IN INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SRI. SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SRI. ARUN KUMAR GARODIA, ACCOUNTANT MEMBER IT(TP)A 135/Bang/15 (A.Y : 2008 09) M/s. Obulapuram Mining Co., Pvt. Ltd., No. 123, Veeranna Gowda Colony, Club Road, Ganesh Nagar, Bellary 583 103. --- Appellant PAN NO : AAACO5753D Vs. Deputy Commissioner of Income Tax, Central Circle 1(3), Income Tax Department, C.R. Buildings, Queens Road, Bangalore 560 001. --- Respondent Appellant By: Sri. Lakshmi Narayan, Advocate Respondent By: Ms. Neera Malhotra, CIT(DR) Date of Hearing: 29.08.2016 Date of Pronouncement: 17.10.2016 ORDER PER SUNIL KUMAR YADAV, J.M This appeal is preferred by Assessee, against order of CIT(A) inter alia on following grounds: 1. order of learned Assessing Officer under section 143(3) r.w.s 263 & 144C(13) of Act is opposed to law, facts and circumstances of case, and therefore liable to be cancelled. IT(TP)A 135/Bang/15 Page 2 of 6 2. Learned lower authorities erred in making reference u/s. 144C without meeting arguments/objections of appellant as noted in para 6.1 to 6.4 of pages 3,4,5,6 & 7 of order of Learned DRP and as such, reference u/s. 144C is invalid and entire assessment itself is invalid. 3. Learned AO should have appreciated that appellant is not ELIGIBLE ASSESSEE as defined in section 144C(15)(b), since it is not foreign company but Indian/Domestic company, and therefore provisions of section 144C do not apply. 4. Learned AO has failed to appreciate that DRP has no jurisdiction u/s. 144C on orders that have merged in order u/s. 263 and hence reference is invalid. 5. Learned AO should have considered fact that order u/s. 263 is subject matter of appeal to ITAT and hence reference to DRP on issues considered by CIT u/s. 263 is not referable u/s. 144C to DRP and hence, DRP lacks jurisdiction. 6. Learned A.O should have appreciated that DRP cannot decide disputes arising from findings and orders of CIT u/s 263 and reference to DRP u/s 144C therefore cannot be made, when passing assessment order in pursuance of order u/s 263. 7. order under section 144C is barred by limitation in view sections 144C (12) and 153, and therefore liable to be cancelled. 8. order of Assessing Officer passed after obtaining approval of Joint Commissioner of Income Tax as mentioned in para-6 of page- 10 of impugned assessment order is bad in law because orders/directions of DRP u/s. 144C are binding on Assessing Officer and cannot be approved by JCIT who is not superior authority over DRP. 9. APPLICATION OF TP PROVISIONS: a) Learned Dispute Resolution Panel (DRP) and lower authorities ought to have held that there is no A.E. since authorities are unable to show that provisions of Sub Section (1) of Sec. 92A are attracted and also criteria in Sub Section to IT(TP)A 135/Bang/15 Page 3 of 6 92A are also satisfied and therefore, ought to have concluded that Transfer Pricing (TP) provisions do not apply to facts of appellant. b) Learned DRP ad lower authorities erred in holding that deeming provision in Se. 92B(2) is attracted without first pointing out how provisions of Sec. 92A(1) is attracted and also criteria laid down in Sec. 92A(2) is also simultaneously attracted. c) Learned authorities failed to appreciate that in absence of A.E. as defined in Sec. 92A, there can be no application of Sec. 92B(2) of Act. d) Learned DRP has erred in holding that there is no basis for argument of appellant that Transfer Pricing Officer (the TPO) has no jurisdiction to resort to implied provisions of law or deeming provision for purpose of determination of actual state of affairs in business arrangement without appreciating settled legal position. e) Learned Authorities failed to appreciate that when contract was entered into with M/s. GLA Ltd., and as such, there was no common director and therefore, transactions made in pursuance of contract are made under uncontrolled conditions. f) Learned authorities have grossly failed to meet arguments and objections raised by appellant because that is only view possible in law and as such should have held in favour of appellant regarding application of Transfer Pricing provisions. g) participation in management or control or capital envisaged in clauses (a) or (b) of section 92A(1) can be exercised only by virtue of share holding specified in clauses (a) and (b) of section 92A(2) as per settled law, and when Shri. Gali Janardhan Reddy is only director without any share holding in M/s. GLA Ltd., and further without attracting either clause (e) or clause (f) of section 92A(2), such right of participation or management of