ACIT, Circle- 21(2), New Delhi v. Rolls Royce India Pvt. Ltd., New Delhi

ITA 6913/DEL/2018 | 2011-2012
Pronouncement Date: 27-05-2021 | Result: Dismissed

Appeal Details

RSA Number 691320114 RSA 2018
Assessee PAN AABCR5277Q
Bench Delhi
Appeal Number ITA 6913/DEL/2018
Duration Of Justice 2 year(s) 6 month(s) 27 day(s)
Appellant ACIT, Circle- 21(2), New Delhi
Respondent Rolls Royce India Pvt. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 27-05-2021
Appeal Filed By Department
Order Result Dismissed
Bench Allotted I2
Tribunal Order Date 27-05-2021
Last Hearing Date 09-02-2021
First Hearing Date 09-02-2021
Assessment Year 2011-2012
Appeal Filed On 31-10-2018
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-2 : NEW DELHI) BEFORE SHRI ANIL CHATURVEDI ACCOUNTANT MEMBER AND SHRI KULDIP SINGH JUDICIAL MEMBER (THROUGH VIDEO CONFERENCE) ITA NO.6913/DEL./2018 (ASSESSMENT YEAR : 2011-12) ACIT CIRCLE 21 (2) VS. M/S. ROLLS ROYCE INDIA PV T. LTD. NEW DELHI. 2 ND FLOOR BIRLA TOWER WEST 25 BARAKHAMBA ROAD NEW DELHI 110 001. (PAN : AABCR5277Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.K. KAPOOR CA REVENUE BY : SHRI S.B. SHUKLA CIT DR DATE OF HEARING : 01.04.2021 DATE OF ORDER : 27.05.2021 O R D E R PER KULDIP SINGH JUDICIAL MEMBER : APPELLANT ACIT CIRCLE 21 (2) NEW DELHI (HEREINA FTER REFERRED TO AS THE REVENUE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 20.1.2016 PASSED BY THE ASSESSING OFFICER (AO) IN CONSONANCE WITH THE ORDER S PASSED BY THE LD. TPO/CIT (A) UNDER SECTION 254/143 (3) OF TH E INCOME-TAX ITA NO.6913/DEL./2018 2 ACT 1961 (FOR SHORT THE ACT) QUA THE ASSESSMENT YEAR 2011-12 ON THE GROUNDS INTER ALIA THAT :- 1. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS JUSTIFIED IN TREATING THE APPEAL EFFECT O RDER AS THE FINAL ASSESSMENT ORDER WITHOUT APPRECIATING THE FACT THAT NEITHER ANY REFERENCE WAS MADE FROM THIS OFFICE FOR FRESH COMPU TATION OF ANN'S LENGTH PRICE TO THE TPO NOR DID THE LD. TPO PASS TH E FINAL ORDER WHICH IS TO BE PASSED U/S 92CA(3)? 2. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS JUSTIFIED IN TREATING THE APPEAL EFFECT O RDER AS THE FINAL ASSESSMENT ORDER WITHOUT APPRECIATING THE FACT THAT THIS CASE FOR THE SAME A.Y. IS SUB-JUDICE BEFORE THE HON'BLE HIGH COU RT. BY THE TIME APPEAL IS PENDING BEFORE THE HON'BLE HIGH COURT HO W CAN THE APPEAL EFFECT BE TREATED AS THE FINAL ASSESSMENT OR DER? 3. