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Income Tax Appellate Tribunal, Hyderabad ‘ A‘ Bench, Hyderabad
Before: Shri Mahavir Singh, Vice- & Shri Manjunatha, G.
आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A‘ Bench, Hyderabad Before Shri Mahavir Singh, Vice-President And Shri Manjunatha, G. Accountant Member आ.अपी.सं / (िनधा�रण वष�/Assessment Year: 2017-18) Shri Syed Gulam Vs. Income Tax Officer Mohiuddin (International Taxation)-1 Hyderabad Hyderabad PAN:DECPM0365H (Appellant) (Respondent) िनधा��रती �ारा/Assessee by: Shri P Murali Mohan Rao, CA राज� व �ारा/Revenue by:: Shri Shiva Sewak, CIT(DR) सुनवाई की तारीख/Date of hearing: 16/05/2024 घोषणा की तारीख/Pronouncement: 03/06/2024 आदेश/ORDER Per Manjunatha, G. A.M This appeal filed by the assessee is directed against the assessment order dated 12.01.2023 of the learned Assessing Officer (International Taxation-1), Hyderabad, relating to A.Y.2017-18.
2. The grounds raised
by the assessee read as under:
1. The Final assessment order passed by the Income Tax Officer (Int Taxn)-1,HYD (herein after referred to as 'AO) is erroneous both on facts and in law to the extent the order is prejudicial to the interest of the appellant.
The Ld. A.O erred in reopening of the assessment without fairly and judiciously appreciating the facts of the case which is incorrect and unjustified.
3. The Assessing Officer, while issuing notice u/s 148 of the Act, has not enclosed the reasons recorded u/s 148(2) of the Act and the sanction accorded u/s 151 of the Act, which, thus the notice issued is itself invalid and is without jurisdiction. 4. The Ld. A.O. ought to have obtained the prior approval of the competent authority before issuing notice u/s 148 as laid down under the provisions of section 151 of the IT Act, 1961. 5. The Ld. A.O. erred in reopening the assessment under section 147 of the Act and issuing notice under section 148 of the Act, without having reasonable satisfaction or bonafide belief on his part to show that the assessee's actual income has escaped assessment. 6. The Ld. A.O erred in reopening the assessment u/s 147 of the Act and issuing notice u/s 148 of the Act on the basis of a borrowed satisfaction which is incorrect and unjustified. 7. The Ld. A.O erred in not applying his independent mind and has not made any proper inquiry and reopened the assessment u/s 147 of the Act which is incorrect and against the principles of natural justice. 8. The Ld. A.O made an addition of Rs. 22,00,000/- as unexplained Investment u/s 69 without appreciating the facts of the case which is incorrect and bad in law. 9. The Ld. A.O erred in making a huge addition of Rs. 22,00,000/- to the income of the assessee without providing proper opportunity of being heard which is against the principles of natural justice. 10. 11. 12. The Ld. A.O has erred in reopening the assessment without recording the reasons and without communicating the reasons for reopening which is incorrect and unjustified. 11. The Ld. A.O made a huge addition of Rs. 22,00,000/- on the basis of loose sheets those of which have been made based on the culled out seized material which is nothing but an un-authenticated, unsigned, un-reliable. 12. The Ld. A.O ought to have appreciated the fact that rough excel sheets found with other person are not documentary evidence and making addition u/s 69 of the Act on the basis of the same is unjustified.
The Ld. A.O grossly erred in treating the amounts found in some excel sheet which do not clearly communicate as to whether the figures represent receipts or payments and making addition based on same is incorrect and 14. The Ld. A.O failed to pass a lucid and clear order stating as to how the figures found in a third persons place in the excel sheet represented unexplained cash in the hands of the assessee.
The Ld. A.O ought to have appreciated the fact that the assessee 15. has transferred amount towards sale consideration to M/s Skill Promoters Private Ltd through proper banking channels.
The Ld. A.O making a huge addition of Rs. 22,00,000/- without 16. having any documentary and corroborative evidence especially u/s 69 as unexplained investment which is baseless.
