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TMI Blog2025 (3) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... ('the Act') and is therefore void-ab-initio, bad in law and liable to be quashed 1.2. On the facts and circumstances of the case & in law, the final assessment Ld. AO dated February 28, 2023 passed by Ld. AO in contravention of the provisions of Section 144B(1)(xxix) of the Act which states that such order mandatorily to be passed by the National Faceless Assessment Centre and therefore, the order is without jurisdiction and liable to be quashed. 1.3. On the facts and circumstances of the case & in law, the final assessment Ld. AO dated February 28, 2023 is invalid and barred by limitation in view of the provisions of Section 144C(13) r.w.s. 144B(1) (xxix) of the Act, and is therefore liable to be quashed. Transfer Pricing ('TP') Grounds TP adjustment with respect to Advertisement, Marketing and Promotion ('AMP') expenditure 2. On the facts and circumstances of the case, & in law, the Ld. Ld. AO/ Learned Transfer Pricing Officer ('Ld. TPO') [in pursuance to the directions of the Dispute Resolution Panel ('Ld. DRP')]. erred in enhancing the income of the Appellant by INR 12,01,20,375/- (on substantive basis) and INR 31,27,93,371/- ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applying profit split ratio of 25:75 to allocate profits between the AE and the Appellant on an arbitrary basis and without giving any basis. Protective Adjustment 5. Without prejudice to the Ground 2 and 3, on the facts and in the circumstances of the case, & in law, the Ld. DRP/Ld. AO/TPO erred in proposing an addition of Rs. 31,27,93,371 on protective basis by holding that alleged excessive AMP expenses is an international transaction and in doing so have grossly erred in: 5.1. proposing use of bright line test ("BLT) (AMP/Sales) for establishing the existence of international transaction and computing the value of adjustment on account of AMP adjustment in complete disregard of the binding decisions of the Jurisdictional High Court: and 5.2. imputing a mark-up of 17.58% (being operating profit ('OP')/ operating cost ('OC')) earned by the companies rendering marketing support services (MSS) on the alleged AMP expenses, without providing any cogent reason and selecting companies which are functionally different and ought to be excluded. Both Protective and Substantive Adjustment 6. Without prejudice to the Ground 2 and 3, on the facts and in the circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant by INR 10,06,01,977/-while holding that the international transaction pertaining to payment of buying commission does not satisfy the arm's length principle envisaged under the Act, and in doing so have grossly erred in: 8.1. disregarding the arm length's price (ALP) as determined by the Appellant in the TP documentation maintained by it in terms of Section 92D of the Act read with rule 10D of the Income Tax Rules, 1962 and arbitrarily applying the CUP method without any cogent basis; 8.2. holding that Appellant did not receive any tangible benefit in lieu of the services availed thereby challenging the commercial wisdom of the Appellant in making payment for services availed; and 8.3. disregarding the elaborate documentary evidence submitted as part of assessment proceedings to erroneously assume that 'no benefit' has been conferred upon the Appellant from the impugned international transactions pertaining to buying commission and thereafter determining the ALP of the said transactions as 'NIL; 9. Without prejudice to the grounds mentioned (Grounds 8.1 to 8.3) above, on the facts and circumstances of the case and in law, both the Ld. TPO and Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the objections before the ld. DRP. The ld. DRP has given directions in terms of its order passed u/s 144C(5) of the Act dt. 03.06.2022 wherein certain direction were given to the TPO. In compliance to the directions given by the ld. DRP, the TPO has passed the effect order on 14.07.2022 with a copy to the Jurisdictional assessing officer. Accordingly, the due date for passing of the final Assessment Order was 31.08.2022 as the effect order as per directions given by ld. DRP stood passed by TPO and served upon the Assessing officer i.e. the DCIT, Circle 1(1) Delhi on 14.07.2022. Since the final Assessment Order has been passed on 28.02.2023 which is in divergence to due date prescribed u/s144C (13) of the Act, the assessee submits that the final order passed by the Assessing Officer is barred by limitation, and hence, should be treated as void. It is further argued by the assessee that the order was passed by the Jurisdictional assessing officer whereas the draft order was passed by the Faceless Assessment Centre thus the final assessment order is against the provisions of section 144B relating to the faceless assessment scheme. 