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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Shri Manjunatha, G. & Shri Prakash Chand Yadav
Per Manjunatha, G. A.M This appeal filed by the assessee is directed against the draft assessment order dated 31/01/2024 passed by the Income Tax Officer (International Taxation)-1 Hyderabad, relating to A.Y.2015-16.
Facts of the case, in brief, are that the assessee is a non-resident individual and has not filed return of income on or before the due date u/s 139(1) of the I.T. Act, 1961 for the A.Y 2015-16. As per information available on record, it was seen that during the financial year 2014-15 relevant to A.Y 2015-16, the Page 1 of 11 of 2024 Chundi Sukumar Reddy assessee has accrued income on account of capital gain which has escaped assessment within the meaning of section 147 of the I.T. Act, 1961. Therefore, the assessment has been reopened and notice u/s 148 dated 28.03.2021 was issued. The case was selected for scrutiny and during the course of assessement proceedings, the Assessing Officer noticed that during the financial year relevant to A.Y 2015-16, the appellant has sold a property vide document No.1130/15, dated 25.02.2015 for a consideration of Rs.75,80,000/-. The Assessing Officer called upon the assessee to file necessary evidences including the relevant sale deed and computation of Long-Term Capital Gain. The assessee neither appeared nor filed any details. Therefore, the Assessing Officer has passed order u/s 144C(1) of the I.T. Act, 1961 on 01/03/2023 and made an addition of Rs.34,21,060/- towards Long-Term Capital Gain derived from sale of property.
The assessee has filed objection against the draft assessment order before the DRP-1 Bengaluru and challenged the draft assessment order passed by the Assessing Officer on 01/03/2023 in light of notice u/s 148 issued on 28/03/2021 and claimed that assessment order is barred by limitation. The assessee had also challenged the addition made towards the Long-Term Capital Gain.
The learned DRP vide their direction issued u/s 144C(5) of the I.T. Act, 1961 dated 26/12/2023 rejected the legal ground taken by the assessee on limitation of draft assessment order passed by the Assessing Officer u/s 144C(5) and held that the period of limitation as per section 153(2) of the I.T. Act, 1961
Page 2 of 11 of 2024 Chundi Sukumar Reddy is 12 months from the end of financial year in which notice u/s 148 was served. Since the Department has dispatched the notice on 01/03/2023 in the evening, it should be construed that the notice was served in April, 2021 i.e. financial year 2021-22 and if we consider 12 months from the end of the financial year, the order passed by the Assessing Officer is within the time allowed under the Act. The DRP had also rejected the explanation of the assessee with regard to the computation of capital gain and upheld the additions made by the Assessing Officer. In pursuant to the DRP directions, the Assessing Officer has passed final assessment order u/s 147 r.w.s. 144C(13) of the I.T. Act, 1961 on 31/01/2024 and determined the total income at Rs.34,21,060/-.
Aggrieved by the final assessment order, the assessee is in appeal before the Tribunal.
The learned Counsel for the assessee submitted that this issue is squarely covered in favour of the assessee by the decision of the ITAT Hyderabad Benches in the case of Shri Syed Gulam Mohiuddin vs. Income Tax Officer (International Taxation)- 1, in wherein under identical set of facts, it has been held that the final assessment order passed by the Assessing Officer u/s 147 r.w.s. 144C(13) is barred by limitation. The learned Counsel for the assessee further referring to the notice u/s 148 dated 28/03/2021 submitted that even otherwise assuming for a moment, the extended time is available to the Assessing Officer but still, the assessment order passed by the Assessing Officer is beyond limitation, because as per section 153(2), the re-assessment order should be passed on or before
Page 3 of 11 of 2024 Chundi Sukumar Reddy 31/03/2023, whereas in the present case, the final assessment order has been passed on 31/01/2024 which is beyond limitation and liable to be quashed.
The learned DR, on the other hand, supporting the orders of the DRP submitted that as per section 153(2) of the I.T. Act, 1961, the Assessing Officer shall have time of 12 months from the end of the financial year in which notice u/s 148 was served and in the present case, since the notice was served in the financial year 2021-22, the draft assessment order passed by the Assessing Officer is within the time limit under the Act, and thus, the grounds taken by the assessee needs to be rejected.
We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the notice u/s 148 of the Act, was issued on 28/03/2021 i.e. in the financial year 2020-21. As per section 153(2) of the I.T. Act, 1961, the time limit for completion of assessment u/s 147 is within 12 months from the end of the financial year in which the notice u/s 148 was served. If we go by the notice issued u/s 148, dated 28/03/2021 and the draft assessment order passed by the Assessing Officer dated 1/3/2023 which is beyond 12 months from the end of the financial year in which notice u/s 148 was served. The learned DRP rejected the legal ground taken by the assessee on the ground that the Department has physically dispatched the notice in the evening of 31/03/2021 and therefore, the notice u/s 148 was presumed to be served in April, 2021 i.e. in the financial year 2021-22 and if we consider the said date, then the draft
Page 4 of 11 of 2024 Chundi Sukumar Reddy assessment order passed by the Assessing Officer on 01/03/2023 is within the time limit for completion of the assessment. We find that the issuance of notice is a pre-condition for assuming jurisdiction by the Assessing Officer, but not the service of notice. In other words, the Assessing Officer assumes jurisdiction to assess or re-assess the income of any assessee by issuance of notice and if we go by the same logic for assuming jurisdiction, the date of issue of notice should be considered. If we consider the date of issuance of notice in the present case i.e. on 28/03/2021 which falls in financial year 2020-21 and as per section 153(2) of the Act, the time limit for completion of assessment is 12 months from the end of the financial year in which the notice u/s 148 was served i.e. on or before 31/03/2022. Since the Assessing Officer has passed the draft assessment order on 01/03/2023, in our considered view, the draft assessment order passed by the Assessing Officer is beyond limitation provided under the Act, and can not be sustained. In so far as the reasons given by the learned DRP to reject the legal ground taken by the assessee that the notice was presumed to be served in April, 2021, in our considered view, the said finding is only on the basis of presumption but not on the actual facts. Therefore, we are of the considered view that the draft assessment order passed by the Assessing Officer u/s 144C(1) of the Act, dated 1/3/2023 is beyond limitation and thus, the order passed by the Assessing Officer is hereby quashed.
Further, even otherwise, the final assessment order passed by the Assessing Officer in the present case in pursuant to direction of the DRP dated 26/12/2023 is beyond limitation as Page 5 of 11 of 2024 Chundi Sukumar Reddy held by the Coordinate Bench in the case of Shri Syed Gulam Mohiuddin vs. Income Tax Officer (International Taxation)-1 in wherein it has been held as under:
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In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that the draft assessment order passed by the Assessing Officer u/s 144C(1) of the I.T. Act, 1961 dated 1/3/2023 is barred by Page 10 of 11 of 2024 Chundi Sukumar Reddy limitation and thus, we quash the order passed by the Assessing Officer u/s 144C(1) of the Act, dated 1/3/2023.