IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 16.12.2014 CORAM HON'BLE MR.JUSTICE R.SUDHAKAR AND HON'BLE MR.JUSTICE R.KARUPPIAH T.C.(A).Nos. 932 and 875 of 2014 M/s.India Trimmings P. Ltd., 6/36, Pillaiappanpalayam Annur - 641 653 .. Appellant in above T.Cs Vs. Assistant Commissioner of Income Tax Company Circle IV(2) Coimbatore .. Respondent in above T.Cs PRAYER: Appeals under Section 260A of Income Tax Act, 1961 against order of Income Tax Appellate Tribunal 'A' Bench, Chennai, dated 02.05.2014 in I.T.A.No.1865/Mds/2011 and order dated 25.7.2014 made in M.P.No.95/Mds/2014 for assessment year 2007-08. For Appellant : Mr.S.Sridhar For Respondent : Mr.T.R.Senthilkumar Standing Counsel for Income Tax COMMON JUDGMENT (Delivered by R.SUDHAKAR, J.) These appeals are filed by assessee challenging order of Income Tax Appellate Tribunal 'A' Bench, Chennai, dated 02.05.2014 in I.T.A.No.1865/Mds/2011 and order dated 25.7.2014 made in (2) M.P.No.95/Mds/2014 for assessment year 2007-08, raising following substantial questions of law: T.C.(A)No.932 of 2014: (i) Whether Income Tax Appellate Tribunal is correct in law in setting aside assessment framed by respondent which assessment order was framed without adhering to prescriptions of section 144C of Act, thereby proving and establishing lapse committed was fatal and not curable? (ii) Whether Appellate Tribunal was correct in law in expanding scope of appeal of Revenue before them for considering and for passing order setting aside assessment framed by respondent for adhering to prescriptions of section 144C of Act in spite of non consideration of arguments of both sides on plea for admission of additional grounds of appeal filed which proved perversity in order passed by them? T.C.(A)No.875 of 2014: (i) Whether Appellate Tribunal is correct in law in not entertaining plea for recall of original order passed within scope of section 254(2) of Act in spite of mistake apparent from record/order in not adjudicating plea relating to admission of additional grounds of appeal for expanding scope of appeal before them? (ii) Whether Appellate Tribunal is correct in law in setting aside assessment framed by respondent which assessment order was framed (3) without adhering to prescriptions of section 144C of Act, thereby proving and establishing lapse committed was fatal and not curable? (iii)Whether Appellate Tribunal was correct in law in expanding scope of appeal of Revenue before them for considering and for passing order setting aside assessment framed by respondent for adhering to prescriptions of section 144C of Act in spite of non consideration of arguments of both sides on plea for admission of additional grounds of appeal filed which proved perversity in order passed by them?" 2. following facts as found in assessment order will be relevant in disposing above appeals. appellant/assessee is wholly owned subsidiary of Conso International Corporation, USA and is engaged in manufacture of Decorative Trimming, such as, Tie Backs, Tassels, Trimmings etc. and is 100% Export Oriented Unit. assessee company has filed their return of income for assessment year 2007-08 on 31.10.2007 admitting total income of Rs.1,37,520/- and value of fringe benefits of Rs.16,16,630/-. book profit under Section 115JB, as returned by assessee, worked out to Rs.1,50,066/-. After processing return under Section 143(1), as case was selected for scrutiny through CASS, notice under Section 143(2) was issued to assessee. (4) 3. As international transactions were involved in this case, case was referred to Transfer Pricing Officer, Chennai in order to compute Arms Length Price with approval of Commissioner of Income Tax-II, Coimbatore. It appears that Transfer Pricing Officer has passed order on 28.10.2010 in terms of Section 92CA(3) of Income Tax Act, which is recorded in Assessment order, reads as follows: "8. Vide her order in F.No.1510/TPO-IV/AY 2007-08 dt: 28-10-2010, Transfer Pricing Officer -IV, Chennai, has directed Assessing Officer to adjust upwardly total income of assessee by Rs.1,77,80,447/- (Rs.1,05,80,652 + Rs.71,99,795) on account of determination of Arms Length Price of transaction relating to payment carriage outward costs and volume discount at Nil." 4. Thereafter, Assessing Officer proceeded to pass order under Section 143(3) of Income Tax Act and accordingly passed assessment order on 30.12.2010, which includes regular assessment and order of Transfer Pricing Officer after affording opportunity to Authorised Representative of assessee. assessment order came to be challenged by assessee before Commissioner of Income Tax (Appeals) contending that order of Transfer Pricing Officer should have culminated into draft assessment order in terms of Section 144C(1) of Income Tax Act and since Assessing Officer has not passed assessment order on basis of draft assessment order, proceedings under Section 143(3) passed by Assessing Officer dated (5) 30.12.2010 was bad. 5. Commissioner of Income Tax (Appeals), by order dated 30.08.2011, set aside order of Assessing Officer in entirety holding as follows: "6. As per provisions of section 144 C, Assessing Officer shall "notwithstanding anything to contrary contained in this Act, in first instance, forward draft of