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TMI Blog2022 (1) TMI 1362X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us - Decided in favour of assessee. - IT(IT)A No. 2572/Bang/2019 - - - Dated:- 12-1-2022 - Shri. Chandra Poojari, Accountant Member And Smt. Beena Pillai, Judicial Member For the Assessee : Shri Rajan Vora, CA. For the Revenue : Shri Pradeep Kumar, CIT (DR). ORDER PER BEENA PILLAI, JUDICIAL MEMBER This appeal by assessee is directed against the order of the Ld.AO dated 31.12.2015 passed u/s. 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 [the Act] on the following grounds: Based on the facts and circumstances of the case and in law, Cisco Systems Services B.V. India Branch (hereinafter referred to as 'the Appellant'), respectfully craves leave to prefer an appeal against the order passed by the learned Assessing Officer (hereinafter referred to as the 'learned AO') dated October 15, 2019 under section 147 read with section 143(3) read with section 144C of the Income-tax Act, 1961 (`the Act') pursuant to the directions dated September 23, 2019 issued by the DRP u/s 144C(5) of the Act ('the Impugned order') inter-alia on the following grounds: On the facts and circumstances of the case and in law the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Erred in stating that the Assessee has ignored the receipts of the Head Office from third party Indian customers and thereby adding the same to the revenue of the Assessee without considering the corresponding costs incurred by the Head Office in relation to the Indian operations (including the remuneration paid by the Head Office to the Branch Office for the services provided); 8. Erred in making an adjustment to the income of the Assessee having regard to the amounts disclosed in the Service Tax Return filed by the Assessee, without appreciating that the same is under a different taxing statute and cannot be a basis for making an adjustment under the Income-tax Act, 1961; Interest under section 234B of the Act 9. Erred in levying interest of INR 24,06,03,134 under section 234B of the Act, on account of the additions made to the return of income. The Appellant submits that each of the above grounds is independent and without prejudice to one another. The Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otherwise on the records of the department and are also pure questions of law and prayed for admission of the same for adjudication on merits. 4. We have heard the rival submissions and perused the material on record. In our opinion, the issue raised by the assessee being a legal issue and does not require any investigation of facts which are already on record. Accordingly, these grounds are admitted for adjudication following the decision of Hon'ble Supreme Court judgment in the case of M/s National Thermal Power Co. Ltd. (supra) . 5. The Id. AR submitted that the draft assessment order was passed on 21.12.2016 with a mention that such order was passed u/s. 143(3) r.w.s. 144C(13) of the Act. Further, the draft assessment order was also accompanied with a demand notice u/s. 156 of the Act at Rs.20,85,95,610 and also in the draft assessment order the AO initiated penalty proceedings u/s. 271(1)(c) of the Act. According to the Id. AR, passing of the draft assessment order along with demand notice and also initiating penalty proceedings along with draft assessment proceedings are bad in law, being contrary to the procedure prescribed under law, thus subsequent final assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g so, it cannot be applied. 7. We have heard both the parties and perused the material on record. As per section 144C of the Act, it is mandatory for the Ld.AO to pass Draft Assessment Order in accordance with the procedure laid down therein. We have noticed that the coordinate Bench in the case of Suretex Prohphylactics (India) Ltd., 62 CCH 0002 Bang Trib., considered similar issue and given finding after following the decision of Hon'ble Madras High Court in case of Vijay Television (2014) 369 ITR 113 (Mad) observed as follows:- 11. .. Various decisions relied by the Ld.AR reproduced hereinabove highlight that, it is mandatory for Ld.AO to follow the procedures laid down under section 144C of the Act in an assessment that involves assessment of international transaction. Hon'ble Madras High Court in case of Vijay Television (supra) observed as under: Admittedly, the case of the petitioner company was taken up for scrutiny by the second respondent relating to the assessment years 2009-2010 inasmuch as the petitioner company had entered into international transactions during such assessment year. Ultimately, the case was referred to the TPO for determina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other educational institution or any hospital or other medical institution, shall be made by the Assessing Officer, without giving effect to the provisions of section 10, unless -- (i) the Assessing Officer has intimated the Central Government or the prescribed authority the contravention of the provisions of clause (21) or clause (22B) or clause (23A) or clause (23B) or sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, as the case may be, by such [research association], news agency, association or institution or fund or trust or university or other educational institution or any hospital or other medical institution, where in his view such contravention has taken place; and (ii) the approval granted to such research association or other association or fund or trust or institution or university or other educational institution or hospital or other medical institution has been withdrawn or notification issued in respect of such news agency or fund or trust or institution has been rescinded : Provided further that where the Assessing Officer is satisfied that the activities of the university, college or other institut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder sub section (3) within one month from the end of the month in which, -- (a) the acceptance is received; or (b) the period of filing of objections under sub-section (2) expires. (5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), 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 subsection (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (12) of section 144BA. (15) For the purposes of this section, -- (a) Dispute Resolution Panel means a collegium comprising of three Commissioners of Income-tax constituted by the Board54 for this purpose; (b) eligible assessee means,-- (i) any person in whose case the variation referred to in subsection (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) any foreign company.' 