Case Law Details

Case Name : Nikon India Pvt. Ltd. Vs DCIT (ITAT Delhi)
Appeal Number : ITA No. 8752/Del/2019
Date of Judgement/Order : 27/05/2020
Related Assessment Year : 2012-13
Courts : All ITAT (7336) ITAT Delhi (1719)

Nikon India Pvt. Ltd. Vs DCIT (ITAT Delhi)

The issue under consideration is whether the assessment will sustain even if the Assessing Officer ignoring the statutory provisions of section 144C, passed the Final assessment order without issuing draft assessment order to the assessee?

In the present case, the Tribunal vide order dated 31.03.2017 remanded the matter back to the TPO/AO for fresh determination. Thus, as per Section 144C of the Act, it is mandatory for the Assessing Officer to pass draft Assessment Order. But instead of that, the Assessing Officer vide order dated 18.10.2019 merely captioned the final Assessment Order as Draft Assessment Order along with issuance of notices under Section 156 and 274 read with Section 271(1)(c) of the Act which means a final Assessment order u/s 144C was passed without following the mandatory provisions of Section 144C of the Act.

All pronounce decisions highlighted that final Assessment order passed in remand proceedings without passing a draft Assessment order is in violation of Section 144C of the Act and is therefore null and void. The Ld. DR could not bring any case law on contrary to these decisions. In fact, the statute itself gives a mandatory direction to the Assessing Officer under Section 144C that in the first instance the Assessing Officer should forward the draft of the proposed order of assessment. Thus, the Assessment order itself is bad in law and void ab initio, hence quashed. Hence, appeal filed by the assessee is allowed.

FULL TEXT OF THE ITAT JUDGEMENT

These two appeals are filed by the assessee against the Assessment Orders dated 18/10/2019 and 10.10.2019 passed by the Assessing Officer u/s 143 (3) read with Section 144C of the Income Tax Act, 1961, for Assessment Year 2012-13 and 2015-16 respectively.

2. The grounds of appeal are as under:-

ITA No. 8752/DEL/2019

“Appeal under section 253(1) of the Income Tax Act, 1961 (the “Act”) against the order dated October 18, 2019 (received on October 23, 2019) passed under section 143(3) read with section 144C of the Act by the Deputy Commissioner of Income Tax, Circle 3(1), Gurgaon (the “AO”) for the aforesaid assessment year (“AY”)

GROUNDS OF APPEAL

1. That on the facts and circumstances of the case and in law, the AO has erred in assessing the total income of the Appellant under section 143(3) of the Act, for the subject assessment year at INR 123,92,03,240 as against the returned income of INR 5,42,98,030.

2. That on the facts and circumstances of the case and in law, the initial order dated December 18, 2018, and the consequential orders passed in pursuance thereto are bad in law and void ab-initio as the same have been passed in violation of the statutory provisions of section 144C of the Act.

2.1. That on the facts and circumstances of the case and in law, the AO by issuing notice of demand under section 156 and penalty notice under section 274 read with section 271 (1 )(c) of the Act, along with the order dated December 18, 2018 (titled as ‘Draft Assessment Order’) has in a way passed a final assessment order as against the draft assessment order contemplated under section 144C(1) of the Act in the case of an eligible assessee.

3. That on the facts and circumstances of the case and in law, the orders passed by the AO / TPO were bad in law as the pre-requisite for applying Chapter – X, ie, existence of international transaction between two Associated Enterprises (“AE”) under section 92B of the Act, was not satisfied or existed as there was no agreement, understanding or arrangement between the Appellant and the AE for incurrence of such expenditure by the Appellant and the Dispute Resolution Panel (“DRP”) erred in upholding the same.

3.1 That on the facts and circumstances of the case and in law, the orders passed by the AO / DRP/ TPO are bad in law as the unilateral AMP expenditure incurred has been categorized as ‘international transaction’ without passing a speaking / reasoned order recording satisfaction in relation to characterisation / categorization of the AMP expenditure as an ‘international transaction’.

