BRANDIX MAURITIUS HOLDINGS LIMITED,MAURITIUS vs. DCIT INTERNATIONAL TAXATION CIRCLE-1(1)(2), NEW DELHI

PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-

2. The grievances of the assessee read as under:

“1. GENERAL

1.1 That, on the facts and in the circumstances of the case and in law, the order of the learned AO dated October 15, 2019 passed under section 147/ 1440(13)7143(3) of the Income-tax Act, 1961 (“the Act”) in respect of AY 2011-12 is arbitrary; contrary' to law, facts and circumstances; time barred and hence, liable to be quashed.

2. RE-ASSESSMENT PROCEEDINGS BAD IN LAW

2.1 That, on the facts and in the circumstances of the case and in law, the learned AO was not justified in furnishing the reasons for initiation of re-assessment proceedings to the Appellant beyond a reasonable period despite multiple requests made by the Appellant seeking reasons.

3. BUY-BACK DOES NOT RESULT INTO TAXABLE CAPITAL GAINS UNDER THE ACT

3.1 That on the facts and in the circumstances of the case and in law, the learned AO/ Hon’ble DRP erred in ignoring that there should not have been any tax liability under the Act as the transaction of buy-back does not result in any taxable income under the Act since: a. Section 46A of the Act merely characterizes the gain on account of buy-back as ‘capital gains’ but neither there is a charge of tax created by section 46A of the Act nor section 2(24) of the Act covers this gain within its scope; b. Without prejudice to the above, given the fact that Appellant is the parent company of Brandix Apparel India Private Limited (“BAIPL”), the buy-back undertaken by BAIPL would be covered by the exemption under clause (iv) of section 47 of the Act.

4. BUY-BACK DOES NOT RESULT INTO TAXABLE CAPITAL GAINS UNDER THE RELEVANT TAX TREATY

4.1. That,on the facts and in the circumstances of the case and in law, the learned AO/ Hon’ble DRP erred in holding the Appellant liable for tax on capital gains in India arising on account of transfer of shares to BAIPL pursuant to buy-back undertaken by BAIPL by disregarding the provisions of the India-Mauritius tax treaty.

4.2 That,on the facts and in the circumstances of the case and in law, the learned AO/ Hon’ble DRP grossly erred in holding that Circular No. 789 dated April 13, 2000 is applicable only to Foreign Institutional Investors investing in India through entities in Mauritius and not to any other residents of Mauritius.

4.3 Without prejudice to the above, that on the facts and in the circumstance of the case and in the law, the learned AO/ Hon’ble DRP was not justified in attempting to charge the same income in the hands of the Appellant when such income was already charged in the hands of the Appellant’s subsidiary i.e., BAIPL. (Tax effect: INR 5,61,04,244)

5. ERRONEOUS OBSERVATIONS

5.1 That, on the facts and in the circumstances of the case and in law, the learned AO/ Hon’ble DRP erred in imposing tax on capital gains in India in the hands of the Appellant when the learned AO/ Hon’ble DRP has itself admitted that the capital gains in India was taxable in the hands of the holding company i.e., Brandix International Limited (“BIL”).

5.2 That, on the facts and in the circumstances of the case and in law, the learned AO/ Hon’ble DRP erred in holding that the decision to buy-back shares by BAIPL was taken on January 19,2010 being prior to the date (March 30, 2010) of gift of shares by BIL to the Appellant.

6. OTHER

6.1 That, on the facts and in the circumstances of the case and in law, the learned AO erred in levying interest under section 234A of the Act.

(Tax effect: INR 4,48,83,360)

6.2 That, on the facts and in the circumstances of the case and in law, the learned AO erred in levying interest under section 234B of the Act.

(Tax effect: INR 5,77,87,326)

6.3 That on the facts and in the circumstances of the case and in law, the learned AO has erred in initiating proceedings under section 27i(i)(c) of the Act.

The grounds of appeal mentioned above are independent and without prejudice to one another.

Further the Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing before the Hon’ble Tribunal, so as to enable the Hon’ble Tribunal to decide on the appeal in accordance with the law.

3. Vide letter dated 19.08.2022, the assessee has raised the following additional grounds of appeal:

“7. Ground No. 7: On the facts and circumstances of the case & in law, the Learned Assessing Officer (‘Ld. AO’) grossly erred in not providing the copy of mandatory sanction, if any, obtained under section 151 of the Income-tax Act, 1961 (‘the Act’) containing necessary satisfaction and endorsement of the concerned Learned Commissioner of Income-tax, and thus, the initiation of reassessment proceedings and reopening of assessment deserves to be held as invalid and bad in law.