20. Under Section 144 (C) of the Act, it is evident that the assessing officer is required to pass only a draft assessment order on the basis of the recommendations made by the TPO after giving an opportunity to the assessee to file their objections and then the assessing officer shall pass a final order. According to the learned senior counsel for the petitioners, this procedure has not been followed by the second respondent inasmuch as a final order has been straightaway passed without passing a draft assessment order. 21. As rightly pointed out by the learned senior counsel for the petitioners, in the order passed on 26.03.2013, the second respondent even raised a demand as also i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 15.04.2013, that the order dated 26.03.2013 is only a final order and it was directed to be treated as a draft assessment order. In this context, it is worthwhile to refer to the decision of the Honourable Supreme Court in the decision Deepak Agro Foods (supra) wherein in Para No.10, the Honourable Supreme Court discussed as to when an order could be construed as a final order:-- 10. Shri Rajiv Dutta, learned senior counsel appearing on behalf of the appellant, submitted that in the light of its aforeextracted observations and a clear finding that the assessment order for the assessment year 1995-96 had been anti-dated, the order was null and void. It was urged that assessment proceedings after the expiry of the period of limitation being a nullity in law, the High Court should have annulled the assessment and there was no question of a fresh assessment. Thus, the nub of the grievance of the appellant is that in remanding the matter back to the Assessing Officer, the High Court has not only extended the statutory period prescribed for completion of assessment, it has also conferred jurisdiction upon the Assessing Officer, which he otherwise lacked on the expiry of the said per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Shital Prasad Kharag Prasad (supra) wherein the Division Bench of the Allahabd High Court held that a notice contemplated under Section 148 of the Income Tax Act is a jurisdictional notice and it is not curable by issuing a notice under Section 292 B of the Act, if it was not served in accordance with the provisions of the Act. 27. Similarly, the Division Bench of this Court in the decision in the case of V. Ramaiah (supra) Madras held that when an order is passed under Section 158BC of the Act instead of Section 158BD, it is not valid since it is not a defect curable under Section 292B of the Act. It was also held that an order passed after the period of limitation laid down in Section 158BC is not a valid order. It was further held that when there is a prescribed procedure contemplated under the Act or in a particular section and it is violated, then it cannot be cured. In the present case, certain procedure has been contemplated under Section 144C of the Act and they have been violated by the second respondent by passing final order of assessment and therefore such order passed by the second rspondent has got no jurisdiction or it can be cured by virtue of issuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued within one year from the date of filing of the block return. Omission on the part of the assessing officer to issue notice under Section 143(2) cannot be a procedural irregularity and is not curable. 30. It is evident from the above decision of the Division Bench of this Court that where there is an omission on the part of the assessing officer to follow the mandatory procedures prescribed in the Act, such an omission cannot be termed as a mere procedural irregularity and it cannot be cured. 31. In identical case as that of the case on hand, the Division Bench of the Andhra Pradesh High Court, in an unreported decision, had an occasion to consider the scope of the validity of the demand notice issued by the assessing officer in the case of Zuari Cement Ltd. (supra), wherein it was held as under:-- A reading of the above section shows that if the assessing officer proposes to make, on or after 01.10.2009, any variation in the income or loss returned by an assessee, then, notwithstanding anything to the contrary contained in the Act, he shall first pass a draft assessment order, forward it to the assessee and after the assessee files his objections, if any, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CBDT stating that S.144C(1) would apply only from the assessment year 2010-2011 and subsequent years and not for the assessment year 2008-09 is contrary to the express language in S.144C(1) and the said view of the Revenue is unacceptable. The circular may represent only the understanding of the Board/Central Government of the statutory provisions, but it will not bind this Court or the Supreme Court. It cannot interfere with the jurisdiction and power of this Court to declare what the legislature says and take a view contrary to that declared in the circular of the CBDT (Ratan Melting and Wire Industries Case (1 Supra), Indra Industries Revenue has not been able to pursuade us to take a contra view by citing any authority. In this view of the matter, we are of the view that the impugned order of assessment dated 23.12.2011 passed by the respondent is contrary to the mandatory provisions of S.144C of the Act and is passed in violation thereof. Therefore, it is declared as one without jurisdiction, null and void and unenforceable. Consequently, the demand notice dated 23.12.2011 issued by the respondent is set aside. 32. As against this order of the Division Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 144C(1) of the Act dated 25/02/2015 and along with demand notice issued under section 156 and penalty notice under section 274 read with section 271 of the Act. Ratio of Hon'ble Madras High Court has expressed the view that such orders passed by the Ld.AO without following due process of law are liable to be set aside. Thus, this ratio will prevail over the view taken by Hon'ble Kolkotta Hyderabad Tribunal (Supra). We place reliance on the decision of Kaneel Oils Export Inds. Ltd. Vs. JCIT reported in (2009) 121 ITD 596, which is a Third Member decision. As the assessment order passed dated 25/2/2015 has been quashed and set aside, all other issues raised on merits become academic. 8. In the present case, the Ld.AO passed the draft assessment order u/s. 143(3) r.w.s. 144C (13) of the Act on 28.12.2018 which is accompanied with demand notice issued u/s. 156 of the Act dated 21.12.2016 and it is also noticed that in the draft assessment order itself, the AO recorded the statement as follows:- 'Demand notice issued accordingly. Penalty proceedings u/s. 271(1)(c) are initiated separately for the additions made.- 9. Being so, it is observed that the dra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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