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TMI Blog2024 (9) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Assessing Officer and ld. DR for the Revenue vehemently argued that it is a mistake. If it is a mistake, the Department should have acted upon to rectify the mistake within reasonable time. In this case, no records were shown to make such efforts taken by the officer. It is clearly violation of law which deserves to be acted upon and the action of the Assessing Officer is contrary to the provisions of the Act and contrary to the law. For the purpose of any subsequent proceedings, what is relevant is the final assessment order for all purposes including the collection of tax. The assessment order so passed by the Assessing Officer deserves to be quashed. Decided in favour of assessee. - Shri S. Rifaur Rahman, Accountant Member And Shri Yogesh Kumar U.S., Accountant Member For the Assessee : Shri Ajit Jain, AR For the Revenue : Shri Rajesh Kumar, CIT DR ORDER PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER : This appeal has been filed by the assessee against the final assessment order dated 28.07.2022 passed u/s 143(3) r.w.s. 144C (13) of the Income Tax Act, 1961 (hereinafter called the Act ) subsequent to the direction of the Ld. Dispute Resolution Panel (DRP)/TPO vide order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provision of back-office support services (INR 1,887,166) Payment of sourcing fee, Purchase sale of software (INR 1,996,462) Legal Grounds: 2. On the facts and in law, the Hon'ble DRP has grossly erred in restoring certain transfer pricing matters to the Ld. TPO and Ld. AO, which is in gross violation of section 144C(8) of the Act and thus, the final assessment order passed dated 28 July 2022 is bad in law and deserves to be quashed. 3. On the facts and in law, the Ld. TPO/ Ld. AO erred in not following the directions of Hon'ble DRP and thereby violating the provisions of Section 144C(10) read with Section 144C(13) of the Act, thereby rendering the assessment proceedings bad and invalid in law. Specific Grounds on Merits: A. Erroneous adjustment of INR 18,552,925 with respect to international transaction pertaining to Payment of shared service charges, holding fees and ERP fees 4. On the facts and in law, the Revenue erred in rejecting the economic analysis and arbitrarily selecting Comparable Uncontrolled Price ('CUP') method. In doing so, the Revenue failed to discharge the statutory onus to establish if any of the conditions specified in clause (a) to (d) of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputing the profit level indicator [PLI Net Profit Margin) of the comparable companies. 15. On the facts and in law, the Ld. TPO erred in not allowing a risk adjustment under Rule 10B(1)(e) of the Rules 16. On the facts and in law, the Ld.AO/Ld. TPO erred in proposing an adjustment without providing sufficient time to the Appellant and addressing any of the detailed contentions and explanations submitted by the Appellant in response to the show cause notice. Pertaining to Corporate Tax Grounds: 1. On the facts and in law, the Ld. AO has erred while computing the tax liability for the relevant AY by considering credit of tax deducted at source (TDS') of INR 1,66,68,496/- instead of INR 1,69,80,644- 2. On the facts and in law, the Ld. AO has erred while computing the tax liability for relevant AY by not allowing deduction on account of Section 80G amounting to INR 15,14,475/- already claimed by the Appellant in its Return of Income. Interest and Penalty Grounds: 1. On the facts and in the circumstances of the case and in law, the Ld. AO has erred in levying interest under sections 234B and 234C of the Act in the final assessment order passed for relevant AY. 2. On the facts and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in its order which is apparent from the order giving effect passed by the TPO. The same is filed along with additional ground of appeal. He brought to our notice page 2 of OGE passed by the TPO and submitted, it clearly shows that ld. DRP has proposed following directions :- DRP s directions dated 28.06.2022 The proposed adjustment as per the DRP directions : (i) The DRP has upheld the TPO s proposed adjustment on the issue of Intra Group Services. Rs. 1,85,52,925/- (ii) The DRP directed to re-verify the filters and allow the working capital adjustment on the issue of Back office support services. Accordingly, the amount of the adjustment is revised. Rs. Nil/- (*Detailed computation given below) Rs. NIL/- (*Detailed computation given below). (iii) The DRP directed to Revenueverify the filters and allow the working capital adjustment on the issue of payment of sourcing fee/purchase sale of software. Accordingly, the amount of the adjustment is revised. Rs. 1,85,52,925/- Further, he brought to our notice page 6 of OGE of TPO order which shows that the original proposed adjustments of the TPO was Rs. 2,24,36,553/- and now after giving effect to the DRP order, the same is reduced to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 262 (SC) rejected the view of Hon ble High Court for quashing of assessment proceedings and they observed that the High Court should not have quashed the assessment proceedings. Further, he submitted that on the issue of the Assessing Officer failed to refer the case of international transaction to TPO. Hon ble Supreme Court has remitted the issue back to redo the assessment in the case of PCIT vs. M/s. S.G. Asia Holdings (India) Pvt. Ltd. in Civil Appeal No.6144 of 2019 dated August 13, 2018. With regard to reliance to Hexaware Technologies Ltd. (supra) by the ld. AR for the assessee, he brought to our notice page 69 of the decision and submitted that no prejudice caused to assessee by remit the issue back to the Assessing Officer for rectifying the relevant mistake in the final assessment order and finally, he submitted that Assessing Officer had followed the first issue of sustaining the TP adjustments and by mistake, he added item 2 3 of the TP adjustment, therefore, he strongly submitted that there is no violation of section 144C of the Act at all and there is no prejudice cause to the assessee.. 11. In the rejoinder, ld. AR for the assessee submitted that both sections 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant for the issues raised by the assessee. At the same time, we observed that in the case of Hexaware Technologies Ltd. (supra), Hon ble Bombay High Court has dealt with the issue of section 148/148A and section 151A of the Act. Ld. DR for the Revenue relied on the decision of Hon ble Supreme Court in the case of Ashish Agarwal (supra). The facts involved in this case are issue of reassessment proceeding notices issued by the Revenue approximately 90000 u/s 148 of the Act, so in order to protect the rights of the Revenue as well as respective assessees and for public exchequer, the same was remitted back to Assessing Officer to pass relevant orders u/s 148A(d) of the Act. Since the issue involved in this case is completely different than the facts on record, we observed from the decision of Hon ble Bombay High Court in the case of Hexaware Technologies Ltd. (supra). The Hon ble High Court observed as under :- 36. With respect to the arguments of the Revenue, i.e., the notification dated 29th March 2022 provides that the Scheme so framed is applicable only to the extent provided in Section 144B of the Act and Section 144B of the Act does not refer to issuance of notice under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers the whole Scheme otiose cannot be accepted as correct interpretation of the Scheme. The phrase to the extent provided in Section 144B of the Act in the Scheme is with reference to only making assessment or reassessment or total income or loss of assessee. Therefore, for the purposes of making assessment or reassessment, the provisions of Section 144B of the Act would be applicable as no such manner for reassessment is separately provided in the Scheme. For issuing notice, the term to the extent provided in Section 144B of the Act is not relevant. The Scheme provides that the notice under Section 148 of the Act, shall be issued through automated allocation, in accordance with risk management strategy formulated by the Board as referred to in Section 148 of the Act and in a faceless manner. Therefore, to the extent provided in Section 144B of the Act does not go with issuance of notice and is applicable only with reference to assessment or reassessment. The phrase to the extent provided in Section 144B of the Act would mean that the restriction provided in Section 144B of the Act, such as keeping the International Tax Jurisdiction or Central Circle Jurisdiction out of the ambit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... number of cases based on the criteria of Risk Management Strategy. The term randomly is further used at numerous other places in the Office Memorandum with respect to selection of cases for consideration/issuance of notice under Section 148 of the Act. Respondent is clearly incorrect in its understanding of the said Scheme as the reference to random in the said Scheme is reference to selection of Assessing Officer at random and not selection of Section 148 cases as random. If the cases for issuance of notice under Section 148 of the Act are selected based on criteria of the risk management strategy, then, obviously, the same are not randomly selected. The term randomly by definition mean something which is chosen by chance rather than according to a plan. Therefore, if the cases are chosen based on risk management strategy, they certainly cannot be said to be random. The Computer/System cannot select cases on random but selection can be based on certain well defined criteria. Hence, the argument of respondents is clearly unsustainable. If the case of respondent is that the applicability of Section 148 of the Act is on random basis, then the provision of Section 148 itself would bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the Scheme for issuing notice under Section 148 of the Act. (iv) In paragraph 3.1 of the Office Memorandum, it is stated that the case is selected prior to issuance of notice are decided on the basis of an algorithm as per risk management strategy and are, therefore, randomly selected. It is further stated that these cases are flagged to the JAO by the Directorate of Systems and the JAO does not have any control over the process. It is further stated that the JAO has no way of predicting or determining beforehand whether the case will be flagged by the system. The contention of the Revenue is that only cases which are flagged by the system as per the risk management strategy formulated by CBDT can be considered by the Assessing Officer for reopening, however, in clause (i) in the Explanation 1 to Section 148 of the Act, the term flagged has been deleted by the Finance Act, 2022, with effect from 1st April 2022. In any case, whether only cases which are flagged can be reopened or not is not relevant to decide the scope of the Scheme framed under Section 151A of the Act, which required the notice under Section 148 of the Act to be issued on the basis of random allocation and in a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mandatory and provides the specification as to how the notice has to be issued. Further the argument of the Revenue that Section 151A of the Act takes into account that the procedure may be modified under the Act is without appreciating that if the procedure is required to be modified then the same would require modification of the notified Scheme. It is not open to the Revenue to refuse to follow the Scheme as the Scheme is clearly mandatory and is required to be followed by all Assessing Officers. (viii) The argument of the Revenue in paragraph 5.1 of the Office Memorandum that the Section and Scheme have left it to the administration to device and modify procedures with time while remaining confined to the principles laid down in the said Section and Scheme, is without appreciating that one of the main principles laid down in the Scheme is that the notice under Section 148 of the Act is required to be issued through automated allocation and in a faceless manner. There is no leeway given on the said aspect and, therefore, there is no question of the administration to device and modify procedures with respect to the issuance of notice. 39. With reference to the decision of the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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