2023 (5) TMI 404 - AT - Income Tax

Tribunal quashes assessment order over jurisdictional issues, transfer without notice, invalidity, ineligibility, and limitation period.

Sh. Shyam Sunder Bhartia, Versus. The DCIT (International Taxation), Lucknow

Sh. Shyam Sunder Bhartia, Versus. The DCIT (International Taxation), Lucknow - [2025] 129 ITR (Trib) 336 (ITAT [Luck]) Issues Involved:1. Jurisdiction of the assessment order.2. Transfer of case without notice under section 127.3. Validity of the assessment order under section 147 r.w.s. 144C(13).4. Eligibility of the assessee under section 144C(15).5. Limitation period for passing the assessment order.6. Determination of residential status and taxation of global income.7. Charging of interest under sections 234A and 234B.Detailed Analysis:1. Jurisdiction of the Assessment Order:The assessee contended that the final assessment order dated 28.06.2022, passed under section 147 r.w.s. 144C(13) of the Income Tax Act, 1961, was without jurisdiction, non-est, illegal, and bad in law. The order was passed by the DDIT/ADIT (International Tax), Lucknow, without serving any notice under section 127 of the Act or providing a copy of the order, if any, passed under that section for the transfer of the case.2. Transfer of Case Without Notice Under Section 127:The assessee argued that the transfer of the case from ACIT, Circle-1, Moradabad, to DDIT/ADIT (International Tax), Lucknow, was invalid as no notice under section 127 was served. The department admitted that no order under section 127 was passed and only the PAN was migrated after approval from the PCIT, Bareilly. The Tribunal held that the provisions of section 127 mandate recording reasons for the transfer and providing a reasonable opportunity of hearing to the assessee. The transfer without fulfilling these requirements rendered the assessment order void ab initio.3. Validity of the Assessment Order Under Section 147 r.w.s. 144C(13):The assessee contended that the assessment order was illegal and beyond jurisdiction since it was initiated based on 'reason to suspect' rather than 'reasons to believe,' which is a prerequisite for assuming valid jurisdiction under section 147. The Tribunal accepted the assessee's contention, noting that the conditions precedent for assuming valid jurisdiction under section 147 were not satisfied.4. Eligibility of the Assessee Under Section 144C(15):The assessee argued that the draft assessment order under section 144C(1) was invalid as the assessee did not qualify as an 'eligible assessee' under section 144C(15) in the absence of any variation proposed by the TPO and the assessee not being a foreign company. The Tribunal noted that the assessee was not an 'eligible assessee' as defined under section 144C(15)(b), which includes any person in whose case the variation arises as a consequence of the TPO's order and any foreign company. Therefore, the AO was not competent to pass a draft assessment order under section 144C(1).5. Limitation Period for Passing the Assessment Order:The assessee contended that the assessment order was barred by limitation as the extended limitation period of nine months under section 144C(12) was not applicable. The Tribunal held that the assessment order should have been passed within the time limit provided under section 153(2), which was extended up to 30.09.2021 due to the Covid period. Since the assessment order was passed on 28.06.2022, it was clearly barred by limitation and void ab initio.6. Determination of Residential Status and Taxation of Global Income:The assessee argued that the AO/DRP erred in computing the period of stay in India and determining the residential status as 'resident in India.' The Tribunal noted that the AO/DRP incorrectly considered the day of arrival and departure as full days of stay, leading to an erroneous determination of the residential status. Consequently, the salary income earned in Singapore was wrongly taxed in India.7. Charging of Interest Under Sections 234A and 234B:The assessee contended that the AO erred in charging interest under sections 234A and 234B. The Tribunal did not specifically address this issue as the main grounds of appeal were accepted, rendering the assessment order void ab initio.Conclusion:The Tribunal accepted the grounds raised by the assessee regarding the jurisdiction, transfer of the case without notice under section 127, invalidity of the assessment order under section 147 r.w.s. 144C(13), ineligibility under section 144C(15), and the limitation period for passing the assessment order. Consequently, the appeal was allowed, and the assessment order was quashed.