The Ld. A.O ought to have appreciated the fact that the assessee is a nonresident salaried employee and has explained the source of the income.
The Ld. A.O ought to have appreciated the fact that the section 69 of the I.T Act, 1961 is not applicable in the case of a Non-resident and the Ld. A.O erred in making addition of 22,00,000/- u/s 69 of the Act.
The Ld. A.O erred in contending that the assessee has paid an amount of Rs. 22,00,000/- in cash to M/s Skill Promoters Private Limited which is incorrect and baseless.
The Ld. A.O erred in not providing the evidence that the assessee has paid cash to M/s Skill Promoters Private Limited which is unjustified.
The Ld. A.O erred in not appreciating the fact that the assessee has submitted all the information/explanations as required which is unjustified.
The Assessing officer erred in initiating penalty proceedings u/s 274 rws 271AAC(1) of the Income Tax Act.
The assessee may, add or alter or amend or modify or substitute or delete and/or rescind all or any of the Grounds of objections at any time before or at the time of hearing of the objection.”
Facts of the case, in brief, are that the assessee Shri Syed Gulam Mohiuddeein is a non-resident, did not file his return of income for the A.Y 2017-18. The assessee is residing in Saudi Arabia for the financial year 2016-17 relevant to A.Y 2017-18 under reference and earned income from outside India. The assessment has been reopened u/s 147 of the Income Tax Act, 1961 for the reasons stated as per which, the income chargeable to tax had been escaped assessment on account of non-disclosure of consideration paid for purchase of property. As per the reasons recorded by the Assessing Officer, a search and seizure operation u/s 132 of the I.T. Act was conducted in the case of M/s. Skill Promoters (P) Ltd on 22.10.2019. During the course of search, certain data in the form of excel sheet with respect of sale of commercial space in the venture “Sarath City Capital Mall” Kondapur was found and as per the excel sheet, the details of space sold by the Developer to various buyers and consideration in cash and cheque were recorded. It was further noted that in the said annexure, the assessee Shri Syed Gulam Mohiuddin was referred with reference to an agreement of sale for purchase of space and as per the said information, the appellant has purchased a property for a consideration of Rs.33,60,000/- and out of which Rs.22.00 lakhs was paid in cash. Since the appellant did not file his return of income, a notice u/s 148 of the Act dated 30.03.2021 was issued and served on the assessee. The assessee did not filed his return of income, but made his submission with reference to 142(1) notices issued by the Assessing Officer and stated that he has purchased a property from the Developer and paid consideration in cheque and further no cash payment was made as claimed by the Assessing Officer. The Assessing Officer after considering the submission of the assessee passed the draft assessment order u/s 144C of the Act on 8.12.2021 and made addition of Rs.22.00 lakhs as unexplained investment towards cash payment for purchase of property. The assessee has filed objection before the DRP against the draft assessment order passed by the Assessing Officer. The DRP-1 Bengaluru vide their direction issued u/s 144C(1) of the Act dated 12.12.2022 has rejected the arguments of the assessee and upheld the additions made by the Assessing Officer towards cash payment for purchase of property as unexplained investment. Thereafter, the Assessing Officer has passed final assessment order u/s 144 r.w.s. 144C(13) of the Act on 12.01.2023 and determined the total income at Rs.22.00 lakhs.
Aggrieved by the final assessment order, the assessee is in appeal before us.
5. The learned Counsel for the assessee Shri P. Murali Mohan Rao, CA, at the time of hearing referring to the petition filed by the assessee for admission of additional grounds dated 29.01.2024 submitted that the assessee has raised certain legal grounds which were inadvertently omitted to be taken before the learned DRP. Further, the said legal grounds are purely issues concerning the limitation prescribed u/s 153(2) of the Act. Since the additional ground taken by the assessee are purely legal ground and further to decide the said legal ground, there is no need to ascertain fresh facts and thus invoked the decision of the Hon'ble Supreme Court in the case of NTPC Ltd vs. CIT (1998) 229 ITR 383, and submitted that the additional ground of the appeal filed by the assessee may be admitted.
