M/S.inno Estates Private Limitedpan: Aacci1592Aa Private Limited Company v. Dispute Resolution Panel –

IN THE HIGH COURT OF JUDICATURE AT MADRASReserved on 07.06.2017 Delivered on 14.06.2017 CORAM THE HONOURABLE MR.JUSTICE K.RAVICHANDRABAABU Writ Petition No.1787 of 2017and W.M.P.No.1772 of 2017 M/s.Inno Estates Private LimitedPAN: AACCI1592AA Private limited Company, Represented by tis Chief Finance OfficerC.V.Lakshmanan,No.5, Giri Road, T.Nagar,Chennai – 600 017 .. Petitioner Vs. 1. Dispute Resolution Panel – 2, Office of the Dispute Resolution Panel, 7[th] Floor, Income Tax Office, BMTC Building, 80 Feet Road, Koramangala, Bengaluru – 560 095. 2. The Income Tax Officer, Corporate Ward 2(4), Corporate Range -2, 5[th] Floor, 121, Mahatma Gandhi Road, Nungambakkam, Chennai – 600 034. .. Respondents Writ petition filed under Article 226 of the Constitution ofIndia praying for issuance of a Writ of Certiorari to call forthe records of the 1[st] respondent in F.No.138/DRP-2-BNG/2016-17dated 10.11.2016 and consequential order of the 2[nd] respondent inPAN No.AACCI1592A for the Assessment Year 2012-13 dated18.11.2016 and quash the same. For Petitioner : Mr.R.SivaramanFor Respondents: Mrs.Hema Muralikrishnan O R D E R This writ petition is filed challenging the order of the 1[st]respondent dated 10.11.2016 and consequential order of the 2[nd]respondent dated 18.11.2016. 2.The case of the petitioner is as follows:(i) The petitioner is a Private Limited Company engaged inthe business of Real Estate Development of Residential Plots.It is an assessee before the 2[nd] respondent. On 29.09.2012, thepetitioner filed its return of Income electronically for theassessment year 2012-13 declaring 'Nil' income. The case wasselected for scrutiny and a notice under Section 143(2) of theIncome Tax Act dated 08.08.2013 was served on the petitioner.During the course of scrutiny proceedings, it was noted that thepetitioner Company had entered into an international transactionwith its Associated Enterprises abroad and the value of the sameexceeded Rs.15 crores. Hence, the case was referred to theTransfer Pricing Officer for determining the Arms Length Pricewith reference to all transactions reported in Form No.3 CEB.The Transfer Pricing Officer issued a show cause notice dated14.12.2015. The petitioner Company filed a detailed reply on18.12.2015. The Transfer Pricing Officer, by order dated27.01.2016, calculated the Arms Length Price as per theprovisions of Section 92C (1) & (2) of the said Act and orderedadjustment in the income of the assessee amounting toRs.3,67,55,978 towards excess interest paid on CompulsoryConvertible Debentures. (ii) Adopting the said order passed by the Transfer PricingOfficer, the 2[nd] respondent issued a draft assessment order underSection 144C (1) of the said Act on 29.03.2016. The draftassessment oder was served on the authorised representative ofthe petitioner on 29.03.2016. (iii) As per the provisions contained under Section 144C ofthe said Act, the petitioner has to file their objectionsbefore the Dispute Resolution Panel, namely, the 1[st] respondentherein, if the petitioner is intended to object to the draftassessment order. Accordingly, the petitioner filed theirobjections before the 1[st] respondent on 29.04.2016 as per Section144C (2)(b) of the said Act. The 2nd respondent is aware of thefact that such objections were filed before the 1[st] respondent on29.04.2016 i.e., after 30 days time limit. The 1[st] respondentissued a hearing notice and during the course of hearing, themembers of the 1[st] respondent panel informed the petitioner thatthe draft assessment order was served on 29.03.2016 and theobjection was filed beyond the period of 30 days. Since therewas one day delay in filing the objections, the 1[st] respondent,by oder dated 10.11.2016, refused to condone the delay and thus,rejected the objections. The 1[st] respondent had not issued anydirections to the 2[nd] respondent as contemplated under Section 144C (5) of the said Act. Pursuant to the above said orderpassed by the 1[st] respondent, a final assessment order underSection 144(3) r/w Section 144(C)(13) of the said Act was passedby the 2[nd] respondent on 18.11.2016 by making the adjustment asproposed by the Transfer Pricing Officer. Thus, consequently ademand of Rs.1,76,32,760/- was made. As against the impugnedproceedings, the petitioner has no other alternative remedy.Hence, this Writ petition is filed seeking for the relief asstated supra. 