PCIT Vs Flextronics Technologies (India) Pvt. Ltd. (Karnataka High Court)
Summary: The Revenue challenged the order dated 31.12.2018 passed by the Income Tax Appellate Tribunal, Bengaluru in IT(TP)A No.832/Bang/2017 concerning Assessment Year 2012-13. The ITAT had quashed the assessment order on the ground that it was not in conformity with the mandatory requirements of Section 144C of the Income-tax Act, 1961 and was barred by limitation. The Karnataka High Court admitted the Revenue’s appeal to consider four questions of law concerning the limitation applicable to the assessment, compliance with the Dispute Resolution Panel (DRP) directions, the applicability of Section 153(3), and the validity of an assessment order passed under Sections 143(3) read with 144C(13).
The assessee had challenged the final assessment order dated 31.01.2017. In the assessment proceedings, the Assessing Officer had made transfer pricing adjustments aggregating to Rs.40,11,77,583. The draft assessment order was passed on 29.03.2016 under Section 144C, and the assessee filed objections before the DRP on 29.04.2016. The DRP issued directions under Section 144C(5) read with Section 144C(8) on 28.12.2016, granting relief in respect of the transfer pricing adjustment.
The Assessing Officer recorded in the final assessment order that, upon receipt of the DRP’s directions, a reference was made to the Transfer Pricing Officer for reworking the arm’s length price adjustment. However, the order giving effect (OGE) to the DRP directions in respect of the transfer pricing adjustments had not been received. The Assessing Officer stated that, since the assessment proceedings were time-barring, the assessment was being completed on the basis of the transfer pricing adjustment contained in the draft assessment order, with the intention of subsequently taking necessary action under Section 154 after receipt of the TPO’s order giving effect.
