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Income Tax Appellate Tribunal, DELHI BENCH “D”: NEW DELHI
Before: SHRI G.S. PANNU, HON’BLE & MS. ASTHA CHANDRA
Assessee by: S/Sh. Amit Sharma, Sumit Jain & Ravi Sanguri, Advocates Department by: Shri Vizay B. Vasanta, CIT-DR Date of Hearing: 18.07.2023 Date of 06-09.2023 pronouncement: O R D E R PER ASTHA CHANDRA, JM
The appeal filed by the assessee is directed against the order dated 30.12.2019 passed by the Ld. Assistant Commissioner of Income Tax, Circle 1(1)(1) International Taxation, New Delhi (“AO”) under section 143(3) r.w.s. 263 of the Income Tax Act, 1961 (the “Act”) pertaining to Assessment Year (“AY”) 2014-15.
The assessee has raised the following grounds:
“1. Validity of the order passed u/s 143(3) r.w.s 263 of the Income- tax Act, 1961 ("the Act") 1.1 On the facts and circumstances of the case and in law, the Ld. AO has erred in passing the final assessment order without recoursing the statutory requirements of Section 144C of the Act of passing the draft assessment order before passing final assessment order and therefore the impugned assessment order passed u/s 143(3) r.w.s 263 of the Act on 30.12.2019 is bad in law and void ab initio and deserves to be cancelled/ annulled / set aside in light of the Judicial pronouncement of Delhi High Court in the case of JCB India Limited v DCIT (Writ petition 3399/2016), Turner International India Pvt. Ltd v DCIT (Writ petition 4260/2015). 1.2 On the facts and circumstances of the case and in law, the Ld. AO erred in passing the assessment order pursuant to the direction of Ld. CIT (International Taxation) by making the protective assessment in appellant case without making any substantive assessment and therefore the whole assessment proceedings is render nugatory. 1.3 On the facts and circumstances of the case and in law, the Ld. AO erred in raising a demand of INR 3,94,43,650/- while framing a protective assessment vide order dated 30.12.2019 passed under section 143(3) read with section 263 of the Act without appreciating the fact that in view of Judicial pronouncement of Bombay High Court in the case of Sushil Kumar v CIT (1983) 139 FTR 880, the appellant is not obliged to pay demand as enforced on it through protective assessment. Hence the demand raised by Ld. AO is unenforceable and required to be set aside. 1.4 On the facts and circumstances of the case and in law, the Ld. AO has erred in not allowing the credit of withholding tax deducted on the interest income to the appellant. 1.5 On the facts and circumstances of the case and in law, the assessment order claimed to have been passed by Ld. AO on 30.12.2019 u/s 143(3) tws 263 of the Act is barred by limitation as the said impugned order was served to the appellant on 02.01.2020 as it is evident from postal tracking number ED983982895IN, that the order has been dispatched on 02.01.2020 instead of 31.12.2019. Hence, the impugned order passed by Ld. AO under section 143(3) read with section 263 of the Act is barred by limitation and deserved to be set aside.
2. Denial of benefit of beneficial ownership as provided under Article 11 of India - Cyprus Treaty 2.1 On the facts and circumstances of the case and in law, the Ld. AO, pursuant to the order passed u/s 263 of the Act by the Ld. CIT, has erred in passing the impugned assessment order and holding that the Appellant was not the "beneficial owner" of interest income of INR 3,75,95,192/- earned on compulsory Convertible debenture ("CCDs") and thereby not entitled to get the tax treaty relief under Article 11 of India-Cyprus Double Tax Avoidance Agreement ("DTAA") which is bad in law and deserved to be set aside.
2.2 On the facts and circumstances of the case and in law, the Ld. AO, pursuant to the order passed u/s 263 of the Act by the Ld. CIT, has erred in passing the impugned assessment order and holding that the Appellant was not the "beneficial owner" of the interest income without appreciating the plethora of evidences as put forth before him with a preconceived notions and subjective opinion. 2.3 On the facts and circumstances of the case and in law, the Ld. AO, pursuant to the order passed u/s 263 of the Act by the Ld. CIT, has erred in holding that the appellant is not a beneficial owner of the interest income and not liable to claim the benefit of Article 11 of India - Cyprus DTAA without bringing any cogent evidence on record that the appellant is not operating from Cyprus or has no beneficial interest in the said country which is bad in law and deserved to be set aside. 24 On the facts and circumstances of the case and in law, the Ld. AO, pursuant to the order passed u/s 263 of the Act by the Ld. CIT, has erred in holding that the appellant is conduit company having no meaningful business activity without appreciating the fact that the appellant is a commercial concern and have a vested business interest in Cyprus since its incorporation and further without appreciating the law as settled by the Honorable Supreme court in the case of Vodafone International Holdings B. V. v. UOI (2012) 341 ITR 1 that every investment in India should be considered in a holistic manner and the commercial purpose of the entity/appellant.