3.2 That on the facts and circumstances of the case and in law, the TPO erred in re-characterizing the unilateral AMP expenditure being payments made by Appellant to independent third parties as an ‘international transaction’ under chapter X of the Act, particularly when section 92CA of the Act, enables the TPO only to compute the arm’s length price (“ALP”) of the ‘international transaction’.

4. That on the facts and circumstances of the case and in law, the TPO erred in suo-moto benchmarking the alleged international transaction related to AMP expenditure without their being any order or reference from the AO in relation thereto.

Notwithstanding and without prejudice to the above grounds that the AMP expenditure incurred by the Appellant does not constitute an international transaction under Chapter X of the Act, the Appellant craves to raise following grounds on merits:

Re: Additions on substantive basis:

5. That on facts and circumstances of the case and in law, the AO / TPO have erred in making an adjustment of INR 1,59,39,195 in an arbitrary and ad-hoc manner, without sharing the reasons for deviation from the remand proceedings, as the TPO vide remand report dated 26.07.2019, admitted that under intensity method there is NIL adjustment.

5.1 Notwithstanding and without prejudice, that the AO / TPO have erred in not granting the benefit of (+/-) 5% range as contemplated in proviso section 92C(2) of the Act.

Re: Additions on protective basis:

6. That on facts and circumstances of the case and in law, DRP has erred in not directing AO / TPO to exclude the sales and distribution expenditure from the quantum of alleged excessive AMP expenditure while benchmarking the alleged international transaction using substantive and / or protective methods, disregarding the decision of the Hon’ble Tribunal in Appellant’s own case for the subject assessment year.

7. That on the facts and circumstances of the case and in law, the AO / DRP / TPO have erred in enhancing the Transfer Pricing adjustment to INR 118,49,05,211 in the remand proceedings as against adjustment of INR 51,89,69,687 made in first round, without appreciating that the Assessee could not be in a worse-off position in remand proceedings.

8. That on the facts and circumstances of the case and in law, the AO / DRP/ TPO erred in applying Bright Line Test (‘BLT’) and Cost Plus Method (‘CPM’) for making transfer pricing adjustment of INR 118,49,05,211 under both the methods on protective basis. The lower authorities have further grossly erred in not adhering to the binding order of the Hon’ble Tribunal in Appellant’s own case, wherein the Hon’ble Tribunal expressly directed to compute the adjustment on an aggregate basis in the first round of proceedings.

9. That on the facts and circumstances of the case and in law, the AO/ DRP / TPO have grossly erred in arbitrarily applying CPM for making transfer pricing adjustment amounting to INR 1,18,49,05,211, on protective basis, without appreciating that the CPM and BLT are one and the same, and that BLT has been expressly rejected by the Hon’ble Tribunal in’ Appellant’s own case.

10. That on facts and circumstances of the case and in law, the AO/DRP/TPO have erred in making an adjustment in respect of alleged international transaction of excessive AMP expenditure, without appreciating that adjusted gross profit margin as well as operating margin of the Appellant was better than the comparable companies.

11. That on the facts and circumstances of the case and in law, AO /DRP / TPO have erred in determining the routine AMP expenditure by using arbitrary AMP/Sales ratio of 0.46%, which was devoid cogent and basis.

12. That on the facts and circumstances of the case and in law, AO/DRP/TPO have erred in not appreciating that the Appellant had not provided any value added / brand building services to its AE by incurring AMP expenditure, and therefore, no mark-up could have been charged / levied on such expenditure, even if the same was to be characterized as an ‘international transaction’.

12.1. Notwithstanding and without prejudice that no mark-up could have been levied, on the facts and circumstances of the case and in law, AO / DRP / TPO have erred in law and facts, in selecting improper companies as comparable companies for purpose of computing markup for the alleged international transaction without appreciating that the same are functionally different.

13. That on the facts and circumstances of the case and in law, the AO / DRP / TPO have erred in not granting set-off of excess profit from distribution of products while benchmarking the alleged international transaction of incurring excessive AMP expenditure as has been held by the Hon’ble Delhi High Court in the case of Sony Ericson Mobile Communications India Pvt. td.: 374 ITR 118(Del).

14. That on the facts and circumstances of the case and in law, the AO/ DRP / TPO have erred in not granting quantitative / economic adjustments (such as non-payment of royalty / expenses incurred on new product launches) while quantifying arm’s length price of the alleged international transaction of AMP expenditure.

15. That on the facts and circumstances of the case and in law, the AO have erred in levying / charging interest under sections 234B and 234C of the Act.

Each of the above grounds are independent and without prejudice to the other grounds of appeal preferred by the Appellant.”

ITA No. 8753/DEL/2019

“Appeal under section 253(1) of the Income Tax Act, 1961 (the “Act”) against the order dated October 18, 2019 (received on October 23, 2019) passed under section 143(3) read with section 144C of the Act by the Deputy Commissioner of Income Tax, Circle 3(1), Gurgaon (the “AO”) for the aforesaid assessment year (“AY”)

1. That on the facts and circumstances of the case and in law, the AO has erred in assessing the total income of the Appellant under section 143(3) of the Act, for the subject assessment year at INR 163,25,39,320 as against the returned income of INR 64,39,34.320/-.

2. That on the facts and circumstances of the case and in law, the initial order dated December 18, 2018, and the consequential orders passed in pursuance thereto are bad in law and void ab-initio as the same have been passed in violation of the statutory provisions of section 144C of the Act.

2.1 That on the facts and circumstances of the case and in law, the AO by issuing notice of demand under section 156 and penalty notice under section 274 read with section 271 (1 )(c) of the Act, along with the order dated December 18, 2018 (titled as ‘Draft Assessment Order’) has in a way passed a final assessment order as against the draft assessment order contemplated under section 144C(1) of the Act in the case of an eligible assessee.

3. That on the facts and circumstances of the case and in law, the orders passed by the AO / TPO were bad in law as the pre-requisite for applying Chapter – X, ie, existence of international transaction between two Associated Enterprises (“AE”) under section 92B of the Act, was not satisfied or existed as there was no agreement, understanding or arrangement between the Appellant and the AE for incurrence of such expenditure by the Appellant and the Dispute Resolution Panel (“DRP”) erred in upholding the same.

3.1 That on the facts and circumstances of the case and in law, the orders passed by the AO / DRP/ TPO are bad in law as the unilateral AMP expenditure incurred has been categorized as ‘international transaction’ without passing a speaking / reasoned order recording satisfaction in relation to characterisation / categorization of the AMP expenditure as an ‘international transaction’.

3.2 That on the facts and circumstances of the case and in law, the TPO erred in re-characterizing the unilateral AMP expenditure being payments made by Appellant to independent third parties as an ‘international transaction’ under chapter X of the Act, particularly when section 92CA of the Act, enables the TPO only to compute the arm’s length price (“ALP”) of the ‘international transaction’.

4. That on the facts and circumstances of the case and in law, the TPO erred in suo-moto benchmarking the alleged international transaction related to AMP expenditure without their being any order or reference from the AO in relation thereto.

Notwithstanding and without prejudice to the above grounds that the AMP expenditure incurred by the Appellant does not constitute an international transaction under Chapter X of the Act, the Appellant craves to raise following grounds on merits:

5. That on facts and circumstances of the case and in law, DRP has erred in not directing AO / TPO to exclude the sales and distribution expenditure from the quantum of alleged excessive AMP expenditure while benchmarking the alleged international transaction using substantive and / or protective methods, disregarding the decision of the Hon’ble Tribunal in Appellant’s own case and various decisions of the High Court.

6. That on the facts and circumstances of the case and in law, the AO / DRP / TPO grossly erred in applying Bright Line Test (‘BLT’) for making transfer pricing adjustment amounting to INR 98,86,05,077, on protective basis, without appreciating that BLT has been expressly rejected by the Hon’ble Tribunal in Appellant’s own case for earlier AYs.

6.1. Notwithstanding and without prejudice to the ground that BLT is not a statutory method, AO / TPO have erred in arbitrarily selecting the improper company namely, Bharat IT Services Limited for the purposes of BLT without appreciating that the same is functionally not comparable. Further, DRP erred in summarily upholding the order of AO / TPO.

6.2. Notwithstanding and without prejudice to the ground that BLT is not a statutory method, AO / TPO have incorrectly computed the AMP/Sales ratio of companies, namely, (i) Idea Telesystems Limited, (ii) Savex Computers Limited, and (iii) Bharat IT Services Limited.

7. That on facts and circumstances of the case and in law, the AO / DRP / TPO have erred in making an adjustment in respect of alleged international transaction of AMP expenditure, without appreciating that adjusted gross profit margin as well as operating margin of the Appellant was better than the comparable companies.

8. That on the facts and circumstances of the case and in law, AO / DRP / TPO have erred in not appreciating that the Appellant has not provided any value added / brand building services to its AE by incurring AMP expenditure, and therefore, no mark-up could have been charged / levied on such expenditure, even if the same was to be characterized as an ‘international transaction’.

8.1 Notwithstanding and without prejudice that no mark-up could have been levied, on the facts ‘and circumstances of the case and in law, the AO / TPO have erred in selecting improper comparable companies for application of mark-up, being entities providing market support functions. Further, the DRP erred in upholding the erroneous approach of AO / TPO.

8.2. Notwithstanding and without prejudice that no mark-up could have been levied, on the facts and circumstances of the case and in law, AO /DRP/ TPO have erred in selecting / functionally incomparable companies or had insufficient data, namely, (i) Majestic Research Services & Solutions Limited, (ii) Killick Agencies & Marketing Limited and (iii) Fcbulka Advertising Private Limited, as comparables for purpose of computing mark-up for the alleged international transaction.

9. That on the facts and circumstances of the case and in law, the AO / DRP/ TPO have erred in not granting set-off of excess profit from distribution of products while benchmarking the alleged international transaction of incurrence of excessive AMP expenditure as has been held by the Hon’ble Delhi High Court in the case of Sony Ericson Mobile Communications India Pvt. Ltd.: 374 ITR 118(Del).

10. That on the facts and circumstances of the case and in law, the AO / DRP / TPO have erred in not granting quantitative / economic adjustments (such as non-payment of royalty / expenses incurred on new product launches) while quantifying arm’s length price of the alleged international transaction of AMP expenditure.

11. That on the facts and circumstances of the case and in law, the DRP erred in not directing the AO to allow deduction under section 43B(a) of the Act for custom duty amounting INR 52,31,95,566, paid under protest during the subject assessment year for goods purchased and cleared during the subject

12. That on the facts and circumstances of the case and in law, the AO have erred in levying / charging interest under sections 234B and 234C of the Act.

Each of the above grounds are independent and without prejudice to the other grounds of appeal preferred by the Appellant.

The Appellant prays for leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before, or at, the time of hearing of the appeal.

3. Both the appeals are having identical grounds in respect of challenging the Assessment Order on the ground that the same is bad in law and void-ab- initio. Therefore, we are firstly taking up facts for A.Y. 2012-13. During the relevant assessment year Nikon India Private Limited, i.e., the assessee company was a wholly owned subsidiary of Nikon Corporation, Japan. The assessee company is inter-alia engaged in import, sales and distribution for Nikon Imaging products in India through network of local distributors. The assessee filed its return of income declaring income of Rs. 5,42,98,030. The case of the assessee was selected for scrutiny under Section 143(3) of the Act. The assessee had disclosed following ‘international transactions’ with its Associated Enterprise (AE), which were duly reported in Form 3CEB and benchmarked in TP study. These transactions were accepted to be at arm’s length (ALP) by the Transfer Pricing Officer (TPO) / Assessing Officer.

Sr. No. International Transaction Transfer                       Pricing Method Total Value of Transaction (Amount in INR)
1 Purchase of Products, Spares, Promotional and Other Supplies Resale Price Method (RPM) 5,306,499,488
2 Purchase of Fixed Assets Transactional Net Margin Method (TNMM) 5,664,445
3 Sales and Service Support Income Transactional Net Margin Method (TNMM) 18,684,779
4 Commission Income Transactional Net Margin Method (TNMM) 252,061,329
5 Purchase of Fixed Assets Comparable Uncontrolled                           Price Method (CUP) 8,527,876
6 Cost Reimbursements Received Comparable Uncontrolled                           Price Method (CUP) 2,151,406
7 Cost Reimbursements Paid Comparable Uncontrolled                           Price Method (CUP) 82,281,676

The TPO vide order dated 28,2016, held that the assessee was incurring excessive Advertisement, Marketing and Promotion Expenditure (AMP) for development of the brand owned by its foreign AE, therefore such excessive AMP expenditure would amount to ‘international transaction’. Consequently, the TPO made the following adjustments on account of excessive AMP Expenditure:

Particulars Amount (INR)
AMP adjustment Method On substantive basis using Cost Plus  51,89,69,687
AMP adjustment on protective basis using Bright Line Test (BLT) Method 1,21,37,90,558

The Assessing Officer passed the draft assessment order dated 16.02.2016, in conformity with the order of the TPO and determined the total income of the assessee at Rs. 57,32,67,720/- as against the returned income of Rs. 5,42,98,030/-. Thereafter, the assessee filed objections against the draft order before the Dispute Resolution Panel (DRP). The DRP vide directions dated 29.11.2016 confirmed the additions made by the TPO with following modifications:

i) Disallowed the benefit of sales related expenditure while computing cost plus adjustment;

ii) Directed TPO to compute adjustment using Intensity approach; and

iii) Directed the TPO to use a mark-up of 17.32% instead of 20.18% as proposed by the TPO, for the purpose of computing AMP intensity adjustment.

The TPO without following the directions of the DRP, confirmed the addition made in the Transfer Pricing order dated 28.01.2016. Thereafter, the Assessing Officer passed the final assessment order dated 17.01.2017 confirming the additions made by the TPO and assessed the income of the assessee at Rs. 57,32,67,720/- as against the returned income of Rs. 5,42,98,030/-, thereby making a TP adjustment of Rs. 51,89,69,687/-.

4. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Tribunal. The Tribunal vide order dated 31.03.2017 remanded the matter back to the files of the TPO with following directions:

  • The Tribunal restored the legal question on ‘determination whether alleged excessive AMP expenditure incurred is an international transactions or not’ in light of the ratio of judgments of the Hon’ble Delhi High Court in various cases;
  • In case the international transaction is proved to be in existence, the Tribunal directed the TPO to determine the ALP of such international transaction following the judgments of jurisdictional High Court;
  • The Tribunal further directed the Assessing Officer to follow directions of the DRP regarding AMP intensity Also, the Tribunal in para 20 of the order categorically directed the TPO to benchmark the excessive AMP expenditure on an aggregate basis.

Pursuant to the directions of the Tribunal, the TPO vide order dated 31.10.2018, reiterated and held that the assessee was incurring excessive AMP expenditure for development of the brand owned by its foreign AE. Thus, such excessive AMP expenditure would amount to be an international transaction. The TPO again determined adjustment relating to excessive AMP expenditure on substantive as well as protective basis as was done in the first round as under:

Basis Method for Benchmarking Adjustment u/s 92CA of the Act (in INR)
Substantive Cost Plus Method 51,89,69,687
Protective BLT 1,21,37,90,558

The Assessing Officer in the second round without passing a draft assessment order, passed an assessment order dated 18.12.2018 thereby only titling the same as draft assessment order under Section 143(3) read with Section 144C of the Act, making the addition of Rs. 51,89,69,687/- (substantive basis) to the income of the assessee on account of TP adjustment made by the TPO. The said order was accompanied by the demand notice dated 18.12.2018 under Section 156 of the Income Tax Act, 1961 along with notice under Section 274 read with Section 271 of the Income Tax Act, 1961.

