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TMI Blog2023 (12) TMI 973X X X X Extracts X X X X X X X X Extracts X X X X ..... -2018. Now the issue is squarely covered against the revenue in case of Cisco Systems Services B.V [ 2023 (3) TMI 416 - KARNATAKA HIGH COURT] held that it is settled that demand notice stems out of an order of assessment and it is enforceable. It meets the assessee with civil consequences. The argument on behalf of the Revenue that the demand notice was not enforced is fallacious and noted only to be rejected. Mistake which the ACIT has done in passing the final order at the stage of draft order is not curable u/s 292B. Thus draft assessment order passed coupled with the Notice of demand u/s 156 of the Act and followed by notice u/s 274 rws 271(1)(c) of the Act makes the draft order as final. Thus, the draft assessment order dated 30-11-12018 passed by ld AO is invalid and further as the final assessment order is based on an invalid order, same is also quashed. Adjustment of international transaction of payment of royalty for use of trade marks to AES - As assessee has already withdrawn grounds No 10 to 13 of the appeal, respectfully following decision of coordinate bench in [ 2019 (8) TMI 1011 - ITAT PUNE] A.Y. 2008-09, we hold that total income of the assessee shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not time barred in terms of the provisions of section 153 of the Act, 3. erred in holding that the order of the transfer pricing order under section 92CA(3) of the Act dated 30 October 2018 was valid; 4. erred in holding that the reference to the TPO made by the AO was valid, having failed to appreciate that: erred vide letter dated 5 September 2017 intimated that reference to the TPO is being made which was prior to issue of notice under section 143(2) of the Act and without disposing off objections to reassessment filed by the appellant: reference under 92CA of the Act to TPO dated 2 November 2017 was made before issue of notice under section 143(2) of the Act and prior to expiry of a period of 4 weeks after disposing off the objections to reassessment proceedings: the Hon'ble Bombay High Court vide order dated 27 April 2017 in writ petition no. 44 of 2018 had extended the time limit for completion of reassessment proceedings by a period of 10 weeks and had mentioned that the jurisdiction to refer the appellant's case to the TPO would arise on the AO disposing off the appellant's objections to reassessment; 5. erred in holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 67 as starting point for computation of total income as against the total income of INR 192,42,07,339; Deduction under section 80-IC of the Act (INR 12.24.60,000-Tax effect INR 4.08,15,918) 15. erred in holding that receipt by way of scrap sales is not eligible for deduction under section 80-IC of the Act; 16. without prejudice, erred in considering the entity level income from scrap sales of INR 21,64,00,000 for making disallowance while computing profits eligible for deduction under section 80-IC of the Act as against the scrap sales of INR 4,35,53,654 pertaining to Haridwar unit; 17. erred in reducing interest income of INR 18,64,00,000 while computing deduction under section 80-IC of the Act without appreciating that the appellant has suo moto reduced it from profits eligible for deduction under section 80-IC of the Act: 18. erred in holding that other income is not eligible for deduction under section 80-IC of the Act: 19. without prejudice, erred in considering the entity level amount of other income of INR 54,00,000 for making disallowance while computing profits eligible for deduction under section 80-IC of the Act as against the other income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of ₹11,72,725/-. 07. Consequent to that, a draft assessment order was passed under Section 143(3) read with section 147 read with section 144C(1) of the Act on 30th November, 2018, wherein over and above the adjustment in respect of international transaction of ₹11,72,725/-, the assessee was also denied the deduction under Section 80IC of the Act of ₹73,26,45,705/-. Thus, the draft assessment order determined the total income of the assessee at ₹203,80,58,490/-. 08. In paragraph no.6 of the draft assessment order, the Assessing Officer mentioned that Assessed under Section 143(3) read with section 144C (13) of the Income-tax Act, 1961 (the Act). Penalty proceedings are hereby initiated under Section 271(1) (c) of the Act. Credit for taxes paid is allowed as per records. Interest is charged under Section 234A, B and C of the Act as applicable and notice of demand is issued under Section 156 of the Income-tax Act, 1961 (the Act). Tax calculation sheet (ITNS 150 is annexed). 09. Thus, along with the draft assessment order dated 30th November, 2018, a notice of demand amounting to ₹41,62,76,780/-, was issued. Subsequently, the learned Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with section 271(1)(c) of the Act for initiation of penalty is in fact the final assessment order. The learned Assessing Officer should have passed the draft assessment order and should not have raised demand of tax as well as initiated the penalty proceedings. He submits that the learned Assessing Officer withdrew the demand however, still the assessee was asked to pay the demand by Central Processing Centre and therefore, the assessee is prejudiced by issue of demand notice and penalty show cause notice. He therefore submits that such draft assessment order passed is invalid and subsequently, final assessment order passed therein is also vitiated. Therefore, the final assessment order passed by the learned Assessing Officer is also bad in law because same is based on an unsustainable draft assessment order. He referred to several judicial precedents on this issue. 011. The learned Departmental Representative vehemently submitted that when learned Assessing Officer has withdrawn the notice of demand by passing an order under Section 154 of the Act and further also withdrawing the show cause notice issued for initiation of penalty proceedings, the so called error of the dra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come plus the amount of transfer pricing adjustment accepted by the assessee under MAP as the income of assessee. 014. We have carefully considered the rival contentions and perused the orders of the lower authorities. Admittedly, in this case, the draft assessment order dated 30th November, 2018, passed by the learned Assessing Officer contained the last paragraph no.6, wherein ld AO mentions that the assessee is assessed under Section 143(3) read with section 144C (13) of the Act. He also initiated the penalty proceedings under Section 271(1)(c) of the Act and further, issued the demand notice under Section 156 of the Act. The notice of demand under Section 156 of the Income-tax Act, 1961 (the Act) dated 30th November, 2018, was issued for the impugned assessment year determined the outstanding demand of ₹41,62,76,780/-. As per paragraph no.2 of that notice, the assessee was also directed to pay the same within 30 days, further on failure to pay the interest under Section 220(2) of the Act as well as imposition of penalty under Section 221 of the Act was to be initiated. As per paragraph no.6, the assessee was directed to file an appeal before the learned CIT (A)-21, Mum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand u/s 156 of the Act and followed with a show cause notice for levy of penalty u/s 274 read with section 271 (1) (c) of the Act. Both Notice of demand and penalty proceedings are further followed by subsequent communication. Therefore, it is merely not an error but for all practical purposes, the ld AO passed the final assessment order instead of Draft Assessment order. In penultimate paragraph also ld AO mentions section 144 (13) of the Act. 015. Undisputed facts of the case are, in the draft assessment order, the Assistant Commissioner has ordered issuance of demand notice and to initiate penalty proceeding under section 271(1)(c). Both the draft assessment order and the demand notice are dated 30-11-2018. Now the issue is squarely covered against the revenue by order of Honourable Karnataka high court in case of Cisco Systems Services B.V. [2023] 149 taxmann.com 486 (Karnataka)[24-02-2023] | where in it has been further held that 21. Mr. Aravind also contended that the demand notice was not enforced. It is settled that demand notice stems out of an order of assessment and it is enforceable. It meets the assessee with civil consequences. The argument on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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