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TMI Blog2024 (12) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... f judgment of M/s S. G. Asia Holdings (India) Pvt. Ltd. s [ 2019 (8) TMI 661 - SUPREME COURT] the issue is remitted back to the file of Learned AO to pass an order incorporating the DRP direction which have been given effect by the TPO. Appeal of Assessee is allowed for statistical purposes. - DR. B.R.R. KUMAR, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER For the Assessee: Shri Nageswar Rao, Parth Aman Rewaria, Adv For the Respondent: Shri Rajesh Kumar, CIT-DR ORDER PER VIMAL KUMAR, JM: 1. The Assessee s appeal is against assessment order dated 04/12/2014 passed U/s 154/143(3) r.w.s.144C of the Income Tax Act, 1961 (hereinafter called the Act ) subsequent to direction dated 25/09/2014 of the Ld. Dispute Resolution Panel (DRP) for Assessment Year 2010-11. 2. Brief facts of case are that the assessee company filed return of income declaring total income of Rs. 93,41,470/- on 21/09/2010 for Asst. Year 2010-11. The case was selected for scrutiny and notice u/s 142 was issued on 20/09/2011. Further, notice u/s 142(1) along with questionnaire was issued on 02/08/2013. In response to notices, Ms. Amrita Kumari, CA/ Authorized Representative appeared from time to time. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional comparability/ non comparability, and failed to undertake appropriate functional, asset and risk analysis of comparable vis-a-vis the Appellant. Ground 4 Hon ble DRP applied inconsistent approach; rejected Rites Limited engaged in technical and consultancy services being functionally different from the Appellant and in contrast accepted some comparables (such as Apitco Ltd. and WAPCOS Ltd) having similar profile vis-a-vis Rites Ltd. which also needs to be rejected. Ground 5 Ld. TPO has committed a mistake in computing the working capital adjusted margins of the comparable companies while giving effect of the Hon ble DRP s directions. Ground 6 Hon ble DRP/Ld. TPO has erred in ascertaining the risk profile of the Appellant by comparing it against the companies bearing substantial entrepreneurial risk, without giving due cognizance to the fact that Appellant indeed enjoys a No Risk status, i.e., all expenses incurred by the Appellant get reimbursed with a markup of 3 percent, irrespective of their commercial success. Hon ble DRP/Ld. TPO has erred in not making suitable adjustments to account for differences in the risk profile of the Appellant (no risk) vis-a-vis the comparable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under:- We have heard both the parties and perused all the relevant materials available on record. Section 154 of the Income Tax Act is regarding the rectification of mistake and the Assessing Officer on 15.07.2014 has rectified the order thereby giving the final effect of the DRP directions. At the same time, the Assessing Officer was suppose to complete the assessment under Section 143(3) read with Section 144C of the Income Tax Act on the basis of the draft assessment order if the assessee intimates to the Assessing Officer the acceptance of the variation or no objection are received within the period specified in sub section (2) of Section 144C of the Income Tax Act. In the present case, the assessee filed objections before the DRP after passing the draft assessment order. The DRP issued certain directions to the Transfer Pricing Officer. The Assessing Officer was very well aware that the DRP has given certain directions to the Transfer Pricing Officer and it is binding on the Assessing Officer to follow every direction issued by the Dispute Resolution Panel as per as per Section 144C(10) of the Act. Sub-Section (10) of Section 144C is not procedural but a mandatory requireme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harshly affect a particular party but the court has no choice but to enforce it giving full effect to the same. The legal maxim dura lex sed lex which means the law is hard but it is the law , stands attracted in such a situation. It has consistently been held that, inconvenience is not a decisive factor to be considered while interpreting a statute. A result flowing from a statutory provision is never an evil. A court has no power to ignore that provision to relieve what it considers a distress resulting from its operation. Therefore, impugned order may be set aside. 7. The Learned Authorized Representative of Department of Revenue submitted that the DRP passed order u/s 144C (5) on 25/09/2014 issuing certain directions with regard to TP adjustment. As per the provisions of section 144C(13) of IT Act, the final order of assessment is to be passed by AO within one month from the end of the month DRP directions received i.e., by 30/11/2014. As order giving effect from TPO was not received till passing of order, the AO passed order u/s 144C of IT Act on 27/11/2014. AO received order giving effect dated 27/11/2014 from TPO on 02/12/2014 and passed order u/s 154/143(3) r.w.s 144C on 04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the TPO is also dated 30.03.2022, the same was not received by the AO. AO could not incorporate the same in the assessment order. However, he passed the order subject to the modified order of the TPO which is yet to be passed and the necessary modification with regard TP adjustment which would be made by passing rectification of order on receipt of the TPO order in due course. Thus, in the above facts, it is emanating that the final assessment order is without incorporating of DRP s directions. As stated above, the reason is that DRP has given certain directions which were to be given effect by the TPO. The AO till passing the final assessment order has not received the order giving effect by the TPO. In this regard, stating that such an order passed by the AO is not legal in the eyes of law, Id. Counsel of the assessee has placed reliance on the following Tribunal orders and also on the Hon ble Karnataka High Court in the case of Pr.CIT vs. M/s. Flextronics Technologies (India) Pvt. Ltd. in ITA No.332 of 2019 order dated 9th January 2023. (i) Flextronics Technologies (India) Private Ltd. vs. ACIT: IT (TP) A No.832/Bang/2017; (ii) Software Paradigms Infotech (P.) Ltd. vs. ACI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as High Court. We find that Hon ble jurisdictional High Court is binding on the Tribunal, hence we adjudicate this issue with reference to the orders of the Hon ble jurisdictional High Court referred above, as the facts are similar. 7. In the case of Anand NVH Products Pvt. Ltd. (supra), we noted that assessment order has been passed under section 143(3) read with section 144C of the Act without waiting for the decision of the DRP. Hon ble High Court in that case set aside the final assessment order along with notice of demand and restored the matter to the level of DRP. 7.1 In the case of SRF Ltd. (supra), the final assessment order was passed without incorporating the DRP s directions. Hon ble High Court, in such a situation, quashed the final assessment order and the demand of notice and remitted the matter to DRP for consideration under section 144C of the Act. Thereafter, it was directed that the assessment order shall be passed in accordance with the procedure stipulated under section 144B(1) as well as section 144(C) of the Act. 7.2 In the case of Fibre home India Pvt. Ltd. (supra) also, the final assessment order was passed without incorporating the directions of the DRP. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly after providing due and reasonable opportunity of being heard to the assessee. 11. From examination of record, it is crystal clear that order u/s 144C (5) dated 25/09/2014 of DRP contained certain directions with regard to TP adjustment u/s 144C(13). Final order of assessment was to be passed by Ld. AO within one month from the end of the month in which DRP directions were received i.e. 30/11/2014. As the order giving effect from TPO was not received, the Ld. AO passed order dated 27/11/2014 u/s 144C. In the meanwhile, Ld. AO received order giving effect dated 27/11/2014 from the TPO on 02/12/2014, so Ld. AO passed order u/s 154/143(3) r.w. s 144C on 04/12/2014. Thus, the Ld. AO had made a technical lapse with regard to section 144C of IT Act. It is a fact that assessment order dated 27/11/2014 was issued within period of limitation i.e., 30/11/2014. After receiving order giving effect dated 27/11/2014, Ld. AO made necessary corrections of Rs. 1,46,24,889/- in place of Rs. 4,18,05,854/- and passed order dated 04/12/2014 u/s 144C. 12. In view of above material fact, as per ratio of judgment in Pr. CIT vs. M/s S. G. Asia Holdings (India) Pvt. Ltd. s case (supar), the issue is rem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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