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TMI Blog2023 (11) TMI 1097X X X X Extracts X X X X X X X X Extracts X X X X ..... of Atlas Copco India Ltd. [ 2019 (8) TMI 1415 - ITAT PUNE] has held that on identical facts, the assessment order was held to be null and void. As decided in the case of Vijay Television (P.) Ltd. vs. DRP [ 2014 (6) TMI 540 - MADRAS HIGH COURT] held that the omission on the part of the A.O. to follow the mandatory procedures is not a curable defect nor was it a procedural irregularity. We would also like to place reliance on the decision of Lion Bridge Technologies Private Limited [ 2018 (12) TMI 764 - BOMBAY HIGH COURT] wherein it was held that failure to follow the mandatory procedures will render the assessment order null and void. We hereby hold the assessment order to be null and void. As the assessment order has been held to be invalid, we do not find it necessary to adjudicate the other grounds raised by the assessee and the Revenue. TP Adjustment - comparable selection - assessee has objected to the inclusion of the comparable namely Eclerx Services Ltd. selected by the TPO for the reason that the said comparable company was a KPO - HELD THAT:- As decided B C Management Services P. Ltd. [ 2017 (5) TMI 1501 - ITAT DELHI] wherein it was held that the comparables with differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s all the entrepreneurial risks and has also incurred loss on a consolidated level for F.Y 2006-07 (December 31, 2006 and December 31, 2007). However the appellant company being a risk mitigated captive service provider is always compensated on a cost-plus model. Thereby, by no stretch of imagination, one can conclude that the profits have been shifted outside India on account of related party transactions. 4 Ground 3: Hon'ble CIT(A) erred in confirming the action of learned AO / TPO in rejecting the contemporaneous search carried out by the appellant company 4.1 On the facts and in the circumstances of the case and in law, the learned AO / TPO erred and the Hon'ble CIT(A) further erred in upholding / confirming the action of the learned Assessing Officer ('A.O.' for short) /TPO in disregarding the benchmarking analysis and comparable companies selected by the appellant company based on the contemporaneous data in the transfer pricing study report maintained as per section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 ('the Rules') and the various submissions made by the appellant company. 5. Ground 4: Hon'ble CITA) erred in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argin of the alleged comparable companies based on multiple year financial data. 3. The additional grounds of appeal raised by the assessee dated 18.02.2014 are as follows: 1:0 Re.: Validity of Order: ADDITIONAL GROUNDS OF APPEAL 1:1 The Assessing Officer has erred in passing the impugned order under section 143(3) r.w.s. 144C(3) of the Income-tax Act, 1961 ("the Act") without complying with the mandatory provisions of section 144C of the Act. 1:2 The appellant submits that the Assessing Officer has erred in issuing a Notice of Demand dated 06 December 2010 u/s. 156 of the Act and a Notice dated 06 December 2010 u/s. 274 r.w.s. 271 (1) (c) of the Act alongwith the Order dated 06 December 2010 1:3 The Appellant submits that the impugned Order dated 22 February 2011 passed u/s. 143(3) r.w.s. 144C(3) of the Act be struck down as void ab-initio and bad in law 2:0 Re.: General: 2:1 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. 4. The brief facts are that the assessee company was incorporated in India dated 06.09.2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that the A.O. has failed to comply with the mandatory provision of section 144C of the Act by issuing a notice of demand dated 06.12.2010 u/s. 156 of the Act and a notice dated 06.12.2012 u/s. 274 r.w.s. 271(1)(c) of the Act along with the draft assessment order dated 06.12.2010. As the legal issue raised by way of additional ground goes to the root of the case, after hearing parties we hereby admit this ground as per the proposition laid down by the Hon'ble Apex Court in the case of National Thermal Power Co. Ltd. vs. CIT [1998] 229 ITR 383 (SC). We are inclined to decide the additional ground as the same would determine whether the assessment order passed by the A.O. was valid or void-ab-initio before getting into the merits of the case. 9. The learned Authorised Representative ('ld. AR' for short) for the assessee contended that the demand notice dated 06.12.2010 issued u/s. 156 of the Act and the notice u/s. 274 r.w.s. 271(1)(c) of the Act issued along with the draft assessment order violates the mandatory provisions of section 144C of the Act. The ld. AR for the assessee further stated that the A.O. did not have jurisdiction to raise a demand and levy pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 06.12.2010 had issued a notice of demand u/s. 156 and the penalty notice u/s. 274 r.w.s. 271(1)(c) of the Act. The ld. AR for the assessee has relied on the following decisions which are cited hereunder for the proposition that the draft assessment order issued along with the demand notice and penalty notice has been held to be without jurisdiction and, hence, null and void: a. Decision of the Mumbai Bench of the Tribunal in the case of Jazzy Creations Pvt. Ltd. v/s. ITO reported in [2017] 83 taxmann.com 244; b. Decision of the Delhi Bench of the Tribunal in the case of Olympus Medical Systems India Pvt. Ltd. v/s. DCIT [ITA No. 8892/ Del/ 2019]; c. Decision of the Delhi Bench of the Tribunal in the case of Perfetti Van Melle India Pvt. Ltd. v/s. ACIT [ITA No. 9116/Del/2019]; d. Decision of the Delhi Bench of the Tribunal in the case of Suretex Prophylactics (India) Ltd. v/s. ACIT [IT(TP)A No. 430/ Bang/ 2016]; e. Decision of the Pune Bench of the Tribunal in the case of Atlas Copco India Ltd. v/s. DCIT [ITA No. 649/ Pun/2013 and 1726/ Pun/ 2014 along with CO Nos. 34 & 35/ Pun/2019] ; f. Decision of the Pune Bench of the Tribunal in the case of DCIT v/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said proposition has been reiterated by various benches of the Tribunal and also in the case of Hon'ble Madras High Court in the case of Vijay Television (P.) Ltd. vs. DRP [2014] 369 ITR 113 (Mad.) where the Hon'ble High Court held that the omission on the part of the A.O. to follow the mandatory procedures is not a curable defect nor was it a procedural irregularity. We would also like to place reliance on the decision of the Hon'ble Jurisdictional High Court in the case of Pr. CIT vs. Lion Bridge Technologies Private Limited [2019] 260 Taxman 273 (Bom), wherein it was held that failure to follow the mandatory procedures will render the assessment order null and void. 14. By respectfully following the above said decisions, we hereby hold the assessment order to be null and void. As the assessment order has been held to be invalid, we do not find it necessary to adjudicate the other grounds raised by the assessee and the Revenue. 