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS JUSTIFIED IN TREATING THE APPEAL EFFECT O RDER AS THE FINAL ASSESSMENT ORDER WITHOUT APPRECIATING THE FACT THAT THE ORDER OF THE LD. TPO DATED 20.09.2016 SPECIFICALLY STATED IN THE SUBJECT THAT IT IS 'ORDER GIVING PARTIAL EFFECT TO THE DIRECTIONS OF H ON'BLE ITA T IN THE CASE OF M/S ROLLS ROYCE INDIA PVT. LTD. A. Y. 2011-12'. THEREFORE IT WAS NOT AN ORDER U/S 92CA(3) RATHER AN ORDER GIVING ONLY PARTIAL EFFECT TO THE DIRECTIONS OF THE HON'BL E ITAT WHICH WAS NECESSARY FOR FILING OF FURTHER APPEAL BEFORE THE H ON'BLE HIGH COURT. MOREOVER IT GAVE EFFECT KEEPING INTO CONSIDERATION ONLY THOSE GROUNDS/ COMPARABLES THAT HAVE BEEN DELETED/ EXCLUD ED BY THE HON'BLE ITA T AND NOTHING ON THE SET-ASIDE ISSUES W ERE COMMENTED UPON IN THE ORDER OF THE LD. TPO'? 4. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS JUSTIFIED IN TREATING THE APPEAL EFFECT O RDER AS THE FINAL ASSESSMENT ORDER WITHOUT APPRECIATING THE FACT THAT THE APPEAL EFFECT ORDER WAS JUST A MECHANICAL APPLICATION OF IT A T D IRECTIONS BEFORE FILING FURTHER APPEAL AND BY NO STRETCH OF IMAGINAT ION CAN BE HELD TO BE THE FINAL ASSESSMENT ORDER? 5. WHETHER III FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS JUSTIFIED IN INVALIDATING THE ORDER U/S 2 54/143(3) ON THE GROUNDS THAT NO DRAFT ASSESSMENT ORDER WAS PRESENTE D TO THE ASSESSEE BEFORE PASSING THIS ORDER WITHOUT APPRECIA TING THE FACT THAT DRAFT ASSESSMENT ORDER U/S 144C IS TO BE PRESENTED TO THE ASSESSEE COMPANY ONLY BEFORE PASSING THE FINAL ASSESSMENT OR DER AND NOT BEFORE GIVING OF THE APPEAL EFFECT? 6. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS JUSTIFIED IN INVALIDATING THE ORDER U/S 2 54/143(3) ON THE GROUNDS THAT NO DRAFT ASSESSMENT ORDER WAS PRESENTE D TO THE ASSESSEE BEFORE PASSING THIS ORDER WITHOUT APPRECIA TING THE FACT THAT SECTION 144C STATES THAT THE DRAFT ASSESSMENT ORDER IS TO BE FORWARDED TO THE 'ELIGIBLE ASSESSEE' AND THE EXPLAN ATION OF THE 'ELIGIBLE ASSESSEE' GIVEN IN THIS SECTION ITSELF ST ATES 'ANY PERSON IN ITA NO.6913/DEL./2018 3 WHOSE CASE THE VARIATION REFERRED TO IN SUB-SECTION (1) ARISES AS A CONSEQUENCE OF THE ORDER OF THE TRANSFER PRICING OF FICER PASSED 8UNDER SUB-SECTION (3) OF SECTION 92CA. IT IS TO BE NOTED HERE THAT IN THIS CASE THE LD. TPO DID NOT PASS ANY ORDER UN DER SECTION 92CA(3) FOR GIVING EFFECT TO THE DIRECTIONS OF THE HON'BLE ITAT. THE FINAL ASSESSMENT IN THIS CASE IS STILL PENDING. 7. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS JUSTIFIED IN INVALIDATING THE ORDER U/S 2 54/143(3) ON THE GROUNDS THAT NO DRAFT ASSESSMENT ORDER WAS PRESENTE D TO THE ASSESSEE BEFORE PASSING THIS ORDER WITHOUT APPRECIA TING THE FACT THAT SECTION 144C STATES THAT THE DRAFT ASSESSMENT ORDER IS TO BE PRESENTED TO THE ELIGIBLE ASSESSEE WHEN THE AO HAS PROPOSED ANY VARIATION IN INCOME OR LOSS RETURNED WHICH IS 'PREJ UDICIAL' TO THE INTEREST OF SUCH ASSESSEE. IN THIS CASE VIDE THE A PPEAL EFFECT ORDER THE ASSESSED INCOME OF THE ASSESSEE COMPANY HAS BEEN RE VISED DOWNWARDS TO GIVE PARTIAL EFFECT TO THE DIRECTIONS OF THE HON'BLE ITAT AND THIS ORDER CANNOT BE HELD TO BE PREJUDICIA L TO THE INTEREST OF THE ASSESSEE. 8. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS JUSTIFIED IN INVALIDATING THE ORDER U/S 2 54/143(3) BY RELYING ON THE JUDGMENTS OF CONTROL RISK INDIA PVT. LTD. J CB INDIA LTD AND TURNER INTERNATIONAL LTD. WITHOUT APPRECIATING THE FACT THAT IN ALL THESE CASES THE FINAL ASSESSMENT ORDER WAS QUASHED ON THE GROUNDS THAT NO DRAFT ASSESSMENT ORDER WAS PRESENTED TO THE ASSESSEE COMPANY BEFORE PASSING THE FINAL ASSESSMENT ORDER. NONE OF THESE CASES HAVE TALKED ABOUT FOLLOWING THE SAME PROCEDUR E EVEN BEFORE PASSING THE APPEAL EFFECT ORDER. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : THE TAXPAYER IS WHOLLY OW NED SUBSIDIARY OF ROLLS ROYCE INTERNATIONAL LIMITED. THE TAXPAYER OPERATES THROUGH AN OFFICE IN INDIA IN ORDER TO PROVIDE COMM ERCIAL INFORMATION SERVICES AND MARKET SUPPORT SERVICES TO ROLLS ROYCE INTERNATIONAL LTD. RELATING TO INDIAN TERRITORY AND NEIGHBOURING COUNTRIES. THE TAXPAYER FILED ITS REVISED RETURN O F INCOME FOR AY 2011-12 AT AN INCOME OF RS.38 22 94 149/-. THE ASS ESSMENT WAS FRAMED U/S 143 (3) READ WITH SECTION 144C OF THE AC T BY THE AO BY MAKING TRANSFER PRICING (TP) ADDITIONS OF RS.5 12 6 2 317/- ITA NO.6913/DEL./2018 4 PROPOSED BY THE TPO AND PASSED THE DRAFT ORDER. TH EREAFTER LD. DRP PARTLY ACCEPTED THE OBJECTIONS RAISED BY THE TA XPAYER AND REDUCED THE TP ADDITION TO RS.3 62 82 532/-. THERE AFTER FINAL ORDER WAS PASSED U/S 143 (3)/144C/92CA (3) OF THE A CT. 3. THEN THE TAXPAYER CARRIED THE MATTER BEFORE THE LD. CIT (A) WHO HAS DIRECTED THE AO/DRP TO REEXAMINE SOME OF TH E COMPARABLES CHALLENGED BY THE TAXPAYER AND TO VERIF Y AND ALLOW THE RISK ADJUSTMENT. 4. IN OTHER WORDS THIS IS SECOND ROUND OF LITIGATI ON BEFORE THE TRIBUNAL CHALLENGING THE IMPUGNED ORDER DATED 20.10 .2016 PASSED BY THE AO IN PURSUANCE OF THE TP ORDER DATED 20.09. 2016 GIVING PARTIAL EFFECT TO THE DIRECTIONS OF THE TRIBUNAL IN CASE OF THE TAXPAYER FOR AY 2011-12. 5. THE TAXPAYER CARRIED THE MATTER BEFORE THE LD. C IT(A) BY WAY OF FILING THE APPEAL WHO HAS ACCEPTED THE APPEAL BY QUASHING THE ASSESSMENT ORDER PASSED U/S 254/143(3) OF THE ACT B EING INVALID. FEELING AGGRIEVED BY THE ORDER PASSED BY THE LD. CI T (A) THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF F ILING THE PRESENT APPEAL. 6. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL GONE THROUGH THE DOCUMENTS R ELIED UPON AND ITA NO.6913/DEL./2018 5 ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. UNDISPUTEDLY IN THE FIRST ROUND OF LITIGATION B EFORE THE TRIBUNAL DECIDED VIDE ORDER DATED 22.04.2016 THE A PPEAL OF THE TAXPAYER WAS ALLOWED DIRECTING THE AO/TPO TO REEXAM INE SOME OF THE COMPARABLES CHALLENGED BY THE TAXPAYER AND VERI FY AND ALLOW THE RISK ADJUSTMENT SOUGHT FOR BY THE TAXPAYER. IT IS ALSO NOT IN DISPUTE THAT TILL NOW NO ORDER HAS BEEN PASSED BY THE TPO IN CONSONANCE WITH THE ORDER (SUPRA) PASSED BY THE TRI BUNAL RATHER AN ORDER DATED 20.09.2016 IS PASSED BY THE LD. TPO UND ER THE SUBJECT ORDER GIVING PARTIAL EFFECT TO THE DIRECTIONS OF H ONBLE ITAT IN CASE OF M/S. ROLLS ROYCE INDIA P. LTD. AY 20111-12 . 8. AO THEREAFTER WHILE GIVING EFFECT TO THE ORDER DATED 20.09.2016 PASSED BY THE TPO FRAMED THE ASSESSMENT AT RS.40 97 57 996/-. 9. LD. DR FOR THE REVENUE CHALLENGING THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) CONTENDED THAT LD. CIT (A ) HAS ERRED IN TREATING THE APPEAL EFFECT ORDER AS THE FINAL ASSES SMENT ORDER PASSED BY THE AO AS THE TPO HAS NEVER PASSED A FINAL ORDER AFTER REMAND OF THE CASE BY THE TRIBUNAL U/S 92CA(3) OF THE ACT. 10. HOWEVER ON THE OTHER HAND LD. AR FOR THE TAXP AYER RELIED UPON THE ORDER PASSED BY THE LD. CIT (A) AND CONTEN DED THAT ANY ITA NO.6913/DEL./2018 6 ASSESSMENT ORDER CONTAINING PROPOSED TP ADJUSTMENT WITHOUT PASSING DRAFT ASSESSMENT ORDER IS NOT SUSTAINABLE I N THE EYES OF LAW AND AS SUCH LD. CIT (A) HAS RIGHTLY QUASHED THE AS SESSMENT ORDER PASSED BY THE AO AND RELIED UPON THE JUDGMENTS OF HONBLE DELHI HIGH COURT IN THE CASES OF TURNER INTERNATIONAL IND IA (P) LTD. VS. DCIT 82 TAXMANN.COM 125 (DELHI) DCIT VS. CONTR OL RISKS INDIA (P) LTD. (2017) TII-56-HIGH COURT-DELHI-TP AN D JCB INDIA LTD. VS. DCIT IN WRIT PETITION NO.3399/2016 3429/2016 & 3431/2016 . 11. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRC UMSTANCES OF THE CASE AND CONTENTIONS RAISED BY THE LD. AUTHORIS ED REPRESENTATIVES OF THE PARTIES TO THE APPEAL THE S OLE QUESTION ARISES FOR DETERMINATION IN THIS CASE IS :- AS TO WHETHER IMPUGNED ASSESSMENT ORDER DATED 20.10.2016 PASSED BY THE AO PURSUANT TO THE ORDER DATED 20.09.2016 PASSED BY THE TPO GIVING PARTIAL EFFECT TO THE ORDER PASSED BY THE TRIBUNAL IN CASE OF THE TAXPAYER FOR AY 2011-12 WITHOUT PASSING DRAFT ASSESSMENT ORDER IS SUSTAINABLE IN THE EYES OF LAW? 12. THE TRIBUNAL IN THE FIRST ROUND OF LITIGATION V IDE ORDER DATED 22.04.2016 CATEGORICALLY DIRECTED THE TPO TO REEXAM INE SOME OF THE COMPARABLES CHALLENGED BY THE TAXPAYER AND ALLO W AFTER VERIFICATION THE RISK ADJUSTMENT SOUGHT FOR BY THE TAXPAYER BY PARTLY ALLOWING THE APPEAL. IN SUCH EVENTUALITIES THE ON LY COURSE ITA NO.6913/DEL./2018 7 