AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (1) TMI 1282
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....P. Since, the issue raised in the additional ground is a purely legal and jurisdictional issue going into the root of the matter and can be decided without requiring fresh investigation of facts, we are inclined to admit the additional ground for adjudication and proceed to address the issue at the very outset. 4. Briefly, the facts relating to this issue are, the first named assessee is a tax resident of United Kingdom (UK). It had entered into a contract with Reliance Industries Limited (RIL) for engineering and procurement services relating to RIL's plant in Jamnagar Special Economic Zone (SEZ) and DTA area. As stated by the Assessing Officer, in the year 2012, the assessee entered into engineering and procurement support service agreement with RIL in relation to construction of a plant at RIL's refinery complex at Jamnagar SEZ. As per the terms of the contract, the assessee is responsible for providing certain engineering information, engineering services and support services in relation to procurement of machinery and equipment for construction of the plant at RIL's refinery. Whereas, the second named assessee is a tax resident of USA. The said assessee entered into an engine....
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....of ITAT, Delhi Bench, in case of PJSC Stroytransgaz Vs. DDIT, reported in [2019] 106 taxmann.com 114 (Delhi - Trib.). Further, learned DRP made it clear that FTS/FIS income can be added only on protective basis. After receiving the directions of learned DRP, the Assessing Officer passed the final assessment orders virtually reproducing the contents of the draft assessment order and again added back the receipts as FTS/FIS. 7. Before us, learned counsel appearing for the assessee submitted that it is a clear case of non-implementation of directions of learned DRP by Assessing Officer while framing the final assessment orders. He submitted, as per the mandate of section 144C of the Act, every direction of learned DRP is binding on the Assessing Officer and he has to pass the final assessment order in conformity with the directions of learned DRP. Drawing our attention to the final assessment orders, he submitted, the Assessing Officer has merely repeated the contents of the draft assessment order without following the specific directions of learned DRP. Thus, he submitted, the final assessment orders are wholly without jurisdiction, hence, unsustainable. In support of such contentio....
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.... Undisputedly, the assessees in appeal are tax residents of UK and USA respectively. During the assessment years under dispute, the assessees have received fees towards rendering certain services to RIL for its plants situated in Jamnagar SEZ. While framing the draft assessment orders, the Assessing Officer has treated the receipts as FTS/FIS under India-UK and India - USA tax treaties. However, while disposing of objections filed by the assessee, the DRP had given the following two directions: (i) The assessees have business connection/PE in India in the form of RIL facilities in Jamnagar and in Mumbai. Hence, the receipts, being attributable to the PE, have to be treated as business income under Articles 6 & 7 of the respective address and taxed in India, and; (ii) The receipts can also be treated as FTS/FIS, however, since, the assessees have business connection and PE in India, the receipts have to be taxed as FTS/FIS under section 44DA of the Act, but on protective basis. 10. On perusal of final assessment orders, which are under challenge in the present appeals, it is observed, though, the Assessing Officer has reproduced the entire directions of learned DRP in the bod....
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..... Union of India (supra), the Hon'ble Jurisdictional High Court, in judgment dated 23.03.2016, while considering identical nature of dispute relating to non-implementation of directions of DRP in the final assessment order has gone through the entire provision of section 144C, which is a code by itself, and held as under: "29. The above submissions have been considered. In the first place the Court would like to observe that this is an instance of blatant disregard by the AO of the order of the DRP notwithstanding that the DRP had categorically held that the two Petitioners do not satisfy the conditions of an 'eligible assessee' in terms of Section 144 (15) (b) (ii) of the Act. As already noticed under Section 144C (10) of the Act the AO had no option but to comply with the order of the DRP. Even if no direction was issued by the DRP under Section 144C (5) of the Act, the fact that the DRP held that both the Petitioners were not 'eligible Assessees' could not have been ignored by the AO. 30. It appears to the Court that it is plain that under Section 144C, the AO should have proceeded to pass an order under Section 143 (3) of the Act. Instead the AO confirmed t....
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....O passed the final assessment order under Section 143 (3) of the Act instead of passing a draft assessment order under Section 144C (1) of the Act and then sought to issue a Corrigendum modifying the final order of the assessment to be read as a draft assessment order but beyond the period prescribed for limitation for passing such order. The High Court held the entire exercise to be without jurisdiction. 35. In Pankaj Extrusion Limited v. Assistant Commissioner of Income Tax (2011) 241 CTR (Guj) 390 the Division Bench of Gujarat High Court, in interpreting Section 144C of the Act held that where an Assessee was not an 'eligible assessee', the question of passing the draft assessment order under Section 144C of the Act did not arise. 36. As far as the decision of this Court in Honda Cars India Limited v. Deputy Commissioner of Income Tax (supra) is concerned, the question that arose is whether the AO could have passed the draft assessment order when the Assessee did not satisfy the condition 'eligible assessee' under Section 144C (15) (b) of the Act. Answering the question is in the negative, the Court held that the draft assessment order of the AO is null and....
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.... is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities. The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not 'acceptable' to the department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result would only be undue harassment to Assessees and chaos in administration of tax laws." 39. In Nav Bharat Impex v. Union of India (supra) the Division Bench of this Court dealt with the case where despite the clear directions given by the CIT (Appeals), the delayed refunds were paid....
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....in the present case, the AO did pass the final assessment order in continuation of draft assessment order under Section 144C (1) of the Act and the said final assessment order has been held by this Court, for the reasons recorded hereinabove, to be invalid. 44. The other plea of the Revenue that the Petitioners ought to have challenged the final assessment order before the CIT (A) is untenable for the reason that it was contrary to the order of the DRP which held in favour of the Petitioners. The order of the DRP was not challenged by the Revenue. In the circumstances, the final assessment order was without jurisdiction and this constitutes sufficient ground for the Court exercise its powers under Article 226 of the Constitution. 45. For the above reasons, the draft assessment order dated 28th March 2014 and the final assessment order dated 28th January 2015 passed by the AO are held to be void ab initio and quashed on that basis. The orders consequential thereto also do not survive. However, it is clarified that the Court has not expressed any opinion regarding the validity of the proceedings against the Petitioners under Section 147/148 of the Act. The rights and contention....