JAMAKHANDI SEEMA HANUMANT,UNITED ARAB EMIRATES vs. INCOME TAX OFFICER, WARD (INTERNATIONAL TAXATION) 1(2), BANGALORE

PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

This appeal filed by assessee is directed against the order of NFAC for the assessment year 2017-18 passed u/s 250 of the Income-tax Act,1961 ['the Act' for short] dated 29.9.2023. The assessee has raised following grounds of appeal: “Orders of lower authorities are bad in law and liable to be quashed: 1.1. The learned Assessing Officer has erred in passing the rectification order in the manner passed. The rectification order is bad in law for non-compliance of legal principles and also for want of application of principles of natural justice In any case, there being no mistake apparent on record, the assumption of jurisdiction u/s 154 of the Act is bad in law and the order as passed is liable to be quashed. 1.3. The rectification order is also bad in law for failing to a) specify the mistakes apparent from records if any in the original assessment order that have been rectified in the impugned order; to compute appellant's assessed income. b)

IT(IT)A No.783/Bang/2023 Jamakhandi Seema Hanumant, Bangalore Page 2 of 8 Thus, also the impugned order is liable to be quashed. 1.4. In any case, the original assessment order being bad in law the impugned rectification order is void ab-initio and thus also liable to be quashed. 1.5. The learned Commissioner of Income tax (Appeals) has erred in not quashing the order of the learned assessing officer and has further erred by enhancing the assessment. 1.6 The orders of the lower authorities are bad in law and liable to be quashed or atleast the additions and enhancements made are liable to be deleted. [Tar effect of above ground : Rs 5,70, 077/-] Without prejudice: 2. Additions / enhancement made by lower authorities are liable to be deleted. 2.1. The learned assessing officer has erred in making additions to the income originally assessed in the hands of the appellant. The addition as done by the learned assessing officer being without any basis and explanations is bad in law. The learned Commission of Income Tax (Appeals) has erred in confirming the additions. 2.2. The learned Commission of Income Tax (Appeals) has also erred by enhancing the assessed income of the appellant by erroneously a. holding that appellant's employment is not exercised in UAE b. denying DTAA benefits to the appellant on grounds of alleged VISA violations. c. concluding that entire salary income and consulting income of the appellant is taxable in India. In any case, the additions and enhancements made by the lower 2.3. authorities are beyond the scope of rectification proceedings u/s 154 of the Act. 2.4. The income as was offered to tax by the appellant and as was originally assessed in the hands o the appellant being correct under provisions of law and the facts of the appellant's case has to be accepted without any variations. The variations under the rectification order and enhancement under the appellate order being and contrary to the provisions of law have to be deleted. [Tax effect of above ground : Rs 5,70,077/-1

3 In view of the above and on other grounds to be adduced at the time of hearing, it is requested that the orders of the lower authorities be quashed or atleast the additions and enhancements made be deleted. [Tax effect of above ground : Rs 5,70, 077/-1

IT(IT)A No.783/Bang/2023 Jamakhandi Seema Hanumant, Bangalore Page 3 of 8 2. Facts of the case are that during the FY 2016-17, the assessee had stayed in both India and the UAE. She initially filed a return on 25.7.2017. Subsequently, she filed a revised return on 21.8.2018 in which she claimed treaty benefits under the India-UAE DTAA. In the revised return of income filed for the AY 2017-18, the assessee had proportionately offered salary income to tax in India. In the assessment order u/s 143(3) dated 06.12.2019, the proportionate salary returned by the appellant was brought to tax. However, in the assessment order, not only the salary but the un-exempted gratuity was also brought to tax proportionately, resulting in short computation of taxable income. Since the mistake was apparent from the record, the AO issued a notice to the assessee giving her an opportunity to file any objection to the proposed rectification. Per the AO, no response was received from the assessee, hence he proceeded with the rectification. Aggrieved by the impugned rectification order, assessee went in appeal before ld. NFAC. The ld. NFAC has not only confirmed the addition made by the ld. AO in rectification proceedings u/s 154 of the Act but it has also enhanced the income by holding as follows: a. holding that assessee's employment is not exercised in UAE b. denying DTAA benefits to the assessee on grounds of alleged VISA violations. c. concluding that entire salary income and consulting income of the assessee is taxable in India. Against this assessee came in appeal before us. 3. We have heard the rival submissions and perused the materials available on record. In this case, before ld. AO, assessee filed the written submissions on 13.1.2021 as follows:

