PR COMMISSONER OF INCOME TAX vs. M/S GMR HYDERABAD INTERNATIONAL AIRPORT PVT LTD

THE COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION 4TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BENGALURU – 560 095.

THE DEPUTY COMMISSIONER

THE COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION 4TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BENGALURU – 560 095.

THE DEPUTY COMMISSIONER

Whether on the facts and in the circumstances on the case, the Tribunal is right in quashing final assessment order by relying on decisions of Hon’ble Madras High Court in case of Vijay Television (reported in 2014) 369 ITR page 113 (MAD) for quashing final assessment order by holding that there was no draft assessment order without appreciating that the facts are distinguishable in the case since a Draft Assessment order was passed indeed in this case and the assessee approached the Dispute Resolution Panel base on such order?

Whether on the facts and in the circumstances on the case, order passed by Tribunal can be said as perverse in nature in

ITA No. 427/2022 has been filed challenging order dated January 12, 2022 in IT(IT)A No. 2572/Bang/2019. ITA No. 429/2022 has been filed challenging order dated January 19, 2022 in IT(IT)A No. 961/Bang/2017. ITA No. 428/2022 has been filed challenging order dated December 27, 2021 in IT(IT)A No. 2888/Bang/2017.

The questions of law raised and also the assessee in all the three appeals are common. Hence, these appeals are being disposed of by this common order.

Heard Shri. K. V. Aravind, learned Senior Standing Advocate for the Revenue and Shri.Nageshwar Rao, learned Advocate for the Assessee.

Briefly stated the facts of the case are, assessee is a company incorporated and registered in Amsterdam and

For A.Y. 2011-12, Assessee has filed its return declaring income of Rs.17,92,72,000/-. Assessee received a notice of demand dated December 28, 2018 under Section 156 of the Income Tax Act, 19613 for Rs.82,99,46,321/- along with the draft assessment order under Section 143(3) of the Act passed by the ACIT (Intl. Taxn)4, Circle I, Bengaluru.

Revenue’s case is, for A.Y. 2011-12, assessment under Section 143(3) was completed on December 31, 2015.

On December 28, 2018, Assessing officer passed draft assessment order under Section 147 read with Section 144(C) of the Act. Assessee filed objections before the DRP5 and the DRP disposed of the objections on September 23, 2019. Assessing Authority passed the final assessment order under Section 147 read with Section 144(C) of the Act on October 15, 2019 by making an addition of Rs.78,76,82,156/- and retained additions made in the assessment order dated October 31, 2015. Assessee challenged the same before ITAT. By the impugned order, ITAT has allowed assessee’s appeal. Feeling aggrieved, Revenue has preferred these appeals.

Assailing ITAT’s order, Shri. K. V. Aravind submitted that:  ITAT failed to notice that assessee had understood the order dated December 28, 2018 as ‘draft

With these submissions, Shri. Aravind prayed for allowing these appeals.

Opposing these appeals, Shri. Nageshwar Rao for the assessee, submitted that at the stage of passing the draft assessment order the ACIT had completed the assessment and issued a demand notice. This is contrary to law laid down in various authorities. Therefore, the impugned order does not call for any interference.

We have carefully considered the rival contentions and perused the records.

Undisputed facts of the case are, in the draft assessment order, the ACIT has ordered issuance of demand notice and to initiate penalty proceeding under Section 271(1)(c) of the Act. Both the draft assessment order and the demand notice are dated December 28, 2018.

Argument canvassed by the Revenue is, though demand notice has been issued, assessee had understood the order dated December 28, 2018 as a draft assessment order and filed its objections before the DRP. The defect if any is a

Section 144C lays down a detailed procedure. Under Section 144C(1), the AO7 is required to forward a draft of the proposed order of assessment to the assessee. Assessee may file its acceptance or objection before the DRP and the AO. If assessee intimates its acceptance or no objections are received within 30 days, the AO shall complete the assessment. Where the DRP receives any objection from the assessee, it shall issue necessary directions to the AO to enable him to complete the assessment after considering the documents/material mentioned in Section 144C (6)(a) to (g) which includes the draft order. Before issuing the directions,

Upon receipt of the directions from DRP under Sub- Section 5, the AO shall, in conformity with the directions, complete the assessment within one month from the end of the month in which such direction is received. A notice of demand under Section 156 may be issued after completion of the assessment under Section 144C(13).

In Vijay Television Case, it is held as follows:

In the case on hand, though it is claimed by the Revenue that order dated December 28, 2018 was a draft assessment order, we may record that the ACIT has directed issuance of demand notice and also initiated penalty proceedings. As in Vijay Television Case, the said order along with demand notice was served on the assessee.

In Vijay Television Case, instead of passing the draft assessment order, the final assessment order was passed. Subsequently, Revenue sought to correct the mistake by issuing corrigendum. Following the decision of Andhra Pradesh High Court in Zuari Cement Ltd Vs. Asstt. CIT8, the Madras High Court set aside the order in Vijay Television Case.

In Kalyan Kumar Ray Vs. CIT9, relied upon by Shri. Nageshwar Rao, it is held that assessment is one integrated process involving not only the assessment of total income but also determination of the tax. In this case at the stage of passing the draft order, the ACIT had assessed the tax, passed a final order and also issued a demand notice.

Mr. Aravind also contended that the demand notice was not enforced. It is settled that demand notice stems out of an order of assessment and it is enforceable. It meets the assessee with civil consequences. The argument on behalf of the Revenue that the demand notice was not enforced is fallacious and noted only to be rejected.

We have carefully considered Section 292B of the Act. The mistake which the ACIT has done in passing the final order at the stage of draft order is not curable under Section 292B of the Act.

We have considered the appeals both on delay and merits. In the light of discussion made hereinabove, these appeals are devoid of merit and they are accordingly, dismissed. The questions of law are answered in favour of the Assessee and against the Revenue.