3. The respondents filed counter affidavit, wherein it isstated as follows: (i) This writ petition is not maintainable, since thepetitioner has statutory right of appeal before the appellateforum. Without prejudice to the above preliminary objections, itis stated that the assessee Company had entered into transactionwith persons located in notified territory as specified underSection 94A of the Income Tax Act during the finance year 2011-12 and therefore, the case of the petitioner was referred toTransfer Pricing Officer in order to examine the transactions asreported in Form 3 CEB. (ii) The draft assessment order was passed on 29.03.2016under Section 143(3) r/w section 144C(1) of the said Act and wasserved on the assessee on 29.03.2016 itself. Subsequently, on28.04.2016, the petitioner Company, in their letter dated27.04.2016, intimated about the filing of objections before the1st respondent and requested that the tax demand be kept inabeyance till the disposal of the appeal. The petitioner hadfiled the objection before the 1[st] respondent only on 29.04.2016.However, the petitioner served a letter on the 2[nd] respondentdated 27.04.2016, as if the objections were filed before the 1[st]respondent on the said day itself. The petitioner had thus,misled the 2[nd] respondent with regard to the date of filing ofthe objections before the 1[st] respondent. In fact, the petitionerhas claimed before the 1[st] respondent that the draft assessmentorder was served only on 31.03.2016, which is a false statement.Since the petitioner company has intimated the filing ofobjections through letter dated 27.04.2016 and preempted the 2[nd]respondent from completing the assessment, the final assessmentorder was not passed. However, after the disposal of theobjections by the 1[st] respondent, the final assessment order waspassed by the 2[nd] respondent on 18.11.2016 by raising a demandof Rs.1,76,32,760/- on the petitioner Company. 4. Mr.R.Sivaraman, learned counsel for the petitionersubmitted as follows: The draft assessment order was made on 29.03.2016 andserved on the petitioner on the same day. The objections werefiled before the 1[st] respondent on 29.04.2016, admittedly, withone day delay. Therefore, the 2[nd] respondent ought to have passedthe final order on or before 31.05.2016 as contemplated under 4. Mr.R.Sivaraman, learned counsel for the petitionersubmitted as follows: The draft assessment order was made on 29.03.2016 andserved on the petitioner on the same day. The objections werefiled before the 1[st] respondent on 29.04.2016, admittedly, withone day delay. Therefore, the 2[nd] respondent ought to have passedthe final order on or before 31.05.2016 as contemplated under Section 144C(4) of the said Act since the objection was notfiled within time. However, in this case, the final order waspassed on 18.11.2016 and thus, it is barred by limitation. The2[nd] respondent cannot take the order passed by the 1[st] respondentdated 10.11.2016 as a direction issued to the 2[nd] respondent. Inthe absence of any specific direction issued by the 1[st]respondent and when the objection were rejected only on theground of delay, the 2[nd] respondent cannot take shelter underSection 144C(13) to bring the final order dated 18.11.2016 asthe one passed within the period of limitation. The 1[st]respondent has not passed the order as contemplated underSection 144C(5) & (6) of the said Act and therefore, the orderpassed by the 2[nd] respondent, pursuant to the order passed by the1[st] respondent, cannot be challenged by way of statutory Appealbefore the appellate authority. Alternatively, in case, if thisCourt is of the view that the 1[st] respondent is empowered tocondone the delay, the matter may be remitted back to the 1[st]respondent to decide the same on merits or if the Court comes tothe conclusion that the order passed by the 1[st] respondent,virtually, amounts to a direction issued to the 2[nd] respondent,the petitioner may be given an option to file an appeal beforethe appellate forum challenging the order of the 2[nd] respondent. 5. Per contra, learned counsel Mrs.Hema Muralikrishnan,appearing for the respondent submitted as follows:The petitioner has not come to this Court with clean hands.They have misled the 1[st] and 2[nd] respondents with regard to thedate of receipt of the draft assessment order and filing of theobjections before the 1[st] respondent, respectively. In the letterdated 27.04.2016 addressed to the 2[nd] respondent, the petitionerclearly stated that their objections were filed before the 1[st]respondent, while in fact, such objection was filed subsequentlyonly on 29.04.2016. The 1[st] respondent has no power to condonethe delay. Therefore, such panel has rightly rejected theobjections as barred by limitation. In view of the letter dated27.04.2016 issued by the petitioner, the 2[nd] respondent had towait till the 1[st] respondent dispose the objections. However,after the disposal of such objections, the final order ofassessment came to be passed within 8 days and therefore, thereis no delay in passing the final order. The petitioner can fileappeal before the Appellate Authority challenging the finalorder of assessment. 