3. Without prejudice to ground no. 2, on the facts and circumstances of the case and in law, the Ld. AO, pursuant to the order passed u/s 263 of the Act by the Ld. CIT, has erred in not allowing the deduction while calculating income as per the provisions of the Act of interest paid on unsecured loan which is available under section 57 of the Act and incurred wholly and exclusively for the purpose of earning interest income from CCDs. 4. on the facts and circumstances of the case and in law, the learned AO has erred in calculating interest under Section 234A / 234B / 234C / 244A of the Act while determining the tax liability of the Appellant.
5. On the facts and circumstances of the case and in law, the learned AO has erred in initiating penalty proceedings under section 271(1)(c) of the Act.
6. The Appellant craves leave to add, alter, modify, rectify and amend all or any of the Grounds of Appeal before or at the time of hearing
The assessee filed an application dated 23rd May, 2023 seeking permission to raise the following additional ground:-
Additional Ground No-1 On the facts and circumstances of the case and in law, the impugned order passed by the Ld. AO does not contain any Document Identification No. (DIN) nor any reason has been mentioned in the impugned order for non-issuance of DIN. The impugned order is contrary to the binding CBDT Circular No. 19/2019 dated 14-08-2019 and consequently, the impugned order is invalid and 'non-est' on the facts and circumstances of the case and liable to be quashed.
In support of the admittance of the above additional ground, the assessee placed reliance on the decision of Hon’ble Supreme Court in National Thermal Power Co. Ltd. vs CIT (1998) 229 ITR 383 (SC).
We have heard the Ld. Representative of the parties on the issue of admittance or otherwise of the additional ground. In National Thermal Power Co. Ltd. (supra) the Hon’ble Supreme Court observed that the Tribunal should not be prevented from considering questions of law arising in assessment proceedings. Where the Tribunal is only required to consider the question of law arising from the facts which are on record in the assessment proceedings there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. We, therefore following the decision (supra) of the Hon’ble Apex Court admitted the above additional ground.
We now proceed to consider the legal issue raised by the assessee before us in the additional ground.
The Ld. AR invited our attention to the Ld. AO’s order dated 30.12.2019 passed under section 263/143(3) of the Act which is the subject matter of appeal before the Tribunal. He pointed out that it will be observed that there is no mention of Document Identification No. (“DIN”) in the body of the order. He further submitted that perusal of the order would also 4 reveal that there is no mention of any reason for non-issuance of DIN. He contended that this is in violation of the binding CBDT Circular No. 19/2019 dated 14.08.2019. As a consequence the impugned order of the Ld. AO is invalid and ‘non-est ‘ in the eye of law and deserves to be quashed.
The Ld. AR further submitted that the Ld. AO passed the impugned order on 30.12.2019 and his letter of intimation of DIN is dated 24.01.2020 which is beyond 15 days. Thus, the requisite condition mentioned in para 3 and 5 of the CBDT Circular No. 19/2019 dated 14.08.2019 have also not been complied with. He, therefore, vehemently argued that in the light of the facts and circumstances of the assessee’s case, the impugned order of the Ld. AO be held as invalid and ‘non-est’.
The Ld. CIT(DR) has placed on record letter No. DCIT/Intl.Tax/Circle- 1(1)(1)/2023-24/114 dated 12.07.2023 of Ld. Dy. CIT addressed to him stating therein, inter alia that contention of the assessee that the impugned order passed by the Ld. AO does not contain any DIN is utterly wrong as such order was issued with DIN ITBA/COM/F/17/2019-20/1023540616(1) dated 31.12.2019 and duly sent to assessee on email ID (copy enclosed). Hence there is no violation of CBDT Circular No. 19/2019 dated 14.08.2019 and relevant assessment order has been passed with valid DIN.
