TMI Blog2023 (1) TMI 1370X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed u/s 153(1) of the Act i.e. within the twenty one (21) months from the end of the assessment year i.e. on or before 31st December, 2016. And since the assessment order was framed on 7th Feb, 2017, the action of the AO is barred by limitation. No infirmity in the impugned order of the Ld. CIT(A). Therefore, we confirm the action of the Ld. CIT(A) and decline to interfere with the order of the CIT(A). Hence the appeal of the revenue is dismissed. - Shri Aby T. Varkey, JM And Shri M. Balaganesh, AM For the Assessee : Shri Nitesh Joshi For the Revenue : Shri Milind Chavan (Sr. DR) ORDER PER ABY T. VARKEY, JM: The revenue has filed this appeal challenging the action of the Ld. CIT(A)-56, Mumbai dated 16.06.2022 the assessment order passed by the AO u/s 143(3) r.w.s. 144C of the Income Tax Act, 1961 (hereinafter the Act ) for AY. 2014-15. 2. The revenue has challenged the validity of the action of Ld CIT(A) wherein the Ld. CIT(A) was pleased to hold that the assessment order passed by the AO dated 07.02.2017 was time barred because it was passed after the time barring date 31.12.2016. According to Ld. CIT(A), since there was no variation in the returned income by the assessee/for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nership of interest by the assessee on merits and by simply Stating that there is no requirement to adjudicate other issues urged by the assessee , (v) Whether on the facts and circumstances of the case, the Ld. CIT(A) committed grave error in law by quashing the assessment order ignoring the fact that the draft assessment order was in substance and effect in conformity with or according to the intent and purpose of the Act being prejudicial to the assessee and such mistake or defect was curable u/s 292B of the 1.T. Income Tax Act, 1961. (vi) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was correct in not considering and appreciating the factual comments of the AO in the remand report submitted against the additional grounds raised by the assessee. (vii) Whether the Ld. CIT(A) was correct in not appreciating that the draft order was issued and served on 26.12.2016, well before the date of limitation and that the assessee took advantage of section 144C to respond only on 25.01.2017, and taking advantage of its own delayed response, claimed benefit by raising the additional ground, which allowed by the Ld. CIT(A). 3. We have heard both the parties and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... framed and not otherwise. The assessee pointed out to the Ld. CIT(A) that the AO did not change the income returned by the assessee and hence there was no variation of income returned, which is prejudicial to the interest of assessee. Accordingly, the assessee submitted that the essential condition prescribed u/s 144C(1) of the Act was not satisfied. And therefore, the AO ought not to have issued the draft assessment order and ought to have passed the assessment order within the twenty one (21) months from the end of the assessment year i.e. on or before 31st December, 2016 as per Section 153 of the Act. And since the final assessment order has been passed by the AO in the instant case on 7th Feb, 2017, the action of the AO is barred by limitation. And therefore, the assessee pleaded before the Ld. CIT(A) that the assessment framed by the AO, after 31st Dec, 2016 was barred by limitation and hence need to be quashed. The Ld. CIT(A) by passing the impugned order has held that since there was no variation in the income or loss returned which is prejudicial to the interest of the assessee, the AO ought to have framed the final assessment order u/s 143(3) of the Act before time barring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submitted that the condition prescribed u/s 144C of the Act was not satisfied. And therefore, the AO ought not to have issued in the first instance the draft order u/s 144C(1) of the Act. Rather, he ought to have passed the assessment order u/s 143(3) of the Act on or before 31st Dec, 2016. Thus according to the Ld. AR, it can be seen that the AO has not changed the quantum of interest income and hence there is no variation of income or loss returned by the assessee, which is prejudicial to the interest of the assessee. Accordingly, the Ld. AR submitted that the AO was not legally correct in adopting the procedure prescribed u/s 144C(1) of the Act and thus extended the time for passing the final order on 7th Feb, 2017, which action of the AO was clearly barred by limitation. And therefore the Ld. AR does not want us to interfere in the action of the Ld. CIT(A). 