PRAKASH KANYADARA,VIJAYAWADA vs. INCOME TAX OFFICER (INT TAXN)-1, HYDERABAD

Brief facts of the case are that the assessee is a non-resident and did not file return of income for the assessment year 2015-16. Learned Assessing Officer, however, found from the NMS data that the assessee made certain payments to non-resident Indians, made deposits in his account through banking and non-banking channels. Learned Assessing Officer, therefore, issued notice under section 148 of the Act and passed draft assessment order under section 144C of the Act on 31/03/2022 proposing an addition Rs. 1,62,16,300/-, treating the cash deposits in the assessee’s account as un-explained money under section 69 of the Act. Assessee expressed his willingness to prefer an appeal before the learned CIT(A) and, therefore, the learned Assessing Officer has to pass the final assessment order in terms of the draft assessment order.

At this stage, however, by way of decision dated 04/05/2022, the Hon’ble Apex Court in the case of Union of India vs. Ashish Agarwal (2002 SCC Online SC 543), held that the extended assessment notice issued under the un-amended law shall be deemed to be the show cause notice under clause (b) of section 148A of the Act of the amended law and directed the Assessing Officers to follow the procedure with respect to such notices. Central Board of Direct Taxes (CBDT) also issued instruction No. 01/2022 on 11/05/2022, and as a part of the procedure, the Assessing Officers are required to furnish the information and material relied upon for issuance of extended reassessment notices.

In these circumstances, the draft assessment order dated 31/03/2022 was treated as infructuous and the learned Assessing Officer issued notice under section 148A(a) of the Act on 31/05/2022 by furnishing the information and material which was relied upon.

In response to such notice, assessee submitted that he is a non- resident and employed in USA and during the year, he earned rental

P a g e 2 | 8 income in India from immovable property of Rs. 1.22 lakhs and interest on deposits on which TDS was deducted, that he duly declared this income in the return of income filed on 25/10/2021 in response to notice issued under section 148 dated 24/06/2021 admitting total income of Rs. 3,68,920/-. Assessee further submitted that the cash deposits made into the bank account are out of cash in hand brought forward from preceding previous years and withdrawals made during the current year. According to the assessee, he planned to make investment in India and issued cheques to relatives and friends. Learned Assessing Officer, however, proceeded to issue notice under section 148 of the Act. Learned Assessing Officer passed the draft assessment order dated 31/05/2023.

Aggrieved by the draft assessment order, assessee preferred objections before the learned DRP. Learned DRP, however, rejected the objections in limine by order dated 24/07/2023 holding that the limitation under section 144C(2) of the Act, the assessee has to file the objections before the DRP within thirty days of the draft order, but since the objections of the assessee were received on 19/07/2023 by the learned DRP, beyond the time allowed for filing the objections, the same cannot be taken cognizance of or treated as valid presentation of objections. Learned DRP accordingly refused to go into the merits of the case and rejected the same.

Assessee is, therefore, before us in this appeal, stating that the assessment order is bad under law inasmuch as the learned Assessing Officer failed to appreciate the fact that the assessee remitted funds from USA from tax paid income to India and funds from NRE account were transferred to NRO account for the purpose of investment in land, and P a g e 3 | 8 further that the learned Assessing Officer failed to appreciate the difference between NRE bank account and NRO bank account.

Learned AR submitted that in this case under section 144C(2) of the Act, the limitation is available to the assessee for thirty days from the date of receipt of the draft assessment order and, therefore, the objections dated 28/06/2023 submitted by the assessee at the Aayakar Seva Kendra are well within the time and merely because those were forwarded to the learned DRP by letter dated 14/07/2023 by the concerned authorities does not result in presentation of the objections beyond the period of limitation. According to him, when once the objections are presented before the specified authority, namely, Aayakar Seva Kendra, the presentation is complete and the subsequent transmission of the papers to the learned DRP will not bar the presentation by law of limitation. He placed reliance on the copy of acknowledgement dated 30/06/2023 about filing of Form- 35A and the copy of the letter dated 14/07/2023 by the Income Tax Officer to the learned DRP stating that such objections were wrongly received in the office of the PCIT-1 but the jurisdiction vests with the CIT, DRP-1. According to the learned AR, the mistake occasioned because of the wrongly noting of the addressee of the covering letter to the objections in Form-35A.

