M/S.renault Nissan Automotive India Private Ltd. Plot v. The Secretary, Dispute Resolution Panel-2 Bengaluru 7[Th] Floor, Income Tax Office, Bmtc Building, 80 Feet Road, Koramangala, Bangalore – 560 095. .. 1[St] Resp

THE HON'BLE MR. JUSTICE K.RAVICHANDRABAABU M/s.Renault Nissan Automotive India Private Ltd.Plot No.1, SIPCOT Industrial Park,Mathur Post, Oragadam,Kancheepuram,ChennaiTamilnadu-602 105represented by its Chief Financial Officer,Mr.Sandip Neogi ... Petitioner in W.P.No.26814/2017M/s.Nissan Motor India Pvt. Ltd.ASV ramana Towers,37 and 38, Venkatanarayana Road,Thiyagaraja Nagar,Chennai,Tamil Nadu – 600 017represented by its Chief Financial Officer,Mr.Sandip Neogi ... Petitioner in W.P.No.26815/2017vs. 1. The Secretary, Dispute Resolution Panel-2 Bengaluru 7[th] Floor, Income Tax Office, BMTC Building, 80 Feet Road, Koramangala, Bangalore – 560 095. .. 1[st] respondent in both theW.Ps. 2. The Deputy Commissioner of Income-tax, Corporate Circle 5(1) Aayakar Bhawan, Mg Road, Nungambakkam, Chennai – 600 034... 2[nd] respondent inW.P.No.26814/2018 3. The Deputy Commissioner of Income-tax, Corporate Circle 4(2) Aayakar Bhawan, MG Road, Nungambakkam, Chennai – 600 034. .2[nd] respondent in W.P.No.26815/2018 4. Joint Commissioner of Income-tax, Transfer Pricing Officer-TPO-2, Room No.502, 5[th] Floor, Tower-1, BSNL Building, 16 Greams Road, Chennai-600 006. ... 3[rd] Respondent in both the W.Ps. W.P.No.26814/2017 filed under Article 226 of theConstitution of India to issue a Writ of Certiorari tocall for the records in F.No.316/DRP-2-BNG/2016-17 dated27.09.2017 on the file of the 1[st] respondent and quash thesame. W.P.No.26815/2017 filed under Article 226 of theConstitution of India to issue a Writ of Certiorari tocall for the records of the 1[st]respondent inF.No.373/DRP-2-BNG/2016-17dated25.09.2017andconsequential order of lthe 2[nd] respondent in PAN dated 03.10.2017 for the assessment Year 2013-14and quash the same. For Petitioner : Mr.Percy J.Pardzwalla Senior Counsel for Sandeep Bagmar For Respondents : Mrs.Hema Muralikrishnan Standing CounselC O M M O N O R D E R W.P.No.26814 of 2017 is filed by the manufacturerchallenging the order of the Dispute Resolution Paneldated 27.09.2017. W.P.No.26815 of 2017 is filed by theDistributor challenging the order of the DisputeResolution Panel dated 25.09.2017 and the consequentialassessment order dated 03.10.2017. 2. In both the writ petitions the issue raised isone and the same. In respect of the assessment year 2013-14, thereturn of income tax was filed by the respective writpetitioners along with documents prescribed under theIncome Tax Rules by computing arms length price of https://hcservices.ecourts.gov.in/hcservices/ For Respondents : Mrs.Hema Muralikrishnan Standing CounselC O M M O N O R D E R W.P.No.26814 of 2017 is filed by the manufacturerchallenging the order of the Dispute Resolution Paneldated 27.09.2017. W.P.No.26815 of 2017 is filed by theDistributor challenging the order of the DisputeResolution Panel dated 25.09.2017 and the consequentialassessment order dated 03.10.2017. 2. In both the writ petitions the issue raised isone and the same. In respect of the assessment year 2013-14, thereturn of income tax was filed by the respective writpetitioners along with documents prescribed under theIncome Tax Rules by computing arms length price of https://hcservices.ecourts.gov.in/hcservices/ international transactions. Thus, the assessment wasreferred to the Transfer Pricing Officer for determiningarm's length price. The Transfer Pricing Officer raisedobjections on the overseas tested party approach adoptedby the petitioner. The petitioner filed their analysisalso by claiming certain economic adjustments in order toremove from its financial items, which according to thepetitioner has incorrectly distorted the petitioner'soverall profitability. However, the Transfer PricingOfficer rejected the approach adopted by the petitionerand through a show cause notice dated 20.10.2016,characterised the petitioner's operation as 'contractmanufacturing' and rejected the economic adjustmentsclaimed by the petitioner. Consequently, the TransferPricing Officer passed an order dated 31.10.2016proposing the transfer pricing adjustment ofRs.770,01,10,000/-. Based on such order passed by theTransfer Pricing Officer, the Assessing Officer, passed adraft assessment dated 19.12.2016 under Section 143(3)read with Section 144(1) read with Section 92CA of theAct dated 31.12.2016, wherein the Assessing Officereffected the adjustment as directed by the TransferPricing Officer. Though the rectification petition wasfiled by the petitioner before the Transfer PricingOfficer, the same was dismissed 23.06.2017. Thus, thepetitioner filed their objections before the DisputeResolution Panel namely, the first respondent herein on24.01.2017 under Section 144-C of the said Act objectingthe addition made by the transfer Pricing Officer. Thefirst respondent, however passed the impugned order byissuing directions to the assessing officer, which ineffect, is accepted the conclusion arrived by theTransfer Pricing Officer in toto. 3. Insofar as W.P.No.26815/2018 is concerned,consequent upon such order passed by the firstrespondent, the Assessing Officer passed the assessmentorder by taking into account, the directions issued bythe Dispute Resolution Panel while recalculating theTransfer Pricing adjustments. Thus, these writ petitionsare filed before this Court questioning the aboveproceedings of the first and second respondent, asstated supra. 