Case Law Details
HIGH COURT OF MADHYA PRADESH
Bhatia International Ltd.
versus
Additional Commissioner of Income-tax, Indore
WRIT PETITION NOS. 2229 & 2230 OF 2011
MAY 14, 2012
ORDER
S.C. Sharma, J.
Regard being had to the similitude in the controversy invoked in the present cases, the writ petitions were analogously heard and by a common order, they are being disposed of by this Court. Facts of Writ Petition No. 2229/2011 are narrated hereunder.
2. The petitioner Company before this Court, a Company incorporated and registered under the Companies Act, 1956, has filed this present petition challenging the reference made under section 92CA(1) dated 26/3/2009 for the assessment year 2008 – 2009 by the Addl. Commissioner of Income-tax, Range III, Indore for passing an order u/s. 92CA(3) of the Income-tax Act, 1961. The petitioner Company is also aggrieved by order dated 29/10/2010 passed by the Addl. Commissioner of Income Tax (Transfer Pricing Officer) for the Assessment Year 2008 – 2009 u/s. 92CA(3) of the Income-tax Act, 1961. The petitioner Company is also aggrieved by the Show-Cause Notice dated 10/11/2010 and 6/1/11 issued by the Addl. Commissioner of Income Tax Range – 3 for the Assessment Year 2008 – 2009. It has been stated in the writ petition that the petitioner Company is engaged in the import of coal for the purposes of reselling and while importing coal, the petitioner Company engages ships on time charter/voyage charter basis mostly from foreign shipping companies. The petitioner Company has further stated that a search was carried out u/s. 132 of the Income Tax Act, 1961 at the premises of the petitioner Company on 25th September, 2007 and thereafter notice dated 3/3/2008 was issued u/s. 153A of the Income-tax Act for the Assessment Year 2002 – 2003 to Assessment Year 2007 – 2008. It has been further stated that the petitioner Company filed the return of income for the Assessment Year 2008 – 2009 on 25/9/2008 and the Assessment was selected for scrutiny. A notice was issued u/s. 143(2) dated 30/10/2008. The petitioner Company has further stated that as per the statutory provisions contained u/s. 92E of the Income-tax Act, the petitioner Company has filed the Accountant’s Report in Form No. 3CEB with respect to international transactions and thereafter the respondent No. 1 Addl. Commissioner of Income Tax Range – 3, made a reference to the Transfer Pricing Officer for computation of arm’s length price in relation to the international transactions. The contention of the petitioner Company is that no approval of the Commissioner of the Income Tax was obtained for making a reference u/s. 92CA(1) by the first respondent. The petitioner Company further stated that the Transfer Pricing Officer has thereafter passed an order on 29/10/2010 u/s. 92CA(3) of the Income-tax Act, 1961 without following the principles of natural justice and fair play, meaning thereby, proper opportunity was not given to the petitioner Company by the Transfer Pricing Officer and documents demanded by the Company were also not given to the petitioner Company by the Transfer Pricing Officer. It has also been stated that opportunity to examine one Mr. Deepak Sehgal was also not given to the petitioner Company and therefore the order passed by the Transfer Pricing Officer deserves to be set aside. The petitioner Company has also prayed for quotient of subsequent Show Cause Notice dated 10/11/2010 and 6/1/2011. The petitioner Company has raised various grounds before this Court and has relied upon the judgments delivered by the Hon’ble Supreme Court and various High Courts governing the issue on merits. On the question of availability of alternative remedy, the petitioner Company has relied upon the judgment delivered in the case of Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC); Harbanslal Sahnia v. Indian Oil Corpn. Ltd. [2003] 2 SCC 107; Whirlpool Corpn. v. Registrar of Trade Marks [1998] 8 SCC 1; A.V. Venkateswaran, Collector of Customs v. Ramchand Sobhraj Wadhwani AIR 1961 SC 1506.
