GATE GOURMET SWITZERLAND GMBH,SWITZERLAND vs. DCIT CIRCLE INTERNATIONAL TAX 1(3)(1), NEW DELHI

Though, the assessee has raised multiple grounds, both, on legal issues as well as on merits, however, the basic grievance of the assessee before us is, while passing the final assessment order, the Assessing Officer has not implemented the directions of learned DRP in letter and spirit as per the mandate of section 144C(13) of the Act.

As could be seen from the facts on record, the assessee is a non-resident corporate entity, incorporated in Switzerland and a tax resident of Switzerland. In the previous year relevant to the assessment year under dispute, the assessee had received an amount of Rs.58,85,733/- from its Indian Associated Enterprise (AE) and a further amount of Rs.16,21,275/- from Mumbai Airport Lounge Services Pvt. Ltd. It is a fact on record that for the year under consideration, the assessee had originally not filed any return of income. Subsequently, the assessment was reopened under section 147 of the Act and in response to the notice issued under section 148, the assessee filed its return of income on 24.11.2021, declaring income of Rs.3,10,35,460/- and paid tax at the rate of 10% by applying the beneficial provisions of India – Switzerland Double Taxation Avoidance Agreement (DTAA). In course of assessment proceeding, as alleged by the Assessing 2 | P a g e Officer, the assessee did not comply with various queries made.

After considering the remand report, learned DRP issued certain directions to the Assessing Officer in the matter of addition proposed in the draft assessment order. However, without carrying out the directions of learned DRP, the Assessing Officer passed the final assessment order repeating the addition made in the draft assessment order.

Having considered rival submissions, we find, though, in course of assessment proceeding, the assessee, for whatever may be the reason, could not furnish certain documentary evidences, such as, TRC, underlying agreement with Indian parties, no PE Certificate etc., however, before learned DRP, the assessee did furnish the aforesaid evidences by way of additional evidence.

After admitting the additional evidences, learned DRP forwarded them to the Assessing Officer for factual verification and report. It is observed, in the remand report, the Assessing Officer has not only objected to the admission of additional evidences, but also questioned the authority of learned DRP in admitting additional evidences. In our view, by doing so, the Assessing Officer has exceeded his jurisdiction. As per sub- section (8) of section 144C of the Act, DRP has been vested with powers to confirm, reduce or enhance the variations proposed in the draft assessment order. However, the provision makes it clear that the DRP cannot set aside the proposed variation, or issue any direction for further inquiry and passing of the assessment order. Sub-section (10) of section 144C makes it clear, every 4 | P a g e direction issued by the DRP shall be binding on the Assessing Officer. Sub-section (11) of section 144C provides that no direction under sub-section (5) shall be issued by the DRP unless opportunity of being heard is provided to the assessee and the Assessing Officer on such directions, which are prejudicial to the interest of the assessee or the interest of Revenue respectively.

Thus, the aforesaid provisions make it clear that not only the DRP has been vested with wide powers while deciding objections, but the directions of learned DRP are binding on the Assessing Officer. Further, Rule 9 of DRP Rules empowers the DRP to call upon or permit the assessee to produce any document or examine any witness or file any evidence to enable it to issue proper direction. Thus, when the statute confers power on the DRP to call upon and admit additional evidences, the Assessing Officer cannot challenge the authority of learned DRP in admitting the additional evidences. Pertinently, while rejecting the objections of the Assessing Officer on the issue of admission of additional evidences, learned DRP has given the following directions to the Assessing Officer on merits:

As could be seen from the aforesaid observations of learned DRP, it has issued a specific direction to the Assessing Officer to verify from his records whether he has asked for further details/query from the assessee during the remand proceeding, which the assessee did not furnish. In case, it is so, the addition to be retained. Learned DRP had further directed, in case, the Assessing Officer has not asked for any clarification or conducted any inquiry during the remand proceeding, the Assessing Officer must record, as to why and under what circumstances, he did not conduct any inquiry relating to the manner of delivery of services or proof of employees visiting India for rendering such services, that too, without providing any opportunity to the assessee.

In view of the aforesaid, we are inclined to set aside the final assessment order and restore the matter back to the Assessing Officer for fresh adjudication of the issues contested by the assessee in course of proceeding before learned DRP and before us, as well. The Assessing Officer is directed to consider the additional evidences furnished by the assessee before learned 7 | P a g e DRP on their own merits and pass assessment order with proper reasoning in the light of the directions issued by learned DRP.

In the result, the appeal is allowed for statistical purposes.