4. Mr.Percy J.Pardzwalla, learned senior counselappearing for the petitioner, apart from raising thecontentions touching upon the merits of the matter dealtwith by the Transfer Pricing Officer as well as by thedispute Resolution Panel, has mainly emphasised that thefirst respondent has passed the impugned order in totalnon-application of mind to the objections raised by the 4. Mr.Percy J.Pardzwalla, learned senior counselappearing for the petitioner, apart from raising thecontentions touching upon the merits of the matter dealtwith by the Transfer Pricing Officer as well as by thedispute Resolution Panel, has mainly emphasised that thefirst respondent has passed the impugned order in totalnon-application of mind to the objections raised by the petitioner in detail as against the order passed by theTransfer Pricing Officer. It is his contention that acryptic order passed by the first respondent simply byaccepting the finding of the Transfer Pricing Officerwith one line approval cannot withstand the scrutiny oflaw. Thus, the learned senior counsel contended that theDispute Resolution Panel ought to have considered theobjections raised by the petitioner in detail, discussedthe same based on the materials placed and arrived at aconclusion thereafter. In the absence of the above saidprocedure, the learned senior counsel contended that theorder of the first respondent and the consequential orderof the second respondent are liable to be set aside.Learned senior counsel invited this Court's attention tothe order passed by the Transfer Pricing Officer, thedetailed objections raised by the petitioner before theDispute Resolution Panel and the relevant findingsrendered by the Dispute Resolution Panel in the impugnedorder in respect of each objections raised by thepetitioner. After inviting the attention of this Court tothose details, the learned senior counsel pointed outthat the Dispute Resolution Panel is not justified inrejecting the objections and confirming the order of theTransfer Pricing Officer simply by stating that they arein agreement with the findings rendered by the TransferPricing Officer without there being any detaileddiscussions and independent findings on each issue. 5. Learned counsel appearing for the respondentscontended that the first respondent panel has consideredthe objections raised by the petitioner and passed theimpugned order. 6. Heard both sides and perused the materials placedbefore this Court. 7. There is no dispute to the fact that in pursuantto the order passed by the Transfer Pricing Officer, thepetitioner approached the first respondent and filed theobjections by invoking the jurisdiction under Section 144(C) of the said Act. There is no dispute to the fact thatthe grounds of objections raised by the petitionercontained a detailed list of the objections, namely,Objection Nos.1 to 6B with annexure containing SerialNos.1 to 10. It is also seen that each of thoseobjections were dealt in detail by the petitioner byplacing their reliance on certain documents and otherrelevant provisions. This Court, at this stage, is notinclined to express any view on the merits of thoseobjections as it is for the first respondent to considerthe same being the panel, exercising the power under Section 144-C. However, in this case, perusal of theimpugned order of the first respondent would clearlyindicate that apart from extracting each objectionsraised by the petitioner and the relevant portion of theorder passed by the Transfer Pricing Officer dealing withsuch objection, the first respondent has not furtherdiscussed anything on the said objection in detail as tohow the objections raised by the petitioner cannot besustained or as to how the findings rendered by thetransfer Pricing Officer on such issue has to beaccepted. On the other hand, the only finding rendered bythe first respondent on each is as follows: Section 144-C. However, in this case, perusal of theimpugned order of the first respondent would clearlyindicate that apart from extracting each objectionsraised by the petitioner and the relevant portion of theorder passed by the Transfer Pricing Officer dealing withsuch objection, the first respondent has not furtherdiscussed anything on the said objection in detail as tohow the objections raised by the petitioner cannot besustained or as to how the findings rendered by