3. A reply has been filed on behalf the respondents and it has been stated on affidavit that while making a reference under section 92CA(1) dated 26/3/2009, for the assessment year 2008 – 2009, approval was obtained from the Commissioner of Income Tax – I, as per the provisions of the Income-tax Act, 1961. It has also been stated that keeping in view the international transactions, as per the provisions of Sec. 92CA of the Income-tax Act, 1961, reference was made u/s. 92CA(1) of the Income-tax Act, 1961 in case of the petitioner for the assessment year 2008-2009 for computation of arm’s length price on 26/3/2009 to the Transfer Pricing Officer – I (Addl. Commissioner of Income Tax, Ahmedabad). It has been further stated that the reference was made correctly after obtaining approval from the Commissioner and after verifying the details furnished by the assessee in Auditor’s Report in Form No. 3CEB with respect to the international transactions with associate enterprises. The Department has further stated that the petitioner Company had entered into international transactions of substantial magnitude of more than 832 crores with its associate concerns and keeping in view the aforesaid, a reference was made by the respondent No. 1. It has been further stated that the reference u/s. 92CA(1) is as per law and Transfer Pricing Officer has rightly passed the order keeping in view the statutory provisions as contained under the Income-tax Act, 1961. The Department has further stated that since the case was referred to Transfer Pricing Officer, the time-limit of 33 months as per the third proviso of Sec. 153B is duly available for completing the assessment and once the assessment proceedings are open the Assessing Officer has got all the powers to enquire any issue which has got review implications and assess accordingly within a period of 3 months and mere issuance of Show-Cause Notice does not reflect any satisfaction on the part of respondent No. 1 that provisions of sec. 93 are applicable. The respondents have stated that the present petition has been filed after issuance of a Show-Cause Notice and it is premature, hence deserves to be dismissed.
4. The Transfer Pricing Officer has also filed an affidavit and all minute details have been furnished by the Transfer Pricing Officer in the matter of fixing of arm’s length price. It has been stated that the petitioner while appearing before the Transfer Pricing Officer, despite various opportunities, deliberately did not furnish the requisite details. It has been categorically stated on affidavit that pursuant to the reference received by the Transfer Pricing Officer vide letter dated 26/3/09 which was received on 3/4/09. Letter dated 3/04/2009 was issued to the petitioner asking several details in relation to the Transfer Pricing proceedings and in response to the letter issued by the Transfer Pricing Officer, the petitioner attended the Office on 28/4/09 and submitted letters dated 27/4/09. The petitioner was asked to file the following details :
1. Incorporation documents of AE (FZE), details of legal law, where it is registered
2. Balance sheet and Profit & Loss account of Associated Enterprises
3. Freights paid to third parties and comparison with those paid to associated enterprises
4. Break-up of freight expenses in Profit & Loss Accounts.
The affidavit further reveals that the petitioner also did not appear on some of the dates, sought adjournments and he was also informed that he should co-operate with the proceedings. The Transfer Pricing Officer has categorically stated that documents were furnished to the petitioner and in spite of repeated opportunities, a totally non – cooperative attitude was adopted by the petitioner Company. The respondents have further stated that reasonable opportunity was granted to the petitioner Company. They were heard in the matter and after following the prescribed procedure, the impugned order has been passed. The Department has furnished all minute details while filing affidavits of various officers and the same establishes that the petitioner has participated in the proceedings before the Transfer Pricing Officer.
5. The original record was also produced before this Court and the same reveals that there was an approval of the Commissioner of Income Tax in respect of reference made by the Addl. Commissioner of Income Tax to the Transfer Pricing Officer.
6. Mr. Mohan Parasaran, learned Addl. Solicitor General of India has vehemently argued that there is a complete mechanism provided under the Income-tax Act, 1961 for raising objections in the matter of fixation of arm’s length price and at this stage, the question of interference, does not arise. He has placed reliance upon the judgment delivered by the Division Bench of Bombay High Court in the case of Hindalco Industries Ltd. v. Addl. CIT [2012] 17 taxmann.com 187 and has prayed for dismissal of the writ petition.
7. Heard learned counsel for the parties at length and perused the record.
8. In the present case, the petitioner Company is aggrieved by a reference made by the Addl. Commissioner of Income Tax, Range- 3, u/s. 92CA(1) dated 26/3/2009 to the Transfer Pricing Officer (Addl. Commissioner of Income Tax, Ahmedabad). The order passed by the Transfer Pricing Officer dated 29/10/2010 is also under challenge and the subsequent Show-Cause Notice issued pursuant to the order dated 29/10/2010 are also under challenge.
9. In the present case, the first ground raised by the petitioner Company is that no approval, as required u/s. 92 has been obtained from the Commissioner of Income Tax.
Section 192CA reads as under :
92CA Reference to Transfer Pricing Officer- (1) Where any person, being the assessee, has entered into an international transaction in any previous year, and the Assessing Officer considers it necessary or expedient so to do, he may, with the previous approval of the Commissioner, refer the computation of the arm’s length price in relation to the said international transaction under section 92C to the Transfer Pricing Officer.
(2) Where a reference is made under sub-section (1), the Transfer Pricing Officer shall serve a notice on the assessee requiring him to produce or cause to be produced on a date to be specified therein, any evidence on which the assessee may rely in support of the computation made by him of the arm’s length price in relation to the international transaction referred to in sub-section (1).
(2A) Where any other international transaction other than an international transaction referred under sub-section (1), comes to the notice of the Transfer Pricing Officer during the course of the proceedings before him, the provisions of this Chapter shall apply as if such other international transaction is an international transaction referred to him under sub-section (1).
(3) On the date specified in the notice under sub-section (2), or as soon thereafter as may be, after hearing such evidence as the assessee may produce, including any information or documents referred to in sub-section (3) of section 92D and after considering such evidence as the Transfer Pricing Officer may require on any specified points and after taking into account all relevant materials which he has gathered, the Transfer Pricing Officer shall, by order in writing, determine the arm’s length price in relation to the international transaction in accordance with sub-section (3) of section 92C and send a copy of his order to the Assessing Officer and to the assessee.
(3A) Where a reference was made under sub-section (1) before the 1st day of June, 2007 but the order under sub-section (3) has not been made by the Transfer Pricing Officer before the said date, or a reference under sub-section (1) is made on or after the 1st day of June, 2007, an order under sub-section (3) may be made at any time before sixty days prior to the date on which the period of limitation referred to in section 153, or as the case may be, in section 153B for making the order of assessment or reassessment or recomputation or fresh assessment, as the case may be, expires.
(4) On receipt of the order under, sub-section (3), the Assessing Officer shall proceed to compute the total income of the assessee under sub-section (4) of section 92C in conformity with the arm’s length price as so determined by the Transfer Pricing Officer.
(5) With a view to rectifying any mistake apparent from the record, the Transfer Pricing Officer may amend any order passed by him under sub-section (3), and the provisions of section 154 shall, so far as may be, apply accordingly.
(6) Where any amendment is made by the Transfer Pricing Officer under sub-section (5), he shall send a copy of his order to the Assessing Officer who shall thereafter proceed to amend the order of assessment in conformity with such order of the Transfer Pricing Officer.
(7) The Transfer Pricing Officer may, for the purposes of determining the arm’s length price under this section, exercise all or any of the powers specified in clauses (a) to (d) of sub-section (1) of section 131 or sub-section (6) of section 133 or Section 133A.
Explanation. For the purposes of this section, Transfer Pricing Officer means a Joint Commissioner or Deputy Commissioner or Assistant Commissioner authorised by the Board to perform all or any of the functions of an Assessing Officer specified in sections 92C and 92D in respect of any person or class of persons.
The aforesaid statutory provision of law does provide for an approval by the Commissioner and the original record produced before this Court establishes that there was an approval by the Commissioner in the matter of reference to the Transfer Pricing Officer. In the present case, the impugned order has been passed by an authority who is jurisdictionally competent to pass such an order and it can never be said that the order passed by the respondents is without jurisdiction.
10. Section 144C of the Income-tax Act, 1961, reads as under :
144C. Reference to Dispute Resolution Panel. —(1) The Assessing. Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee.
(2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order,—
(a) file his acceptance of the variations to the Assessing Officer: or
(b) file his objections, if any, to such variation with,—
(i) the Dispute Resolution Panel; and
(ii) the Assessing Officer.
(3) The Assessing Officer shall complete the assessment on the basis of the draft order, if—
(a) the assessee intimates to the Assessing Officer the acceptance of the variation; or
(b) no objections are received within the period specified in sub-section (2).
(4) The Assessing Officer shall, notwithstanding anything contained in section 153, pass the assessment order under sub-section (3) within one month from the end of the month in which,—
(a) the acceptance is received; or
(b) the period of filing of objections under sub-section (2) expires.
(5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment.
(6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:—
(a) draft order;
(b) objections filed by the assessee;
(c) evidence furnished by the assessee;
(d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority;
(e) records relating to the draft order;
(f) evidence collected by, or caused to be collected by, it; and
(g) result of any enquiry made by, or caused to be made by, it.
