DELHI HIGH COURT - TURNER GENERAL ENTERTAINMENT NETWORKS INDIA PVT. LTD. V. ITO, NEW DELHI, W.P.(C) 682/2019
DATED:
17-05-2017
Summarised
Judgement (Scroll for the Complete Judgement)
In
the facts of above case, the Assessing Officer had disposed of the said
application in the same manner as in the case referred to hereinabove, before
Madras High Court and since the assessee could not make payment of 20% of
disputed demand since the amount of demand was very large i.e.
Rs.11,79,69,539/-, the Assessing Officer rejected the said application stating as under:-
“In
this regard, it is intimated that your application dated 04.05.2018 & your
submission dated 26.10.2018 has been considered. Your request for keeping the
demand in abeyance only till disposal of appeal by Ld. CIT(A), New Delhi cannot
be accepted as you have failed to make payment of 20% of the disputed demand in
accordance with CBDT OM dated 31.07.2017.
Therefore,
your application for stay of demand of ₹ 11,79,69,539/- is hereby rejected as
you have failed to comply with the conditions laid down in CBDT OM dated
31.07.2017.”
Writ Petition was filed before the Hon’ble
Delhi High Court. The Hon’ble Court held as under:-
“7. This Court is of the opinion that the AO
had to necessarily apply his/her mind to the application for stay of demand and
pass appropriate orders having regard to the extant directions and circulars
including the memorandum of 29.02.2016. This in turn meant that AO could not
have imposed a precondition of the kind that has been done in the impugned
order. Consequently, the impugned order is hereby set aside. The AO shall
consider the application for stay of demand made by the AO in its letter dated
04.05.2018 and pass necessary and appropriate orders, and exercise his
discretion having regard to the facts and circumstances of the case, within
three weeks from today.”
==========================================
Complete Judgement
Delhi High Court
Turner International India Pvt. ...
vs Deputy Commissioner Of Income Tax ... on 17 May, 2017
IN
THE HIGH COURT OF DELHI AT NEW DELHI
18
& 19
W.P.(C) 4260/2015
TURNER
INTERNATIONAL INDIA PVT. LTD...... Petitioner
Through:
Mr. M.S. Syali, Senior Advocate with
Mr.
Mayank Nagi & Mr. Tarun
Singh,
Advocates
versus
DEPUTY
COMMISSIONER OF INCOME TAX CIRCLE 25(2),
NEW
DELHI .....
Respondent
Through:
Mr. Dileep Shivpuri, Senior Standing
Counsel
& Mr. Sanjay Kumar, Junior
Standing
Counsel
And
W.P.(C) 4261/2015
TURNER
INTERNATIONAL INDIA PVT. LTD. ..... Petitioner
Through:
Mr. M.S. Syali, Senior Advocate with
Mr.
Mayank Nagi & Mr. Tarun
Singh,
Advocates
versus
DEPUTY
COMMISSIONER OF INCOME TAX CIRCLE 25(2),
NEW
DELHI ..... Respondent
Through:
Mr. Dileep Shivpuri, Senior Standing
Counsel
& Mr. Sanjay Kumar, Junior
CORAM:
JUSTICE
S. MURALIDHAR
JUSTICE
CHANDER SHEKHAR
WP(C)
4260 of 2015 & 4261 of 2015
ORDER
Dr.
S. Muralidhar, J.:
1.
The challenge in these writ petitions is to the Assessment Orders passed by the
Assessing Officer („AO‟) on 31st March, 2015 for the Assessment Year („AY‟)
2007-08 (subject matter of challenge in WP (C) No. 4261/2015) and AY 2008-2009
(subject-matter of challenge in WP (C) No. 4260/2015). Both the Assessment
Orders were accompanied by the Demand Notices which have also been challenged
in these writ petitions.
2.
The background facts are that the Petitioner is a wholly-owned subsidiary of
Turner Broadcasting System Asia Pacific Inc. It is engaged in the business of
sub-distribution of distribution rights and sale of advertisement inventory on
satellite delivered channels.
3.
For the AY 2007-08, it filed its returns on 31st October 2007, declaring its
income at Rs. 10,69,43,491/-. This was later revised on 31st March, 2009 to
claim a higher TDS. As far as AY 2008-09 is concerned, the Petitioner filed a
return of income on 30th September, 2008 declaring its income at Rs.
35,04,23,465/-.
4.
In respect of both the returns, since there were international transactions
involving the Assessee, a reference was made by the AO to the Transfer Pricing
Officer („TPO‟). In respect of both the AYs, two separate orders were passed by
the TPO on 29th October, 2010 (in respect of AY 2007-08) and 17th October, 2011
(in respect of AY 2008-09), in respect of the Distribution Activity segment.
5.