6. The learned Counsel for the assessee referring to the additional ground of appeal filed by the assessee submitted that in the present case, notice u/s 148 of the Act was issued on 30.03.2021. As per the provisions of section 153(2) of the Act, the assessment order should be passed on or before one year from the end of the relevant A.Y i.e. on or before 31.3.2022. However, the Assessing Officer has passed the final assessment order u/s 144 r.w.s. 144C(13) on 12.02.2023 which is beyond the time limit prescribed under the Act and thus,555 barred by limitation. In this regard, he relied upon the decision of the ITAT in the case of Shri Farooq Ali vs. Income Tax Officer in ITA No.104/Hyd/2023.
The learned DR, on the other hand, supporting the order of the DRP submitted that the assessee being a non- resident is subject to proceedings u/s 144C of the Income Tax Act, 1961. As per section 144C of the Act, the time limit for completion of the assessment in a case of non-resident shall extent for a period of 12 months irrespective of the time limit provided u/s 153 of the I.T. Act, 1961. Since the assessee being a non-resident, he subjected to the proceedings u/s 144C of the Act, the limitation provided u/s 144C is applicable and if we go by the said provision, the assessment order passed by the Assessing Officer dated 12.1.2023 is within the time allowed under the Act and thus, there is no merit in the legal grounds taken by the assessee and the same needs to be dismissed. In this regard he has filed a written submission on this issue which has been reproduced as under: “1. Today i.e. l6/05/2024 this case came for hearing before the Hon'ble ITAT, A-Bench, Hyderabad, wherein the Ld AR of the assessee submitted that the case is covered by the order of Hon'ble ITAT B" Bench's in the case of Mohd. Faroog Ali, in ITA No. 104/Hyd./2023 & SA No. 59/Hyd./2023, dt. 10.04.2024, wherein assessment order passed u/s. 147 r.w.s. 144C, was held to have become time barred as assessment order was not passed as per the time limit prescribed u/s. 153(2). The Hon'ble Bench in Para No. 25 of the said order has held as under: “Thus, a perusal of the above provision clearly shows that the time limit for completion of the assessment in the present case lapses on 31.03.2022. However, the final assessment order u/s. 144 r.w.s. 144C has been passed on 30.01.2023 as against 31.03.2022, therefore, the Same n our opinion, is barred by limitation and accordingly, the assessment order is liable to be quashed. We therefore, quash the re assessment proceedings being barred by limitation. Since the assessee succeeds on this preliminary legal issue, the other ground become academic in nature and therefore, are not being adjudicated. " 2. The Ld. AR relying on the above order of the Hon'ble Bench had pleaded that the facts in the present case are identical to the case of Sri. Syed Gulam Mohiuddin in ITA No. 136/Hyd./2023 and hence is covered by the order of the Hon'ble Bench referred above. 3. The learned AR argued that in this case the notice u/s. 148 was issued on 29thMarch, 2021 and final assessment order was passed on 30th January, 2023, after incorporating the directions of the Learned DRP, which is beyond the time limit of 12 months prescribed u/s. 153(2) and therefore, the same is time barred. 4. The undersigned has requested a time till 5 pm tomorrow i.e. 17thMay, 2024, to file written submissions and it was informed that the case is heard without even going on merit. The written submissions of CIT (DR) are as under:
ON TIME LIMITS OF PASSING DRAFT AND FINAL ASSESSMENT ORDERS: i. The department submits that provisions of Sec. 153 determine the time limit of the draft order. ii The department submits that in the below mentioned cases, it has been held that draft order must be passed within the time limit of Section 153. Tally India Pvt. Ltd. 435 ITR 137 (Kar.) Lionbridge Technologies 260 Taxman 273 (Bom.) iii) The department respectfully submits that, it is fact that, the assessee preferred an appeal before the Hon'ble DRP against the additions made by the AO. iv. The department prays to draw attention of the Hon'ble Bench to the provisions contained in Section 144C(13) of the I.T.Act .The usage of the phrase "notwithstanding anything contrary contained in Section 153 or Section 153B" conveys that the general time limits provided u/s. 153 are not applicable for those assesses who have opted to proceed with the DRP route. v. The department submits that the entire Section 144C is a self-contained code by itself. Assessment orders passed within timelines provided u/s. 144C, irrespective of the timelines prescribed u/s. 153 are passed within timelines provided under law and are not time barred. vi. In support of its submission, the department places reliance on the following case law: Religar Capital Markets Ltd. Vs. DCIT 111 taXmann.com 387 (Delhi-Trib).