IT(IT)A No.783/Bang/2023 Jamakhandi Seema Hanumant, Bangalore Page 4 of 8 “In response to above. I wish to submit as follows: l. I am an Indian Citizen residing in Dubai for the last several years. 2. For the year under consideration, I had filed my return of income on 25-07-2017 reporting taxable income of Rs25.42.910/-. Thereafter on 21-08-2018 1 revised my return of income reporting revised taxable income of Rs.6,98,000/-. My return was selected for scrutiny and has been assessed u/s 143(3) of the Act. In the assessment order dated 06-Dec-2019 my revised return of income has been accepted without any variations. I am now in receipt of the above notice proposing to rectify the assessment order. I wish to submit that the proposed rectification is bad in law on following counts: a. The original assessment proceedings are void-ab-initio and therefore the proposed rectification proceedings are also bad in law b. There is no mistake apparent from records in the original assessment order. c. The notice proposing rectification fails to identify the mistake apparent from records that is proposed to be rectified and also fails to provide details of proposed rectification d. Adopting an alternate / debatable view under rectification proceeding is not permissible. 3. Detailed legal submissions in respect of each of the above grounds are produced below: 4. Original assessment proceedings are void-ab-initio a. My return of income for AY 2017-18 was selected for scrutiny vide notice u/s 143(2) dated 23.09.2019. b. It is pertinent to note that the time limit for service of notice IL's 143(2) is 6 months from the end of the month in which the return of income is filed. In my case the return of income was originally filed by me on 25-07-2017. Thereafter this return was revised by me on 21-08-2018. It is a settled law that the revised return only replaces the original return and is not a separate return in itself. The time limit for service of 143(2) notice in my case therefore has to be reckoned from 25-07-2017 and not 21-08-2018. Accordingly. the notice u/s 143(2) in my case ought to have been served on or before 30-09-2018. The notice u/s 143(2) in my case however has been issued only on 23-09-2019. Therefore. the notice 143(2) is time barred and the entire assessment proceedings are void-ab-initio. Such legal proposition finds support in the case of Kunal Structures India Pvt.1Äd. vs DCIT, reported in (2020) 113 Taxmann.com and also in the case of Sindhu Cargo Services Pvt. Ltd (TS- c. My participation in the assessment proceedings was without prejudice to all my rights under law in so far as in my opinion assessment proceedings were void-ab-initio. The aspect of assessment proceedings being void-ab-initio and my participation in the same without prejudice was expressly stated by me in my submissions dated 30-11-2019 available on the records of your kind authority. d. The assessment proceedings being void-ab-initio the proposed rectification proceedings are also bad in law. 5. No mistake in the original assessment order: a. In the notice it has been indicated that there is an error in the computation of the taxable component of gratuity received by me.

