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Facts
The assessee, a Malaysian mobile telecom service provider, faced reassessment for A.Y. 2014-15 after the AO, based on information, noted an alleged non-deduction of TDS on Rs. 12,94,43,028 received as Cellular Roaming Charges. The AO proposed to tax this as Fees for Technical Services (FTS), confirmed by the DRP. The assessee contended that the actual amount was Rs. 12,94,430.28 (below Rs. 50 lakhs) and therefore the reassessment notice issued after three years was time-barred.
Held
The tribunal found that the AO had made an error by ignoring a decimal, overstating the escaped income from Rs. 12,94,430.28 to Rs. 12,94,43,028. As the correct escaped income was below Rs. 50 lakhs, and the notice under Section 148 for A.Y. 2014-15 was issued on 25.06.2021 (beyond the three-year limitation period from the end of the assessment year), the reassessment proceedings were held to be time-barred and invalid. The tribunal quashed the assumption of jurisdiction for passing the order and did not rule on the merits of the addition or penalty initiation.
Key Issues
1. Whether reassessment proceedings initiated under Section 148 of the Income-tax Act for A.Y. 2014-15 were time-barred due to the escaped income being below Rs. 50 lakhs and the notice issued after the three-year limitation period. 2. Whether the Assessing Officer committed a factual error in calculating the escaped income by ignoring a decimal point.
Sections Cited
144C(1), 144, 144C(13), 148, 149, 56, 234B, 234C, 271(1)(c), 195, 149(1)(a), 148A(d), 147
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Income Tax Appellate Tribunal, DELHI ‘D’ BENCH,
Before: SHRI VIKAS AWASTHY & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-
This appeal by the assessee is preferred against the order of the ld. ACIT, International Taxation, Delhi dated 29.03.2024 u/s 144C(1) of the Income-tax Act, 1961 [the Act, for short] pertaining to A.Y. 2014- 15.
The assessee has raised the following grounds of appeal:
1. Assessment proceedings and impugned order passed for the subject AY are time barred and bad in law and thus invalid. 1.1 On the facts and circumstances of the case and in law, the impugned order passed by the learned AO under section 144 read with section 144C(13) of the Act is bad in law and thus, is liable to be quashed. 1.2 On the facts and circumstances of the case and in law, the notice issued under section 148 of the Act is barred by limitation by the application of first proviso of section 149 of the Act and thus, is liable to be quashed. 1.3 On the facts and circumstances of the case and in law, the learned AO has erred in recognizing cellular roaming charges as asset" and accordingly erred in issuing notice under section 148 of the Act. 1.4 On the facts and circumstances of the case and in law, the amount of income escaping assessment is less than INR 50 lakhs and thus the notice issued under section 148 is liable to be quashed.
2. Non-taxability of Cellular Roaming Charges/Interconnect Usage Charges ('IUC') on payments received from Vodafone Mobile Services ('VMSL') 2.1 That on the facts and in the circumstances of the case and in law, the learned AO vide impugned order has erred in making an addition of INR 12,94,43,028 on account of IUC and taxed the income as Fee for Technical Services ('FTS') in the hands of the Appellant under the Act and Double taxation Avoidance Agreement ('DTAA'). 2.2 That on the facts and circumstances of the case, the learned AO has failed to consider the fact that during AY 2014-15, the Appellant only received remittances amounting to INR12,94,430.28 instead of INR 12,94,43,028 and made an addition of the later amount to the income of the Appellant. 2.3 That on the facts and circumstances of the case and in law, without prejudice to above, the learned AO has erred in considering that the IUC income received by the Appellant would be taxable under the residual clause as "other income" under D'TAA and section 56 of the Act 3. Levy of interest under section 234B and 234C of the Act 3.1 That on the facts and circumstances of the case and in law, the learned AO erred in levying interest under section 234B and 234C of the Act.
4. Initiation of penalty proceedings 4.1 That on the facts and circumstances of the case and in law, the learned AO has erred in initiating penalty proceedings under section 271(1)(c) of the Act, being against the provisions of the Act.
5. General 5.1 Each of the above ground is independent and without prejudice to the other grounds of appeal preferred by the Appellant. 5.2 The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time
before or at, the time of hearing, of the appeal, so as to enable your Honour to decide this appeal according to law.”
Representatives of both the sides were heard at length. Case records carefully perused. Relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules.
Briefly stated, the facts of the case are that the assessee is foreign company incorporated in Malaysia and engaged in the activity of providing mobile telecommunications products and services. During the F.Y 2016, the assessee transferred all its operation to Maxis Broadband SDN BHD. Information was available with the department that the assessee has received Cellular Roaming Charges amounting to Rs.12,94,43,028/- from M/s Vodafone Mobile Services during the F.Y 2013-14, relevant to the A.Y 2014-15. The information received in the case is as under:-
"As per the information, during the F.Y 2013-14 relevant to AY 2014-15, M/s Vodafone Mobile Services had made foreign remittances of Rs. 12,94,43,028/- to M/s Maxis Mobile Services SDN BHD Malaysia on account of Cellular Roaming Charges without deduction of tax".