In the background of the above submissions following is further submitted: Incorrect Reference to the provisions of the Act by the Ld AR: i) The assessee in this case is NRI and has not filed return of income for the assessment year under consideration. ii) During search action in the case of M/s. Skill Promoters and Developers Pvt. Ltd., Hyderabad, a pen drive containing the details of sale of commercial space in Sarath City Capital Mall, Kondapur, Hyderabad was found which indicated that part of the sale consideration had been received in cash. The Managing Director of the company Sri. Syed Mohammed Aslam had admitted that he had received part of the consideration in cash totaling to Rs. 112
crores were received in cash from over 200 customers, Sri. Syed Gulam Mohiuddin is one of them. iii) Based on the above information, the Assessing Officer has initiated action u/s. 147 and issued notice u/s. 148 on 30.03.2021 after recording reason and getting approval of the competent authority. iv) The assessee did not file return of income in response to notice u/s 148 and did not cooperate in the assessment proceedings. The Assessing Officer issued a draft assessment order u/s. 144C on 29.03.2022 proposing addition of Rs 22,00,000/- on account of payment of on-money for purchase of immoveable property. v) The Assessing Officer vide para-No. 11 of the assessment order, informed the assessee that he eligible assessee under sub-sec. 15(b)(ii) of Sec. 144C to avail benefit of reference of raising objections or to approach. As per the provisions u/s 144C(2)he assessee had time of 30 days to either accept the order, or propose objections before the A0 against the Assessment order or file objections before ethe Ld. DRP Bengaluru. In case of acceptance of the order by the assessee, final Assessment Order is to be passed by the AO within 30 days of communication of acceptance by the assessee. vi) Therefore, the assessee has only 30 days to accept the draft assessment order or raise objection against the assessment order before the AO. After, receipt of acceptance or objections against, the Assessing Officer has one month time from the end of the receipt of the communication from the assessee to pass final order. It is emphasized that this time limit has overriding effect over the time limits mentioned in the section 153 and 153B as is clear from the plain reading of the provisions mentioned above. vii) However, as the Assessee did not accept the draft Assessment and chose to raise objection before the Ld DRP Bengaluru, the time limit for passing final order by the Assessing Officer was to be governed by the provisions u/s 144C(12) &% 144C(13): Sec. 144C(12) "No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee. Sec. 144C(13) "Upon receipt of the directions issued under sub- section (5), the Assessing officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 (or section 153B), the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received." viii) Therefore, it is clear from the provision's u/s 144C(13) that the Assessing Officer has to pass final order after incorporating direction of the Ld DRP within one month from the end of month in which such direction is received and this time limit is not subject to the time limit u/s 153 and 153B as mentioned in the provisions above. ix) In this case the Ld DRP has passed order u/s 144C(5) on 12/12/2022, and the Assessing Officer had time to pass the final order by 31/01/2023. The Assessing Officer has passed order on 12/01/2023, which is well within the time limit u/s 144C(13). Hence the contention of the assesses is without any basis and is against the clear provisions of the I T Act, 1961. The Hon'ble Bench is requested to dismiss the same. x) Without prejudice to the above, the department would like to submit that if the time limit u/s 153 is considered, the very purpose of including Non- Resident Indian u/s. 144C(15)(b) (ii) as eligible assessee would get defeated because the time limit for the Assessing Officer to draft the order gets restricted and is less than the time limit available in other cases. This is against the interest of eligible assessees in general, as it severely restricts the opportunities that could be available to make submissions before the Assessing Officer and before the Learned DRP, as the total time limit for finishing the process is reduced unlike the assessee who gets further time for assessment order, can avail larger time limit in first appeal. Thus, any such interpretation goes against the legislative intent of providing grievance redressal to eligible assessees.