7. The petitioner is an assessee before the 2[nd] respondent.In respect of the assessment year 2012-13, the petitioner's casewas referred to the Transfer Pricing Officer for determining theArms Length Price with reference to all transactions reported inForm No.3 CEB, since the petitioner had entered intoInternational transactions with its Associate Enterprises. The https://hcservices.ecourts.gov.in/hcservices/ Transfer Pricing Officer, after issuing notice to the petitionerand considering their reply, passed an order under Section 92CA(3) of the said Act on 27.01.2016. Consequently, by adopting thesaid Transfer Pricing Officer's order, the 2[nd] respondent issueda draft assessment order under Section 92CA(4) of the said Acton 29.03.2016 and forwarded the same as required under Section144C of the said Act to the assessee on the very same day. Thecore contention of the dispute between the parties arises onlyfrom this stage. https://hcservices.ecourts.gov.in/hcservices/ Transfer Pricing Officer, after issuing notice to the petitionerand considering their reply, passed an order under Section 92CA(3) of the said Act on 27.01.2016. Consequently, by adopting thesaid Transfer Pricing Officer's order, the 2[nd] respondent issueda draft assessment order under Section 92CA(4) of the said Acton 29.03.2016 and forwarded the same as required under Section144C of the said Act to the assessee on the very same day. Thecore contention of the dispute between the parties arises onlyfrom this stage. 8. On receipt of the draft assessment order, the petitionerfiled their objections before the Dispute Resolution Panel,namely, the 1[st] respondent, on 29.04.2016. Admittedly, the saidfiling was with one day delay, since Section 144C(2) of the saidAct mandates filing of such objection within 30 days of thereceipt of the draft order. The 1[st] respondent, by order dated10.11.2016 rejected the objections only on the reason that theassessee has filed the same beyond the specified period of 30days. Accordingly, the 1[st] respondent communicated such decisionto the petitioner as well as the 2[nd] respondent as per theprovisions under Section 144C(5) of the said Act. Thereafter,the final assessment order was passed by the 2[nd] respondent on18.11.2016 under section 143(3) r/w section 144C(13) of the saidAct. 9. It is not in dispute that the petitioner has filed theirobjection before the 1[st] respondent only on 29.04.2016 byspecifically indicating as though the draft order of assessmentwas served on them only on 31.03.2016. Thus, it is evident thatthe petitioner made the 1[st] respondent to believe that theobjections were filed in time. However, when it was pointed outby the 2[nd] respondent to the 1[st] respondent, through communicationdated 25.07.2016, that the draft assessment order was served onthe assessee on 29.03.2016 itself, the petitioner filed anaffidavit before the 1[st] respondent on 07.11.2016 reiteratingthat they received the draft assessment order only on 31.03.2016and even otherwise, the delay is only one day, if the date ofservice of draft assessment order is taken as 29.04.2016. Aftertaking such stand before the 1[st] respondent, the petitionerbefore this Court, in the affidavit filed in support of thiswrit petition, has admitted the date of service of the draftassessment order as 29.03.2016. Learned counsel for thepetitioner also admitted that the draft assessment order wasserved on the petitioner on 29.03.2016. Thus, it is evident thatthe petitioner, having received the draft assessment order on29.03.2016, has deliberately and intentionally misled the 1[st]respondent as though it was served on them only on 31.03.2016,so as to bring the filing of the objections within the period oflimitation. 