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Income Tax Appellate Tribunal, DELHI ‘D’ BENCH,
Before: SHRI N.K. BILLAIYA, & SHRI N.K. CHOUDHRY
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-
The above captioned two separate appeals by the Revenue are preferred against two separate orders of the CIT(A) - 43, New Delhi dated 25.07.2018 pertaining to Assessment Years 2014-15 and 2015-16.
The cross objections by the assessee are preferred against the very same order of the ld. CIT(A) for the same Assessment Years.
Since both the appeals and cross objections pertain to same assessee and were heard together, they are being disposed of by this common order for the sake of convenience and brevity
Since the issue raised in the cross objections goes to the root of the matter, we decided to dispose the cross objections first.
The common ground in the cross objections is as under:
“1. That on the facts and in the circumstances of the case and in law, CIT(A)-43 erred in not quashing the final order dated February 15,2018 passed by the Assessing Officer as the same was one without jurisdiction, null and void and unenforceable being barred by limitation
2. That on the facts and in the circumstances of the case and in law, CIT(A)-43 erred in not quashing the demand notice dated February 15, 2018 issued by the Ld. AO consequent to the final order passed by Ld. AO, as the same was one without jurisdiction, null, void and unenforceable, being barred by limitation.
3. The Appellant craves leave to add, alter, amend and / or withdraw any of the grounds of appeal hereinabove at or before the hearing of the appeal and to submit any papers, documents or statements so as to enable the Hon’ble Income Tax Appellate Tribunal to dispose-off this appeal in accordance with law.
5. Briefly stated, the facts of the case are that draft assessment order u/s 144C(1) r.w.s 143(3) of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] was passed on 22.1.2017 for which the assessee decided not to file objections against the draft assessment before the DRP and decided to prefer an appeal before the ld. CIT(A).
Pursuant to the decision taken by the assessee, the Assessing Officer framed the final assessment order wherein the returned income of the assessee amounting to Rs. 27,38,71,150/- was assessed as such.
In the return filed by the assessee, the assessee sought benefit of Article 11 of the DTAA between India and Cyprus, which benefit was denied by the Assessing Officer and the income of the assessee was subjected to tax @ 20% u/s 115A of the Act.
Before us, the ld. counsel for the assessee vehemently stated that there is no variation in the income of the assessee, therefore, the Assessing Officer was not justified in passing draft assessment order u/s 143(3) r.w.s 144C(1) of the Act. The ld. counsel for the assessee placed strong reliance on the decision of the co-ordinate bench at Mumbai in order dated 25.02.2020.
Per contra the ld. DR strongly supported the findings of the Assessing Officer and pointed out that the Finance Bill, 2020 has amended the relevant provisions of the Act and since the amendment is curative in nature, the same should be applied retrospectively.
We have given thoughtful consideration to the rival contentions and have carefully perused the assessment order. In so far as the facts of the case are concerned, there is no quarrel. The returned income of Rs. 27,38,71,150/- was assessed as such with the only difference that the Assessing Officer denied the benefit of India – Cyprus DTAA and taxed the income @ 20% u/s 115A of the Act.
On these undisputed facts, all that has to be decided is as to whether the Assessing Officer was justified in passing a draft assessment order when there is no variation in income or loss returned which is prejudicial to the interest of the assessee.
Section 144C(1) of the Act provides that :
“The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment to the eligible assessee if he proposes to make, on or after the 1 st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee.”
As mentioned elsewhere, there is no variation in the income returned by the assessee and returned income has been assessed as such. It is also not in dispute that the assessee is an eligible assessee in terms of section 144C(15)(b)(ii) of the Act, but then, there is no change in the figure of income returned by the assessee vis a vis income assessed by the Assessing Officer.
As pointed out by the ld. DR, Finance Bill 2020 proposes to make issuance of draft assessment order in the case of eligible assessees mandatory even when there is no variation in income or loss returned by the assessee but this amendment may take effect from 01.04.2020.
The relevant part of the Finance Bills reads as under:
“Amendment in Dispute Resolution Panel (DRP).
Section 144C of the Act provides that in case of certain eligible assessees, viz., foreign companies and any person in whose case transfer pricing adjustments have been made under sub-section (3) of section 92CA of the Act, the Assessing Officer (AO) is required to forward a draft assessment order to the eligible assessee, if he proposes to make any variation in the income or loss returned which is prejudicial to the interest of such assessee. Such eligible assessee with respect to such variation may file his objection to the DRP, a collegium of three Principal Commissioners or Commissioners of Income-tax. DRP has nine months to pass directions which are binding on the AO.
It is proposed that the provisions of section 144C of the Act may be suitably amended to:- include cases, where the AO proposes to make any variation which (A) is prejudicial to the interest of the assessee, within the ambit of section 144C; expand the scope of the said section by defining eligible assessee (B) as a non-resident not being a company, or a foreign company.
This amendment will take effect from 1st April, 2020. Thus, if the AO proposes to make any variation after this date, in j case of eligible assessee, which is prejudicial to the interest of the assessee, the above provision shall be applicable.”
Similar view was taken by the co-ordinate bench at Mumbai in the case of IPF India Property Cyprus [No. 1] Ltd [supra]. The relevant findings read as under:
“7. Coming to the second point, we find that there is no dispute that if no draft assessment order was to be issued in this case, the assessment would have been time barred on 31stDecember 2017 but the present assessment order is passed on 17'1’ August 2018. Once we hold that no draft assessment order could have been issued in this case, as the provisions of Section 144C(1) could not have been invoked in this case, the time limit of completion of assessment was available only upto 31st December 2017. The mere issuance of draft assessment order, when it was legally not required to be issued, cannot end up enhancing the time limit for completing the assessment under section 143(3). We, therefore, uphold the plea of the assessee on this point as well. The impugned assessment order is indeed, in our considered view, time barred. We, accordingly, hold so.”
In light of the above, we hold the assessment order to be time barred and since the assessment order itself has been held to be time barred, all the issues raised by the Revenue in its appeals which deal with the merits of stand taken by the Assessing Officer in the assessment order become academic and infructuous and require no separate adjudication.
In the result, both the cross objections of the assessee in CO Nos.
202 & 203/DEL/2018 are allowed whereas both the appeals of the Revenue in & 6145/DEL/2018 are dismissed.
The order is pronounced in the open court on 21.07.2022.