thetransfer Pricing Officer on such issue has to beaccepted. On the other hand, the only finding rendered bythe first respondent on each is as follows: “After considering all the issuesraised, we are in agreement with theabove findings as well as the reasoncited by the TPO, Therefore, objectionsof the assessee are rejected.”8. At this juncture, it is relevant to note thepower conferred on the Dispute Resolution Panel underSection 144C of the Income Tax Act and as to how suchpower has to be exercised. It is seen from the aboveprovision of law that the assessee shall file theirobjections if any, to such variation made in the draftorder of assessment within 30 days to the DisputeResolution Panel and the Assessing Officer ascontemplated under Section 144C(2). Sub Section 5 ofSection 144C contemplates that the Dispute ResolutionPanel shall issue such directions as it thinks fit forthe guidance of the Assessing Officer to enable him tocomplete the assessment. But such directions referred toin Sub section 5 shall be issued by the DisputeResolution Panel only after considering the following asprovided under sub section 6, viz., b) objection filed by the assessee; d) report, if any, of the Assessing Officer,Valuation Officer or Transfer pricing Officer or anyother authority; e) records relating to the draft order; f) evidence collected by or cause to be collected by, it; and https://hcservices.ecourts.gov.in/hcservices/ g) result of any enquiry made by, or caused to bemade by, it.Sub-Section 7 of section 144C further contemplates thatthe Dispute Resolution Panel may make such furtherenquiry as it thinks fit or cause any further enquiry tobe made by any Income Tax authority before issuing anydirections. Perusal of the procedure contemplated underSub-Section 6 and Sub-Section 7 thus, would clearlyindicate that issuance of such directions as contemplatedunder Sub-Section 5, cannot be made mechanically or as anempty formality and on the other hand, it has to be doneonly after considering the above stated materials.Therefore, the consideration of the above materials bythe Dispute Resolution Panel must be apparent on the faceof the order and such exercise would be evident only whenthe order contains the discussion of facts andindependent findings on those facts, by the DisputeResolution Panel. Certainly mere extraction of the rivalcontentions will not satisfy the requirement ofconsideration. In the absence of any such independentreasoning and finding, it should be construed that theDispute Resolution Panel has not exercised its power andissued directions by following the mandatory requirementscontemplated under Section 144C(6) and (7). In this case,it is found that the Dispute Resolution Panel had failedto do such exercise. Thus, it is evident that the firstrespondent has passed a cryptic order, which in otherwords, can be called as an order passed with non-application of mind. 9. Therefore, this Court is fully convinced thatthe matter has to go back to the first respondent forconsideration of the objections raised by the petitionerin detail and to pass a fresh order on merits and inaccordance with law with reasons and independentfindings. Only when such a speaking order is passed bythe 1[st] respondent, the Assessing Officer will be in aposition to pass the consequential order of assessment.Since this Court is satisfied to set aside the order ofthe first respondent, the consequential order passed bythe second respondent in W.P.No.26815/2017 is also liableto be set aside. 10. Accordingly, both these writ petitions areallowed and the impugned orders are set aside.Consequently, the matter is remitted back to the firstrespondent for considering the objections raised by thepetitioner in detail and pass fresh order on merits andin accordance with law by giving independent reasons andfindings. It is made clear once again that this Court isnot expressing any view on the merits of the claim made by the petitioner or the findings rendered by theTransfer Pricing Officer, as it is for the firstrespondent to consider and decide. The first respondentshall pass such order after hearing the petitioner withina period of eight weeks from the date of receipt of acopy of this order. No costs. Consequently connectedmiscellaneous petitions are closed. Sd/- Assistant Registrar(CS ix) //True Copy// Sub Assistant Registrar vsiTo 1. The Secretary, Dispute Resolution Panel-2 Bengaluru 7[th] Floor, Income Tax Office, BMTC Building, 80 Feet Road, Koramangala, Bangalore – 560 095. 2. The Deputy Commissioner of Income-tax, Corporate Circle 5(1) Aayakar Bhawan, Mg Road, Nungambakkam, Chennai – 600 034.3. Joint Commissioner of Income-tax, Transfer Pricing Officer-TPO-2, Room No.502, 5[th] Floor, Tower-1, BSNL Building, 16 Greams Road, Chennai-600 006. +1cc to Mr.Sandeep Bagmar , Advocate SR.No. 67957+1cc to Mr.Sandeep Bagmar , Advocate SR.No. 67958+1cc to Mrs.Hema Muralikrishnan , Advocate SR.No.67918 ASK(25/10/2018)