10. Therefore, it is not in dispute that the petitioner hasfiled the objection before the 1[st] respondent only on 29.04.2017.When such being the admitted factual position, the letter dated27.04.2016 issued by the petitioner to the 2[nd] respondent wouldshow that the petitioner has deliberately made the 2[nd]respondent to believe as if the appeal/objection has either beenalready filed or filed on 27.04.2016 before the 1[st] respondent.For better appreciation, the above letter dated 27.04.2016 isextracted hereunder:To 27.04.2016Income Tax OfficerCorporate Ward 2(4)Chennai-24Madam,Sub: Appeal for IT Assessment order forAssessment year 2012-13Ref: Your order dated 29-03-2016 PAN-AACC11592A (Inno estates Private Limited)Please find attached the entire set ofdocuments filed before the Dispute RedressalPanel. We request you to keep the demand inabeyance till the disposal of the appeal.Thanking you,For Inno Estates Private LimitedDirector.11. In the above said letter, apart from making the 2[nd]respondent to believe as though the objection was filed in time,the petitioner has also requested him to keep the demand inabeyance till the disposal of such objection. Therefore, the 2[nd]respondent is statutorily prevented from passing the finalassessment order, as contemplated under Section 144C(3) of thesaid Act. A perusal of Section 144C(2) of the said Act wouldshow that the assessee, on receipt of the draft order, shallfile his objections within 30 days of the receipt of the draftorder with Dispute resolution Panel and the Assessing officer.Only when no objections are received within the period specifiedunder Sub- Section 2, the Assessing Officer shall complete theassessment on the basis of the draft order, as contemplatedunder Section 144(C)(3) of the said Act. In this case, bycommunication dated 27.04.2016, the petitioner, by attaching theentire set of documents filed before the 1[st] respondent, assertedand made the Assessing Officer to believe that the objectionwas filed in time. Therefore, the 2[nd] respondent is justified indeferring the matter till an order is passed by the 1[st]respondent. At this juncture, it is to be noted that what iscontemplated under Section 144C(2) is the filing of theobjections by the assessee with the Dispute Resolution Panel,if he is not accepting the draft assessment order. Of course,the said provision also contemplates filing of such objection before the Assessing Officer as well. If such objection is filedin time, then the Dispute Resolution Panel alone shall proceedto decide the matter as provided under Section 144C(5)& (6)ofthe said Act. Therefore, the Assessing Officer cannot proceed topass the final order till the Dispute Resolution Panel passes anorder as stated supra. Once the objection is filed within theperiod of limitation, consideration of the same is vested onlywith the Dispute Resolution Panel as provided under Section 144C(5),(6),(7) & (8) of the said Act and as such the AssessingOfficer cannot decide such objection. Therefore, filing of suchobjection before the Assessing Officer within time itself willnot get over the period of limitation, if such filing beforethe Dispute Resolution Panel was after such period. 12. The next contention raised by the petitioner is that theorder passed by the 1[st] respondent does not contain anydirections to the 2[nd] respondent and therefore, the final orderpassed by th 2[nd] respondent on 18.11.2016 cannot be treated asthe one passed in accordance with Section 144C(13) of the saidAct. I do not think the learned counsel for the petitioner isjustified in making such contention in view of sub-section 8 ofSection 144C which reads as follows: 12. The next contention raised by the petitioner is that theorder passed by the 1[st] respondent does not contain anydirections to the 2[nd] respondent and therefore, the final orderpassed by th 2[nd] respondent on 18.11.2016 cannot be treated asthe one passed in accordance with Section 144C(13) of the saidAct. I do not think the learned counsel for the petitioner isjustified in making such contention in view of sub-section 8 ofSection 144C which reads as follows: (8) The Dispute Resolution Panel mayconfirm, reduce or enhance the variationsproposed in the draft order so, however, thatit shall not set aside any proposed variationor issue any direction under sub-section (5)for further enquiry and passing of theassessment order(Explanation – For the removal ofdoubts, it is hereby declared that the powerof the Dispute Resolution Panel to enhancethe variation shall include and shall bedeemed always to have included the power toconsider any matter arising out of theassessment proceedings relating to the draftorder, notwithstanding that such matter wasraised or not by the eligible assessee) 13. A perusal of the above said provision of law wouldundoubtedly make it clear that the Dispute Resolution Panel mayconfirm, reduce or enhance the variation proposed in the draftorder. It is not in dispute that the 1[st] respondent rejected theobjection filed by the petitioner on 10.11.2016, of course, onthe ground that it is barred by limitation. Still it is an orderrejecting the objections. Once, the 1[st] respondent has chosen