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TMI Blog2024 (1) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue : Shri Anil Sant ORDER PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by the assessee challenging the impugned final assessment order dated 27/12/2021, passed under section 143(3) r/w section 144C(13) of the Income Tax Act, 1961 ( the Act ), pursuant to the directions 29/11/2021, issued by the learned Dispute Resolution Panel-1, Mumbai ( learned DRP ), for the assessment year 2018-19. 2. In this appeal, the assessee has raised the following grounds: 1. On the facts and in the circumstances of the case and in law the Ld. Deputy Commissioner of Income Tax (International Taxation)-2(1)(1), Mumbai [hereinafter referred to as 'the Ld. A.O.'] and Ld. DRP erred in making an addition of Rs. 3,91,30,966/- being amount received on sale of software to Indian companies by treating the same as fees for technical services without appreciating the fact that the Appellant has not rendered any technical services by selling the software to the Indian companies. Thus, the said amount received on sale of software is not chargeable to tax in India. Therefore, the addition of Rs. 3,91,30,966/- made by the Ld. A.O. / DRP is unjustified and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment to the assessee. The assessee did not offer the above receipt for tax in its return of income and claimed a refund of the tax withheld by its clients. Accordingly, during the assessment proceedings, the assessee was asked to show cause as to why its receipts from the sale of software may not be treated as Royalty or Fees for Technical Services under the provisions of the Act and the relevant Articles of India Finland Double Taxation Avoidance Agreement (DTAA). 4. The Assessing Officer (A.O.), vide draft assessment order dated 26/02/2021, did not agree to the submissions of the assessee and held that the revenue earned by the assessee is in the nature of Fees for Technical Services under the Act as well as the India Finland DTAA. 5. The assessee filed detailed objections before the learned DRP on 23/03/2021, against the findings of the A.O. in the draft assessment order. While the objections filed by the assessee before the learned DRP were pending for adjudication, the A.O. passed the order dated 15/04/2021 under section 143(3) r/w section 144C(3) of the Act computing the total income of the assessee at Rs. 3,91,30,966, by considering the income received from Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The learned A.R. also placed reliance upon the decision of the Hon'ble Supreme Court in National Thermal Power Co. Ltd. v/s CIT, [1998] 229 ITR 383 (SC) in support of the admission of additional grounds of appeal. 8. On the other hand, the learned Departmental Representative ( learned D.R. ) vehemently objected to the admission of the additional grounds raised by the assessee and submitted that in the initial round of hearing concluded on 18/07/2023, the assessee did not raise any ground challenging the legality and validity of the impugned final assessment order. The learned D.R. further submitted that two final assessment orders are passed in the present case as the assessee did not file any intimation before the A.O. regarding the filing of objections before the learned DRP on 23/03/2021. The learned D.R. submitted that the learned DRP after considering all the subsequent events rightly iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has, inter alia, placed reliance upon the decision of the Hon'ble Supreme Court in National Thermal Power Co. Ltd. (supra). We find that in the aforesaid decision, the Hon'ble Supreme Court held that the legal issue can be raised for the first time before the Tribunal so long as the relevant facts are on record in the assessment proceedings for that issue. Since all the relevant orders form part of the record for adjudication of the additional grounds of appeal raised by the assessee, therefore, we are of the considered view that investigation into fresh facts is not required in the present case. Further, the Hon'ble Jurisdictional High Court in Inventors Industrial Corporation Ltd. v/s CIT, [1992] 194 ITR 548 (Bom.) held that the ground by which the jurisdiction to make the assessment itself is challenged can be urged before any authority for the first time, even in the second round of proceedings. Therefore, in view of the above, since the issue raised by the assessee by way of additional grounds of appeal is a legal issue, which can be decided on the basis of facts available on record, we find no merits in the submissions of the Revenue and accordingly we a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RP, then the learned DRP is duty bound to issue directions under section 144C(5) of the Act. It was further held that every direction issued by the learned DRP is binding on the A.O. as per the provisions of section 144C(10) of the Act. Thus, it was held that once the draft assessment order has been passed by the A.O. and the objections are filed before the learned DRP within the permitted time, the A.O. has a very limited role i.e., to pass the final order as per the directions issued by the learned DRP. The relevant findings of the learned DRP, in this regard, are reproduced hereunder: 5.1 We have gone through the written submissions of the assessee, oral arguments made during the course of the hearing and the material available before us. Before we proceed to address the objections made, it is necessary to apply our mind to one of the peculiar fact of the case. It has been submitted that the draft order was passed by the AO on 26.02.2021 and the assessee filed its objections before the DRP on 23.03.2021 which is within the time permitted u/s 144C(2) of the Income Tax Act. However, final order u/s 143(3) has been passed by the AO, even while objections of the assessee were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he rulings of Hon'ble ITAT and High Courts in several cases. Hon'ble Delhi High Court in the case of SRF Ltd. v. National Faceless Assessment Centre, Delhi [2021] 129 taxmann.com 174 (Delhi) has held that where objections to draft assessment order filed by assessee were pending disposal with DRP, impugned