5. On the other hand the ld. CIT DR vehemently suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g contained in section 153, pass the assessment order under sub-section (3) within one month from the end of the month in which,- (a) the acceptance is received; or (b) the period of filing of objections under sub-section (2) expires. (5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment. (6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:- (a) draft order; (b) objections filed by the assessee; (c) evidence furnished by the assessee; (d) report, if any, of the Assessing Officer, Valuation Officer of Transfer Pricing Officer or any other authority; (e) records relating to the draft order; (f) evidence collected by, or caused to be collected by, it; and (g) result of any enquiry made by, or caused to be made by, it. (7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5),- (a) make such further enquiry, as it thinks fit; or (b) cause any further enquiry to be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision of this Act, the assessment, reassessment or recomputation under sub-section (3) of section 143 or under section 144 or under section 147, as the case may be, with respect to the cases referred to in sub-section (2), shall be made in a faceless manner as per the following procedure, namely:- (i) the National Faceless Assessment Centre shall assign the case selected for the purposes of faceless assessment under this section to a specific assessment unit through an automated allocation system; (ii) the National Faceless Assessment Centre shall intimate the assessee that assessment in his case shall be completed in accordance with the procedure laid down under this section; (iii) a notice shall be served on the assessee, through the National Faceless Assessment Centre, under sub-section (2) of section 143 or under sub-section (1) of section 142 and the assessee may file his response to such notice within the date specified therein, to the National Faceless Assessment Centre which shall forward the same to the assessment unit; (iv) ....(xx) (xxi) in case of an eligible assessee, where there is a proposal to make any variation which is prejudicial to the interest of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nit who shall pass the final assessment order in accordance with section 144C(13). Thus in any case whether the assessment is completed by Jurisdictional Assessing officer or by Faceless assessing officer, the final order should be passed within the time prescribed u/s 144C(13) of the Act. 8. In the instant case one more facts is relevant to state that, the draft assessment order was passed by the Faceless Assessment Centre and the Final assessment order was passed by the jurisdictional Assessing officer thus the department itself has deviated from the faceless assessment system. At this stage we must refer the observations made by the AO in para 3.2 of the final assessment order which are as under: "3.2 The draft order was issued at an assessed income of Rs. 306,97,12,330/- after making addition of Rs. 62,55,98,613/- as proposed by TPO and another addition of Rs. 10,06,01,977/- on account of disallowance u/s 40(a)(i) of the IT Act. The assessee filed the appeal before the Hon'ble DRP on 05.10.2021, aggrieved with the above mentioned draft assessment order. The Hon'ble DRP vide its order u/s 144C(5) of the Act dt. 03.06.2022, with copies marked and served upon NeAC Delhi, ACIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which in no case extended the time limit for passing the Final Assessment Order available to Assessing Officer in terms of section 144C(13) of the Act. Accordingly, in the present case, the limitation for passing final order by AO expired on 31.07.2022, thus the final assessment order passed on 28.02.2023 is barred by limitations and is void and invalid order. 10. The Hon'ble jurisdictional High Court in the case of PCIT Vs. M/s Fibrehome India Pvt. Ltd. in ITA No. 91 of 2024 vide order dt. 5.2.2024 has held as under: "3. We note that an identical question has been answered by us in W.P.(C) 15381 of 2022 titled as "Louis Dreyfus Company India Private Limited vs. Deputy Commissioner of Income Tax Circle 13(1), Delhi & Ors." in favour of the assessee / petitioner. While dealing with this question, we had observed as follows:- "14. The determination which the AO makes in the first instance is recognized to be a draft of the proposed order of assessment by virtue of section 144C(1) of the Act. If the assessee be aggrieved by the proposed order of assessment, it is entitled to file objections before the DRP in accordance with Section 144C(2) of the Act. The power of the AO to compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Shell India and Vodafone Idea construe the time lines as provided in Section 144C to be mandatory in character. In our considered opinion, this interpretation is in accord with the intent behind insertion of that provision and the bare text and spirit of that section. Thus, we accord our approval to the interpretation as set out in the aforenoted decisions of the Bombay High Court. 