We have given our careful thought to the submission of the parties and perused the records. On perusal of the impugned order dated 30.12.2019 of the Ld. AO on record we observed that mention of DIN is conspicuous by its absence in the body of the order. It is evident from the evidence submitted by the Ld. CIT-DR that the PDF of the impugned order was e-mailed to the assessee on 31.12.2019 at 6.54 pm at the given e-mail ID of the assessee. However, it is also apparent that there is no mention of DIN in this communication. Scanned copy of order was also sent which did not contain DIN.
We have perused the intimation for impugned order sent by the Ld. AO to the assessee placed before us by the Ld. CIT(DR) and find that the said intimation is different from the intimation referred to by the assessee which appears at page 25 of the paper book. For the sake of proper appreciation we reproduce the said intimation produced by the Revenue herein under:- “GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE INT TAX 1(1)(1), DELHI To, AMADOROCO LIMITED 4TH FLOOR, 12 ESPERIDON STREET NICOSIA 1087 999999,FOREIGN Cyprus PAN: Assessment Year. Dated: DIN & Letter No: AAKCA2466M 2014-15 31/12/2019 ITBA/COM/F/17/2019- 20/1023540616(1)
Sir/Madam/M/s, Subject: Intimation for order u/s 263/143(3) of the Income Tax Act, 1961. You are hereby informed that the order u/s 263/143(3) of the Income Tax Act, 1961 for AY- 2014-15 in your case is sent by speed post/Mail.
BANDANA DEORI CIRCLE INT TAX 1(1)(1), DELHI (in case the document is digitally signed please refer Digital Signature at the bottom of the page)” 11. We observe that this intimation only informs the assessee that the impugned order is sent by speed post/mail. It is not the intimation of DIN for the impugned order. The Ld. Dy. CIT has erred in treating the DIN for intimation letter dated 31.12.2019 placed on record by the Ld. CIT-DR as DIN for the impugned order.
We have gone through the CBDT Circular No. 19/2019 (F No. 225/95/2019-ITA II) appearing at pages 27-28 of the Paper Book. In para 2 thereof it is stated that in order to prevent instances (narrated in the opening para) and to maintain audit trail of all communication, no communication shall be issued by any Income Tax Authority to the assessee or any other person on or after the 1st day of October, 2019 unless a computer generated DIN has been allotted and is duly quoted in the body of such communication. Undoubtedly the impugned assessment order is one such communication which has been issued by the Ld. AO without allotting a computer generated DIN and duly quoting in the body of the impugned assessment order. There is thus clear violation of the specific requirement under the CBDT Circular No. 19/2019 to quote the DIN in the body of the impugned assessment order.
Para 3(i),(ii),(iii),(iv) and (v) of the Circular No. 19/2019 enumerate the exceptional circumstances in which the Income Tax Authority may issue the communication manually but only after recording reasons in writing in the file and with the prior written approval of Chief Commissioner/Director General of Income Tax. The communication issued manually in situations specified in para 3 (i), (ii) or (iii) of the Circular, the Income Tax Authority is required to take steps to regularise the failure to quote DIN within fifteen (15) working days of its issuance in the manner laid down in para 5 of the said Circular, namely by –
(i) Uploading the manual communication on the system (ii) Compulsorily generating the DIN on the system (iii) Communicating the DIN so generated to the assessee as per electronically generated proforma available on the system.
Para 4 of the Circular says in unequivocal terms that any communication which is not in conformity with para 2 and para 3 shall be treated as invalid and shall be deemed to have never been issued.
The case of the assessee is that the communication, namely the assessment order dated 30.12.2019 is not only without mention of DIN in the body of the order, there is no material on the record mentioning the reason for non-issuance of DIN. Furthermore, the letter of intimation of DIN dated 24.01.2020 is also not within fifteen (15) working days of the issuance of the impugned assessment order dated 30.12.2019. There is thus violation of the mandate enshrined in para 2 and para 3 of the CBDT Circular No. 19/2019 dated 14.08.2019. Therefore, the consequence mentioned in para 4 of the said Circular, namely that the impugned assessment order dated 30.12.2019 be treated as invalid and non-est in the eye of law should follow. We are in agreement with the above contentions of the assessee. In taking this view, we are supported by the ratio decidendi of the decision of Hon’ble Delhi High Court in CIT (International Taxation) – 1, New Delhi v. Brandix Mauritius Holdings Ltd. (2023) 293 Taxman 385 (Delhi).
Accordingly, additional ground taken by the assessee raising purely legal issue is allowed. We are not adjudicating the appeal on merits.
In the result, the appeal of the assessee is allowed. 17.