AVAILABLE TO THE TPO WAS TO REEXAMINE THE COMPARABL ES BY PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE TAXP AYER FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS VIZ. IB I CHEMATUR ENGINEERING & CONSULTANCY LTD. MITCON CONSULTANTS & ENGG. SERVICES LTD. ASHOK LEYLAND PROJECT SERVICES LTD. & HSCC (INDIA) LTD.. HOWEVER LD. TPO FOR THE REASONS BES T KNOWN TO HIM EVOLVED HIS OWN PROCEDURE BY PASSING ORDER DATED 20 .09.2016 UNDER THE SUBJECT : ORDER GIVING PARTIAL EFFECT TO THE DIRECTIONS OF H ONBLE ITAT IN CASE OF M/S. ROLLS ROYCE INDIA P. LTD. AY 2011-12 ON THE BASIS OF WHICH ASSESSMENT ORDER HAS BEEN FRA MED BY THE AO. 13. WHEN ASSESSMENT ORDER HAS BEEN FRAMED U/S 154/1 43(3) OF THE ACT PURSUANT TO THE ORDER DATED 20.09.2016 PASS ED BY THE TPO THE TAXPAYER HAD THE ONLY REMEDY TO APPROACH THE LD . CIT (A) BY WAY OF FILING APPEAL. LD. CIT (A) HAS ACCEPTED THE APPEAL AND HELD THE ASSESSMENT ORDER DATED 20.10.2016 AS INVALID. IN THE ENTIRE EXERCISE LD. TPO/AO HAVE DEPRIVED THE TAXPAYER TO AVAIL OF THEIR REMEDY TO CHALLENGE THE DRAFT ASSESSMENT ORDER TO B E PASSED BY THE AO PURSUANT TO THE TP ORDER PASSED BY THE LD. TPO. 14. WHEN UNDISPUTEDLY THE ORDER PASSED BY THE TRIBU NAL IN THE FIRST ROUND OF LITIGATION IS TO BE TREATED UNDER TH E PROVISIONS CONTAINED U/S 92CA(3) AND SECTION 144C OF THE ACT A ND IN THESE ITA NO.6913/DEL./2018 8 CIRCUMSTANCES THE TP ORDER (SUPRA) IS ALSO TO BE T REATED U/S 92CA(3) OF THE ACT ON THE BASIS OF WHICH DRAFT ASSE SSMENT ORDER WAS REQUIRED TO BE PASSED SO AS TO ENABLE THE TAXPA YER TO APPROACH THE LD. DRP IF SO REQUIRE. SO ASSESSMENT ORDER P ASSED BY THE AO WITHOUT PASSING DRAFT ASSESSMENT ORDER TO ENABLE TH E TAXPAYER TO APPROACH LD. DRP IS NOT SUSTAINABLE IN THE EYES OF LAW. 15. IDENTICAL ISSUE HAS BEEN DECIDED BY THE HONBLE DELHI HIGH COURT IN THE CASES OF TURNER INTERNATIONAL INDIA (P) LTD. VS. DCIT DCIT VS. CONTROL RISKS INDIA (P) LTD. AND JCB INDIA LTD. VS. DCIT (SUPRA) WHEREBY FINAL ASSESSMENT ORDER HAS BEEN QUASHED ON THE GROUND THAT NO DRAFT ASSESSMENT ORDE R WAS PASSED BEFORE PASSING FINAL ASSESSMENT ORDER. 16. PROCEDURE ADOPTED IN THIS CASE BY THE LD. TPO/A O IS UNHEARD OF. IN THESE CIRCUMSTANCES WE ARE OF THE CONSIDER ED VIEW THAT LD. CIT (A) HAS RIGHTLY QUASHED THE FINAL ASSESSMENT OR DER. SO FINDING NO PERVERSITY OR ILLEGALITY IN THE IMPUGNED ORDER PRESENT APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 27 TH DAY OF MAY 2021. SD/- SD/- (ANIL CHATURVEDI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 27 DAY OF MAY 2021 TS ITA NO.6913/DEL./2018 9 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.DRP 5.CIT(ITAT) NEW DELHI. AR ITAT NEW DELHI.