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2023 (3) TMI 1186 - AT - Income TaxValidity of assessment order passed u/s 143(3) r.w.s. 144C(3) - necessity of variation in the income returned by the assessee - period of limitation - whether AO could have proceeded u/s 144C(1) r.w.s.144C(3) in a case where there is no variation in the income returned which is prejudicial to the assessee - HELD THAT - In the facts of the present appeal, admittedly, there is no variation in the income or loss returned which is prejudicial to the interest of the assessee. Therefore, in our considered opinion, the provisions of Section 144C(1) of the Act is not applicable to assessee s case. As following the decision of the coordinate bench in assessee s case 2022 (9) TMI 1236 - ITAT DELHI firstly; we hold that the assessment order is invalid due to wrongful assumption of jurisdiction under section 144C(1) of the Act and secondly; because it is barred by limitation. Accordingly, the impugned assessment order is quashed and the order of Commissioner (Appeals) is set aside. Additional grounds are allowed.
Issues Involved:
1. Delay in filing the appeal. 2. Validity of the assessment order under section 144C. 3. Assessment order being barred by limitation. Detailed Analysis: 1. Delay in Filing the Appeal: The registry notified a delay of 177 days in filing the appeal. The assessee's counsel argued that there was no actual delay because the period of limitation was extended due to the Supreme Court's order considering the Covid-19 pandemic. The Departmental Representative did not object to this argument. Consequently, the tribunal condoned the delay and admitted the appeal for adjudication on merits. 2. Validity of the Assessment Order under Section 144C: The primary contention of the assessee was that the assessment order under section 143(3) read with section 144C(3) was invalid as there was no variation in the income returned by the assessee. The assessee argued that the Assessing Officer (AO) simply re-characterized the royalty income as business income without any actual variation in the income returned. Section 144C(1) empowers the AO to frame a draft assessment order only if there is any variation in the income returned which is prejudicial to the interest of the assessee. Since there was no such variation, the AO had no jurisdiction to pass the order under section 144C(1). The tribunal noted that prior to the amendment by the Finance Act, 2020, the AO could propose a draft assessment order only where there was a variation in the income or loss returned. The tribunal concluded that the AO wrongly assumed jurisdiction under section 144C as there was no variation in the income returned by the assessee. The tribunal referenced several cases, including Mousmi SA Investment LLC, IPF India Property Cyprus [No. 1], and Silver Bells, where similar issues were adjudicated. The tribunal held that the AO's action of re-characterizing the income without any variation in the returned income was not in accordance with the provisions of section 144C, making the assessment order void ab initio. 3. Assessment Order Being Barred by Limitation: The assessee also contended that the assessment order was barred by limitation. The tribunal considered the timeline of events and noted that the final assessment order was passed beyond the permissible period. The tribunal referenced the decision of the Hon'ble High Court of Madras in Roca Bathroom Products Pvt. Ltd., which emphasized that the provisions of sections 144C and 153 are not mutually exclusive but rather mutually inclusive. The outer time limit for completing the assessment, including the proceedings before the Dispute Resolution Panel (DRP), must be adhered to. The tribunal observed that the DRP proceedings are a continuation of the assessment proceedings and must be concluded within the prescribed time limits. The tribunal held that the AO failed to conclude the assessment within the stipulated period, rendering the assessment order barred by limitation. The tribunal concluded that the assessment order was invalid due to the wrongful assumption of jurisdiction under section 144C(1) and because it was barred by limitation. Consequently, the impugned assessment order was quashed, and the order of the Commissioner (Appeals) was set aside. All other grounds raised by the assessee were deemed academic and not adjudicated. Conclusion: The appeal was allowed, and the order was pronounced in the open court on 26/12/2022.
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