proposed order of assessment order (hereafter in this section referred to as draft order) to eligible assessee if he proposes to make, on or after first day of October, 2009 in variation in income or loss returned which is prejudicial to interest of such assessee, other sub-sections of section 144 C mention about further procedure of completion of assessment and reference to Dispute Resolution Panel. As seen from assessment order, it was passed on 30.12.2010 without giving draft of proposed order of assessment to assessee, since there was variation in income which is prejudicial to interest of assessee. Assessing Officer has directly passed Order u/s 143(3) thereby denying opportunity to appellant to file his objections before Dispute Resolution Panel and also Assessing Officer. Since Assessing Officer has not followed provisions of section 144 C thereby denying opportunity to appellant to approach Dispute Resolution Panel, order u/s 143(3) is bad in law. In view of this, grounds of appeal as per additional grounds are allowed." (6) 6. Aggrieved by order of Commissioner of Income Tax (Appeals), Department filed appeal on 18.11.2011 before Income Tax Appellate Tribunal raising following grounds: "1. order of learned Commissioner of Income-tax (Appeals) is against facts and circumstances of case. 2. learned Commissioner of Income-tax (Appeals) erred in deleting entire additions made in assessment on ground that order was not passed in pursuance of directions of DRP u/s 144C of Act. 3. learned CIT(A) ought to have deleted addition made by Transfer Pricing Officer rather than deleting all additions including additions made by Assessing Officer." 7. Tribunal, by order dated 24.4.2012, disposed of appeal exparte by way of remand. However, at behest of assessee, who filed application to recall exparte order on account of non- appearance, Tribunal was inclined to accept plea and order dated 24.4.2012 was recalled and appeal was restored to file. At that juncture, Department has raised additional grounds raising new plea, which was vehemently opposed by appellant/assessee stating that it was belated. said additional grounds and objections of assessee are as follows: During course of hearing revenue filed additional grounds of appeal which was served on Respondent on 01.04.2014 after lapse of more than 2 years (7) (appeal filed on 18.11.2011) and admittedly there was no petition for condoning delay in filing said additional grounds of appeal. Respondent vehemently had objected to admission of additional grounds of appeal especially to change their stand totally in present appeal proceedings. For sake of easy reference, said additional grounds of appeal filed by revenue is re-produced below: 2. learned Commissioner of Income Tax (Appeals) erred in cancelling assessment, since provisions of sec.144C was not followed. 3. learned Commissioner of Income Tax (Appeals) ought to have observed that non issue of draft order u/s. 144C of Act was on procedural irregularity. On plain reading of said grounds of appeal it is crystal clear that revenue has put up different case without explaining bona fide reasons for belated change of their stand and on contrary revenue relied on two decisions to press their plea for adjudication of revised grounds of appeal so as to get another round of proceedings for Assessing Officer. 8. In effect, when appeal was originally filed, objection of Department was that Commissioner of Income Tax (Appeals), while passing order dated 30.8.2011 ought not to have deleted entire addition on premise that procedure prescribed under Section 144C was not followed. It is contention of appellant/assessee that grounds of appeal by Department is that jurisdiction of Commissioner of Income Tax (Appeals) to set aside assessment order (8) passed under Section 143(3) dated 30.12.2010 should be limited to issue with regard to order of Transfer Pricing Officer and not otherwise. Nevertheless, it is also contention of appellant that they are entitled to object appeal filed by Department on ground of violation of procedure and requirement under Section 144C of Income Tax Act. 9. This issue that was canvassed vehemently by appellant was brushed aside by Tribunal and we find that first order of Tribunal dated 02.05.2014 is merely proceeded on basis that there was concession by Authorised Representative of assessee and magnanimously agreed by Department Representative in remanding matter and therefore, Tribunal passed following order: 4. At time of hearing Ld. A.R., conceded for remitting case back to file of Ld. Assessing Officer for hearing case afresh. Ld. D.R. magnanimously agreed for same. 5. Considering facts and circumstances of case, and in accordance with request of both parties, we hereby remit back matter to file of Ld. Assessing Officer for denovo consideration. We also make it clear that assessee shall co-operate with Revenue in their proceedings promptly without seeking unnecessary adjournments in order to expedite orders of Revenue. 6. In result, appeal of Revenue is allowed for statistical purposes. (9) 10. Aggrieved by this order of Tribunal assessee filed appeal before this Court in T.C.