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13-03-2020, Nomura Research Institute, Section 147, 92CA, Tribunal Kolkata
This is an appeal filed by the assessee directed against the final order passed by the AO u/s 143(3) r.w.s. 144C of the Income Tax Act, 1961 (hereinafter ‘the Act’) on 16.05.2019.
2. The assessee has aised the following jurisdictional grounds:
“1. For that the order dated May 16, 2019 passed by the Assessing Officer is a nullity.
2. For that the reference made to the TPO on September 8, 2015 was incompetent and his orderdated October 27, 2017 was a nullity.
3. For that the AO acted without jurisdiction in initiating proceedings under section 147 on the basis of the purported order dated October 27, 2017 and the order under section 143(3) /147 dated May 16, 2019 is a nullity.
4. For that further and in any event and without prejudice to the aforesaid, the AO could not have made any transfer pricing adjustments in the absence of a reference under section 92CA after assumption of jurisdiction under section 147.
5. For that the Assessing Officer erred in assessing the total income of the Appellant at INR 9,40,36,160/- as against total income of INR 4,31,54,335/- computed as per the final assessment order passed on August 31, 2016 under section 143(3) of the Act.”
3. Facts in brief. Nomura Research Institute Financial Technologies India Pvt. Ltd. is an Indian company incorporated in the year 2001 and is engaged in providing software services to its Associated Enterprises (‘AEs’).
For the subject AY, the company had filed its return of income (‘RoI’) on 28 November 2014 disclosing a total income of INR 4,31,43,710 under the normal provisions of Income Tax Act, 1961 ('the Act’) and book profit of INR 4,22,29,700 under section 115JB of the Act. Since the tax liability under the normal provisions was higher, the company had paid taxes under the normal provisions of the Act.
The ROI filed by the company was selected for scrutiny through CASS on the basis of various reasons except Transfer Pricing risk paramete . Subsequently, the Assessee has filed submissions responding to the specific questions raised by the Ld. AO. Later, the Ld. AO passed the final assessment order under section 143(3) of the Act dated 31 August 2016 (‘final assessment order") making a disallowance of INR 10,626 under the normal provisions of the Act. Subsequent to the final assessment order, the assessee received a notice dated 6th January 2017 from the Transfer Pricing Officer (herein after referred as’ or ‘Ld. TPO’) under section 92CA(2) read with section 92D of the Act initiating transfer pricing proceedings. In response to the said notice, the Assessee vide letter dated 14 February 2017 submitted that the final assessment order was already passed by the Ld. AO and hence TP proceed ng was invalid and should be dropped.
However, the Ld. TPO disregarded the submission and continued with the TP proceedings. The Ld. TPO also issued show cause notice (SCN) dated 23 October 2017 where the Ld. TPO has proposed adjustment to the international transaction. The Assessee responded to the SCN vide submission dated 26 October 2017. Later, the Ld. TPO passed the transfer pricing order (referred to as ‘T.P. order) dated 27 October 2017 under section 92CA(3) of the Act making an upward adjustment of INR 5,08,27,823. Subsequently, a notice dated 26 February 2018 under section 148 of the Act was issued by the Ld. AO initiating the re-assessment proceedings for the captioned AY. The Ld. AO, upon request, also issued the reasons for initiating re-assessment proceedings which mentioned that transfer pricing order was not considered in the assessment order dated 31.08.2016 and hence income has escaped assessment.
The Assessee has filed its objections against the 148 proceedings, however the same was disregarded by the Ld. AO. Later, the Ld. AO has passed draft assessment order dated 02 August 2018 determining the total income of the Assessee at INR 9,40,36,160 incorporating the transfer pricing adjustment proposed in the TP Order.
Aggrieved by the draft order and the order passed by the learned TPO, the Assessee has preferred to submit this application before the Hon’ble Dispute Resolution Panel (“Hon’ble Panel” or the “Panel”).
4. The DRP in his direction u/s 144C(5) of the Act dated 22.04.2019 held as follows: “DRP Directions: