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TMI Blog2023 (2) TMI 1002X X X X Extracts X X X X X X X X Extracts X X X X ..... s shown in Form No. 26AS - Findings given by AO is totally based upon the findings given in earlier Assessment Years. Even the directions of the DRP are based upon the directions given in earlier Assessment Years and both the authorities grossly erred in not realizing that the assessee has discontinued its business after Assessment Year 2010-11. Therefore, drawing support from earlier year s order would do no good to the Revenue as the facts are not similar. In fact, the Assessing Officer has put the entire burden on the assessee to show in whose hands the receipts shown in Form 26AS has been declared. By putting the onus on the assessee, the AO has grossly erred as the assessee is not responsible to explain the recipients of the receipts shown in Form No. 26AS. AO should have asked the payer, details of the payee to whom payments have been made by the payer on which it could deduct tax at source . Therefore, on merit also, addition cannot survive as facts are not identical to the facts of earlier Assessment Years - Appeal of assessee allowed. - ITA No. 6503/DEL/2019 - - - Dated:- 9-2-2023 - SHRI N. K. BILLAIYA , ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA , JUDICIAL MEMBER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DRP erred in mechanically and arbitrarily following the assessment order for earlier years and concluding that the Appellant has a fixed place permanent establishment ( PE ) and a dependent agent PE in India as per the India-USA Double Taxation Avoidance Agreement ( DTAA ). 4.1 That on the facts and in the circumstances of the case in law, the Ld. AO/Ld. DRP erred in not appreciating that the Appellant has discontinued its business operations in the relevant AY and accordingly, does not have any business connection/PE in India. 5. That on the facts and in the circumstances of the case in law, the Ld. AO pursuant to the directions of Ld. DRP erred in computing the total income of the Appellant at INR 4,97,37,942 as against returned income of Nil without appreciating that the amounts reflected in Form 26AS does not belong to the Appellant. 6. Without prejudice to the aforementioned grounds, the Ld. DRP erred in making an arbitrary addition of INR 4,97,37,942 to the income of the Appellant taking a notional profit rate of 75% without any basis. 7. That on the facts and circumstances of the case and in law, the Ld. AO erred in levying interest under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. In its reply, the assessee stated that it did not have any receipts during the year under consideration and TDS has been deducted by the payer companies inadvertently against the PAN of the assessee company. It was explained that the receipts disclosed in Form 26AS was of its subsidiary company M/s Travel Port Global Distribution System B.V. Netherlands. To a specific query, the assessee was asked whether the same has been offered to tax by its subsidiary company. 10. Reply of the assessee did not find any favour with the Assessing Officer. Taking a leaf out of the proceedings for Assessment Year 2010-11, the Assessing Officer observed that there is no change in the facts of the case and concluded by holding that the assessee has PE in India and profit of 100% was attributed to the assessee company and addition of Rs. 6,63,17,256/- was made. 11. The assessee carried the matter before the ld. CIT(A) and challenged the validity of the assessment order before the DRP but without any success. 12. It was strongly contended before the DRP that the assessee is not an eligible assessee within the provisions of section 144C of the Act. 13. This plea was dismissed by the DRP w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under challenge is on the proposition that the order is void ab initio. The Assessing Officer has framed draft assessment order when the provisions were not applicable to the assessee. 18. Eligible Assessee means, any person in whose case variation referred to in sub-section arises as a consequence of an order passed by the TPO u/ss (3) of section 92CA of the Act. 19. Facts of the case in hand show that no order has been passed by the TPO, therefore, there is no question of any variation arising as a consequence of the order of the TPO and since the assessee is an LLP, therefore, it cannot be termed as a foreign company, which means that provisions of section 144C of the Act with all its sub section do not apply to the assessee, which means that the impugned assessment order dated 21.06.2019 is void ab initio. 20. The co-ordinate bench at Mumbai in ITA No. 2572/Mum/2017 had the occasion to consider a similar issue and held as under: 9. We have considered rival submissions and perused material on record. The issue in dispute lies in a very narrow compass. It has to be examined whether the assessee can be termed as an eligible assessee under section 144C(15)(b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c company to be an Indian Company or any other company which declares and pays dividend within India out of its income. Whereas, the documentary evidences placed before us including the return of income filed by the assessee as well as the residency certificate issued under section 10F of the Act, it is seen thatthe status of the assessee has been shown as limited liability partnership. In fact, the Department has allotted PAN to the assessee in the status of a partnership firm. The definition of firm under section 2(23) of the Act includes a limited liability partnership. Further, in the draft assessment order passed under section 144C of the Act for the assessment year 2016 17, the status of the assessee has been shown as firm. Thus, from these facts, it becomes clear that the assessee is not a foreign company but a limited liability partnership. The aforesaid factual position has not been controverted by the learned Departmental Representative by bringing before us any documentary evidence. Keeping in view the aforesaid factual position qua the relevant statutory provision, if we examine the judicial precedents it can be seen that in the case of ESS Advertising (Mauritius)S.N.C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicial to the interest of such assessee. 8.The aforesaid provision which is a non obstante clause, provides that the AO has to forward a draft of the proposed order of assessment to the eligible assessee‟, if he proposes to make an order after the first day of October, 2009 making any variation in income and or loss returned which is prejudicial to the interest of such assessee. The eligible assessee has been defined in clause (b)of sub section 15 which reads as under:-144C(15)(b) eligible assessee means i) any person in whose case the variation referred to in subsection (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA and (ii) any foreign company. From the conjoint reading of the aforesaid provisions it is quite clear that assessee must be a foreign company in whose case the variation which has been referred and if there is any variation arising out of consequence of order passed by the TPO in terms of section 92CA (3), then only provision of section 144C can be triggered. Here in this case as noted by AO himself, there is no variation as a consequence of any order passed by the TPO as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions made in para 30, which are as under:- It appears to the Court that it is plain that under Section 144C, the AO should have proceeded to pass an order under Section 143(3) of the Act. Instead the AO confirmed the draft assessment order passed under section 144C(1) of the Act. This, therefore, vitiated the entire exercise. The Court has no hesitation in holding that the final assessment order dated 28th January, 2015 is without jurisdiction and null and void. The draft assessment order dated 28th March, 2014 having been passed in respect of entities which were not eligible assessees‟, is also held to be invalid. 14. Reverting to the assessment year under consideration, we find that the Assessing Officer passed draft assessment order u/s 144C(1) of the Act on receipt of the order from the TPO. Thereafter, the final assessment order was passed after routing the matter through the DRP. As the assessee is not an eligible assessee‟, the assessment should have been completed u/s 143(3) instead of adopting the path of passing the draft assessment order u/s 144C(1). We find that the facts and circumstances for the assessment year under consideration are identical to those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e return filed by the petition. In view of the which, neither of the two conditions are satisfied in the case of the petitioner and thus the petitioner for the purposes of Section 144C(15)(b) is not an eligible assessee . Since the petitioner is not an eligible assessee in terms of Section 144C(15)(b), no draft order can be passed in the case of the petitioner under Section 144C(1). 13................................. 14. In view of the above, it is clear that the petitioner, not being an eligible assessee in terms of Section 144C(15)(b) of the Act, the Assessing Officer was not competent to pass the draft assessment order under section 144C (1) of the Act. The draft assessment order dated 31.3.2015 is accordingly quashed. 15. Since we have quashed the draft assessment order, the question that the assessment has now become time barred is left open and it is open to the parties to take recourse of such remedy, as may be available to them in law. 11. Following these judgments, now there are numerous judgments not only passed by the various High Courts but also by this Tribunal, wherein it has been categorically held that, if assessee is not an eligible assessee in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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