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Income Tax Appellate Tribunal, DELHI ‘I-1’ BENCH,
Before: SHRI N.K. BILLAIYA, & SHRI LALIET KUMAR
PER N.K. BILLAIYA, ACCOUNTANT MEMBER,
This appeal by the assessee is preferred against order dated 31.03.2011 framed u/s 143(3) r.w.s 144C(13) r.ws. 143(3A) and 143(3B) of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'].
The grievances of the assessee read as under:
“On the facts and circumstances of the case & in law, the final assessment order passed by the Learned Assessing Officer (‘Ld. AO’) is bad in law and is void ab-initio.
2. On the facts and circumstances of the case & in law, the Ld. Assessing Officer while issuing the notice of demand under section 156 of the Income-tax Act, 1961 (‘the Act’) has erred in ignoring the fact that the disputed tax demand of Rs. 10,45,22,430 has been settled under The Direct Tax Vivad Se Vishwas Act, 2020 (‘VSV Act’).
3. On the facts and circumstances of the case & in law, the Ld. AO erred in passing the final assessment order in contravention to the provisions of Section 5(3) of the VSV Act. Further, in doing, the Ld. AO grossly erred in disregarding the express provisions of law providing finality to the proceedings concluded under the VSV Act by way of issuance of Form 5 by the Designated Authority.”
Briefly stated, the facts of the case are that for the year under consideration, the assessee filed its return of income on 29.11.2016 declaring loss of Rs. 23.29 crores. Return was processed u/s 143(1) of the Act. Subsequently, the return was selected for scrutiny assessment and accordingly, statutory notices were issued and served upon the assessee.
The TPO passed an order u/s 92CA(3) of the Act on 31.10.2019 wherein the TPO proposed an adjustment of Rs. 31.59 crores by treating the Advertisement, Marketing and Promotion expenses to be an international transaction.
Pursuant to the order of the TPO, the Assessing Officer passed a draft assessment order on 11.12.2019 wherein disallowances/additions including TP adjustments amounting to Rs. 42.16 crores were proposed.
The assessee raised objections before the DRP vide Memo dated 09.01.2020.
In the meantime, the assessee wanted to take the benefit of Direct Tax Vivad se Vishwas Act, 2020 and accordingly, necessary form was filed before the designated authority to settle the issues arising out of the draft assessment order.
The assessee also furnished an undertaking in Form No. 2 as per the provisions of section 4(5) of the VSV Act waiving its right to pursue any claim in relation to the tax arrears.
Subsequently, as per provisions of section 5(1) of the VSV Act, the designated authority granted a certificate dated 26.12.2020 in Form 3 providing the particulars of tax arrears and the amount payable.
In light of the provisions of section 4 of VSV Act, the assessee filed letter dated 21.01.2021 with the DRP for withdrawal of the objections on account of application filed under VSV Act. The assessee was finally served with Form 5 on 05.02.2021 evidencing that the assessee has settled the disputed tax demand under VSV Act.
On 01.03.2021, the DRP accepted the request of the assessee and dismissed the objections as withdrawn and directed the Assessing Officer to take necessary action as stated under the law.
Ignoring the factum mentioned hereinabove, the Assessing Officer framed final assessment order and computed the total income of the assessee at Rs. 18.87 crores as against loss of Rs. 23.29 crores raising a demand of Rs. 10.45 crores.
Vide letter dated 20.04.2021, the assessee informed the Assessing Officer that the demand notice issued u/s 156 of the Act should not be enforced as the assessee has settled the dispute under VSV Act and brought to the notice of the Assessing Officer Form 5 issued by the designated authority on 05.02.2021.
On receiving no communication from the Assessing Officer, the assessee was left with no choice but to prefer this appeal before this Tribunal.
In our considered view, once Form No. 5 has been issued by the designated authority evidencing that the assessee has settled the disputed tax demand under VSV Act as per the relevant provisions of the Act, the Assessing Officer should not have proceeded to frame the final assessment order dated 31.03.2021 framed u/s 143(3) r.w.s 144C (13) of the Act as Form, 5 was issued on 05.02.2021 much before the date of final assessment order.
To add insult to injury, the Assessing Officer did not care to reply to the letter dated 20.04.2021 filed by the assessee asking the Assessing Officer to quash the demand raised by the final assessment order specifically pointing out to the Assessing Officer that Form 5 has already been issued and disputed tax demand has already been settled under VSV Act.
Considering the aforementioned facts in totality and perusing the relevant documentary evidences brought on record before us by the assessee, we hereby quash the final assessment order and direct the Assessing Officer to decide the issue in light of relevant provisions of VSV Act.
In the result, the appeal of the assessee in is allowed.
The order is pronounced in the open court on 28.09.2021.