TMI Blog2019 (4) TMI 2079X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Revenue : Shri V. Sreekar (DR) ORDER PER B. R. BASKARAN, AM: The assessee has filed this appeal challenging the assessment order passed by the AO u/s 143(3) r.w.s. 144C of the Act for assessment year 2014-15, in pursuance of directions given by Ld Dispute Resolution Panel (DRP). 2. The assessee is challenging the validity of assessment order passed on the ground that the AO was not right in law in invoking the provisions of sec.144C of the Act in the instant year, since the conditions prescribed for invoking the said provisions do not exist in the present case. Accordingly, it is being contended that the assessment order passed by the AO is void and is liable to be quashed. 3. We heard the parties on this legal issue. The facts relevant to the same are discussed in brief. The assessee herein is a tax resident of Cyprus. It has invested in an Indian company named Keystone Realtors P Ltd (KRPL) by subscribing to 1556 Compulsorily convertible Debentures (CCD) of KRPL. The assessee earned interest income of Rs.1963.74 lakhs during the year under consideration. The assessee offered the same as its business income in the return of income filed by it for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in quality, amount o level . In the instant case, the AO has held that the rate of tax prescribed under DTAA is not applicable and the rate prescribed in sec. 115A(1)(a)(ii) of the Act is applicable, which is higher than the rate prescribed in DTAA. He submitted that the same makes the assessment order prejudicial to the interests of assessee. Accordingly the Ld DRP has confirmed the action of the AO. The Ld DR reiterated that the impugned assessment order was prejudicial to the interests of assessee, since the rate of tax has been increased. He submitted that the expression variation in the income or loss returned which is prejudicial to the interest of such assessee used in sec.144C(1) shall include the variation in tax also, as ultimate objective of assessment is to collect tax from the assessee on the assessed income. 7. In the rejoinder, the Ld A.R submitted that the dictionary meaning of the term variation may mean difference in quality, amount or level . In the instant case, what was assessed is the interest income. The expressions quality or level are not applicable to the interest income. Hence the expression amount alone shall apply in the instant case, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfully invoke the provisions of Section 144C, thus, two basic conditions are required to be fulfilled: - the assessee is an eligible assessee [i.e. (i) any person in whose case the variation referred to the income or loss in the returned income or loss, which is prejudicial to the interest of the assessee, is made on account of an order under section 92A(3) i.e.an ALP adjustment], or (ii) any foreign company]; and - the Assessing Officer proposes to make any variation in the income or loss returned by the assessee which is prejudicial to the interest of such assessee . [13] There is no dispute that the assessee is an eligible assessee inasmuch as the assessee is a foreign company. The first condition for giving a choice to the assessee to follow the DRP route, which, in turn, requires issuance of draft assessment order, is thus clearly fulfilled. [14] As for the second condition, i.e. the Assessing Officer proposing to make any variation in the income or loss returned by the assessee which is prejudicial to the interest of such assessee , since the Assessing Officer has merely accepted the returned income, as filed by the assessee, the second condition is not fulfilled. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, reject the plea of the assessee that since the Assessing Officer has issued the impugned assessment order directly, without first issuing a draft assessment order, the impugned assessment order should be quashed and treated as non est. 9. The Ld A.R also placed his reliance on the decision rendered by Pune bench of ITAT in the case of DCIT vs. Magna International Inc (ITA No.2098/Pun/2016 dated 21-01-2019), wherein also identical view was expressed. In this case, the Ld CIT(A) quashed the assessment order on the ground that the AO did not follow the provisions of sec.144C of the Act. The Tribunal found that there was no variation in the income returned by the assessee, which was prejudicial to the interests of assessee. Hence the Tribunal reversed the order passed by Ld CIT(A) in the appeal filed by the revenue. For the sake of convenience, we extract below the operative portion of the order passed on this issue by the Pune bench of Tribunal in the above said case:- 11. We have heard the rival contentions and perused the record. The assessee is a foreign company. For the year under consideration, the assessee had furnished return of income declaring total income at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e questionnaire was raised. In such scenario when the Assessing Officer passes the order after including sum of ₹ 62,12,060/- to the receipts offered in the return of income, then income totals to ₹ 12,38,01,862/-. The Assessing Officer has assessed the aforesaid income in the hands of assessee under section 143(3) of the Act. In such facts and circumstances, variation in the income is not on account of any addition made by the Assessing Officer but is on account of voluntary offer of additional income by the assessee and it cannot be said that the Assessing Officer has made variation in the income returned, which is prejudicial to the interest of such assessee. The variation in the income is qualified by the words which is prejudicial to the interest of such assessee. 14. In the facts of present case, addition, if any is made to the returned income is on account of suo motu offer by the assessee of the receipts received by the assessee during the year under consideration from an Indian entity and by an inadvertent error, the same were not offered in the return of income. So, it does fail the test of prejudicial to interest of assessee. Hence, there is no merit in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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