15. In the result, the appeal filed by the assessee is allowed and the appeal filed by the Revenue is dismissed. ITA No. 586/Mum/2015 16. This appeal has been filed by the assessee challenging the order of the A.O. pursuant to the direction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st accounts of the assessee has been worked out as following : Profit and loss account Year ended 31st March As per P and L Income 60,90,10,934 60,90,10,934 Other Operating Income 2,89,839 2,89,839 Bank Interest 2,03,428 Less: Operating expenditure Personnel costs 30,75,19,489 30,75,19,489 Administrative and other expenses 15,12,35,554 15,12,35,554 Foreign Exchange Loss 2,43,65,712 Loss on sale of fixed assets 6,427 Interest 2871957 depreciation 5,44,95,352 5,44,95,352 Total operating cost ('TC') 51,32,50,378 54,04,94,491 Operating Profit ('OP') 9,60,50,378 6,90,09,710 OP/TC 18.71% 19. The assessee's OP/TC margin was determined at 18.71%. It is observed that the lower authorities had relied on the order of the A.O. in treating the assessee as KPO during the assessment for A.Ys. 2008-09 and 2009-10, by rejecting the contention of the assessee that it was providing ITES services. The filters applied by the assessee and TPO are as follows: Filters adopted by the assessee Filters adopted by the Transfer Pricing Officer ('TPO' for short) Operating income/sales > 50% Operating income/sales > 75% Research and Development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allenging the impugned order made by the A.O. 23. The ld. AR for the assessee contended that the international transaction entered into by the assessee to its AE related to the back office support services and the same were determined at arms length price. The ld. AR for the assessee further stated that the lower authorities have wrongly interpreted the low end back office services which are in the nature of BPO to be high end knowledge process out sourcing. The ld. AR relied on the assessee's case for A.Y. 2011-12, wherein it was held that Exclerx Services Ltd. selected as comparable by the TPO was functionally different from that of the assessee company thereby directing the TPO to exclude the said comparable while bench marking the international transaction of the assessee for determination of the ALP. The ld. AR relied on the decision of the Tribunal in ITA No. 1074/Mum/2016 along with the other decisions. 24. The ld. DR contended that the transfer pricing report of the assessee infers that the assessee provides services in the nature of KPO and that the assessee has failed to adopt proper filters including the validity export filter of >75% for the reason that the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. We find in the facts of the instant case and in the light of the arguments advanced by both the sides, we feel there is no need to address the preliminary issue as to whether the assessee is a BPO or KPO. We find that the ld.AR was very fair in stating that once the comparable Eclex is excluded from the list of comparables chosen by the ld.TPO, then its margin would be through, warranting no adjustment to ALP in respect of international transaction carried out by it. Hence, we proceed to address that particular comparable alone in this order. We find that the ld.AR placed reliance on the following decisions to support his contentions:- (i) Delhi Tribunal decision in the case of BC Management Services (P) Ltd. v. DCIT [(2017) 83 taxmann.com 346 (Delhi-Trib.) for assessment years 2011-2012 and 2012-2013 - dated 25.05.2017. (ii) Hon'ble Delhi High Court decision in the case of Pr.CIT v. B.C. Management Services (P.) Ltd. reported in [(2018) 89 taxmann.com 68 (Delhi)] dated 28.11.2017. (iii) Delhi Tribunal decision in the case of Agilent Technologies (International) Private Limited v. ITO for assessment years2010-2011 to 2012-2013 dated 12.02.2018. (iv) Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not comparable as the business model in both are different i.e. outsourcing in one and in-house in the other. We further note that M/s.Integreon Managed Solutions (India) Pvt.Ltd. the impugned order of the Tribunal places reliance upon the decision of the Tribunal dated 30.10.2013 of its co-ordinate bench in the case of PTC Software India (P.) Ltd. which also excluded M/s. Coral Hub Ltd. (formerly known as 'Vishal Information Technologies Ltd.'). Mr. Suresh Kumar the learned counsel for the Revenue very fairly states that being aggrieved by the above order an appeal was filed to this Court being Income Tax Appeal No.732 of 2014 (CIT v. PTC Software). This appeal was dismissed upholding the finding of the fact of the Tribunal that M/s. Coral Hub (formerly known as 'Vishal Information Technologies Ltd.') was a company not only engaged in IT enabled services but also in providing agency services by way of outsourcing to third party vendors. In this case also, the impugned order of the Tribunal has come to a finding of the fact that the services rendered by the Respondent to its AE is different from the activities/services provided by M/s. Coral Hub Ltd. Therefore, they ..... X X X X Extracts X X X X X X X X Extracts X X X X
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