2021 (4) TMI 1357 - AT - Income Tax

Validity of assessment order u/s 144C - time limit prescribed for completion of assessment proceedings u/s 153 - HELD THAT - The assessment year involved is AY 2015-16 and the final assessment order has been passed on 27/09/2019. The date of directions given by Ld. DRP is 29/08/2019. Upon perusal of final assessment order, it could be observed that there is no proposed variation in the income or losses reported by the assessee. The matter before Ld. AO was only with respect to the applicable rate of tax on the interest income earned by the assessee. Provisions of Section 144C(1) would not apply and the due date for completion of assessment proceedings and passing the assessment order as per Section 153 would be 31/12/2018. As against this, the final assessment, in the present case, has been passed on 27/09/2019 and therefore clearly barred by limitation. The fact of issuance of draft assessment order, when it was not legally required to be issued, could not end up enhancing the time limit for completion of the assessment u/s 143(3). Thus we allow the additional ground of appeal and hold that the assessment framed by learned Assessing Officer was time barred and hence quashed.

Summary

Issues involved: Assessment of income at applicable tax rate, validity of assessment order under Section 153.

Analysis:

1. Assessment of income at applicable tax rate: The appeal concerned the final assessment order for the Assessment Year 2015-16, where the dispute arose regarding the applicable tax rate on the income earned by the assessee. The assessee offered the income at 10% under the Tax-Treaty provisions between India and Cyprus, while the Assessing Officer (AO) contended that the income should be taxed at 20% plus surcharge and cess as per Section 115A(1)(a)(ii) of the Act. The income in question was interest on fully convertible debentures from a specific entity. The Tribunal considered the arguments presented by both sides regarding the tax rate applicability.

2. Validity of assessment order under Section 153: The additional ground raised by the assessee challenged the validity of the assessment order, contending that it was not passed within the prescribed time limit under Section 153 of the Act. The assessee argued that since there was no variation in the returned income, the draft assessment order was not required, and hence, the final assessment order was barred by limitation. The Tribunal examined the relevant dates, including the issuance of the final assessment order and directions by the Dispute Resolution Panel (DRP), to determine the timeliness of the assessment order.

3. Judicial Precedents and Interpretation: The Tribunal referred to previous decisions in the assessee's case for earlier assessment years and cited relevant judgments to support the position that in cases where no draft assessment order was required, the assessment would be time-barred if not completed within the stipulated time frame. The Tribunal relied on the decision in IPF India Property Cyprus (No.1) Ltd. v. DCIT, emphasizing that the mere issuance of a draft assessment order, when not legally required, does not extend the time limit for completing the assessment under section 143(3). Based on the interpretation of the law and previous rulings, the Tribunal allowed the additional ground raised by the assessee and held the assessment to be time-barred, thereby quashing the assessment order.

4. Final Decision: Ultimately, the Tribunal allowed the appeal, concluding that the assessment framed by the Assessing Officer was time-barred and, therefore, quashed. The Tribunal's decision rendered other grounds raised in the appeal irrelevant due to the primary issue of the assessment order's validity. The judgment was pronounced on 5th April 2021 by the Tribunal.