toreject the objections either on merits or on the ground ofdelay, it goes without saying that resultant position of suchrejection is nothing but confirmation of the draft order passedby the 2[nd] respondent, as contemplated under Section 144C(8) ofthe said Act. Consequently, the final order passed by the 2[nd] respondent on 18.11.2016 is certainly an order passed underSection 144C(13) of the said Act, more particularly, when the 1[st]respondent in its order dated 10.11.2016 clearly stated that thedirections are communication to the assessee and thedepartmental authorities as per the provision of Section 144C(5) of the said Act. 14. No doubt, the learned counsel for the petitioneremphasized that there is no specific direction, whatsoever inthe said order dated 10.11.2016. In my considered view, thedismissal or rejection of the objections filed by thepetitioner, on whatever the ground may be, itself is a directionto the Assessing Officer to complete the assessment inaccordance with draft order as contemplated under Section 144C(5) which reads as follows:(5) The Dispute Resolution Panel shall,in a case where any objection is receivedundersub-section(2),issuesuchdirections, as it thinks fit, for theguidance of the Assessing Officer to enablehim to complete the assessment. 15. Hence, the dismissal or rejection of the objection andcommunication of the same has to be treated and construed as adirection given to the Assessing Officer to complete theassessment as per draft order. Only when the panel choses toreduce or enhance the variation proposed, it can give anyspecific directions. Therefore, I do not think that thepetitioner is justified in contending that the final order isnot an order passed under Section 144C(13) of the said Act. 15. Hence, the dismissal or rejection of the objection andcommunication of the same has to be treated and construed as adirection given to the Assessing Officer to complete theassessment as per draft order. Only when the panel choses toreduce or enhance the variation proposed, it can give anyspecific directions. Therefore, I do not think that thepetitioner is justified in contending that the final order isnot an order passed under Section 144C(13) of the said Act. 16. The next question that would arise for consideration isas to what is the remedy available to the petitioner as againstthe order passed under Section 144C(13) of the said Act. I havealready found that the final order passed by the 2[nd] respondentdated 18.11.2016 is the one passed under Section 144C(13) of thesaid Act. I have also found that the said order was passed wellwithin the period of limitation. In such a situation, thepetitioner is entitled to file an appeal before the AppellateAuthority as contemplated under Section 246(1)(a) of the saidAct, which covers an order passed against the assessee underSection 144 of the said Act as well. When such statutoryappellate remedy is available to the petitioner, this Court isnot inclined to entertain this writ petition by going into thecontentions raised on the merits of the matter by eitherparties. It is well settled that when a statutory appellateremedy is available, more particularly in fiscal matters,parties should not be permitted to resort to the remedy underArticle 226 of the Constitution of India. The reliance placedon by the learned counsel for the petitioner in the decisionsreported in 2016(75) taxmann.com (Rain Cements Ltd. v. Deputy Commissioner of Income Tax, Circle 3(1), Hyderabad) and 2013(31)taxmann.com 396 (Intimate fashions (India) (P,) Ltd. vs.Assistant commissioner of Income-tax, Company CircleII(3),Chennai) is not helping the petitioner in any manner as thefacts and circumstances involved in those cases are totallydifferent and distinguishable. 17. Accordingly, this writ petition is dismissed withliberty to the petitioner to challenge the impugned order of the2[nd] respondent by way of filing an appeal before the 1[st] AppellateAuthority under Section 246(1)(a) of the Income Tax Act within aperiod of four weeks from the date of receipt of a copy of thisorder. No costs. Consequently, connected miscellaneous petitionis closed. Sd/- Asst.Registrar (CS V ) /true copy/Sub Asst. RegistrarvsiTo1. Dispute Resolution Panel – 2, Office of the Dispute Resolution Panel, 7[th] Floor, Income Tax Office, BMTC Building, 80 Feet Road, Koramangala, Bengaluru – 560 095.2. The Income tax Officer, Corporate Ward 2(4), Corporate Range -2, 5[th] Floor, 121, Mahatma Gandhi Road, Nungambakkam, Chennai – 600 034. +1cc to Mr.R.Sivaraman, Advocate in sr.no.42331+1cc to M/s.Hema Muralikrishnan, Advocate in sr.no.41887W.P.No.1787 of 2017 LRS(CO)NR 29/06/2017