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2023 (5) TMI 404 - AT - Income TaxValidity of assessment order passed u/s 147 r.w.s. 144C - transferring the case of the Assessee without serving any notice u/s 127 - case of the Assessee was stated to have been transferred by ACIT Circle-1 Moradabad to DDIT / ADIT (International Tax) Lucknow considering the NRI status of the Assessee - HELD THAT - The mandate of section 127 of the Act is that before transferring the jurisdiction from one Assessing Officer to another who is not subordinate to the same Commissioner it needs must be ensured (i) that the Commissioners to whom the respective Assessing Officers are subordinate are in agreement inter se regarding the transfer (ii) that reasons are recorded for transferring the jurisdiction (iii) that a reasonable opportunity of hearing is provided to the affected Assessee and (iv) that an order is passed u/s 127 of the Act . In the present case as per the jurisdiction order No. 3/2020 dated 22.12.2020 passed by the Pr . CCIT and furnished on record by the Revenue the superior head of the ACIT / DCIT (International Tax) Lucknow is the Commissioner of Income Tax (International Taxation) Delhi whereas vide Corrigendum dated 27.08.2020 Sr. No. (viii) of Notification No. S.O. 2755(E) dated 13.8.2020 it was clarified that the PCIT Bareilly exercised jurisdiction over the Assessee who was assessed / assessable with the jurisdiction of the Pr. CIT / CIT Moradabad - Ground Nos.1 and 2 raised by the Assessee are accepted. Assessment u/s 144C - Whether AO erred in passing a draft assessment order u/s 144C (1) without appreciating that the Assessee did not qualify as an eligible assessee u/s 144C(13) where no variation had been proposed by the AO and the Assessee was not a foreign company? - HELD THAT - As per section 144(15)(b) eligible assessee means any person in whose case a variation prejudicial to the interest of such person is proposed to be made by the AO which variation arises in consequence of the TPO s order and any foreign company. Section 144(1) requires a draft of the proposed assessment order to be forwarded by the AO to such eligible assessee. In the present case vide the assessment order dated 28.6.2022 the Assessee has been held to be a resident in India as a consequence whereof salary income earned by the Assessee in Singapore has been taxed in India. Then in the Assessee s case no variation prejudicial to his interest at the hands of the AO has arisen as a consequence of the order passed by the TPO under section 92CA(2) of the Act nor is the Assessee a foreign company. Therefore neither of the conditions prescribed by section 144C (15) (b) stands fulfilled and as such the Assessee is not an eligible assessee within the meaning of section 144C (15). Hence as correctly contended there was no question of the AO passing a draft proposed assessment order under section 144C(1). Further still the Assessee being an individual even in case he were to be held to be a non-resident he would not fall within the definition of eligible assessee as prescribed by section 144C(15). Assessment barred by limitation - Assessee was not an eligible assessee and no draft order was to be forwarded to him as observed by us herein-before. Therefore also the requirement of section 144C (12) could not have been complied with. Once this is so the limitation to pass the assessment order would be one provided under section 153(2) of the Act prescribes for the proviso to section 153(2) provides that the time limit to pass an assessment order u/s 147 is twelve months from the end of the financial year in which notice u/s 148 was served. Herein the notice u/s 148 was issued on 3.7.2019. Thus the limitation would have been 31.3.2021. This stood extended up to 30.09.2021 by virtue of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act 2020 read with Notification S.O. 2580(E) No. 74/2020/F.No.370142/35/2020-TPL dated 25.6.2021. The assessment order however was passed on 28.06.2022. The same is hence clearly barred by the limitation provided u/s 153(2) of the Act. The same is accordingly held to be void ab initio for this reason also. Assessee appeal allowed.
Issues Involved:
1. Jurisdiction of the assessment order. 2. Transfer of case without notice under section 127. 3. Validity of the assessment order under section 147 r.w.s. 144C(13). 4. Eligibility of the assessee under section 144C(15). 5. Limitation period for passing the assessment order. 6. Determination of residential status and taxation of global income. 7. Charging of interest under sections 234A and 234B. Detailed Analysis: 1. Jurisdiction of the Assessment Order: The assessee contended that the final assessment order dated 28.06.2022, passed under section 147 r.w.s. 144C(13) of the Income Tax Act, 1961, was without jurisdiction, non-est, illegal, and bad in law. The order was passed by the DDIT/ADIT (International Tax), Lucknow, without serving any notice under section 127 of the Act or providing a copy of the order, if any, passed under that section for the transfer of the case. 2. Transfer of Case Without Notice Under Section 127: The assessee argued that the transfer of the case from ACIT, Circle-1, Moradabad, to DDIT/ADIT (International Tax), Lucknow, was invalid as no notice under section 127 was served. The department admitted that no order under section 127 was passed and only the PAN was migrated after approval from the PCIT, Bareilly. The Tribunal held that the provisions of section 127 mandate recording reasons for the transfer and providing a reasonable opportunity of hearing to the assessee. The transfer without fulfilling these requirements rendered the assessment order void ab initio. 3. Validity of the Assessment Order Under Section 147 r.w.s. 144C(13): The assessee contended that the assessment order was illegal and beyond jurisdiction since it was initiated based on "reason to suspect" rather than "reasons to believe," which is a prerequisite for assuming valid jurisdiction under section 147. The Tribunal accepted the assessee's contention, noting that the conditions precedent for assuming valid jurisdiction under section 147 were not satisfied. 4. Eligibility of the Assessee Under Section 144C(15): The assessee argued that the draft assessment order under section 144C(1) was invalid as the assessee did not qualify as an "eligible assessee" under section 144C(15) in the absence of any variation proposed by the TPO and the assessee not being a foreign company. The Tribunal noted that the assessee was not an "eligible assessee" as defined under section 144C(15)(b), which includes any person in whose case the variation arises as a consequence of the TPO's order and any foreign company. Therefore, the AO was not competent to pass a draft assessment order under section 144C(1). 5. Limitation Period for Passing the Assessment Order: The assessee contended that the assessment order was barred by limitation as the extended limitation period of nine months under section 144C(12) was not applicable. The Tribunal held that the assessment order should have been passed within the time limit provided under section 153(2), which was extended up to 30.09.2021 due to the Covid period. Since the assessment order was passed on 28.06.2022, it was clearly barred by limitation and void ab initio. 6. Determination of Residential Status and Taxation of Global Income: The assessee argued that the AO/DRP erred in computing the period of stay in India and determining the residential status as "resident in India." The Tribunal noted that the AO/DRP incorrectly considered the day of arrival and departure as full days of stay, leading to an erroneous determination of the residential status. Consequently, the salary income earned in Singapore was wrongly taxed in India. 7. Charging of Interest Under Sections 234A and 234B: The assessee contended that the AO erred in charging interest under sections 234A and 234B. The Tribunal did not specifically address this issue as the main grounds of appeal were accepted, rendering the assessment order void ab initio. Conclusion: The Tribunal accepted the grounds raised by the assessee regarding the jurisdiction, transfer of the case without notice under section 127, invalidity of the assessment order under section 147 r.w.s. 144C(13), ineligibility under section 144C(15), and the limitation period for passing the assessment order. Consequently, the appeal was allowed, and the assessment order was quashed.
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