2022 (7) TMI 1474 - AT - Income Tax

Validity of Draft assessment order u/s 144C(1) - time limit of completion of assessment - benefit of India-Cyprus DTAA denied - income of the assessee was subjected to tax @ 20% u/s 115A Assessee stated that there is no variation in the income of the assessee, therefore, AO was not justified in passing draft assessment order u/s 143(3) r.w.s 144C(1) - HELD THAT - There is no variation in the income returned by the assessee and returned income has been assessed as such. It is also not in dispute that the assessee is an eligible assessee in terms of section 144C(15)(b)(ii) of the Act, but then, there is no change in the figure of income returned by the assessee vis a vis income assessed by the Assessing Officer. As pointed out by the ld. DR, Finance Bill 2020 proposes to make issuance of draft assessment order in the case of eligible assessees mandatory even when there is no variation in income or loss returned by the assessee but this amendment may take effect from 01.04.2020. We hold the assessment order to be time barred and since the assessment order itself has been held to be time barred, all the issues raised by the Revenue in its appeals which deal with the merits of stand taken by the Assessing Officer in the assessment order become academic and infructuous and require no separate adjudication.

Summary

Issues:
Two separate appeals by the Revenue against orders of CIT(A) for Assessment Years 2014-15 and 2015-16; Cross objections by assessee against the same order; Disposal of both appeals and cross objections together; Jurisdiction of Assessing Officer in passing final assessment order without jurisdiction; Denial of DTAA benefit between India and Cyprus; Variation in income assessed by Assessing Officer; Validity of draft assessment order under section 144C(1) of the Income-tax Act, 1961; Retrospective application of Finance Bill, 2020 amendment; Time limitation for completion of assessment.

Detailed Analysis:

1. Cross Objections and Jurisdiction Issue:
The cross objections raised by the assessee challenge the validity of the final assessment order dated February 15, 2018, passed by the Assessing Officer, contending it was without jurisdiction, null, void, and unenforceable due to being time-barred. The issue goes to the root of the matter, prompting the tribunal to address the cross objections first.

2. Background and Disputed Facts:
The draft assessment order under section 144C(1) was passed on 22.1.2017, and the assessee chose to appeal before CIT(A) instead of filing objections before DRP. The Assessing Officer subsequently finalized the assessment, denying the DTAA benefit, and taxed the income at 20% under section 115A of the Act.

3. Contentions and Legal Considerations:
The assessee argued that there was no variation in income, questioning the Assessing Officer's justification for the draft assessment order. The Assessing Officer, however, supported the assessment, citing the curative nature of the Finance Bill, 2020 amendment, proposing mandatory draft assessment orders even without income variation.

4. Analysis of Relevant Provisions:
Section 144C(1) mandates forwarding a draft assessment order to eligible assessees if there is a variation in income prejudicial to their interests. In this case, where no such variation existed, the tribunal examined the applicability of the provision, considering the Finance Bill, 2020 amendment and its retrospective effect from 01.04.2020.

5. Precedent and Decision:
The tribunal referred to a similar case in Mumbai where it was held that the assessment order would be time-barred if no draft assessment order was required. Consequently, the tribunal upheld the plea of the assessee, declaring the assessment order time-barred and rendering the revenue's appeals on the merits moot and unnecessary.

6. Final Verdict:
The tribunal allowed the cross objections of the assessee while dismissing the appeals of the Revenue, emphasizing the time-barred nature of the assessment order. The decision was pronounced on 21.07.2022, resolving the jurisdictional and procedural issues raised in the appeals and cross objections comprehensively.