control did not exist and therefore, there was no A.E u/s. 92A. h) No individual or other person having any control or controlling interest in M/s. GLA International PTE Ltd., has any control over appellant and therefore clause (j) or clause (k) of section 92A(2) is also not satisfied and as such it is not relevant that Sri. Gali Janardhana Reddy became one of directors of M/s. GLA International PTE Ltd., for purpose of section 92A. 10. DETERMINATION OF ALP: WITHOUT PREJUDICE THAT a) authorities should have appreciated that contractual terms is material to determination of ALP as per Clause (c) of Rule 10B (2) and therefore, arms length price (ALP) should be determined by taking only such uncontrolled transactions which also had similar contractual terms, as NMDC and MMTC, whose financial data is available in public domain. IT(TP)A 135/Bang/15 Page 4 of 6 b) It should have been appreciated that NMDC and MMTC could not be accused of entering into tainted agreements or exercising undue influence for purpose of avoiding or shifting of profits and therefore comparable uncontrolled transactions defined in Rule 10B(2) read with Rules 10B(3) and 10C of I.T. Rules for determination of ALP. c) ALP determined is not in accordance with rules prescribed and therefore liable to be cancelled and treating purported international transactions as at arm s length. d) 5 percent standard deduction ought to have been given while determining ALP. e) authorities erred in not appreciating that M/s. GLA International PTE Ltd., is responsible for payment, delivery of goods and further obliged to pay minimum of 35% on cost, which is significant risk while evaluating ALP. f) authorities should have appreciated that price/profit margin of minimum of 35% on cost at all times even under depressed market conditions is what appellant could not have secured from any other importer and therefore, such price even under alleged controlled conditions, is at arm s length. g) authorities should have appreciated that there are no deemed international transactions u/s. 92B and therefore, question of determination of Arms Length Price of such alleged international transactions did not arise. 11. authorities failed to appreciate that there were no payments/expenses to be disallowed u.s.37(1) and therefore, no income was admitted in return filed u/s. 153A on this issue and Learned A.O is also not able to identify any such payment in books of account of appellant assessee. 12. Learned A.O and DRP failed to appreciate there was no excess stock and ought to have accepted explanation of assessee which reconciled stock figures/details. 13. Learned Assessing Officer erred in initiating penalties afresh in order when penalties were dropped by assessing officer on completing of original assessment u/s 143(3) dated 32/12/2009 and further when there are no directions of CIT u/s 263 in this regard. Appellant seeks your leave to add, alter amend or delete any of grounds urged at time of hearing. IT(TP)A 135/Bang/15 Page 5 of 6 2 During course of hearing learned counsel for assessee has invited our attention to facts that present appeal is emanated from order of assessing officer passed consequent to order of CIT passed u/s. 263 of act. 3 order passed by CIT u/s. 263 of act has been challenged by assessee before Tribunal in ITA 545/Bang/12 and Tribunal vide its order dated 29/07/2016 quashed order of CIT passed u/s. 263 of act. Since order of CIT, consequent to which assessing officer has passed impugned order from which present appeal has been emanated, is set aside/quashed by Tribunal, entire proceedings consequent becomes invalid and deserves to be set aside. Copy of order of Tribunal dated 29/07/2015 is placed on record. 4 learned DR did not dispute this fact. 5 Having carefully examined order of Tribunal passed in appeal filed against order of CIT u/s. 263 of act. We are view that once order of CIT passed u/s. 263 is quashed, consequential proceedings are not sustainable in eyes of law. We therefore set aside order IT(TP)A 135/Bang/15 Page 6 of 6 of Assessing Officer as well as CIT(A). Accordingly appeal of assessee is stands allowed. 6 In result appeal of assessee is allowed. Order pronounced in open court on this 17th October, 2016. Sd/- Sd/- (ARUN KUMAR GARODIA) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Place : Bangalore Dated : 17/10/2016 /MK/ Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR, ITAT, Bangalore 6. Guard File By Order Assistant Registrar Income-Tax Appellate Tribunal Bangalore M/s. Obulapuram Mining Co., Pvt. Ltd. v. Deputy Commissioner of Income Tax, Central Circle 1(3), Bangalore