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TMI Blog2023 (1) TMI 1431X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent/Department : Dr. Yogesh Kamat, Shri Soumender Kumar Das. ORDER PER RAHUL CHAUDHARY, JUDICIAL MEMBER: 1. The present appeal is directed against the Final Assessment Order dated, 31.10.2018, passed under Section 143(3) read with Section 144C(13) of the Income Tax Act, 1961 [hereinafter referred to as the Act ], as per directions issued by Dispute Resolution Panel-1, (West Zone) Mumbai (hereinafter referred to as the DRP ) under Section 144C(5) of the Act pertaining to the Assessment Year 2014-15. 2. The relevant facts, in brief, are that the present appeal has been filed by India Medtronic Private Limited as a successor to Covidien Healthcare India Private Limited. The return for the Assessment Year 2014-15 was filed by the Covidien Healthcare India Private Limited (CHPL) on 28.11.2014. The case was selected for scrutiny and notice under Section 143(2) of the Act dated 03.09.2015 was issued to CHPL. During the assessment proceeding, reference was made to the Transfer Pricing Officer (TPO) on 30.12.2016. Before the Transfer Pricing Order could be passed, the amalgamation of CHPL with India Medtronic Private Limited (IMPL) was approved by NCLT vide order, dated 10.08.2017. On 31. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly, subsequent final assessment order passed is null and void and should be quashed. 6. The Ld. Authorised Representative for the Appellant, while advancing arguments in relation to Ground No. 2 and Ground No. 23 above submitted that the Transfer Pricing Officer and Assessing Officer, despite being aware of the fact of merger of CHPL with IMPL, passed the Transfer Pricing Order, dated 31.10.2017 and Draft Assessment Order, dated 29.12.2017, in the name of unknown existent entity (i.e. CHPL the amalgamating company which had ceased to exist when the Draft Assessment Order was passed on). Therefore, the Final Assessment Order, dated 31.10.2018, passed in the name of IMPL is null and void and therefore, liable to be quashed. In support of his contentions the Ld. Authorised Representative for the Appellant referred to the following sequence of events. S. No. Date Particulars 1. 17.07.2017 Submissions, dated 17.07.2017, filed before Assistant Commissioner of Income Tax ( OSD ), Corporate Range-1 [hereinafter referred to as the Assessing Officer ] in the name of CHPL 2. 08.08.2017 Submission, dated 08.08.2017, filed before Assessing Officer in the name of Covidien Healthcare India Priva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited) 18. 10.09.2018 DRP directions passed in the name of India Medtronic Private Limited (successor to Covidien Healthcare India Private Limited) 19. 31.10.2018 Final Assessment Order passed in the name M/s India Medtronic Private Limited (successor to Covidien Healthcare India Private Limited) with PAN No. AABCT6021C (pertaining to Covidien India) 7. The Ld. Authorised Representative for the Appellant submitted that Transfer Pricing Order as well as the Draft Assessment Order having been passed in the name of non-existing entity were void-ab-initio. Therefore, the Final Assessment Order is liable to be quashed since the entire proceedings are based upon invalid Transfer Pricing Order and invalid Draft Assessment Order. In this regard, he placed reliance upon the decision of the Delhi Bench of the Tribunal in the case of Fedex Express Transportation and Supply Chain Services (India) Private Limited (2019) (108 taxmann.com 542(Mumbai), dated 11.07.2019 and in the case of BOEING India Private Limited (2020) (121 taxmann.com 276) (Delhi-Trib) dated 17.08.2020. 8. Per contra, the Ld. Departmental Representative submitted that the transfer pricing order was passed on 31.10.2017. No i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue were rejected by the Tribunal in the cases cited by him. 10. We have considered the rival submissions and perused the material on record. We note that the Delhi Bench of the Tribunal has, in the case of Fedex Express Transportation and Supply Chain Services (India) Private Limited (supra), held as under: 20. The next question which we are required to examine now is as to whether a valid draft assessment order is mandatory to assume jurisdiction under Section 144C of the Act. In other words, it would be appropriate to examine as to whether an invalid draft assessment order, as noted above in the earlier paras, can be construed as a jurisdictional defect meaning thereby that the same is incurable thereby making the subsequent assessment proceedings null and void in the eyes of law. The phraseology of Sec. 144C(1) of the Act itself shows that the Assessing Officer is required to forward a draft of the proposed order of assessment if he proposes to make a variation in the returned income or loss which is prejudicial to the interests of the assessee. Undoubtedly, the draft assessment order has legal connotations as it