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TMI Blog2023 (10) TMI 1468X X X X Extracts X X X X X X X X Extracts X X X X ..... ich relates to dispatch and receipt of electronic record as contemplated u/s 132 of the Information Technology Act, 2000, as discussed. Considering the peculiar facts of the case from all possible angles, we are inclined to accept that the DRP directions were communicated on 30.11.2021 making the assessment order dated 31.01.22 barred by limitation. Decided in favour of assessee. - SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND MS ASTHA CHANDRA, JUDICIAL MEMBER For the Assessee : Shri Nageshwar Rao, Adv Shri Parth, Adv Shri Akshay Uppal, Adv For the Department : Shri Rajesh Kumar, CIT-DR Shri Manu Chaurasia, Sr. DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER:- This appeal by the assessee is preferred against the order dated 31.01.2022 framed u/s 143(3) r.w.s 144C(13) r.w.s 144B of the Income- tax Act, 1961 [hereinafter referred to as 'The Act'] pertaining to A.Y. 2017-18. 2. The grievances of the assessee read as under: Based on the facts and circumstances of the case and in law, Haier Appliances India Pre Limited (hereinafter referred to as Haler India or the Appellant) craves leave to prefer an appeal against the order passed by the National Faceless Assessment Centre Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely towards brand promotion. 10. The TPO /AO erred on facts and in law by holding that the Appellant was incurring expenditure primarily for promoting Haier brand and creating marketing intangibles for the parent company and ignoring that the same directly benefitted the Appellant s sale; 11. The TPO AD erred on facts and in law by assuring that AMS expenses incurred by Appellant have led to creation of marketing intangibles. 12. The TPO / AO erred on facts and in law by incorrectly holding the AMP expense incurred by the Appellant to be 'non-routine on the basis of a bright line test . 13. The TPO / AO erred on facts and in law by considering routine selling expenses for computing the alleged excess AMP expenditure. GROUNDS AGAINST BENCHMARKING OF AMP FUNCTION 14. The TPO /AO erred on facts and in law by undertaking multiple assessments of the same transaction using different methodologies without appreciating the tact a transaction can only be benchmarked using the Most Appropriate Method (MAM) only once 15. The TPO /AO erred on facts and in law by bundling and unbundling AMP transaction with the main business in the same order. 16. The TPO /AO erred on facts and in law by ig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant, b. The Appellant was bound to issue the share capital at face value, owing to the regulations prescribed by Companies Act, 2013, c. The issuance of share capital is a capital transaction and hence, cannot be made taxable as a revenue receipt, d. There wasn't any non-monetary benefit that arose out of the impugned transaction of receipt of share capital, which may warrant the applicability of section 28(iv). e. The action of AO/ DRP in mis-interpretating the provision of Law and its application thereof is patently bad, untenable and illegal in the eyes of law. GROUNDS PERTAINING TO PENALTY PROCEEDINGS 27. That on facts and in laws, the AO/ TPO/ DRP erred in holding that the Appellant has underreported its income in respect of each item of disallowance/ additions and in initiating penalty proceedings under section 270A read with section 274 of the Act. The Appellant craves leave to add, alter, modify or delete such other objections before or during the course of hearing before the Hon'ble Income Tax Appellate Tribunal (ITAT ), so as to enable the Hon'ble ITAT to decide on the grounds raised by the Appellant, as per law. 3. The substantive ground argued before us is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 144C(5) of the Act were not accessible to FAU on ITBA before 01.12.2021. Therefore, the receipt of direction in terms of section 144C(13) of the Act cannot be considered any time before . Therefore, finalization of the assessment order on 31.01.2022 was done well within the time prescribed u/s 144C(13) of the Act. 12. The ld. counsel for the assessee referred to various emails and clarifications mentioned in the written submissions of the CIT - DR dated 27.06.2022 and pointed out that even the Revenue has accepted that the DRP directions were issued by the DRP Secretariat through the ITBA on 30.11.2021, though subsequently, it has been clarified as under: 2.1 In order to verify the contents of the e-mail as well as its authenticity, this office has sent an e-mail communication to DRP-1, New Delhi. The DRP-1 has given a reply vide e- mail dated 10.06.2022 which is enclosed as Annexure A to these submissions for kind perusal. The reply of the DRP is reproduced as under for clarity sake: In the mail sent on 2nd June 2022, an inadvertent mistake was made whereby the DRP mentioned to have been delivered instead of issued on 30.11.2021. The DRP Secretarial can only confirm the issuance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of order giving effect of DRP order by the TPO and DRP order was not recorded till date of proposal for generation of final order u/s 144C(13) of the Act. 16. It would be pertinent to refer to the reply received from Faceless Assessing Officer, heavily relied upon by the ld. DR, which reads as under: I am directed to forward the trail mail received from ITBA in the above matter and to convey as under:-A perusal of the mail shows that the direction of DRP u/s 144C(5) was not accessible to FAU on ITBA before 01. 