(7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5),—
(a) make such further enquiry, as it thinks fit; or
(b) cause any farmer enquiry to be made by any income-tax authority and report the result of the same to it.
(8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order.
(9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members.
(10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer.
(11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Asses sing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the Revenue, respectively.
(12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee.
(13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received.
(14) The Board may make rules for the purposes of the efficient functioning of the Dispute Resolution Panel and expeditious disposal of the objections filed under sub-section (2) by the eligible assessee.
(15) For the purposes of this section,—
(a) “Dispute Resolution Panel” means a collegium comprising of three Commissioners of Income-tax constituted by the Board for this purpose;
(b) “eligible assessee” means,—
(i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and
(ii) any foreign company.’.
The aforesaid statutory provision of law provides for submitting objections to the Dispute Resolution Panel and the Assessing Officer. The Dispute Resolution Panel comprises of three Commissioners of Income-tax constituted by the Board for the purpose. Thus, a complete mechanism has been provided under the Act itself for resolving such a dispute and therefore, this court does not find any reason to interfere at this stage in the matter.
11. The Division Bench of the Bombay High Court while dealing with an order passed by the Addl. Commissioner of Income-tax Transfer Pricing Officer – I, in the case of Hindalco Industries Ltd. (supra) in paras 10 to 13 has held as under :
10. Section 92(1) provides that any income arising from an international transaction shall be computed having regard to the Arm’s Length Price. Section 92B(1) defines the expression “international transaction” while section 92C provides for the computation of the Arm’s Length Price. Under sub-section (3) of section 92C, the Assessing Officer is empowered to determine the Arm’s Length Price in relation to an international transaction on the basis of the provisions of sub-sections (1) and (2) taking account of such material, information or documents as is available with him, where he is of the opinion inter alia that the price charged or paid in an international transaction has not been determined in accordance with sub-sections (1) and (2), or where the information and documents relating to the transaction have not been kept by the assessee in accordance with the statutory provisions, or where the information or data used in the computation is not reliable or correct or the assessee has failed to furnish within a specified time any document which he is required to furnish. Section 92CA empowers the Assessing Officer to make a reference to the Transfer Pricing Officer. Under sub-section (1) of Section 92CA, where any person being an assessee has entered into an international transaction in any previous year and the Assessing Officer considers it necessary or expedient so to do, he may, with the Commissioner’s approval refer the computation of the Arm’s Length Price in relation to the international transaction under section 92C to the Transfer Pricing Officer. Upon a reference being made to him, the Transfer Pricing Officer is required to serve upon the Assessee a notice requiring the assessee to produce any evidence on which the assessee may rely upon in support of the computation made by him of the Arm’s Length Price in relation to the international transaction. After considering the evidence which the assessee may produce and after taking into account all relevant materials which he has gathered, the Transfer Pricing Officer can determine the Arm’s Length Price in accordance with sub-Section (3) of Section 92C. The proviso to sub-section (3) requires the Assessing Officer to furnish a notice calling upon the assessee to show cause why the Arm’s Length Price should not be determined on the basis of material, information or documents in the possession of the Assessing Officer. Once a determination is made by the Transfer Pricing Officer, the Assessing Officer under Section 92CA(4) has to compute the total income of the assessee in conformity with the Arm’s Length Price as determined by the Transfer Pricing Officer. Section 144C mandate’s that the Assessing Officer shall forward a draft of the proposed order of assessment if he proposes to make any variation in the income or loss returned which is prejudicial to the interest of the Assessee. Upon receipt of the draft order, the Assessee is entitled to submit his objections to the variation with the Dispute Resolution Panel and the Assessing Officer under sub-section (5) of section 144C. The Dispute Resolution Panel where it has received any objections from the assessee is empowered to issue such directions, as it thinks fit, for the guidance of the Assessing Officer. The Dispute Resolution Panel is empowered under sub-section (7) to make its own enquiry or to cause any further enquiry to be made by any Income-tax Authority. Under sub-section (8) the Panel may confirm, reduce or enhance the variation of the draft order so, however, that it shall not set aside any variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order. Under Section 253(1)(d), an order passed by the Assessing Officer under section 143(3) or section 147 in pursuance of the directions of the Dispute Resolution Panel is subject to an appeal before the Appellate Tribunal.
