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TMI Blog2014 (9) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... the statement of project manager, Shri K.G. Ramesh - right from the stage of issuance of the direction by the DRP to the stage of passing of the final assessment order, there has been a gross violation of statutory provisions and the powers given therein - the DRP is a quasi-judicial authority and, therefore, while dealing with the lis it is obliged to ascribe cogent and germane reasons as to why the assessee's objections are not maintainable and there should be absolutely clarity on the directions to the AO, because the law does not envisage for providing further opportunity to the assessee at the stage of passing of final assessment order - the order / direction of the DRP, as a whole, is not in consonance with sub-sec. (5) r/w sub-sec. (8) of section 144C. If an authority has not carried out the function or exercised power, as provided in the statute or it has transgressed the statutory power, then it amounts to gross irregularity of exercising of power and such an irregularity is not fatal, so as to declare the entire proceedings as null and void resulting into quashing of the entire order - A distinction has to be made between illegal assumption of jurisdiction provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in India. 2.1 The learned Dispute Resolution Panel ( DRP ) and ADIT erred in law and on facts in concluding that the Appellant had a fixed placed PE in India as per the India-Singapore DTAA. 2.2 The learned ADIT erred in treating the Project Manager as the employee of the Appellant and providing services as its key personnel in India and thereby concluding that the Appellant also had a service PE in India. 2.3 The learned DRP and ADIT erred in holding that the provisions of Article 5(4) of the India Singapore DT AA will also apply which deals with the constitution of a PE in case the supervisory activities in India exceed 183 days in a fiscal year in relation to a construction, installation or assembly project. GROUND NO.3: Specific provisions dealing with Construction PE of the India-Singapore DTAA ought to be considered over the general provisions. 3.1 In determining existence of a PE, the learned ADIT erred in applying provisions of Fixed Place PE under Article 5(1), Supervisory PE under Article 5(4) and Service PE under Article 5(6) instead of applying only the more specific provisions of Construction PE under Article 5(3) of the India-Singapore DTAA as applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit of India-Singapore DT AA, erred in law in taxing the aforesaid amount under the head 'Income from Other Sources instead of applying the provisions of section 44BB of the Act. GROUND NO.8: Erroneous initiation of penalty under section 271(1)(b) of the Act. 8.1 The learned ADIT erred in initiating penalty proceedings under section 271(1)(b) without appreciating the fact that the Appellant has complied with all the notices issued by the learned ADIT and has submitted all the documents which were requested for during the assessment proceedings. GROUND NO.9: Erroneous levy of interest under section 234B of the Act. 9.1 The learned ADIT erred in levying interest under section 234B of the Act. GROUND NO.10: General 10.1 The learned AD IT erred in initiating penalty proceedings under section 271(1)(c) of the Act. 10.2 The Appellant craves leave to add, alter, amend, substitute and/or modify in any manner whatsoever all or any of the foregoing grounds of appeal at or before the hearing of the appeal.‖ 2. The learned counsel, Shri Girish Dave, on behalf of the assessee, by way of preliminary objection, submitted that the impugned final assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, there was no project site in existence and, therefore, no question of any profit being chargeable to tax in India. Several decisions were also referred and relied upon by the assessee before the Assessing Officer during the course of draft assessment proceedings, which have been incorporated by the Assessing Officer from Page-5 to 7 of the order. Thereafter, the Assessing Officer examined the agreement entered between the assessee and B.G. and concluded that the assessee has P.E. in India in the form of fixed place P.E., under Article 5(3). Thereafter, he held that the activities of the assessee company are squarely covered by the provisions of section 44BB and liability to tax will arise under section 44BB and, accordingly, he assessed the income under the deeming provisions of section 44BB and taxed 10% of gross receipt of ₹ 435,24,25,151. 4. Against the said draft assessment order, the assessee raised various objections before the DRP, rebutting each and every observations made by the Assessing Officer that how a P.E. cannot be said to have been established in India in this fiscal year under the various provisions of Article-5. Its main plank of argument before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;ble Jurisdictional High Court in Vodafone India Services Pvt. Ltd. v/s Union of India, [2013] 359 ITR 133 (Bom.), wherein the Hon'ble High Court categorically held that provisions of section 144C, do not permit the DRP to set aside any proposed verification in the draft assessment order or issued any direction of further enquiry and passing of the assessment order. Thus, the learned Counsel contended that the impugned final assessment order is in complete violation of provisions of section 144C and, therefore, it has to be held as illegal, being in violation of law. 6. The learned Departmental Representative, on the other hand, submitted that the Assessing Officer has not violated any the directions of the DRP, as he has carried out enquiry in pursuance of the directions of the DRP only. Regarding DRP's order, he submitted that the DRP has held that there was a P.E. of the assessee in India, which is evident from the observation made in Para-9, 10, 11 and 12. Though he admitted that the DRP, while considering the documents filed before it took it as an additional evidence and has remanded the matter to the Assessing Officer to take into account such evidences and als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4B and 144C, are not pari materia, as sub-section 13 of section 144C, clearly provides that the Assessing Officer has to pass the order in conformity with the direction of the DRP. Such a provision was not there in section 144B. Otherwise also, the scope and power of the DRP, as defined in section 144C, is on different footing as