By K. B. Bhujle, Advocate
Pr. CIT vs. WOCO Motherson Advanced
Rubber Technologies Ltd.; 406 ITR 375 (Guj):
Date of order: 20th February, 2017
A. Y. 2011-12
The
assessee was a joint venture company of a company in Germany and another in
India. For the A. Y. 2011-12, in the draft assessment order issued by the
Assessing Officer u/s. 143(3) read with section 144C of the Act, the Assessing
Officer proposed only an arm’s length price adjustment of Rs. 1,48,43,000/- and
did not propose any disallowance in the draft assessment order. The draft
assessment order was carried before the Dispute Resolution Panel (DRP) but the
assessee did not succeed. Thereafter, while passing the final assessment order
the Assessing Officer not only made addition of the arm’s length price
adjustment of Rs. 1,48,43,000/-, but also disallowed 50% of the deduction
allowed u/s. 10AA on the ground that it was claimed in excess by the assessee.
The
Tribunal held that the disallowance made u/s. 10AA was in breach of section
144C and set aside the disallowance.
On appeal
by the Revenue, the Gujarat High Court upheld the decision of the Tribunal and
held as under:
“i) Considering the entire scheme of section
144C, in conformity with the principals of natural justice, the assessee is
required to be given an opportunity to submit objections with respect to the
variations proposed in the income or loss returned. Therefore, while passing
the final assessment order, the Assessing Officer cannot go beyond what is
proposed in the draft assessment order.
ii) When the Assessing Officer forwarded a draft
of the proposed assessment order to the assessee, he had not proposed to make a
disallowance of Rs. 7,64,15,421/- u/s. 10AA of the Act. The Tribunal was right
in deleting the disallowance made by the Assessing Officer in respect of the
claim made by the assessee u/s. 10AA on the ground that the disallowance was in
breach of section 144C in as much as it was not proposed by the Assessing
officer in the draft assessment order.”