11. In the present case, the Assessing Officer, while making a reference to the Transfer Pricing Officer stated in her order dated 9 October, 2009 that she considered it necessary or expedient so to do. While seeking the approval of the Commissioner, the Assessing Officer relied upon an instruction of the CBDT which stipulates that all cases where international transactions exceeding Rs. 15 crores are involved, shall within the meaning of section 92 be selected for compulsory scrutiny. The Commissioner granted his approval on 30 September, 2009. The Transfer Pricing Office issued a notice to the assessee as far back as on 3 March, 2010 upon receipt of the reference. The petitioner participated in the proceedings before the Transfer Pricing Officer. Eight hearings took place before the Transfer Pricing Officer in the course of which the petitioner submitted its representations. The Transfer Pricing Officer has now rendered a determination on 31 October, 2011, at this stage, we are of the considered view that it would be inappropriate for this court to exercise its writ jurisdiction under Article 226 of the Constitution to entertain a petition challenging the validity of the reference male by the Assessing Officer to the Transfer Pricing Officer on 9 October, 2009 and the underlying approval of the Commissioner dated 30 September, 2009, both of which have been issued over two years ago. The petitioner, in any case had notice before the Transfer Pricing Officer as far back as on 3 March, 2010 and participated in those proceedings. Under the statutory provisions, to which a reference is made earlier, a comprehensive remedy is available to the Petitioner before the Assessing Officer frames an order of assessment. A draft order has to be prepared to which the petitioner is entitled to submit its objections. Even against the draft order, the petitioner has a remedy of moving the Dispute Resolution Panel. Though the Assessing Officer is bound by the determination of the Arm’s Length Price by the Transfer Pricing Officer, it is evident from the statutory scheme that the Appellate Tribunal before which remedy of an Appeal is available would be entitled to consider every aspect of the matter when it renders its decision in the exercise of its appellate powers.
12. In this view of the matter, we are not inclined to exercise the writ jurisdiction under Article 226 of the Constitution of India at this stage. We find no merit in the submission that there was a breach of the principles of natural justice by the Transfer Pricing Officer. Under sub-section (3) of section 92CA the Transfer Pricing Officer is required to comply with the principles of natural justice and to render a determination of the Arm’s Length Price in relation to the international transaction in accordance with section 92C(3), the proviso to which has been noted earlier. The Delhi High Court in its decision in Maruti Suzuki India Ltd. v. Additional Commissioner of Income-tax [2010] 328 ITR 210 has affirmed the importance of complying with the principles of natural justice for the purposes of the proceeding. In this case, the petitioner was on notice of the nature of the enquiry which was being persued by the Transfer Pricing Officer. The Transfer Pricing Officer addressed a communication on 4 October, 2011 detailing the information that was required and the basis on which disclosure was sought. The petitioner adduced detailed submissions by its letter dated 14 and 21 October, 2011.
13. We are of the view that there is no breach of the principles of natural justice which would warrant the interference of this Court under Article 226 of the Constitution, at this staged. We however clarify that in the remedy which is available to the petitioner in appeal, it would be open to the petitioner to urge all appropriate grounds and contentions and these observations are made by the Court confined to the question as to whether a petition under Article 226 of the Constitution should be entertained at this stage. Before we conclude, we may also note that in the present case, there is no challenge to the validity of the instructions issued by the CBDT (Instruction 3/2003). The validity thereof has been upheld by the Delhi High Court in Sony India (P.) Ltd. v. Central Board of Direct Taxes [2007] 288 ITR 52.
Keeping in view the aforesaid judgment passed by the Division Bench of the Bombay High Court, as reasonable opportunity was granted to the petitioner which is evident from the affidavit filed by the Department and also keeping in view the fact that the order has been passed by an authority competent to pass such an order, the question of interference, at this stage, under Article 226 of the Constitution of India, does not arise. The petitioner is certainly at liberty to raise all appropriate grounds and contentions before the appropriate fora and the observations made by this Court are only confined to the issue whether a petition under Article 226 of the Constitution of India should be entertained at this stage or not.
12. This Court is of the considered opinion that at this stage as the petitioner Company is having alternative and efficacious remedy, the question of interference in the peculiar facts and circumstances of the case does not arise and the writ petition is accordingly dismissed. No order as to costs.