final assessment order under section 143(3) read with section 144C(3) being passed by Assessing Officer against assessee was without jurisdiction. Hon'ble Delhi High Court in the case of Anand Nvh Products (P.) Ltd. v. National e-Assessment Centre Delhi [2021] 130 taxmann.com 257 (Delhi) has held that final assessment order passed by Assessing Officer without waiting for decision of DRP upon such objections raised by assessee was unjustified and same was to be set aside. Hon'ble ITAT, Kolkata Bench in the case of Century Plyboards (India) v. ACIT in ITA No. 278/Kol/2020 has held that when DRP is in seisn of the case of assessee and till the DRP gives direction as per section 144C(5) of the Act, the AO does not enjoy jurisdiction over the assessee's case. 5.5 In view of above, the Panel is of the considered view that irrespective of the fact that AO has pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rused the application, we are of the considered view that there exists sufficient cause for not filing the present appeal within the limitation period and therefore, we condone the delay in filing the appeal by the assessee. 17. Coming back to the issue raised by the assessee vide the aforesaid additional grounds of appeal, we find that the Hon'ble Jurisdictional High Court in Undercarriage and Tractor Parts Pvt. Ltd. (supra) while deciding the Writ Petition filed by the taxpayer challenging the directions issued by the learned DRP and the consequent final assessment order held that the learned DRP can only give directions in pending assessment proceedings and once the assessment order is passed, rightly or wrongly, the assessment proceedings came to an end. Accordingly, in the facts of the case, since the A.O. had already passed the final assessment order prior to the directions issued by the learned DRP, the Hon'ble Jurisdictional High Court held that the learned DRP has no power to pass any directions as contemplated under section 144C(5) of the Act. As a result, the Hon'ble Jurisdictional High Court set aside the directions issued by the learned DRP and the conse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by, it. (7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5), - (a) make such further enquiry, as it thinks fit; or (b) cause any further enquiry to be made by any income-tax authority and report the result of the same to it. (8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order. [Explanation - For the removal of doubts, it is hereby declared that the power of the Dispute Resolution Panel to enhance the variation shall include and shall be deemed always to have included the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee). (9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members. (10) Every direction issued by the Dispute Resolution Panel shall be bindi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ete the assessment, which also presupposes pending assessment proceedings. Sub-section 8 of Section 144C of the Act provides the DRP may confirm, reduce or enhance the variations proposed in the draft orde .......... which means the assessment proceedings are still pending. Sub-section 11 of Section 144C of the Act provides no direction under sub-section 5 shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the revenue, respectively which also presupposes pending assessment proceedings. Similarly under sub-section 12 of Section 144C of the Act which says no direction under sub-section 5 shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee ; and Under sub-section 13 of Section 144C of the Act which says upon receipt of the directions issued under sub-section 5, the Assessing Officer shall, in conformity with the directions, complete, .......... the assessment .......... . Therefore, the DRP could give directions only in pending assessment proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any presumption or assumption. A taxing statute has to be interpreted in light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency. Before taxing any person it must be shown that he falls within the ambit of charging section by clear words used in the section and if the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject. There is nothing unjust in the tax payer escaping if the letter of the law fails to catch him on account of the legislature's failure to express itself clearly A Constitution Bench in the case of Commissioner of Customs (Import), Mumbai Vs. Dilip Kumar And Company And Ors., (2018) 9 SCC 1, had reiterated these principles. It was a case where on a reference to the Larger Bench the Supreme Court was considering a question whether an ambiguity in a tax exemption provision or notification, the same must be interpreted so as to favour the assessee. Making a clear distinction between a charging provision of a taxing statute and exemption notification which waives a tax or a levy normally imposed, the Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e DRP has been infructuous and therefore, it wishes to withdraw the application filled before the DRP We have considered the above letter dated 26.08.2019 filed by the assessee. Since, the objections filed by the assessee are in time as prescribed under the Act and AO's draft order is as per the Act, we, therefore proceed to issue directions to the AO/TPO as per the Act. Discussion and Direction of the DRP are as under. Notwithstanding this, the DRP has proceeded to issue the directions which it should not have done. 13 In the circumstances, we hereby quash and set aside the directions issued by DRP on 16th September 2019 and the consequent assessment order dated 31 October 2019. 18. In the present case, it is undisputed that the A.O. had already passed the final assessment order on 15/04/2021, i.e., prior to the issuance of directions by the learned DRP under section 144C(5) of the Act on 29/11/2021. We find that the learned DRP while assuming the jurisdiction to issue the directions under section 144C(5) of the Act had placed reliance upon the decision of the Hon ble Delhi High Court as well as Co ordinate Benches of the Tribunal, however, since the decision i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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