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TMI Blog2024 (12) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... and served demand notice but has also initiated the penalty proceedings. In our considered view, the assessment order dt. 28/12/2019 when once become invalid and non-est, we do not find any provision to rectify a non-existing order. Therefore, the aforementioned effort of the AO would do no good to the revenue. Whether demand notice is an integral part of the assessment orde r in concerned, the same has been answered in the case of CIT Vs. Purshottam Das T Patel [ 1993 (8) TMI 21 - GUJARAT HIGH COURT ] held when an order in writing in respect of both these things is passed, it can be said that there is a complete order of assessment. These two steps may be taken simultaneously or separately, but it cannot be gainsaid that both of them will have to be taken within the time prescribed by the Act. Admittedly, in this case the second step was not taken within the prescribed time. After determining the total income, the Income-tax Officer possibly left the matter to his subordinates for the purpose of calculating the tax payable by the assessee on the basis of the assessed total income. Even if we assume in favour of the Assessing Officer that he approved the said calculation when the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21 passed by the Assistant Commissioner of Income-tax, Circle -7(1)(1), Mumbai, under section 143(3) read with section 144C(13) of the Act, in pursuance of the directions issued by Dispute Resolution Panel-1, Mumbai (hereinafter referred to as 'learned DRP'), on the following grounds, which are independent of and without prejudice to each other. On the facts and in the circumstances of the case and in law, the learned Assessing Officer (hereinafter referred to as the 'learned AO )/ learned Transfer Pricing Officer (hereinafter referred to as the 'learned TPO) erred and Hon'ble DRP further erred: Validity of final assessment order 1. In directly passing the final assessment order under section 143(3) of the Act, without passing the draft assessment order as applicable in case of Appellant being 'eligible Assessee' as per section 144C(1) of the Act, thereby entire order which not in consonance of the Act should be quashed. In upholding the validity of corrigendum order in spite of the fact that the corrigendum cannot be resorted to cure an error of jurisdictional nature and in cases where the order proposed to be rectified by the corrigendum is in itself v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applying export turnover filter; f) Rejecting Sundaram Business Services Limited by on account of persistent losses in the past three years, despite in FY 2015-16 the company has earned profits; g) Rejecting Hartron Communications Limited (Segmental), on account of negative margin earned by the comparable company: h) Accepting following companies as comparables to the Appellant, despite the same not being comparable to that of the Appellant due to following factors such as functional dissimilarity, insufficient segmental informing, super normal profits, etc. MPS Limited Thirdware Solutions Limited Corporate tax grounds 5. In disallowing the amortization cost in respect of employee stock option plans (ESOP) granted to its employees [hereinafter collectively referred as ESOP cost] amounting to INR 8,95,03,698 incurred by the Appellant, on the basis that the ESOP costs are notional/contingent in nature. In disregarding the order of Hon'ble ITAT in the appellant's own case for AY 2008-09, AY 2009-10, AY 2011-12, AY 2012-13, AY 2014-15 and AY 2015-16 where the amount of ESOP cost was allowed as a deductible expenditure in the year of amortization. Without prejudice to the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 144C of the Act and the same reads as under:- 11. Provisions of section 144C read as under: 144C. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. 12. Most relevant clauses pertinent for adjudication of the quarrel reads as under: (3) The Assessing Officer shall complete the assessment on the basis of the draft order, if (a) the assessee intimates to the Assessing Officer the acceptance of the variation; or (b) no objections are received within the period specified in sub-section (2). (13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 [or section 153B], the assessment without providing any further opportunity of being heard to the assessee, within one month from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) (extracted supra), the assessment is completed either under sub- Section (3) or (13). A perusal of Section 144C of the Act shows that the AO shall, at the first instance forward the draft order of the proposed assessment and on receiving the said order, the assessee may approach