IT(IT)A No.783/Bang/2023 Jamakhandi Seema Hanumant, Bangalore Page 5 of 8 b. For the year under consideration. I was a non-resident of India. My stay in India for the year under consideration was only 73 days. c. More than a decade ago I along with my family moved to Dubai and since then have been residing there. Prior to moving to Dubai I was working in India with a Company by name M/S JDA Software Pvt Ltd. I moved to Dubai accompanying my husband who got employed in an organization in Dubai. Post relocation in Dubai I continued to work remotely for M/S JDA Software P Ltd from Dubai only. As part of vacations. occasionally I would visit India and stay with my parents and my in-laws. d. For the year under consideration. I was employed with M/S JDA Software P Ltd only until -3F of Aug 2016. Upon termination of employment. I received a sum of Rs. 13.65,413 as gratuity. Of the said gratuity received by me Rs. 10,00,000/- was claimed to be exempt. My total taxable salaries after exemptions worked out to Rs.17,07,876/- e. In terms of Article 15 of DTAA between India and UAE out of total Salary income received by me. only that portion of salary that is attributable to the period for which employment is exercised in India is taxable in India. It is pertinent to my employment has been wholly exercised from Dubai and no part of my employment has been exercised in India. My visit in India in the year 2016. like earlier years was part of my vacation and family visits. Only a few days were spent by me towards employment termination formalities. But for these couple of days. entire time in India has been spent towards family and personal matters. However, in my return of income filed for AY 2017-18, out of total salary earned by me salary proportionate to the number of days I was residing in India (i.e. 57 days out of total employment period of 153 days) has offered to tax in India. In effect. a sum of Rs. 6,36,267/- was offered to tax in India. f. The above computation of my salary income has also been verified and accepted in my regular assessment of income. g. There are no mistakes apparent from record in the assessment order. The gratuity income received by during the year under appeal has accrued as income in my hands only during the year under consideration. Out of the total taxable component of the gratuity that has accrued in my hands during the year under consideration. I have lawfully been granted relief in terms of Article 15 of the DTAA. There is no mistake in the assessment order that is apparent from records. The proposed rectification therefore requires to be dropped.

IT(IT)A No.783/Bang/2023 Jamakhandi Seema Hanumant, Bangalore Page 6 of 8 elaborate on how the computation adopted in the original assessment order is erroneous and has resulted in short computation of taxable income. It is not clear from the notice as to what is the mistake apparent from records in the assessment order. The notice also does not throw any light on the rectification that is proposed to be carried out to my assessed income. The impact of the proposed rectification in terms of increase / decrease in income or taxes has no where been quantified. c. On this count also the proposed rectification is bad in law. 7. Where there are debatable / alternate views rectification is not permissible a. I have submitted in detail above that the gratuity received by me during the year under consideration is an item of income which has accrued during the year and has rightly been taxed in the manner so taxed in the assessment total order. b. Without prejudice and without acceding even if an alternate view is to be of taken that gratuity being attributable to earlier years of service- relief under that is DTAA has to be computed in accordance with employment exercised in India to before earlier years. no additional income can be taxed in my hands. Detailed submissions on this aspect are as below: c. Where there are more than one possible views on a matter of taxation. in the rectification cannot be resorted to. This view is upheld by the Apex Court in the case of T.S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50 (SC). : "A in the mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long- drawn process of reasoning on points on which there mav conceivablv be two opinions. A decision on a debatable point of law is not a mistake apparent from the record". d. In the assessment order, the manner of computation as filed by me in the also return of income has been accepted. It is now not permissible to take an income alternate view under rectification proceedings.

IT(IT)A No.783/Bang/2023 Jamakhandi Seema Hanumant, Bangalore Page 7 of 8 question is debatable. Moreover. the point which is not examined on fact or in law cannot be dealt with as mistake apparent on the records. c. In CIT v. Keshri Metal tm. [19991237 ITR 165 (SC). the Court has held that under section 154. there has to a mistake apparent from the record. In other words. a look at the record must show that there has been an error and that error may be rectified. Reference to documents outside the record and the law is impermissible n applying the provisions of section 154 d- Similar conclusions were drawn by Calcutta High court in case of Oil India Ltd. CIT 119901 183 ITR 412 (Cal.) wherein it was reiterated that in rectification proceedings fresh determination Of facts should not involved It was held that documents and information outside the record çannot be referred to in rectification proceedings. e. In light of above. on the matter of relief granted under DTAA on gratuity income there is no mistake that is apparent from record. The proposed rectification requiring fresh determination of facts is beyond the scope of powers under section 154 and therefore requires to be dropped.

IT(IT)A No.783/Bang/2023 Jamakhandi Seema Hanumant, Bangalore Page 8 of 8 15 of DTAA between India and UAE, gross gratuity attributable to employment exercised in India (on a higher side) would be only Rs.2,48,555/- [14,91,333/12x2]. b. Such gratuity as computed above would be fully exempt under section 10) of the Act.

Sd/- (Chandra Poojari) Accountant Member

Bangalore, Dated 15th Nov, 2023. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order Asst. Registrar, ITAT, Bangalore