Violation of the Rule no-11 of Income Tax (Appellate Tribunal ) Rules 1963, by the LD AR: 1) Fresh ground raised before the Hon'ble Bench: A perusal of the Grounds of appeal filed before the Hon'ble Bench it is seen that no ground related to time barring of the Assessment was raised before the Ld. DRP. Therefore, fresh ground cannot be raised before the Hon'ble ITAT, if it was not raised before the First Appellate Authority.
2) No original Grounds: On perusal of the Grounds of Appeals filed by assessee before the Hon'ble Tribunal, it is seen that there is no ground related to the issue of time barring of Assessment in Form 36 filed before the bench. Hence, it is prayed that before the Hon'ble Tribunal, not to entertain this issue. In view of the above submissions, the Hon'ble Bench is requested to provide opportunity to the Department to argue the case on merit.”
We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. The assessee is a non-resident individual for the A.Y 2017- 18 and is an eligible assessee as per section 144C(15) of the I.T. Act, 1961. As per section 144C of the Act, the assessment of an eligible assessee shall be dealt with in accordance with the said provision. As per the provision of section 144C, in case of an eligible assessee, the Assessing Officer shall pass a draft assessment order and served on the assessee, if he propose to make any variation in his total income. The assessee, after receipt of draft assessment order shall have two options. As per sub section (2) of section 144C, on receipt of draft assessment order, the eligible assessee shall within 30 days file its acceptance of the variations to the Assessing Officer or file his objection, if any, to such variation with the DRP. If the eligible assessee file his acceptance to the Assessing Officer, then the Assessing Officer shall complete the assessment within one month from the end of the month in which the acceptance is received. In case an eligible assessee files objection before the DRP, then the DRP shall issue its direction within 9 months from the end of the month in which the draft order is forwarded to the assessee. Thereafter, the Assessing Officer shall pass his final assessment order within one month from the end of the month in which such direction is received.
In the present case, there is no dispute with regard to the fact that the appellant has filed his objection against the draft assessment order passed by the Assessing Officer before the DRP. Therefore, in ordinary course, the extended time limit for completion of the assessment should be available to the Assessing Officer as per section 144C r.w.s. 153C of the I.T. Act, 1961. But, the argument of the learned Counsel for the assessee is that as per section 153(4) of the Act, the extended period of 12 months for completion of assessment is available only where a reference under sub section (1) of section 92CA is made during the course of the assessment or re-assessment, but not in a case where there is no reference to the TPO. We find force in the argument of the learned Counsel for the assessee for the simple reason that, as per section 153(2), the time limit for completion of assessment or re-assessment shall be 12 months from the end of the financial year in which notice u/s 148 was served. However, sub-section (4) of section 153 extends the said time limit by another 12 months notwithstanding anything contained in sub-section (1), (1A), (2), (3) and (3A) where a reference u/s 92CA)(1) is made during the assessement proceedings to the TPO. In other words, except the cases of the reference to the TPO, extended time limit of 12 months for completion of assessment is not available even in a case of Non-Resident assessment, even though the said assessement proceedings is covered u/s 144C of the Act. Since the extended time limit of 12 months is not available in the case of Non-Resident as per section 153(4) of the Act, in our considered view, the Assessing Officer ought to have completed the assessment as per the provisions of section 153(2) of the Act which is one year from the end of the financial year in which notice u/s 148 was served. In the present case, if we go by date of notice issued u/s 148 of the Act i.e. 30.03.2021, the time limit for completing the assessment u/s 147 was available up to 31/03/2022 and thus, the final assessment order passed by the Assessing Officer u/s 144 r.w.s. 144C dated 12.01.2023 is clearly barred by limitation.