(A)No.932 of 2014 raising above-mentioned substantial questions of law. 11. Thereafter, application was filed before Tribunal under Section 254(2) by assessee seriously contending that there was no concession at any point of time and matter was persuaded vehemently. appellant relied on gist of arguments dated 05.04.2014 filed during course of argument on 08.04.2014, which has been taken note of by Tribunal assessee has also raised objection on ground that various legal facets of case has not been considered by Tribunal as has been pointed out earlier. 12. Tribunal taking note of said objection came to hold that Tribunal had misunderstood submissions and gesture of Authorised Representative, which made them to pass such order. However, Tribunal chose to rectify order by passing revised order on 25.7.2014, which reads as follows: "5. We have heard both sides and perused materials on record. It appears that Bench had misunderstood submissions and gesture of Ld. A.R at time of hearing appeal and had therefore observed in order that Ld. A.R had conceded for remitting case back to file of Ld. Assessing Officer for fresh hearing. Therefore paras-4 & 5 of order of Tribunal in ITA (10) No.1865/Mds./2011 is accordingly modified and shall be henceforth read as follows:- "Para - 4 Ld. D.R taking cue from observations of Bench magnanimously conceded for remitting case back to file of Ld. Assessing Officer for hearing case afresh. Ld. A.R. on other hand, stoutly opposed for remitting back matter and relied on order of Ld. CIT(A). Para - 5 Considering facts and circumstances of case, we hereby remit back matter to file of Ld. Assessing Officer for denovo consideration (since Ld. Assessing Officer had not followed provisions of Sec.144C of Act). We also make it clear that assessee shall co-operate with Revenue in their proceedings promptly without seeking unnecessary adjustment in order to expedite order of Revenue." 6. In result, Miscellaneous Petition of assessee is allowed to extent indicated herein above." 13. Aggrieved by this Miscellaneous order, assessee filed appeal before this Court T.C.(A)No.875 of 2014 raising above-mentioned substantial questions of law. 14. Heard Mr.S.Sridhar, learned counsel appearing for appellant and Mr.T.R.Senthilkumar, learned Standing Counsel appearing for (11) Revenue and perused materials placed before this Court. 15. At outset we have to point out that there is totally non- application of mind by Tribunal. core issue raised in appeal, objections of appellant and non-consideration of issue raised in appeal clearly makes order of Tribunal non-speaking order. 16. We find from arguments advanced by appellant and respondent that there is no scope for passing such non-speaking order of remand, for which we record our reasons as under: i) order of assessment under Section 143(3) of Income Tax Act dated 30.10.2010 is also in relation to order passed by Transfer Pricing Officer dated 28.10.2010 under Section 92CA(3) of Income Tax Act and that was challenged before Commissioner of Income Tax (Appeals), which was allowed in favour of assessee. Against which, Department filed appeal to Tribunal, scope of which we have recorded earlier is limited to that portion of order of Commissioner of Income Tax (Appeals) interfering with entire order passed under Section 143(3); in other words, it should be limited only to order relatable to order of Transfer Pricing Officer dated 28.10.2010. That matter was pending before Tribunal for more than two years. (12) Thereafter, additional grounds have been raised, which was objected to by assessee saying that new plea was sought to be raised and that issue has not been addressed by Tribunal; ii) core issue raised by assessee is with regard to order passed by Assessing Officer under Section 143(3) read with Section 92CA(3) of Income Tax Act; contention of assessee is that requirement under Section 144C (1) of Income Tax Act has not been followed and Commissioner of Income Tax (Appeals) has accepted such stand and it is for Tribunal to consider objection of assessee in light of objection filed in relation to non- compliance of Section 144C of Income Tax Act. That aspect has not been considered by Tribunal and therefore question of law which is raised by assessee ought to have considered by Tribunal and there was no scope for passing non-speaking remand order; and iii) Tribunal ought to have considered scope of such appeal, additional grounds raised and objections of assessee and should have given ruling on same. 17. We, therefore, have no hesitation to hold, for reasons stated above, that order of Tribunal is non-speaking order and Tribunal has not considered issue raised and objected by either side. (13) Hence, we set aside the order of Tribunal and remand matter to Tribunal for passing fresh orders on merits. 18. In result, both appeals are allowed by way of remand. No costs. (R.S.J.) (R.K.J.) 16.12.2014 Index : No Internet : Yes sl To 1. Assistant Registrar, Income Tax Appellate Tribunal Chennai Bench "A", Chennai. 2. Commissioner of Income Tax (Appeals) -I, Coimbatore. 3. Assistant Commissioner of Income Tax Company Circle IV(2), Coimbatore (14) R.SUDHAKAR,J. and R.KARUPPIAH,J. sl T.C.(A).Nos.932 and 875 of 2014 16.12.2014 M/s. India Trimmings P. Ltd. v. Assistant Commissioner of Income-tax, Company Circle-IV(2), Coimbatore