AO isn’t required to pass draft assessment order while considering case remanded back by tribunal: HC

Case details: Enfinity Solar Solutions (P.) Ltd. v. DCIT - [2021] 129 taxmann.com 172 (Madras)

Judiciary and Counsel Details

• • S.M. Subramaniam, J.
  • Veerabathiran Prasanth and R. Sivaraman for the Petitioner. 
  • D. Prabhu Mukunth Arunkumar, Standing counsel for the Respondent.

Facts of the Case

Assessee entered into international transactions of purchase of raw material from its Associated Enterprises (AEs). Thus, the case was transferred to the Transfer Pricing Officer (TPO) under Section 92CA for determining the arm’s length price. TPO made an adjustment to the Arm Length Price (ALP) of international transactions undertaken by assessee. Further, a draft assessment order was issued under Section 144(3), read with Section 144C(1). Assessing Officer (AO) issued final assessment order incorporating the adjustments. On appeal, ITAT remitted the matter back to the TPO. TPO computed the ALP of international transactions with respect to the purchase of materials, which resulted in a downward adjustment.

The assessee filed a writ petition on the ground that the revenue, instead of issuing a draft assessment order, had issued the final assessment order in the remand proceedings, and the same was unjustified.

High Court held

On writ, Madras High Court held that the procedure contemplated under Section 144C had been scrupulously followed by revenue by passing a first draft assessment order during the original assessment. Assessee filed an objection before the Disputes Resolution Panel, who in turn also passed an order, and after that, a final assessment order under Section 143(3) was passed. Thus, once again, commencing from the beginning is not the idea behind the provision.

Once the procedure has been followed and the ITAT remitted the matter back to decide the particular issue with a specific finding, it is sufficient if AO/TPO decided the remitted issue and the final assessment order is passed. Repetition of the same procedures would become an empty formality, which is not intended under the provision. Therefore, when the matter was remitted with reference to a particular issue to be clarified or decided by the Competent Authority, it is sufficient if such an issue is decided, and thereafter, a final assessment order is passed.

List of Cases Referred to

• • Pr. CIT v. Headstrong Services India (P.) Ltd. [2021] 125 taxmann.com 262/278 Taxman 224 (Delhi) (para 6)
  • Durr India (P.) Ltd. v. Asstt. CIT [W.P. No. 32751 of 2017, dated 27-5-2021] (para 7)
  • GE Oil & Gas India (P.) Ltd. v. Asstt. CIT [W.P. No. 1575 of 2020, dated 5-1-2021] (para 7).