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Facts
The assessee, a tax resident of Singapore, inadvertently disclosed certain income (LTCG, STCG) and offered dividend income at a higher rate than per the India-Singapore DTAA in their return. The assessee sought rectification before the AO and DRP. However, the AO passed an order based on proposed variations, and the DRP rejected the claim.
Held
The Tribunal found that the assessee had a right to raise additional grounds before the DRP and that the DRP is empowered to examine issues arising from assessment proceedings. Since the claim was made before both the AO and DRP, the matter was restored to the AO.
Key Issues
Whether the DRP has the jurisdiction to consider additional grounds or claims not originally part of the assessment proposal, and whether the AO can grant relief for such claims.
Sections Cited
143(3), 144C(13), 144C(5), 144C(1), 6, 5(2), 90(2), 144C(8)
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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA & SHRI ANIKESH BANERJEE
This appeal of the assessee is directed against the final assessment order of the passed by the Learned Income-tax Officer, Int. Tax Ward 2(3)(1), Mumbai, (in short, ‘Ld.AO’) order passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 (in short, ‘the Act’), date of order 22/01/2025., for Assessment Year 2022-23. The said order was originated by the recommendation
The brief facts of the case are that the assesse is a tax resident of Singapore. The certificate of residence issued for calendar years 2021, 2022 by the Inland Revenue Authorities of Singapore was submitted before the Ld.AO. The assessee filed the return of income for the impugned assessment year declaring total income at Rs.4,81,74,660/-. The case was selected for scrutiny through CASS. The Ld.AO issued the draft assessment order u/s 144C(1) of the Act and proposing assessment of total income at Rs.4,84,61,440/-. The only variation made was of Rs. 2,86,776/- on account not offering rental income for the full financial year. During the assessment proceedings, before finalization of draft assessment order, the assesse claimed that the assessee wrongly declared the non taxable long term capital gain (LTCG) and short-term capital gain (STCG) in the return of income and paid the tax. The assesse also wrongly offered dividend income to tax at 20% as against 15% as per Article 10 of India – Singapore DTAA. The assesse by a letter dated 15/03/2024 claimed the said exemption and tax relief before the Ld.AO. As the assessee had not filed any revised return due to lapse of the due date. But the Ld.AO had not considered the assessee’s claim and passed the order considering the variations made in respect of rental income amount to R.2,86,776/- whereas the assesse claimed that assessee is eligible for refund of Rs.41,57,260/- arising in line with the relief claimed by the assessee during the course of assessment proceedings. The issue was then carried before the Ld. DRP. The Ld. DRP had considered that as the issue was not claimed in the return of income or in the revised return; so, the Ld.AO was not eligible to allow the said relief to the assessee at the assessment stage. So, Zubin Jehanbux Gndevia the Ld.DRP rejected the assessee’s claim and upheld the impugned draft assessment order. Thereafter, the final assessment order was passed as per the recommendation of the Ld.DRP.
The Ld.AR filed a paper book containing pages 1 to 172, which is placed on the record. The Ld.AR invited our attention to APB pages 48 to 148 where the assessee claimed the relief and the mistake was made in treating the LTCG & STCG as taxable income. The Ld.AR further stated that the issue was agitated before the DRP and the relevant paragraph 5.2 is extracted below:- “5.2. Arguments of the Applicant: Facts as submitted to the Assessing Officer Re.: Proposal to reject relief claimed by the Assessee and non-consideration of the India - Singapore Double Taxation Avoidance Agreement For the Financial Year 2021-22 i.e. Assessment Year 2022-23, the Assessee was a tax resident of Singapore. The Certificate of Residence' issued for calendar year 2021 and 2022 issued by the Inland Revenue Authority of Singapore was submitted with the Learned AO. For the said period, the Assessee was a non-resident of Indie per the provisions of S. 6 of the Indian Income Tax Act, 1961 (The Act) and India-Singapore DTAA At the time of filing the income tax return, the Assessee has erroneously disclosed certain income Le long-term capital gain and short-term capital gain at the time of filling the income-tax return for AY 2022-23, which was not taxable in India in line with the India-Singapore DTAA The Assessee also erroneously offered dividend income to tax at 20% as against 15% as per Article 10 of the India Singapore DTAA.
It is hereby submitted that per the provisions of section 5(2) of the Act, non-resident individuals are taxable in India in respect of a. Income received or deemed to be received in India and b. Income accruing or arising in India or deemed to accrue or arise in India.
Further per provisions of S. 90(2) of the Act where India has entered into DTAA applicable to such non-resident, the provisions of the Act or DTAA whichever is more beneficial shall be applicable. It should be noted that for the purpose of availing treaty benefit, one shall be required to provide, amongst other documents, a valid Tax Residency Certificate (TRC) for the period in which the treaty benefit is being claimed The Assessee has a valid TRC for calendar year 2021 as well as 2022. The Assessee also furnished the other document required for availing the treaty benefit Le. Form 10F for Financial Year 2021-22 i.e. Assessment Year 2022-23 with the Learned AO.
Excess income offered to tax erroneously in the income-tax return.”
The Ld.DR argued and relied on the order of the revenue authorities.
We have heard the rival submissions and perused the documents available on record. The assessee is a tax resident of Singapore and has duly submitted a certificate of tax residency before the Ld. AO. It is an admitted fact that, while filing the return of income for the impugned assessment year, the assessee inadvertently disclosed certain items of income, namely, Long-Term Capital Gains (LTCG) and Short-Term Capital Gains (STCG). Furthermore, the assessee had erroneously offered dividend income to tax at 20% instead of 15%. Before completion of the draft assessment order, the assessee filed a claim and specifically requested rectification of the mistake in the return of income. This claim, seeking relief of tax, was made before the Ld. AO by way of a letter dated 15/03/2024. The assessee also Zubin Jehanbux Gndevia raised this issue before the Ld. DRP. However, the Ld. DRP brushed aside the claim holding that it had no jurisdiction to admit additional evidence or additional claims. In this context, the Ld. AR placed reliance upon Notification No. 84/2009 [S.O. 2958(E)/F.No.142/22/2009-TPL], dated 20-11-2009, wherein Clause 7(4) specifically provides as under: “Hearing of objections. 7. (1) For the purpose of hearing of objections, the panel may hold its sittings at its headquarters or at such other place or places as it may deem proper. (2) On the date fixed for hearing, if an authorised representative appears on behalf of eligible assessee, he shall file the authorisation letter before the commencement of the hearing. (3) The panel may consider the application for filing additional affidavit and may either allow such application or reject it. (4) The eligible assessee may, with the permission of the panel, urge any additional ground which has not been set forth in the objections.” Thus, it is evident that the assessee has the right to raise additional grounds before the DRP. In support of this contention, reliance was also placed on the judgment of the Hon’ble Delhi High Court in Lahmeyer Holding GMBH vs. Deputy Director of Income-tax, Circle 3(2) (2015) 59 taxmann.com 336 (Delhi), wherein it was held that, in terms of the Explanation to section 144C(8), the DRP is empowered to examine issues arising out of the assessment proceedings even if such issues do not form part of the variations proposed by the Ld. AO. On careful consideration, we find that the assessee had made its claim both before the Ld. AO and before the Ld. DRP. Therefore, in the interest of justice, we restore the matter to the file of the Ld. AO with a direction to verify the assessee’s claim and grant the relief, if found admissible, in accordance with law.