12.21 at 2.30.06 AM Hence the receipt of direction in terms of section 144C(13) cannot be considered anytime before. As such it is clear that the finalization of assessment order on 31.01.2022 was done well within the time prescribed u/s144C(13) of the Act Kindly let us know if any further details are required in this matter. 17. The ld. DR also referred to the following mail received by the DDIT 4 Systems ITBA : Please refer to your below email on the subject cited above. In this regard, I am directed to attach herewith the case history/noting of the case, as desired. Besides, I am also directed to provide the below details as provided by the technical team for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2357;ित्त मंत्रालय / MINISTRY OF FINANCE आयकर विभाग / INCOME TAX DEPARTMENT CIT(DRP-1), Delhi-2 सेवा में / To. HAIER APPLIANCES INDIA PRIVATE LIMITED BUILDING NO. 1.OKHLA INDUSTRIAL ESTATE OKHLA PHASE 3 NEW DELHI, Delhi, India, 110020. स्थायी लेखा संख्या/ PAN: AABCH3162L द.प.सं. एवं प्रपत्रक संख्या / DIN Document No.: ITBA/DRP/S/91/2021-22/1037373340(1) दिनांक/ Dated: 30/11/2021 Intimation Letter for Order u/s 144C(5) महोदय/ महोदया / मेसर्स, Sir/Madam/M/s. This is to inform you that Order u/s 144C(5) dated 26/11/2021 is having Document No. (DIN) ITBA/DRP/M/144C(5)/2021-22/1037373233(1). This is a system generated document and does not require any signature. 23. Fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Technology Act, 2000 contains provisions for the time and place of the dispatch and receipt of electronic records. It reads as follows: 13. Time and place of dispatch and receipt of electronic record - (1) Save as otherwise agreed to between the originator and the addressee, the dispatch of an electronic record occurs when it enters a computer resource outside the control of the originator. (2) Save as otherwise agreed between the originator and the addressee, the time of receipt of an electronic record shall be determined as follows, namely- (a) if the addressee has designated a computer resource for the purpose of receiving electronic records,- (i) receipt occurs at the time when the electronic record enters the designated computer resource; or (ii) if the electronic record is sent to a computer resource of the addressee that is not the designated computer resource, receipt occurs at the time when the electronic record is retrieved by the addressee; (b) if the addressee has not designated a computer resource along with specified timings, if any, receipt occurs when the electronic record enters the computer resources of the addressee. (emphasis supplied) The dispatch of a rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment Order u/s.144C of the Act filed objections along with Form No.35A on 29.04.2021 before Dispute Resolution Panel-1, New Delhi. During the DRP proceedings, the assessee had objected to the Determination of ALP by the TPO regarding AMP (Advertising Marketing and Promotional) expense and Adjustment on account of trading segment [Substantive Adjustment (Intensity) Protective Adjustment (Brightline Test)]. 3. The TPO in its order vide DIN Order No: ITBA/COM/F/17 /2021- 22/1039115464 (1) dated 27.01.2022 re-calculated the arm's length pr ice based upon the directions of the Hon'ble DRP. After including the effect of the direction of the Hon'ble DRP by the TPO, the total income of the assessee is computed as under: Income as per ITR Rs.43,97,33,630/- Additions:- 1. Substantive Adjustment as per directions of the DRP Rs.26,78,22,689/- 2. Protective Adjustment as per directions of the DRP Rs.43,76,04,795/- 1. Disallowance of Shares issued above book value Rs.1,50,66,205/- Total Assessed Income Rs.1,16,02,27,319/- Rounded off (u/s. 288A) Rs.1,16,02, 27,320/- Penalty proceedings u/s. 270A read with section 274 of the IT Act is initiated separately for under reporting of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation. 34. The Hon'ble Supreme Court referring to the provisions of section 143(2(ii) of the Act, which contemplates that no notice under the said clause shall be served on the assessee after expiry of six months. The Hon'ble court put to question what is the meaning of the expression served , whether such expression is to be used literally, so as to mean that actual physical receipt of notice by the assessee or the expression served is inter-changeable with the word issue . 