5. The assessee filed objections against the said order before the DRP vide application dated 18.01.2019. The DRP vide order dated 20.09.2019 directed the AO/TPO as under:

  • As regards TP adjustment on protective basis using BLT, the DRP upheld the TP adjustment. The DRP, however, directed the TPO to list out the comparables based on which the TPO arrived at AMP/Sales ratio in the order. Further, directed to consider the comparables and the operating margin of 17.32% as directed by the DRP in order dated 29.11.2016.
  • To compute the AMP adjustment on substantive basis in accordance with the directions of the Tribunal, i.e., using aggregated approach following the AMP intensity method.

The TPO passed an order dated 04.10.2019, giving effect to the directions of the DRP under Section 144C(5) of the Act as under:

  • As regards adjustment on protective basis using BLT, the TPO considered a mark-up of 17.32% as against 20.18% as directed by DRP, thereby reduced the adjustment from Rs. 121,37,90,558/- to Rs. 118,49,05,211/-, without allowing deduction of sales related expenses.
  • Further, adjustment on substantive basis using Intensity approach was made by TPO at Rs. 1,59,39,195/-.

Pursuant to the above, the Assessing Officer passed the final assessment order dated 18.10.2019, wherein, the Assessing Officer did not make any addition on substantive basis, but straight away made an addition on protective basis. The Assessing Officer assessed the income as under:-

Particular Amount (in INR)
Returned income 5,42,98,030
Additions: TP adjustment on account of AMP expenditure (on protective basis) 1,18,49,05,211
Assessed Income 1,23,92,03,241
Rounded off 1,23,92,03,240

6. Being aggrieved by the assessment order, the assessee filed the present appeal.

7. As regards to Ground No. 1, the Ld. AR submitted that the same is general in nature. As regards to Ground Nos. 2 and 2.1, the Ld. AR submitted that the assessment order passed by the Assessing Officer in remand proceedings is bad in law and liable to be quashed. The Ld. AR submitted that the assessment order dated 18.12.2018 was passed by the Assessing Officer along with notices under Section 156 and 274 read with Section 271(1)(c) of the Act. The assessment order, thus was passed in violation of Section 144C of the Act in as much as the AO has passed the final assessment order instead of a draft assessment order. This is against the scheme envisaged in the said Section 144C of the Act and is, therefore, bad in law and void-ab-initio. The AR relied upon the Hon’ble Madras High Court decision in case of Vijay Television (2014) 369 ITR 113 (Madras) wherein it is held that non-passing of draft assessment order after adjustment made by the TPO renders proceedings null and void. This has been followed by various coordinate Benches of the Tribunal including the Delhi Bench in the case of ACIT vs. Oracle India Pvt. Ltd ITA No. 6288/ DEL / 2013, which has clearly held that passing of draft assessment order is compulsory and issuing of demand and penalty notice along with the draft order makes it a final assessment order, in contravention of the provisions of section 144C of the Act. The Benches of the Tribunal & the Hon’ble Madras High Court, in all the aforesaid decisions has held that the Assessing Officer in issuing demand and penalty notices along with the assessment order, even though it was framed as the draft assessment order, in effect, has passed the final assessment order. It has been further observed that not only the income was assessed but the demand payable was also determined, which was against the scheme envisaged by Section 144C of the Act and therefore, bad in law and void-ab-initio. In fact, the Hon’ble High Courts have also held that even in remand proceeding a draft assessment order has to be first passed before passing the final assessment order in light with the provisions under Section 144C(1) of the Act. The Ld. AR also pointed out the decision in the case of JCB India Ltd vs. DCIT [2017] 398 ITR 189 (Delhi) and also relied upon the decision of the Hon’ble Bombay High Court in the case of Pr. CIT vs. Lionbridge Technologies P. Ltd.: [2019] 260 Taxman 273 (Bombay) The Ld. AR relied upon the following decisions wherein passing of  the draft assessment order in the second round of proceedings has been held to be mandatory and if the same has not been done, the assessment framed is liable to be quashed:

> Nokia India (P.) Ltd. vs ADIT: WP(C) NO. 3629 OF 2017 (Delhi), and affirmed by Hon’ble Supreme Court (‘SC’) in ACIT vs Nokia India (P) Ltd. [2018] 259 Taxman 91 (SC)

> Zuari Cement Ltd. v. ACIT: WP(C) No.5557/2012 (AP), dated 21-2-2013 and affirmed by the Hon’ble SC in No. 16694/2013, vide order dated 27th September 27, 2013

> International Air Transport Association vs DCIT: [2016] 290 CTR 46 (Bombay)

> PCIT vs Andrew Telecommunications (P.) Ltd: ITA No. 144 of 2017 (Bombay)

> Turner International India (P.) Ltd. v. Dy. CIT [2017] 398 ITR 177 (Delhi)

> CIT v. C-Sam (India) (P.) Ltd: [2017] 398 ITR 182 (Gujarat)

> ACIT vs Vijay Television (P) Ltd.: [2018] 407 ITR 642 (Madras)

In view of the above, the Ld. AR submits that the order dated 18.12.2018, passed by the Assessing Officer ignoring the statutory provisions of section 144C of the Act, deserves to be quashed.

8. The Ld. DR relied upon the Assessment Order and submitted that the order passed by the Assessing Officer is just and valid as per Section 144C of the Income Tax Act,

9. We have heard both the parties and perused all the relevant material available on record. As regards to Ground No. 1, the same is general in nature hence does not require any adjudication. As regards to Ground Nos. 2 and 2.1, it is pertinent to note that the Tribunal vide order dated 31.03.2017 remanded the matter back to the TPO/AO for fresh determination. Thus, as per Section 144C of the Act, it is mandatory for the Assessing Officer to pass draft Assessment Order. But instead of that, the Assessing Officer vide order dated 18.10.2019 merely captioned the final Assessment Order as Draft Assessment Order along with issuance of notices under Section 156 and 274 read with Section 271(1)(c) of the Act which means a final Assessment order u/s 144C was passed without following the mandatory provisions of Section 144C of the Act. The Ld. AR has rightly relied upon the decisions of the Hon’ble Delhi High Court in cases of Control Risks India (P) Ltd. (supra) and Nokia India Pvt. Ltd. (supra) wherein the SLP have been dismissed by the Hon’ble Supreme Court and confirming the Hon’ble High Court’s The Ld. AR also relied upon the Hon’ble Delhi High Court decisions in cases of Turner International India (supra) and JCB India Ltd. (Supra). All these decisions highlighted that final Assessment order passed in remand proceedings without passing a draft Assessment order is in violation of Section 144C of the Act and is therefore null and void. The Ld. DR could not bring any case law on contrary to these decisions. In fact, the statute itself gives a mandatory direction to the Assessing Officer under Section 144C that in the first instance the Assessing Officer should forward the draft of the proposed order of assessment. When the Tribunal remanded back the matter for fresh determination, it has set aside the earlier Assessment and hence the Assessing Officer has to conduct a fresh Assessment as per the mandate of Section 144C. Thus, the Assessment order itself is bad in law and void ab initio, hence quashed. Therefore Ground No. 2 and 2.1 of the assessee’s appeal are allowed. As regards to Ground No. 3 to 15, the same are on merits. Since the Assessment order itself becomes null and void, the other issues does not survive. Hence, appeal being ITA No. 8752/Del/2019 filed by the assessee is allowed.

10. As regards to appeal being ITA No. 8753/Del/2019 filed by the assessee for A.Y. 2015-16, the issues are identical, hence Ground Nos. 2 and 2.1 therein are allowed. Hence, appeal being ITA No. 8753/Del/2019 filed by the assessee is allowed.

11. In result, both the appeals of the assessee are allowed.

Order pronounced on this 27th Day of May, 2020.

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