This proposition is covered by the decision of the Hyderabad Bench of the Tribunal in the case of Shri Farooq Ali vs. Income Tax Officer in order dated 10/04/2024. The relevant findings of the Tribunal are as under:
“23. We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned DRP and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the AO in the instant case made addition of Rs.2,55,75,000/- u/s 69 of the I.T. Act on the ground that as per the sale deed, the assessee had paid total sale consideration of Rs.2,55,75,000/-on 5.10.2016 to the vendors by way of cash, that the vendors have admitted and acknowledged the same and the assessee could not explain the source of such payment made for purchase of the immovable property. While doing so, he further held that the sale deed in itself is conclusive evidence and the contents of the same could not be proved further and a civil suit filed by the 3rd party claiming the title to the said property after the registration of sale deed between the assessee and the vendors will not negate the contents of the sale deed.
23.1 It is the submission of the learned Counsel for the assessee that the assessment order passed by the Assessing Officer is barred by limitation. It is also his submission that the assessee being an NRI and settled in UAE does not have any economic activities in India, therefore, there cannot be any addition of unexplained investment in the hands of the assessee as these falls under article 22 of Indo-UAE DTAA which makes such income taxable in the country of residence i.e. UAE unless these investments are proved to be made out of income generated in India.
We find some merit in the above argument of the learned Counsel for the assessee. A perusal of the record shows that the notice u/s 148 was issued on 24.2.2021, a fact not disputed by the Revenue. There is no reference made to the TPO for making any adjustment of arm’s length price of the international taxation. We find the provisions of section 153(2) read as under: “ 153. Time limit for completion of assessment, reassessment and re-computation. (1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of twenty-one months from the end of the assessment year in which the income was first assessable: Provided that in respect of an order of assessment relating to the assessment year commencing on the 1st day of April, 2018, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "eighteen months" had been substituted: [Provided further that in respect of an order of assessment relating to the assessment year commencing on the— (i) 1st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "twelve months" had been substituted; (ii) 1st day of April, 2020, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "eighteen months" had been substituted: Provided also that in respect of an order of assessment relating to the assessment year commencing on or after the 1st day of April, 2021, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "nine months" had been substituted.] (1A) Notwithstanding anything contained in sub-section (1), where a return under sub-section (8A) of section 139 is furnished, an order of assessment under section 143 or section 144 may be made at any time before the expiry of nine months from the end of the financial year in which such return was furnished.] (2) No order of assessment, reassessment or re-computation shall be made under section 147 after the expiry of nine months from the end of the financial year in which the notice under section 148 was served: Provided that where the notice under section 148 is served on or after the 1st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words "nine months", the words "twelve months" had been substituted.”
Thus, a perusal of the above provision clearly shows that the time limit for completion of the assessment in the present case lapses on 31.3.2022. However, the final assessment order u/s 144 r.w.s. 144C has been passed on 30.01.2023 which is beyond the time limit prescribed u/s 153(2). Since the assessment order has been passed on 30.01.2023 as against 31.03.2022, therefore, the same, in our opinion, is barred by limitation and accordingly, the assessment order is liable to be quashed. We therefore, quash the re-assessement proceedings being barred by limitation. Since the assessee succeeds on this preliminary legal issue, the other grounds become academic in nature and therefore, are not being adjudicated. “
In this view of the matter and considering the facts and circumstances and also by following the decision of the Hyderabad Bench of the Tribunal in the case of Farooq Ali vs. Income Tax Officer (Supra), we are of the considered view that the assessment order passed by the Assessing Officer u/s 144 r.w.s. 144C(13) dated 12.01.2023 is barred by limitation and thus we quash the re-assessment order passed by the Assessing Officer.
In the result, appeal filed by the assessee is allowed. Order pronounced in the Open Court on 3rd June, 2024.