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Facts
The assessee filed multiple appeals against orders of the CIT(A). For some assessment years (2012-13, 2013-14, 2014-15, 2016-17), the Ld. DR contended that the appeals were not maintainable due to low tax effect. For other assessment years (2015-16, 2017-18), the assessee, a non-resident, challenged the AO's final assessment orders, which were passed directly without first issuing a draft assessment order as mandated by Section 144C, a procedure for eligible assessees. The CIT(A) had previously quashed these assessments for violating Section 144C.
Held
The Tribunal dismissed the assessee's appeals for AYs 2012-13, 2013-14, 2014-15, and 2016-17, citing a low tax effect. For AYs 2015-16 and 2017-18, the Tribunal upheld the CIT(A)'s decision to quash the assessment proceedings, affirming that the AO's failure to issue a draft assessment order under Section 144C to a non-resident assessee constituted a jurisdictional infirmity. The Tribunal emphasized that Section 144C is a mandatory and complete code for eligible assessees.
Key Issues
1. Whether appeals with a tax effect below Rs. 60 lakhs are maintainable before the Tribunal. 2. Whether the failure of the Assessing Officer to issue a draft assessment order under Section 144C to a non-resident assessee is a jurisdictional defect that vitiates the final assessment proceedings.
Sections Cited
147, 144, 143(1), 195, 144C(15), 144C(1), 124(3)
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Income Tax Appellate Tribunal, DELHI BENCHES : G : NEW DELHI
Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL
ORDER PER ANUBHAV SHARMA, JM: These are appeals preferred by the Assessees against the orders dated 28.01.2025 (in respect of and 11.01.2025 (in respect of other appeals) of the Ld. Commissioner of Income-tax (Appeals), NFAC, Delhi (hereinafter referred to as the First Appellate Authority or ‘the ld. FAA’ for short) in appeals filed before him against the orders dated 04.12.2019 (in respect of and 31.03.2022 (in respect of other appeals) of the ITO, Ward 29(1), Delhi (hereinafter referred to as the Ld. AO, for short) passed u/s 147 r.w.s. 144 of the Income-tax Act, 1961 (hereafter referred to as ‘the Act’). Further details of the orders of the lower authorities are as under:-
ITA No. & Appeal No. of the CIT(A), NFAC Assessment Year 2136/Del/2025 NFAC/2011-12/10154326 2137/Del/2025 NFAC/2012-13/10135736 2138/Del/2025 NFAC/2013-14/10135736 2139/Del/2025 NFAC/2014-15/10135737 2140/Del/2025 NFAC/2015-16/10135739 2141/Del/2025 NFAC/2016-17/10135741
At the outset, the ld. AR has pointed out in regard to the appeals that the same are barred by limitation and we find that the Registry has also marked the defect that the appeals are barred by limitation. As there was no resistance from ld. AR to hear appeals on merits delay was condoned and appeals were heard on merits.
At the same time, in regard to the appeals for AYs 2012-13, 2013-14, 2014-15 and 2016-17, it was also pointed out that these appeals are not maintainable as the tax effect is less than Rs.60 lakhs. A report is filed by the ld. DR that they fall in the category of exceptions 3.1(a) of the CBDT Circular No.05/2024 dated 15.03.2024. However, we are of considered view that no question of constitutionality or legality of any provision of law is involved to be decided here in the Tribunal. There is no substance in invoking the exception by the AO. Thus, these appeals in ITAs No.2136, 2137, 2138 & 2140/Del/2025 for Assessment Years AYs 2012-13, 2013-14, 2014-15 and 2016-17 are dismissed being of low tax effect appeals filed by the Revenue.
As with regard to the appeals for 2015-16 and 2017-18, the ld. AR has pointed out that the assessee is a non-resident individual residing in the United Kingdom and this fact is not disputed by the Revenue. The assessee’s return for AY 2020-21 and 2021-22 were filed declaring her status as non-resident. Later, the return was processed u/s 143(1) of the Act vide intimation dated 16.03.2022. The AO was fully conscious of this aspect and, accordingly in the show cause notice as well as the impugned assessment order specifically notes that TDS has been deducted u/s 195 of the Act which is a provision applicable only to non- resident. Thus, being an ‘eligible assessee’ for the purpose of section 144C(15) of the Act, the AO was supposed to first issue a draft assessment order u/s 144C(1) of the Act, but, instead the AO has proceeded to pass a final assessment order directly and this jurisdictional infirmity has been adjudicated by the ld.CIT(A) by the impugned order by quashing the assessment proceedings and holding that there was violation of mandatory provisions and procedure as enshrined u/s 144C of the Act.
The ld. DR, on the contrary, has submitted that non-issuance of draft assessment order does not vitiate the final assessment and is not a jurisdictional defect and reliance was placed on the decisions in the cases Abhishek Jain vs. ITO, Ward 55(1), New Delhi (2018) 94 taxmann.com 355 (Delhi) and CIT vs. 3 Shri Shyam Sunder Infrastructure (P) Ltd. in ITA 236/2014, order dated 04.02.2015 of the Hon’ble Delhi High Court.
On going through these decisions, we find that these two cases involved dispute over territorial jurisdiction between the two AOs wherein by virtue of section 124(3) of the Act, the Hon’ble High Court has held that such objections should be raised at the threshold. However, the assessment in the case of eligible assessee by virtue of provisions of section 144C of the Act is an assessment wherein both the subject i.e assessee and the subject matter of the assessment are vested exclusively with the International Taxation Circle. Section 144C is a complete code in itself which has set out a separate assessment mechanism for eligible assessee’s whose income are subject to transfer pricing variation or who are non-residents or foreign companies. This code entitles these eligible assessee’s to first receive a draft assessment order from the AO, and gives them the option to decide the forum to prefer objection against the draft assessment order or the choice to accept the draft assessment order and retain the liberty to prefer regular appeal route before the Ld. CIT(A). Therefore, the assessee’s challenge was not circumscribed by the restriction under Section 124(3) of the Act. The ld.CIT(A) has accordingly taken the same into consideration and the findings, thus, require no interference.