Classic Legends Pvt Ltd Vs Assessment Unit & Ors (Bombay High Court)
Conclusion: Where the Transfer Pricing Officer (TPO) accepted international transactions at arm’s length without proposing any variation under Section 92CA(3), assessee did not qualify as an “eligible assessee” under Section 144C(15)(b). Consequently, AO had no jurisdiction to issue a Draft Assessment Order under Section 144C(1), Final Assessment Order under Section 143(3) r.w. Sections 144C and 144B.
Held: AO had made a reference to the Transfer Pricing Officer (“TPO”) under Section 92CA. TPO issued notices to assessee and thereafter passed an order under Section 92CA(3) accepting that the international transactions entered into by assessee with its Associated Enterprises were at an Arm’s Length Price. In other words, TPO made no variation. According to assessee, by virtue of the definition of the words “eligible assessee” appearing in Section 144C(15), assessee could never fall within the aforesaid definition because TPO never made any variation. Since no variation was made, there was no occasion for AO to pass any Draft Assessment Order and thereafter serve it upon the assessee. The writ petition had been filed seeking to quash and set aside the Draft Assessment Order passed under Section 144C and the Final Assessment Order passed under Section 143(3) read with Section 144C and Section 144B. The petition had also challenged the Demand Notice issued under Section 156 as well as the Show Cause Notice issued for imposing a penalty under Section 270A and Section 271AAC. The issue before the bench was whether assessee would fall within the definition of “eligible assessee” as contemplated under Section 144C(15)(b)(i). It was held that the statutory scheme makes it clear that Section 144C applies only where there is a variation in the returned income/loss prejudicial to the assessee, arising out of the TPO’s order. In the present case, it was undisputed that assessee was not a non-resident or foreign company [Section 144C(15)(b)(ii)]; and TPO made no variation under Section 92CA(3). Consequently, assessee did not satisfy Section 144C(15)(b)(i). AO therefore lacked jurisdiction to invoke Section 144C. Revenue’s submission that “variation” includes “no variation” could not be accepted. Section 144C(1) itself provides that a draft order can be issued only if the AO proposes to make any variation which is prejudicial to the assessee. Where no variation exists, there can be no prejudice and thus no occasion for objections under Section 144C(2). Assessee not being an “eligible assessee” under Section 144C(15)(b), was not amenable to the draft order procedure. Accordingly, the draft assessment Order; final assessment order; the demand notice and the Show Cause Notices under Sections 270A and 271AAC were all quashed and set aside.
