HASMUKH DIPCHAND GARDI,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-5(2), MUMBAI

Q: Which sections of the Income-tax Act were involved?

Section 153A, Section 143(3), Section 144C, Section 35AC, Section 132

ITA 1309/MUM/2024Status: DisposedITAT Mumbai29 November 2024AY 2015-1630 pages

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What did the Tribunal hold?

The Tribunal held that the issue regarding the non-passing of a draft assessment order under Section 144C was a substantial issue. The assessee, being a non-resident, was an 'eligible assessee' under Section 144C(15). The AO was mandated to issue a draft assessment order if any variation prejudicial to the assessee's interest was proposed. The Tribunal noted that the AO had made additions, thus requiring a draft order. The Tribunal referred to the decision in the case of CIT vs. M/s. K.K. Investments (P) Ltd. and others, which held that the requirement of issuing a draft assessment order under Section 144C is mandatory for eligible assessees, and failure to do so renders the assessment order void ab initio. Therefore, the Tribunal found merit in the assessee's ground regarding the non-compliance with Section 144C. The Tribunal decided to quash the assessment orders for all relevant assessment years on this ground. Consequently, the other grounds of appeal, including the absence of incriminating material, re-computation of LTCG, disallowance of deduction under Section 35AC, ad-hoc addition of cash in hand, and assessment of rental income, were rendered infructuous and did not require adjudication. The issue regarding the application of Article 22 of the India-UAE DTAA was also not decided as the primary issue of the validity of the assessment order was decided in favour of the assessee.

What were the facts?

The assessee, Hasmukh Dipchand Gardi, is an individual who has been a non-resident of India since 1973, residing in the UK and later in Dubai. The appeals concern assessment orders passed under Section 153A/143(3) of the Income-tax Act, 1961, for assessment years 2013-14 to 2020-21. These orders were passed following search proceedings. The assessee challenged the assessment orders before the Commissioner of Income-tax (Appeals) [CIT(A)]. The assessee had previously filed writ petitions before the Bombay High Court, which allowed the filing of additional grounds of appeal before the CIT(A). The CIT(A) adjudicated the appeals, and the assessee is now before the Income-Tax Appellate Tribunal (ITAT) challenging the CIT(A)'s orders.

What were the issues?

The Tribunal had to decide the following issues: 1. Whether the assessment order passed by the Assessing Officer (AO) is void, bad in law, and without jurisdiction for not passing a draft assessment order as required under Section 144C of the Income-tax Act, 1961, given that the appellant is a non-resident and falls under the definition of an ‘eligible assessee'. - Assessee's contention: The AO erred in not quashing the final assessment order as it was passed without a draft assessment order, violating Section 144C, making the order void and without jurisdiction. The assessee relied on Section 144C(1) and the definition of an 'eligible assessee'. - Revenue's contention: Not recorded. 2. Whether the assessment order passed by the AO is liable to be quashed in the absence of any incriminating material for the assessment year under reference, which is a prerequisite for issuing a notice under Section 153A. - Assessee's contention: The CIT(A) erred in not quashing the assessment order due to the absence of incriminating material, which is a mandatory pre-requisite for a Section 153A notice. - Revenue's contention: Not recorded. 3. Whether the CIT(A) erred in directing the AO to assess Long-Term Capital Gain (LTCG) on the sale of property at Rs.1,01,48,320/- as against Rs. 70,30,000/- offered by the appellant. - Assessee's contention: The CIT(A) ought to have assessed LTCG at Rs. 70,30,000/-. - Revenue's contention: Not recorded. 4. Whether the CIT(A) erred in confirming the AO's action in disallowing the deduction of Rs. 20,00,000/- claimed by the appellant under Section 35AC of the Act. - Assessee's contention: The CIT(A) ought to have allowed the deduction of Rs. 20,00,000/- under Section 35AC. - Revenue's contention: Not recorded. 5. Whether the ad-hoc addition of Rs. 1,00,000/- made by the CIT(A) ought to be deleted. - Assessee's contention: The ad-hoc addition made by the CIT(A) ought to be deleted. - Revenue's contention: Not recorded. 6. Whether the CIT(A) erred in directing the AO to assess rental income of Rs. 1,30,360/- under the head "Income from Other Sources" as against "income from House Property" offered by the appellant. - Assessee's contention: Rental income ought to be assessed under the head "income from House Property". - Revenue's contention: Not recorded. 7. Whether the CIT(A) erred in not applying Article 22 ('Other Income') of the Double Taxation Avoidance Agreement (DTAA) between India and UAE for determining the country in which the income is taxable. - Assessee's contention: Article 22 of the India-UAE DTAA ought to have been applied, and consequently, the income should not have been taxed in India as it was not expressly dealt with in any other Article of the DTAA. - Revenue's contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 153A,Section 143(3),Section 144C,Section 35AC,Section 132

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