistical purposes.
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