the Dispute Resolution Panel (DRP), by raising objections. If the assesse accepts the variations, then the AO shall proceed by framing the final assessment order and if the objections are raised by the DRP, then, upon receipt of the directions issued by the DPR, the AO shall complete the assessment. However, we find that while drafting the said draft assessment order, the AO not only issued and served demand notice but has also initiated the penalty proceedings. Vide order dt. 10/01/2020, framed u/s 154 of the Act, the AO has decided as under:- In this case, for A.Y. 2016-17, a draft assessment order us 144C was passed on 30.12.2019 vide DIN ITBAJAST/S/ 143(3))2019-20/1023352392(1) dated 28.12.2019. However, the demand notice u/s 156 of the I.T. Act determining demand of Rs. 252,54,84,961/- (Rs. 61,26,061/- Rs. 251,93,58,900/-, being regular demand and DDT demand respectively) payable was inadvertently i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, no fault can be found with the process, though it is only when both the computation sheets are signed or initialled by the Income-tax Officer that the process described in section 143(3) will be complete. In our opinion, this decision, far from helping the Revenue, goes against it. The Supreme Court has in terms stated that assessment is one integrated process involving not only the assessment of the total income but also the determination of the tax. It has further observed that the latter is as crucial as the former. Therefore, unless the total income is determined and the determination of tax is also done, it cannot be said that the process of assessment is complete. What section 153 requires is that the assessment should be completed within the prescribed time-limit. The words order of assessment cannot be construed to mean assessment of total income only. Those words would mean an order in writing whereby the total income of the assessee is assessed and the tax payable by him is determined. When an order in writing in respect of both these things is passed, it can be said that there is a complete order of assessment. These two steps may be taken simultaneously or separatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee from challenging the validity of the order dated 28/12/2019 has been answered by the Hon'ble Supreme Court in the case of V Mr. T.P. Firm MUAR in 56 ITR 67 wherein the Hon'ble Supreme Court has laid down the ratio :- Approbate and Reprobate is only species of estoppel. It applies only to conduct of parties as in the case of estoppel, it cannot operate against the provisions of a statute. IF particular income is taxable under the I.T. Act, it cannot be taxed on the basis of estoppel or any other equal document. Equity is out of placed in tax place. A particular income is either exigible under the Income tax under taxing statute or not. If it is not, the ITO Has no power to tax the said income. 14. On identical set of facts, Hon ble High Court of Madras in the case of Vijay Television Private Limited reported in 369 ITR 113 (Mad.) has reported as under:- 21. As rightly pointed out by the learned senior counsel for the petitioners, in the order passed on 26.03.2013, the second respondent even raised a demand as also imposed penalty. Such demand has to be raised only after a final order has been passed determining the tax liability. The very fact that the taxable amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hwhile to refer to the decision of the Honourable Supreme Court in the decision reported in (Deepak Agro Foods vs. State of Rajasthan and others) reported in (2008) 16 VST 454 (SC) wherein in Para No.10, the Honourable Supreme Court discussed as to when an order could be construed as a final order:- 10. Shri Rajiv Dutta, learned senior counsel appearing on behalf of the appellant, submitted that in the light of its afore-extracted observations and a clear finding that the assessment order for the assessment year 1995-96 had been anti-dated, the order was null and void. It was urged that assessment proceedings after the expiry of the period of limitation being a nullity in law, the High Court should have annulled the assessment and there was no question of a fresh assessment. Thus, the nub of the grievance of the appellant is that in remanding the matter back to the Assessing Officer, the High Court has not only extended the statutory period prescribed for completion of assessment, it has also conferred jurisdiction upon the Assessing Officer, which he otherwise lacked on the expiry of the said period. 