19. Further, the procedure of assessment as provided under Section 144C does not envisage or contemplate the interdiction or involvement of the TPO once a directive has been framed by the DRP. The role of the TPO comes to an end once an order as contemplated under Section 92 CA(4) of the Act has come to be framed and remitted to the AO. There was thus no occasion for the TPO having resumed proceedings post the passing of the direction by the DRP on 20 June 2022. 20. Undisputedly, the directive of the DRP came to be uploaded on the ITBA portal on 24 June 2022. It is additionally stated to have been dispatched through Speed Post to the third respondent (TPO) and the fourth respondent (Additional/Joint/Deputy/Assistant Commissioner of Income Tax, National Faceless Assessment Centre, New Delhi) on 27 J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndated by the Statute are not strictly adhered the entire object of providing for an alternate redressal mechanism in the form of DRP stand defeated. That is not the intention of the legislature when the provision was introduced in the Act. Section 144C(10) of the Act provide that the directions of DRP are binding on the AO. By failing to pass any order in terms of the provision, the AO cannot be permitted to defeat the entire exercise and render the same futile. When a Statute prescribes the power to do a certain thing in a certain way, then the thing must be done in that way and other methods of performance are forbidden. Once the statute has prescribed a limitation period for passing the final order, it is expected that the internal procedure of the department should mould itself to give meaning to and act in aid of the provision. Any procedural defect (there is none in this case) in the internal mechanism of the working of E-assessment Scheme, cannot operate against the interest of assessee. Hence, the FAO cannot be believed that the DRP direction was received by him only on 23rd August 2023 despite being uploaded on the ITBA portal on 25th March 2021. The failure on the part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... calling for the records of the case so as to examine the failure of Respondent Nos. 1 and 2 to give refund of tax paid by the Petitioner for the assessment year 2016-2017 which is in excess of legitimate tax due on the returned income of the Petitioner and directing Respondent Nos. 1 and 2 to forthwith grant the refund for the assessment year 2016-2017 along with the applicable rate of interest." 26. Before we part, we strongly recommend that a detailed enquiry be initiated on the failure on the part of the Faceless Assessing Officer concerned to act in accordance with the provisions of the Act and the lack of diligence on the part of officials concerned and the system itself insofar as it relates to the present assessment. Strict action should be taken against persons responsible for the laxity and lethargy displayed which has caused a huge loss to the exchequer and in turn to the citizens of this country. A copy of this order be circulated to the CBDT and the Principal Secretary, Ministry of Finance, GOI. 27. Mr. Singh seeks stay of the judgment. Stay refused." Further the decision of Hon'ble Madras High Court in the case of M/s Taeyang Metal India Private Limited vs. DCIT i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the petitioner were purportedly transferred so as to ensure that the proceedings are not barred by limitation is not material for this purpose. Indeed, as contended by learned counsel for the petitioner, the communication dated 12.04.2022 from the PCCIT of the National Faceless Assessment Centre seeking approval for transfer so as to complete assessment within the period of limitation underscores the fact that the income tax authorities were mindful of the fact that assessment would be barred by limitation unless such assessment is proceeded with and completed expeditiously. 8. All that remains is to examine whether the assessment proceedings would be barred by limitation if computed from the end of June 2022. If so computed, the period of one month expired on 31.07.2022, whereas the assessment order came to be issued on 25.03.2023. Hence, the assessment order was issued beyond the time limit specified in sub-section (13) of Section 144C. By taking into account not only statutory prescription but also the interpretation thereof by the Division Bench of this Court in Roca and that of the Division Bench of the Delhi High Court in Louis Dreyfus, 1 conclude that the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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