On the basis of judgment of Hon'ble Supreme Court in the case of UOI Vs Ashish Aggarwal and subsequent CBDT's instructions No.01/2022, the AO issued and served notice u/s 148 of the Act dated 25.06.2021. After following the due procedure, the AO finally proposed the addition of Rs 12,94,43,028/- as Fees from Technical Services. The DRP confirmed the findings of the Assessing Officer that the remittances received from Vodafone are in the nature of FTS and to be taxed on substantive basis. The DRP also held that the same be taxed as income from ‘other source’ on protective basis.
Aggrieved, the assessee is in appeal before us
At the very outset, the ld. counsel for the assessee contended that the proceedings u/s 148 of the Act itself is invalid as the escaped income is below Rs. 50 lakhs and the notice u/s 148 of the Act has been issued after a period of three years. The ld. counsel for the assessee further pointed out that the Assessing Officer ignored the decimal in the amount informed to the Assessing Officer and by ignoring this decimal, he took the amount as 12,94,43,028/-. Since this amount is below Rs. 50 lakhs and notice has been issued beyond 3 years, the Assessing Officer cannot assume jurisdiction and prayed for quashing the assessment.
Per contra, the ld. DR relied upon the orders of the Assessing Officer.
We have heard the rival submissions and have perused the relevant material on record. A perusal of page 8 of the Paper Book, which is letter by the Income tax officer, International Taxation, Ward -3(1)(1), New Delhi to the DCIT, Circle 2(2)(1), New Delhi, reveals the information states that Maxis Mobile Services had received an amount of Rs. 12,94,430.28 on account of Cellular Roaming Charges during FY 2013-14 and TDS u/s 195 has not been deducted. The amount is further verified from the detailed information which is annexed at pages 42 to 45 of the Paper. These pages show that Cellular Roaming charges amounting to Rs 12,94,430.28 has been paid to the assessee under acknowledgement no. R2013020KBOB. We find force in the arguments of the ld. counsel for the assessee that the Assessing Officer mistook the amount by ignoring the decimal and considered the said amount as Rs.12,94,43,028/-. We also find that when the decimal is taken into account, the amount is only Rs. 12,94,430/- which is below Rs. 50 lakhs.
We also find that the AY involved is AY 2014-15 for which the first notice u/s 148 was issued on 25.06.2021. As
per the provision of section 148 r.w section 149(1)(a) of the Act , the time to issue notice u/s 148 for reassessing income which is less than 50 lakh should be within 3 years from the end of the relevant assessment year. We find that in the instant case, the escaped amount is less than Rs 50 lakh and the notice u/s 148 was issued after the period of three years from the end of relevant assessment year. We therefore hold that the re-assessment proceedings were time-barred as limitation period of three years for the relevant assessment year since the notice u/s 148 was issued post June 2021.
This view finds support from the decision of the Hon'ble High Court of Delhi in the case of Ganesh Dass Khanna 460 ITR 546 wherein it has been held as under:
“The notice issued under section 148 was issued for AY 2016-17 on 30 June 2021 and for AY 2017-18 was issued on 28 June 2021. Thereafter, pursuant to the judgment of UOI vs Ashish Agrawal (2022) (444 ITR 1) (SC) order under section 148A(d) was passed. On appeal to the Hon’ble Delhi High Court, it was held that as per the new 148 provision, the time to complete the reassessment proceedings for income which is less than 50 lakhs should be within 3 years from the relevant assessment year. In the instant case the re-assessment proceedings were time-barred as limitation period of three years for the relevant assessment year since the notice issued for post June 2021. Hence, the orders issued under Section 148A(d) and the notice under Section 148 of the amended 1961 Act, for AY 2016-17 and AY 2017- 18 are not valid.”
In view of the above, we are of the considered view that the orders issued under Section 148A(d) and the notice under Section 148 of the amended 1961 Act, for A.Y 2014-15 are not valid and consequently the assumption of jurisdiction for passing order u/s 147 r..w.s 144C(1) of the Act is illegal and liable to be quashed. Ground No 1 with its sub-ground are allowed.
12. The ground no 2 pertains to the merits of the additions. As we have decided the issue on the jurisdictional ground, we are not expressing our opinion on the merits of the case.
The ground no 3 pertains to interest u/s 234B and 234C which is consequential in nature.
The ground 4 pertains to initiation of penalty u/s 271(1)(c). The same is premature and is, accordingly, dismissed as such. is partially allowed.
The order is pronounced in the open court on 14.11.2024.