Pramod Kumar, Member (A) -
(1.) THIS appeal is directed against the order dated 29th October 2012 passed by the Deputy Commissioner of Income Tax, Circle 18(1), New Delhi (hereinafter referred to as 'the Assessing Officer') under section 143(3), read with section 144(C), of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'), for the assessment year 2007 -08.
(2.) THE assessee has raised an interesting preliminary issue challenging validity of reopening of assessment on the facts of this case. The related grounds of appeal, which we will take up together for disposal, are as follows:
1. The final assessment order dated October 31, 2012 passed by the Assistant Commissioner of Income Tax, Circle 18(1) New Delhi ('Learned AO') pursuant to the directions of the Hon'ble Dispute Resolution Panel ('DRP'), draft assessment order dated December 28, 2011 passed by Learned AO and the orders dated October 15, 2010 and October 11, 2012 passed by Additional Commissioner of Income Tax, Transfer Pricing -II(2), New Delhi ('Learned TPO'), are bad in law and void -ab -initio.
2. That on the facts and circumstances of the case and in law, the DRP/AO have grossly erred in not appreciating that the assessment under section 147 of the Act is barred by limitation as per the provisions of section 153(2) of the Act.
That on the facts and in law, the Learned AO has erred in computing the total income of the Appellant at Rs. 27,806,100 as against the returned income of Rs. 5,433,580 by making an upward adjustment of Rs. 22,372,524 with respect to transfer pricing ("TP") matters.
3.THAT on the facts and in circumstances of the case and in law, the Learned AO grossly erred in:
(i) assuming jurisdiction while issuing notice under section 148 of the Act, in the absence of any material to form his belief that certain income has escaped assessment.
(ii) assuming jurisdiction for re -opening the assessment under section 147 of the Act, thereby taking section 147 as a recourse to substitute the regular assessment proceedings under section 143(2)/143(3) of the Act.
4. THAT on facts and circumstances of the case and in law, the DRP/AO have grossly erred in making assessment under section 143(3) read with section 144C(4)/147/148 of the Act since:
(i) the reference under section 92CA(1) made by Learned AO on December 24, 2009 to the TPO based on which the Learned AO has computed the arm's length price in the draft order was an invalid reference as the same was made before the initiation of the reassessment proceedings under section 147 of the Act without the pendency of any assessment proceedings;
(ii) learned AO has himself stated in the order dated November 21, 2011, disposing off the objections to the initiation of the reassessment proceedings that "by an inadvertent mistake, the case was referred to the Transfer Pricing Officer (TPO) for determining the Arm's Length Price of the International Transaction of the assessee on 24.12.2009";
(iii) the Appellant, is not an eligible assessee as defined in section 144C(15)(b) of the Act, as the variation in the income of the Appellant proposed by the Learned AO is not in consequence of an order passed under section 92CA(3) which ought to have been passed by the TPO on the basis of a valid reference under section 92CA(1) of the Act during the course of the reassessment proceedings;
(iv) no reference was made by the Learned AO under section 92CA(1) to the TPO during the assessment proceedings under section 147 of the Act.
(3.) In order to adjudicate on this issue, a few material and undisputed facts need to be taken note of. There is no dispute that the assessee filed the return of income of 29th October 2007, and that the time limit for issuance of notice, under section 143(2), selecting the case for scrutiny assessment expired on 30th September 2008. It is also an admitted position that it was only on 24th December 2009 that the Assessing Officer made a reference, under section 92CA(3), to the Transfer Pricing Officer for determination of arm's length price of the international transactions entered into by the assessee with its associated enterprises. This reference to the TPO, and the resulted proceedings before him, culminated in the order dated 15th October 2010 proposing an arm's length price adjustment of Rs. 2,80,91,619. As there were no proceedings pending before the Assessing Officer, nor was, for that purpose, the case of the assessee was even picked up for scrutiny assessment under section 143(3), the Assessing Officer proceeded to reopen the assessment, which had by then achieved finality, by reopening the assessment. While doing so, as evident from the letter dated 7th October 2011 issued by the Assessing Officer - copy filed before us at page 128 of the paper -book, the Assessing Officer recorded the reasons as follows:
"In this case, return of income was filed on 29.10.2007 declaring income of Rs. 54,33,850. The same was processed under section 143(1) of the Income Tax Act, 1961.
As per form 3CB, the international transactions entered into by the assessee with the associated enterprises were of Rs. 40,11,86,678. To ascertain as to whether the international transactions with the AEs were at arm's length, reference was made under section 92CA(3) of the Act to TPO -II(4) New Delhi vide order dated 15/10/2010. The TPO -II(4) found that the international transactions of the assessee with its associated enterprises were not at arm's length and an adjustment of Rs. 2,80,91,619 was directed to be made to the income of the assessee. As per the order u/s. 92CA(3) of the Act, the income of the assessee has to be enhanced by Rs. 2,80,91,619.
Considering the above fact of the case, as the assessee has not valued its international transactions with associate enterprises at arm's length, resulting under assessment of income by an amount of Rs. 2,80,91,619 should have been added to the income.;