On the basis of the above orders of the TPO, draft Assessment Orders were
passed by the AO. These were objected to by the Petitioner before the Dispute
Resolution Panel („DRP‟). After the DRP concurred with the TPO, final
assessment orders were passed by the AO. These were appealed against by the
Petitioner before the ITAT.
6.
By a common order dated 14th January 2013, in both the appeals pertaining to
the two AYs, the ITAT observed that neither the Petitioner nor the TPO had
taken into consideration appropriate comparables and, therefore, the
determination of arms length price („ALP‟) was not justifiable. While setting
aside the order of the DRP, the ITAT remanded the matters to the AO for
undertaking a transfer pricing study afresh and framing an assessment in
accordance with law.
7.
Following the above order of the ITAT, fresh notices were sent on 2nd August,
2013 by the TPO to the Petitioner under Section 92CA(2) of the Income Tax Act,
1961 („Act‟).
8.
Two separate orders were passed by the TPO on 30th January, 2015 proposing an
upward adjustment to the total income of the Petitioner for each of the AYs.
9.
Pursuant to the above order, the AO on 31st March, 2015 passed final Assessment
Orders in respect of both AYs under Sections 254/143(3)/144 C (13) read with
Section 92 CA (4) of the Act confirming the additions as proposed by the TPO.
Accompanying the aforementioned final Assessment Orders were notices of demand
under Section 156 of the Act and notices under Section 271(1)(c) of the Act
initiating penalty proceedings.
10.
The short ground on which the aforementioned final assessment orders and the
consequent demand notices have been challenged is that there was non-compliance
with the mandatory provision contained in Section 144C(1) of the Act requiring
the AO to first frame draft assessment orders.
11.
The question whether the final assessment order stands vitiated for failure to
adhere to the mandatory requirements of first passing draft assessment order in
terms of Section 144C(1) of the Act is no longer res intregra. There is a long
series of decisions to which reference would be made presently.
12.
In Zuari Cement Ltd. v. ACIT (decision dated 21st February, 2013 in WP(C)
No.5557/2012), the Division Bench (DB) of the Andhra Pradesh High Court
categorically held that the failure to pass a draft assessment order under
Section 144C (1) of the Act would result in rendering the final assessment
order "without jurisdiction, null and void and unenforceable." In
that case, the consequent demand notice was also set aside. The decision of the
Andhra Pradesh High Court was affirmed by the Supreme Court by the dismissal of
the Revenue's SLP (C) [CC No. 16694/2013] on 27th September, 2013.
13.
In Vijay Television (P) Ltd. v. Dispute Resolution Panel [2014] 369 ITR 113
(Mad.), a similar question arose. There, the Revenue sought to rectify a
mistake by issuing a corrigendum after the final assessment order was passed.
Consequently, not only the final assessment order but also the corrigendum
issued thereafter was challenged. Following the decision of the Andhra Pradesh
High Court in Zuari Cement Ltd. v. ACIT (supra) and a number of other
decisions, the Madras High Court in Vijay Television (P) Ltd. v. Dispute
Resolution Panel (supra) quashed the final order of the AO and the demand notice.
Interestingly, even as regards the corrigendum issued, the Madras High Court
held that it was beyond the time permissible for issuance of such corrigendum
and, therefore, it could not be sustained in law.
14.
Recently, this Court in ESPN Star Sports Mauritius S.N.C. ET Compagnie v. Union
of Indi [2016] 388 ITR 383 (Del.), following the decision of the Andhra Pradesh
High Court in Zuari Cement Ltd. v. ACIT (supra), the Madras High Court in Vijay
Television (P) Ltd. v. Dispute Resolution Panel, Chennai (supra) as well as the
Bombay High Court in International Air Transport Association v. DCIT (2016) 290
CTR (Bom) 46, came to the same conclusion.
15.
Mr. Dileep Shivpuri, learned counsel for the Revenue sought to contend that the
failure to adhere to the mandatory requirement of issuing a draft assessment
order under Section 144C (1) of the Act would, at best, be a curable defect.
According to him the matter must be restored to the AO to pass a draft
assessment order and for the Petitioner, thereafter, to pursue the matter
before the DRP.
16.
The Court is unable to accept the above submission. The legal position as
explained in the above decisions in unambiguous. The failure by the AO to
adhere to the mandatory requirement of Section 144C (1) of the Act and first
pass a draft assessment order would result in invalidation of the final
assessment order and the consequent demand notices and penalty proceedings.
17.
For the aforementioned reasons, the final assessment orders dated 31st March,
2015 passed by the AO for AYs 2007-08 and 2008-09, the consequential demand
notices issued by the AO and the initiation of penalty proceedings are hereby
set aside.
18.
The petitions are allowed in the above terms. No order as to costs.
S.MURALIDHAR,
J CHANDER SHEKHAR, J
MAY
17, 2017
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