2024 (1) TMI 114 - AT - Income Tax

Validity of final assessment order passed u/s 144C(13) - DRP orders/directions after final assessment order passed - HELD THAT - DRP can give directions only in pending assessment proceedings, and once the assessment order is passed, the learned DRP would have no power to pass any directions as contemplated under section 144C(5) of the Act. See Undercarriage and Tractor Parts Pvt. Ltd 2023 (9) TMI 759 - BOMBAY HIGH COURT Accordingly, since in the present case, the A.O. had already passed the final assessment order under section 143(3) r/w section 144C(3) of the Act on 15/04/2021, the directions issued by the learned DRP on 29/11/2021 and the consequent final impugned assessment order dated 27/12/2021, are void ab initio.

Summary

Issues Involved:
1. Taxability of amount received from the sale of software.
2. Jurisdiction and validity of the final assessment order.
3. Admission of additional grounds of appeal.
4. Condonation of delay in filing the appeal.

Summary:

1. Taxability of Amount Received from the Sale of Software:
The assessee, a non-resident company and tax resident of Finland, received Rs. 3,91,30,966 from the sale of software to Indian companies. The Assessing Officer (A.O.) treated this amount as "Fees for Technical Services" (FTS) u/s 9(1)(vii) of the Income Tax Act and Article 12(3) of the India-Finland Double Taxation Avoidance Agreement (DTAA). The assessee contended that the amount received was not for technical services and hence not taxable in India, arguing that no right, title, interest, or license was transferred. The Dispute Resolution Panel (DRP) upheld the A.O.'s view, leading to the final assessment order dated 27/12/2021.

2. Jurisdiction and Validity of the Final Assessment Order:
The assessee challenged the jurisdiction and validity of the final assessment order dated 27/12/2021, arguing it was void ab initio since the A.O. had already passed a final assessment order on 15/04/2021. The Hon'ble Jurisdictional High Court in Undercarriage and Tractor Parts Pvt. Ltd. v/s DRP-3 held that the DRP can only issue directions in pending assessment proceedings. Since the A.O. had already completed the assessment, the DRP's directions dated 29/11/2021, and the consequent final assessment order were void.

3. Admission of Additional Grounds of Appeal:
The assessee raised additional grounds challenging the legality of the final assessment order dated 27/12/2021. The Tribunal admitted these additional grounds, noting that the legal issue could be raised for the first time as all relevant facts were on record. The Tribunal found no merit in the Revenue's objection to the delay in raising these grounds.

4. Condonation of Delay in Filing the Appeal:
The assessee sought condonation of a 363-day delay in filing the appeal, explaining it was due to a bona fide belief that the impugned order need not be challenged separately. The Tribunal condoned the delay, citing substantial justice over technical considerations.

Conclusion:
The Tribunal set aside the final assessment order dated 27/12/2021, passed pursuant to the DRP's directions, as void ab initio, following the Hon'ble Jurisdictional High Court's decision. The grounds of appeal on merits were rendered academic and kept open, with the assessee's appeal against the first final assessment order dated 15/04/2021 still pending before the CIT(A). The appeal by the assessee was allowed.