TaxTMI 
TaxTMI 
2023 (10) TMI 922
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....ioner 2. The facts and the arguments laid out by Mr. Ashish Mehta, counsel representing the Petitioner, are detailed below: 2.1 The Petitioner-company, incorporated under the legal framework of Singapore, is primarily engaged in the business of operating ships. It is a tax resident of Singapore, and thus, it filed its return of income in India, declaring its total income as nil for the Assessment Year ("AY") 2017-18. 2.2 On 23rd August, 2018, the return of income filed by Petitioner was selected for scrutiny under Section 143(2) of the Act and a notice requiring the Petitioner to furnish certain details, such as the nature of business activities, tax residency certificate, copy of agreements with Indian customers, financial statements, details of permanent establishment in India etc., was issued on 08th November, 2019. The Petitioner responded to the above queries vide correspondence dated 15th November, 2019, asserting that it does not have a permanent establishment in India. A tax residency certificate was also submitted with the response. Petitioner further stated that its income fell within the purview of Article 8 of the India-Singapore Double Taxation Avoidance Agreement (....
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....passing a prejudicial order, in compliance with Section 144C(1) of the Act. The requirement of supplying a draft order affords the assessee a fair opportunity to raise objections before the Dispute Resolution Panel ("DRP"). However, the Petitioner has been deprived of this recourse by Respondent No. 1. Furthermore, pursuant to the impugned order, a notice imposing a staggering demand of INR 10,51,97,960/-, has also been issued to the Petitioner. Penalty proceedings for misreporting the income have also been initiated, in terms of Section 270A of the Act. Given the non-adherence to Section 144C(1) of the Act, such actions are inherently flawed and lack legal standing. 2.7. It is an established legal principle that any order passed by the AO during remand proceedings, or in adherence to instructions of a higher-ranking authority, qualifies as an assessment order under Section 143(3) of the Act. This conclusion is further bolstered by Respondent No. 1's notice, raising a demand of INR 10,51,97,960/- and imposition of a penalty under Section 270A of the Act, on the basis of findings of the order dated 23rd June, 2022. The communication issued to the Petitioner, informing them of their....
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....d), before the Income Tax Appellate Tribunal. Analysis and findings 4. We have deliberated on the afore-noted contentions. The crux of the dispute hinges on the procedural compliance of Section 144C(1) of the Act by Respondent No. 1. The question that arises for consideration is whether the failure to pass a draft assessment order before the final assessment, as required for a foreign company such as the Petitioner, invalidates the impugned order dated 23rd June, 2022 and the ensuing proceedings. 5. For the sake of convenience, relevant portion of Section 144C above is extracted hereunder: "144C. Reference to dispute resolution panel - (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward 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. (2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order,- ....
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.... process outlined in Section 144C(1) of the Act is not discretionary, but mandatory. It must be adhered to even when the assessment order is issued in line with directions from a higher authority. While Mr. Chawla argued that the provisions of Section 144C shall not apply to orders issued under Section 263, in our opinion, the exercise of revisionary powers does not dilute the requirement of compliance with Section 144C of the Act. The exception carved out in Section 144C(14A) extends to assessment/ re-assessment orders passed by the AO with the prior approval of the Principal Commissioner or Commissioner, as per Section 144BA(12) of the Act. The nature of proceedings initiated under Section 144BA differs from the ones commenced under Section 263. Thus, Mr. Chawla's reliance upon this provision is misconceived, and does not aid the Respondents' case. Section 144C(14A) does not dispense with the AO's obligation to intimate a draft order to an eligible assessee, which term includes foreign companies like Petitioner. 8. Respondent No. 1 failed to discern the true nature and essence of the impugned order. Although this order was passed in remand proceedings to give effect to the direc....