8. Ground No. 8: On the facts and circumstances of the case & in law, the Learned Assessing Officer (‘Ld. AO’) erred in issuing the final assessment order under section 147/ 1440(13)/ 143(3) of the Income-tax Act, 1961 (‘the Act’) dated 15 October 2019 without quoting the mandatory document identification number (‘DIN’) in conformity with Para-2 and Para-3 of Circular No. 19/2019 dated 14 August 2019 and thus, the said final assessment order deserves to be held as invalid, bad in law and void-ab-initio.

The aforesaid grounds of appeal are without prejudice to each other, and the grounds of appeal raised along with the captioned appeal.”

“7. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Income-tax (Appeals) takes too narrow a view of the powers of the Appellate Tribunal Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.”

5. In light of the above ratio, we find that this Tribunal is not required to verify any new facts. Therefore, the additional grounds raised are admitted.

6. It would be pertinent to adjudicate Ground No. 8, since it goes to the root of the matter. Ground No 8 reads as under:

“8. Ground No. 8: On the facts and circumstances of the case & in law, the Learned Assessing Officer (‘Ld. AO’) erred in issuing the final assessment order under section 147/ 1440(13)/ 143(3) of the Income-tax Act, 1961 (‘the Act’) dated 15 October 2019 without quoting the mandatory document identification number (‘DIN’) in conformity with Para-2 and Para-3 of Circular No. 19/2019 dated 14 August 2019 and thus, the said final assessment order deserves to be held as invalid, bad in law and void-ab-initio.:”

7. A perusal of the record shows that the final assessment order along with notice of demand is dated 15.10.2019 and it is an undisputed fact that it has been passed/issued without quoting Document Identification Number [DIN], which is mandatory as per CBDT Circular No. 19/2019 dated 14.08.2019.

Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes

Circular No. 19/2019 New Delhi, dated the 14th August, 20 19

Subject: Generation/Allotment/Quoting of Document Identification Number in Notice/ Order /Summons /letter /correspondence issued by the Income-tax Department - reg.

With the launch of various e-governance initiatives, Income- tax Department is moving toward total computerization of its work. This' has led to a significant improvement in delivery of services and has also brought greater transparency in the functioning of the tax administration. Presently, almost all notices and orders are being generated electronically on the Income Tax Business Application (ITBA) platform. However, it has been brought to the notice of the Central Boa rd of Direct Taxes (the Board) that there have been some instances in which the notice, order, summons, letter and any correspondence (hereinafter referred to as "communication") were found to have been issued manually, without maintaining a proper aud t trail of such communication.

(i) when there are technical difficulties in generating /allotting/ quoting the DIN and issuance 0r communication electronically; or (ii) when communication regarding enquiry, verification etc. is required to be issued by an income-tax authority, who is outside the office, for discharging his official duties; or (iii) when due to delay in PAN migration, PAN is lying with non- jurisdictional Assessing Officer; or (iv) when PAN of assessee is not avail able and where a proceeding under the Act (other than verification under section 131 or section 133 of the Act) is sought to be initiated; or (v) When the functionality to issue communication is not available in the system, the communication may be issued manually but only after recording reasons in writing in the file and with prior written approval of the Chief Commissioner / Director General of income tax. In cases where manual comll1unicati on 'is required to be issued due to delay in PAN migration. the proposal seeking approval for issuance of manual communication shall include the reason for delay in PAN migration. The communication issued under aforesaid circumstances shall state the fact that the communication is issued manually without a DIN and the date of obtaining of the written approval of the Chief Commissioner / Director General of Income-Tax for issue of manual communication in the following format- ... . . ..

This communication issues manually without a DIN on account of reason/reasons given in para 3 (i)/3(iI)/3 (iii)/3 (iv)/3 (v) of the CBDT Circular No ... dated .... . (strike off those which are not applicable) and with the approval of the Chief Commissioner / Director General oj Income Tax vide number .... dated .. .. "

4. Any communication which is not in conformity with Para-2 and Para-3 above, shall be treated as invalid and shall be deemed to have never been issued.

i. uploading the manual communication on the System. ii. compulsorily generating the DIN on the System; iii. communicating the DIN so generated to the assessee/any other person as per electronically generated pro-forma available on the System.