23. It is evident from the above decision of the Honourable Supreme Court that if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond respondent payable by the company inspite of issuance of the corrigendum on 15.04.2013 as a tax due amount. Thus, while issuing the corrigendum, the second respondent did not even withdraw the taxable amount determined by him or updated the status in the website. In any event, such an order dated 26.03.2013 passed by the second respondent can only be construed as a final order passed in violation of the statutory provisions of the Act. The corrigendum dated 15.04.2013 is also beyond the period prescribed for limitation. Such a defect or failure on the part of the second respondent to adhere to the statutory provisions is not a curable defect by virtue of the corrigendum dated 15.04.2013. By issuing the corrigendum, the respondents cannot be allowed to develop their own case. Therefore, following the order passed by the Division Bench of the Andhra Pradesh High Court, which was also affirmed by the Honourable Supreme Court by dismissing the Special Leave Petition filed thereof, on 27.09.2013, the orders, which are impugned in these writ petitions are liable to be set aside. 15. The Hon ble High Court of Karnataka in the case of CIT(IT) vs. Cisco Systems Services B.V. reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been determined itself would show that it was passed as a final order. In fact, a notice for demand under section 156 of the Act was issued pursuant to such order dated 26-3-2013 of the second respondent. Both the order dated 26-3-2013 and the notice for demand thereof have been served simultaneously on the petitioner. Therefore, not only the assessment is complete, but also a notice dated 28-3-2013 was issued thereon calling upon the petitioner to pay the tax amount as also penalty under section 271 of the Act. (Emphasis Supplied) 18. In the case on hand, though it is claimed by the Revenue that order dated December 28,2018 was a draft assessment order, we may record that the ACIT has directed issuance of demand notice and also initiated penalty proceedings. As in Vijay Television (P.) Ltd.'s case (supra) case, the said order along with demand notice was served on the assessee. 19. In Vijay Television Case, instead of passing the draft assessment order, the final assessment order was passed. Subsequently, Revenue sought to correct the mistake by issuing corrigendum. Following the decision of Andhra Pradesh High Court in Zuari Cement Ltd. v. Asstt. CIT [W.P. No. 5557 of 2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one month after the passing of the directions by the DRP in terms of Section 144C(13) of the Act. Nevertheless, the Draft Assessment Order should have in the present facts been passed before 31st March, 2014 in terms of Section 153A(2A) of the Act. In this case, undisputedly, a final order was passed on 12th March, 2014 and is being sought to be corrected by issue of corrigendum on 16th April, 2014 i.e. after the time to pass the Draft Assessment Order has expired. In fact, the Tribunal placed reliance upon the decision of a single judge of the Madras High Court in Vijay Television (P.) Ltd. (supra). This, decision has now been upheld by the Division Bench of the Madras High Court in Asstt. CIT v. Vijay Television (P.) Ltd. [2018] 95 taxmann.com 101/407 ITR 642. In the above case, non issue of Draft Assessment Order could not be corrected by issuing a corrigendum to a final Assessment Order. Just as in the facts before the Madras High Court, here also the demand notice and institution of pending proceedings were not withdrawn by the corrigendum. Besides, in International Air Transport Association v. Dy. CIT [2016] 68 taxmann.com 246/241 Taxman 249 this Court has held that the Draf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in the case of Goldman Sachs (India) Securities Private Limited (GSISPL' or Company) against the order dated 30 June 2021 issued under section 143(3) read with section 144C(13) of the Income Tax Act, 1961 (the 'Act') passed by the Assistant Commissioner of Income Tax, Circle 7(1)(1), Mumbai (learned 'Ao) in pursuance of the directions issued by the Dispute Resolution Panel - 1, Mumbai In this connection, we wish to state as under: 1. The Company had applied for Unilateral and Bilateral Advance Pricing Agreement (APA') (with the United States of America) for five consecutive years covering Financial Year ('FY) 2015-16 to FY 2019-20 for the following transactions: A. Provision of non-binding investment advisory services ('IA ) by GSISPL to its AEs B. Provision of Information technology enabled services (ITES ) by GSISPL to its AEs; C. Reimbursement and recovery of expenses paid/received; D. Receivables and payables arising from provision of aforementioned transactions; and E. Other closely linked transactions relating to the transactions in (A) and (B) above 2. With respect to the abovementioned APA applications, we wish to inform Your Honour that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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