7. As noted (supra), the assessee foreign company resident of Cyprus has returned income of Rs. 13,87,69,300/- and the AO has not varied the returned income (accept the returned interest income) but applied the higher tax rate of 40% in place of assessee s claim of concessional rate of tax under the India Cyprus Treaty (DT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has claimed taxation @ 10% under article 11(2) of the India Cyprus DTAA, the Assessing Officer has declined the said treaty protection on the ground that the assessee was not beneficial owner of the said interest, and, accordingly, brought the income is to tax@ 40% thereof. There is, quite clearly, no variation in the quantum of income. The question whether it was a case in which the Assessing Officer could have issued the draft assessment order, on the facts of this case, needs to be examined in the light of provisions of Section 144C(1) which provides that, The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward5 a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee [Emphasis, by underlining, supplied by us]. The assessee before us is a non-resident company incorporated, and fiscally domiciled, in Cyprus. Accordingly, in terms of Section 144C(15)(b)(ii), the assessee is an el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... phold the plea of the assessee on this point. 8. We note that similar view has been expressed by the Co-ordinate Benches of this Tribunal in the case of Mausmi SA Investments LLC Vs. ACIT (ITA. No. 7026/Mum/2018) dated 10.04.2019. We note that this Tribunal in the case of IPF India Property Cyprus (supra), after taking note of the amendment made of Section 144C(1) of the Act w.e.f. 1st April 2020 which has held that such amendment would not apply to any period prior to 1st April, 2020. We also note that Chennai Bench of this Tribunal in the case of Mosbacher India LLC Vs. ACIT (2016) (76 Taxmann.com 31) wherein the Tribunal examined the scope of provisions of Section 144C(1) of the Act. In that case, the returned income was not varied by the AO, but only higher tax rate was applied on the total income. Therefore, the AO passed the order u/s 143(3) of the Act, which was challenged before the Ld. CIT(A) and then before Tribunal. Before the Tribunal, the assessee took the plea that the AO should have passed draft assessment order u/s 144C(I) of the Act. However, the Tribunal rejected the same with the following observations as under: - [10] We have heard the rival contentions, perused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer has not made any variation in the income or the loss returned by the assessee. The Assessing Officer has simply accepted the income returned by the assessee, and the variations, if at all, are in the computation of tax payable in respect of income returned by the assessee. The variation, as the statutory provision unambiguously states, has to be vis- -vis returned income or loss. That is certainly not the case before us. The assessee s contention is that the income returned by the assessee was an inadvertent mistake and the Assessing Officer ought to have corrected the mistake as all the relevant facts were on record and what the Assessing Officer can bring to tax is income of the assessee in accordance with the law. We will deal with that aspect of the matter separately as and when the occasion comes to deal with the matter on merits. So far as the application of Section 144C is concerned, in our considered view, it is a condition precedent that the Assessing Officer proposes a variation in the income or loss returned by the assessee which is prejudicial to the interest of the assessee , and since this condition is admittedly not satisfied on the facts of this cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il, which is incorrect. The assessee being a Non-resident had offered the said income to tax under section 115A of the. 6 at 10% (plus surcharge and cess), which was applicable for the year under consideration. The assessee during the course of assessment ITA No.2098/PUN/2016 CO No.54/PUN/2018 Magna International Inc Association Vs. DCIT (supra) had quashed the assessment order passed by the Assessing Officer. 12. The relevant provisions of the Act are in section 144C(1) of the Act, which provide that the Assessing Officer in the first instance forward a draft of the proposed order of assessment to the eligible assessee if he proposes to make any variation in the income or loss returned, which is prejudicial to the interest of such assessee. The term eligible assessee is defined under section 144C(15)(b) of the Act. As per definition, eligible assessee means any person (i) in whose case variation referred to in sub-section (1) arises as a consequence of the order of Transfer Pricing Officer passed under section 92CA(3); and (ii) in foreign company. 13. The issue which arises before us is whether in the present set of facts is there any variation in the income or loss returned by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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