Per contra, learned DR placed reliance on the order of the learned DRP and submitted that learned DRP has no powers to condone the delay and to receive the Form-35A received beyond the period of limitation. Reference is made to the decision of the Co-ordinate Bench of the Pune Tribunal in the case of TDK Electronics AG vs. ACIT (IT) in dated 26/02/2020.

We have gone through the record in the light of the submissions made on either side. There is no dispute that the draft assessment order was passed on 31/05/2023. It is also not in dispute that the assessee presented the Form-35A in the Aayakar Seva Kendra on 30/06/2023 and that Aayakar Seva Kendra can receive the papers in the ordinary course of business for onward transmission to the concerned authorities. Letter dated 28/06/2023 through which the assessee submitted Form-35A and relevant papers clearly shows that such papers were meant to be submitted before the Commissioner of Income Tax, Dispute Resolution Committee-1, Bangalore. The acknowledgement generated to be found on the copy of such letter dated 28/06/2023 establishes that those were transmitted to PCIT, Bangalore-1, instead to the Commissioner of Income Tax, Dispute Resolution Committee-1, Bangalore. Further letter dated 14/07/2023 emanating from the office of the Pr. Commissioner of Income Tax-1 to the Commissioner of Income Tax, Dispute Resolution Committee- 1, Bangalore establishes that the papers relating to the objections filed by the assessee were wrongly transmitted to the office of PCIT-1, Bangalore and, therefore, those were re-transmitted to the Commissioner of Income Tax, Dispute Resolution Committee-1, Bangalore.

Learned DRP, in the impugned order observed that the assessee ought to have filed the objections to the draft assessment order within thirty days before the learned DRP, though the assessee produced the acknowledgement showing to have filed the objections, the same cannot be taken cognizance of and, therefore, the filing of objections was barred by limitation. Here the learned DRP missed the fact that the assessee did not mean to file the objections before the PCIT when those were P a g e 5 | 8 presented before the Aayakar Seva Kendra, inasmuch as such a letter clearly establishes that those papers were addressed to and meant to be transmitted to the Commissioner of Income Tax, Dispute Resolution Committee-1, Bangalore.

If there was proper presentation of the objections at Aayakar Seva Kendra within the period of limitation, any subsequent delay occasioned by the clerical or ministerial mistake cannot be attributed to the assessee to hold that there was delay in presenting the same before the learned DRP so as to reject the objections on the ground of delay. The decision in the case of TDK Electronics AG (supra) has no application to the facts of the case, because in such case, there was delay attributable to the assessee and, therefore, while referring to the provisions under section 144C(2), 144C(3), 144C(4) and 92CA(3) of the Act, it was held that in the scheme of the Section 144C, the learned DRP does not enjoy the power to condone the delay in filing the objections. However, in this case, there is no delay on the part of the assessee in presenting the objections, but because of the presentation before the Aayakar Seva Kendra due to clerical or ministerial mistake, the delay in transmitting the papers to the learned DRP occasioned and since the same cannot be attributable to the assessee, it cannot be said that there is delay in filing the objections.

Since it is a verifiable fact, we are of the considered opinion that it would be in the interest of justice to direct the authorities to verify whether there was proper presentation of the papers before Aayakar Seva Kendra on 30/06/2023, before the expiry of limitation in this matter and if it is so, we direct the learned DRP to entertain the objections and dispose of the same according to law. For this purpose, we set aside the impugned order

We, therefore, quash the impugned final assessment order and also the directions of the learned DRP, and restore the issue to the file of learned Assessing Officer/learned DRP for verification as stated above and if there is proper presentation before the Aayakar Seva Kendra within limitation, learned DRP will entertain the objections and dispose it of according to law.

In the result, appeal of the assessee is treated as allowed for statistical purposes.