compared to the scope of power of IAC or Dy. Commissioner given in section 144B. Thus, the decision cited by the learned Departmental Representative will not be applicable. Even the decisions relating to the approval of IAC for levy of penalty under section 271(1)(c), will also not apply here in this case in view of the categorical provisions of the Act provided in the section 144C. Further, the decision of the Hon'ble Jurisdictional High Court in Vodafone India Services Pvt. Ltd. (supra), is amply clear that the DRP cannot set aside the matter before it to the Assessing Officer. It has to decide the objections after considering all the material and then give clear cut directions to the Assessing Officer. Thus, the illegality which has occurred in the directions of the DRP by setting aside to the Assessing Officer for further enquiry and considering th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xures. Thereafter, the DRP has tried to highlight certain discrepancies in the details furnished before the Assessing Officer and before the DRP, which has been briefly discussed in Para-7 and on that premise, direction was given to the Assessing Officer to take note of such facts, while framing the assessment order and also to take necessary proceedings as deem fit. The relevant observations of the DRP as given in Para-7 are as under:- 7. Before the DRP the assessee submitted certain fresh documents which were not produced before A.O. They included 3 Exhibits i.e., I , - J K , of the agreement, that were not produced before the A.O. The fresh documents also included the period of stay in India by various employees and personnel of the assessee during the previous year. Regarding the period of stay it is observed that in its submission dated 17th Sept 2012, the assessee provided details of three of its employees who visited India consistently right from January 2008. Their overall stay was shown as 45 days in India. However, as per the details of employees visit provided to the A.O. it was stated that a period of 22 days were spent by the employees in India. It is found t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment. (6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:-- (a) draft order; (b) objections filed by the assessee; (c) evidence furnished by the assessee; (d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority; (e) records relating to the draft order; (f) evidence collected by, or caused to be collected by, it; and (g) result of any enquiry made by, or caused to be made by, it. (7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5),-- (a) make such further enquiry, as it thinks fit; or (b) cause any further enquiry to be made by any income-tax authority and report the result of the same to it. (8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide manner, the statute contemplates that the DRP should give categorical direction to the Assessing Officer for passing the assessment order. It cannot delegate its authority back to the Assessing Officer. 14. Here maxim of delegatus non potest delegare would be squarely applicable, which envisages that when a power has been conferred upon a person, then he must exercise that power alone, unless expressly empowered to delegate it to another. In other words, when the statute prescribes a particular body or authority to exercise power, then it must be exercised by that body or authority alone. The provisions of statute, as contained in sub-section (8) of section 144C, clearly prohibits the DRP to delegate its power to the Assessing Officer i.e., to set aside the proposed variation or issue any direction to carry out any further enquiry by the Assessing Officer and to take his own decision or discretion before passing of the final assessment order. 15. In the present case, there is a clear cut violation of section 144C(8) by the DRP. Not only this, there is a further violation by the Assessing Officer in the final assessment order, as he went step further in interpreting the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack to the same stage and to the same authority from where the irregularity has crept in. Such an order is always amenable to correction from the stage from where it went wrong. Here, in the present case, on a perusal of the order of the DRP, it is evident that insofar as the issue of P.E. is concerned, they have expressed their opinion, however, they have ultimately left to the Assessing Officer to decide the issue after taking into consideration various evidences filed by the assessee. Hence, instead of deciding or clearly adjudicating the issue, the matter has been delegated to the A.O. which should not have been done. 17. The aforesaid view further gets fortified by the decision of the Hon'ble Jurisdictional High Court in Vodafone India Service Pvt. Ltd. (supra), as relied upon by the learned Counsel. In this decision, Their Lordships were besieged with the jurisdiction of the Transfer Pricing Officer (TPO) under section 92CA(2A) and (2B), in the Writ Petition filed by the assessee petitioner and held as under:- 104. Although the TPO has made his order without any objection by the petitioner as to his jurisdiction, we would have entertained this petition, had we come ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oke its writ jurisdiction if the assessee approaches it at the earliest and in any event before the TPO makes the report. This would only be to save the assessee and the Revenue incurring unnecessary expenses and a waste of time on account of the proceedings before the TPO which are demonstrably without jurisdiction. 106. The position, however, would be entirely different once the TPO passes the order. This is for the reason that the DRP, in any event, would have the jurisdiction to rectify the error and issue the necessary directions to the AO to complete the assessment in accordance with law. The assessment proceedings are not rendered futile or void on account of the TPO lacking inherent jurisdiction. In such cases, where the proceedings before the TPO have concluded, absent anything else warranting the invocation of the writ jurisdiction, a Writ Petition ought not to be entertained and the parties must be relegated to their remedies under the Act. Thus, the Hon'ble Jurisdictional High Court held that the TPO's lack of jurisdiction to proceed with the issue which were not in the realm of international transaction as per objections of the assessee, would not render ..... X X X X Extracts X X X X X X X X Extracts X X X X
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