35. The relevant findings of the Hon'ble Supreme Court read as under: We are of the opinion that the expressions 'serve' and 'issue' the opinion that are interchangeable, as has been noticed in Section 27 of the General Clauses Act, 1887 and also in a judgment of Hon'ble Supreme Court reported as Banarsi Devi Ys. The Income Tax Officer, District IV. Calcutta and others AIR 1964 SC 1742. In the aforesaid case, an argument was raised that Section 4 of the Amending Act (Act No.1 of 1959) only saves a notice issued after the prescribed time, but does not apply to a situation where notice is issued within but served out of time. The Court observed as under: (10)......Section 4 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e party is to avail remedy of appeal etc. is concerned from the date of communication of the decision or order appealed against. But if an authority is to exercise a power or to do an act affecting the rights of the parties, he shall exercise that power within the period of limitation. The decision of such authority comes into force and is operative from the date, it is signed by him. The Court held: 9. The words from the date of decision or order used with reference to the limitation for filing an appeal or revision under certain statutory provisions had come up for consideration in a number of cases, We may state that the ratio of the decisions uniformly is that in the case of a person aggrieved filing the appeal or revision, it shall mean the date of communication of the decision or order appealed against. However, we may note a few leading cases on this aspect. 11. The ratio of these judgments was applied in interpreting Sec. 33A(2) of the Indian Income Tax Act, 1922 in Muthia Chettiar v. C.I.T., ILR 1951 Mad 815 with reference to a right of revision provided to an aggrieved assessee. Section 33A(1) of the Act on the other hand authorised the Commissioner to suo motu call for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision for seeking his remedies against the same, he should be made aware of passing of such order Therefore Courts have uniformly laid down as a rule of law that for seeking the remedy the limitation starts from the date on which the order was communicated to him or the date on which it was pronounced or published under such circumstances that the parties affected by it have a reasonable opportunity of knowing of passing of the order and what it contains. The knowledge of the party affected by such a decision, either actual or constructive is thus an essential element which must be satisfied before the decision. can be said to have been concluded and binding on him. Otherwise the party affected by it will have no means of obeying the order of acting in conformity with it or of appealing against it or otherwise having it set. This is based upon, as observed by Rajamanner, CJ in Muthia Chettiar v. C.I.T. (supra) a salutary and just principle . The application of this rule so far as the aggrieved party is concerned is not dependent on the provisions of the particular statute, but is so under the general law XXX XXX XXX 18 Thus if the intention or design of the statutory provision wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t will be seen that in all the decisions cited before us, it was the communication of the impugned order which was held to be essential and not its actual receipt by the officer concerned and such communication was held to be necessary because till the order is issued and actually sent out to the person concerned the authority making such order would be in a position to change its mind and modify it if it thought fit But once such an order is sent out, it goes out of the control of such an authority, and therefore, there would be no chance whatsoever of its changing its mind or modifying it. In our view, once an order is issued and it is sent out to the concerned government servant, it must be held to have been communicated to him, no matter when he actually received it. (Emphasis by us) We find it difficult to persuade ourselves to accept the view that it is only from the date of the actual receipt by him that the order becomes effective. If that be the true meaning of communication, it would be possible for a government servant to effectively thwart an order by avoiding receipt of it by one method or the other till after the date of his retirement even though such an order is pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice that Hon'ble Supreme Court in Commissioner of Sales Tax and others Vs. Subhash Co. (2003) 3 SCC 454 observed as under: 12. Whether service of notice is valid or not is essentially a question of fact. In the instant case, learned Single Judge found that certain procedures were not followed while effecting service by affixture. There was no finding recorded that such service was non est in the eye of the law. In a given case, if the assessee knows about the proceedings and there is some irregularity in the service of notice, the direction for continuing proceedings cannot be faulted. It would depend upon the nature of irregularity and its effect and the question of prejudice which are to be adjudicated in each case on the basis of surrounding facts. If, however, the service of notice is treated as non est in the eye of the law, it would not be permissible to direct de novo assessment without considering the question of limitation. There also the question of prejudice has to be considered. xxx xxx xxx 22. The emerging principles are: (i) Non-issue of notice or mistake in the issue of notice or defective service of notice does not affect the jurisdiction of the assessing off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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