lays the foundation of any prospective reduction in the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Dr. Shashi Kant Garg v. CIT [2006] 152 Taxman 308/285 ITR 158. In other words, the existence of a legally valid draft order becomes the premise or foundation for the commencement of a legally valid DRP proceedings and consequently, a legally valid final assessment order as per Sec. 143(3) r.w.s. 144C(13) of the Act. In view of the above, we hold that it is mandatory for the Assessing Officer to pass a legally valid draft assessment order and without the same, he cannot assume jurisdiction to proceed with the assessment under Section 144C of the Act. 22. Our above understanding stands fortified by the judgment of the Hon'ble Bombay High Court in the case of International Air Transport Association (supra) which has clearly held that a draft assessment order under Section 144C(1) of the Act is 'mandated' before the Assessing Officer passes a final order under Section 143(3) of the Act in case of an 'eligible assessee', and the relevant extract of the judgment reads as under : 5. Therefore, in view of Section 144C(15) of the Act which defines eligible assessee to whom Section 144C(1) of the Act applies to inter alia mean any foreign company. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an draft order i.e. before an assessment order which is subject to appeal under the Act is passed. The entire object is to ensure that the disputes of Foreign Companies are resolved expeditiously and final assessment orders are not passed without a re-look to the proposed order (draft order), if so desired by the Foreign Company. In essence, it obliges the Assessing Officer to first pass a draft of the proposed assessment order indicating the proposed variation in the income returned. This draft Assessment Order is to be passed under Section 144C(1) of the Act, which entitles an eligible assessee such as a Foreign Company to approach the DRP with its objection to the Draft Assessment order. This is so provided, so that an eligible assessee can have his grievance addressed before the final assessment order is passed. In case, an assessee does not object to the draft assessment order, then a final assessment order is passed in terms of the draft assessment order by the Assessing Officer. It is only on passing of the final assessment order that the assessee, if aggrieved by it, would be able to approach the appellate authorities under the Act. These special rights are made available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed and hence the final assessment order was held to be without jurisdiction. Further, even in cases where a draft assessment order was passed but it was not so required to be passed in law, since the assessee was not an 'eligible assessee', the entire assessment proceedings thereafter have been held to be bad in law and liable to be quashed by the Hon'ble High Courts in the cases of Honda Cars India Ltd. (supra), Pankaj Extrusion Ltd. (supra) and ESPN Star Sports Mauritius S.N.C ET Compagnie (supra). 26. xx xx 27. xx xx 28. In conclusion, to summarise, we hold that since the Transfer Pricing order under Section 92CA(3) of the Act was passed in the name of the amalgamating company, FEIPL, which was not an 'eligible assessee' as per Sec. 144C(15)(b)(i) of the Act, the Assessing Officer did not have any jurisdiction under Section 144C(1) of the Act to pass a draft assessment order. Furthermore, the draft assessment order was also passed in the name of the amalgamating company, FEIPL which was a non-existent entity in the eyes of law on the date of passing of such order; thus, the draft assessment order passed in the present case is illegal and bad in law. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 170 of the Act means completion of assessment by passing a final order of assessment and the final assessment order has been passed in the name of FETSCS, the successor amalgamated company. In our view, the word 'assessment' under the Act cannot be interpreted so narrowly but has to be understood in each section with reference to the context in which it has been used, as held by the Hon'ble Supreme Court in the case of A.N. Lakshman Shenoy v. ITO [1958] 34 ITR 275 (SC). In fact, the Hon'ble Privy Council in the case of CIT v. Khemchand Ramdas [1938] 6 ITR 414 (PC) has observed as under : One of the peculiarities of most Income-tax Acts is that the word assessment is used as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable, and sometimes the procedure laid down in the Act for imposing liability upon the tax-payer. 33. Thus, the expression 'assessment' can also mean the procedures laid down in the Act, if the context so requires; and, qua Sec. 170 of the Act, the word 'assessment' has to be understood as procedure laid down therein. Accordingly, under Section 170 of the Act, the Assessing Officer was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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