2021 (5) TMI 799 - AT - Income Tax

Assessment u/s 144C(13)/143(3) - Assessment order as barred by limitation - validity of draft assessment order framed by the AO - HELD THAT - As the facts of the present case are that the original assessment was framed u/s 143(3) of the Act vide order dated 28.03.2006 and when the dispute travelled up to the Tribunal the Tribunal set aside the matter back to the files of the AO to frame denovo assessment. While giving effect to the order of the Tribunal the AO has erroneously framed a draft assessment order following the provisions of section 144C(1) of the Act which was clearly not applicable on the facts of the case in hand. After receiving the directions from the DRP the final assessment order was framed on 19.08.2011 which is definitely barred by limitation in the light of the provisions of section 153(2A) as applicable during the year under consideration. Thus we have no hesitation in holding that the assessment order dated 19.08.2011 is barred by limitation. Decided in favour of assessee.

Issues Involved:
1. Validity of the assessment order dated 19.08.2011.
2. Confirmation of additions by the DRP and determination of taxable income.
3. Classification of income as 'fees for technical services' under India-UK tax treaty.
4. Non-adherence to binding rulings and notifications by the Assessing Officer/DRP.
5. Non-allowance of set-off of brought forward business loss and unabsorbed depreciation.
6. Levy of interest under section 234B.
7. Levy of interest under section 234D.
8. Withdrawal of interest under section 244A.
9. Proposal to initiate penalty proceedings under section 271(1)(c).

Detailed Analysis:

1. Validity of the Assessment Order:
The assessee challenged the validity of the assessment order dated 19.08.2011 framed under sections 144C(13)/143(3)/254 of the Income Tax Act. The Tribunal admitted an additional ground questioning the applicability of section 144C introduced by the Finance Act, 2009, effective from 01.04.2009. The Tribunal referenced the Madras High Court's decision in Vedanta Limited, which held that section 144C applies prospectively from AY 2011-12. Consequently, the draft assessment order framed by the AO was deemed null and void, and the final assessment order dated 19.08.2011 was barred by limitation.

2. Confirmation of Additions by the DRP:
The assessee contended that the DRP erred in confirming the additions proposed by the AO, determining the taxable income at ?197,829,055 against a loss of ?5,030,030 returned in the income. However, since the Tribunal quashed the assessment order on the grounds of being barred by limitation, it did not delve into the merits of the additions.

3. Classification of Income as 'Fees for Technical Services':
The assessee argued that the AO/DRP incorrectly classified the income as 'fees for technical services' under Article 13 of the India-UK tax treaty, thereby taxing it on a presumptive basis under section 44D read with section 115A. This issue was not addressed due to the quashing of the assessment order.

4. Non-Adherence to Binding Rulings:
The assessee claimed that the AO/DRP did not follow binding rulings of the courts and notifications/circulars issued by the CBDT. This issue was also not addressed due to the quashing of the assessment order.

5. Non-Allowance of Set-Off of Brought Forward Losses:
The assessee contended that the AO/DRP erred in not allowing the set-off of brought forward business loss and unabsorbed depreciation, despite it being allowed in earlier assessments. This issue was not addressed due to the quashing of the assessment order.

6. Levy of Interest under Section 234B:
The assessee argued against the levy of interest under section 234B. This issue was not addressed due to the quashing of the assessment order.

7. Levy of Interest under Section 234D:
The assessee contended against the levy of interest under section 234D. This issue was not addressed due to the quashing of the assessment order.

8. Withdrawal of Interest under Section 244A:
The assessee argued against the withdrawal of interest under section 244A. This issue was not addressed due to the quashing of the assessment order.

9. Proposal to Initiate Penalty Proceedings:
The assessee contended that the AO erred in proposing to initiate penalty proceedings under section 271(1)(c). This issue was not addressed due to the quashing of the assessment order.

Conclusion:
The Tribunal quashed the assessment order dated 19.08.2011 as it was barred by limitation, following the principle that section 144C applies prospectively from AY 2011-12. Consequently, the Tribunal did not address the merits of the case or the specific grounds of appeal raised by the assessee. The appeal was allowed in favor of the assessee.

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