TaxTMI 
TaxTMI 
2025 (5) TMI 1564
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....6-17): 2. First, we take up ITA No.2059/Bang/2024 for the AY 2016- 17 wherein the assessee has raised the following grounds of appeal: 1. GENERAL 1.1. The order passed by learned Assistant Commissioner of Income-tax, Special Range - 6 Bangalore, (hereinafter referred as "AO" for brevity) under section 143(3) of the Income- tax Act, 1961 ('Act' for brevity) and confirmed by the learned Commissioner of Income- tax, Appeals, National Faceless Appeal Centre (NFAC) (hereinafter referred as "CIT(A)" for brevity) ["AO" and "CIT(A)" collectively referred as "Lower authorities" for brevity] is bad in law and liable to be quashed. 2. GROUNDS RELATING TO THE CLASSIFICATION OF PURCHASE OF SHARES AS 'ADVENTURE IN THE NATURE OF TRADE': 2.1. The learned CIT(A) has erred in concurring with the conclusion of the learned AO that the purchase of 87,000 shares of Bharat Electronics Limited (BEL) by the Appellant during the previous year and subsequent sale thereof constitutes an 'adventure in the nature of trade'. 2.2. The Lower authorities have erred in (i) presuming that the Appellant had not bought the BEL shares as In....
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....another. The Appellant craves leave to add, alter, vary, omit, substitute, or amend the above grounds of appeal, at any time before or at the time of hearing, of the appeal, so as to enable the Income-tax Appellate Tribunal to decide the appeal according to law. . 2.1 The assessee has raised the following additional grounds of appeal: 1. The learned Assistant Commissioner of Income-tax, Special Range - 6, Bangalore ['AO' for brevity] has erred in expanding the scope of 'limited scrutiny' of the Appellant, covering additional issues that were not identified for examination under the scrutiny as per the notice issued under section 143(2) of the Income-tax Act, 1961 ['Act' for brevity]. 2. The learned AO has erred in expanding the scope of limited scrutiny of the Appellant without following the mandatory procedure laid down by the Central Board of Direct Taxes ['CBDT' for brevity] to expand the scope of a limited scrutiny or to convert it into a complete scrutiny. 3. The variations made in the assessment order under section 143(3), beyond the scope of limited scrutiny of the Appellant, are without jurisdiction and are hence....
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....717/-. The said short-term capital loss was set off against short-term capital Gain arising from the sale of investment in SmartPlay and the net short-term capital gain of Rs. 55,49,07,175/- (Rs. 75,73,97,892/- - Rs. 20,24,90,717/-) was offered to tax. 4.1 Thereafter, the case of the assessee was selected for scrutiny and accordingly notice under section 143(2), 142(1) as well as 131 of the Act were issued. In response to notices & summon, the assessee appeared on various dates and filed submissions related to relevant details, particulars and clarifications as called for. Further in response to summon also the assessee appeared and a statement u/s 131(1A) was recorded. It is worthwhile here to note that the notice issued u/s 143(2) of the Act provided for the 'Limited Scrutiny'. The issues stated to be identified for examination were: i. Whether refund claim is justified. ii. Whether investment and income relating to foreign bank account are duly disclosed. 4.2 Finally, after taking into consideration the submission of the assessee, the AO, while passing the assessment order under section 143(3) of the Act, treated the transaction of purchase and sa....
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....BDT issued an Order No. F.No.225/402/2018/ITA.II dated 28.11.2018 in which it has been directed that in 'Limited Scrutiny' cases, the assessing officer shall not travel beyond the issues for which the case was selected. It also provides that the scope of 'Limited Scrutiny' may be expanded only if the matter is placed before the PCIT/CIT and his approval is obtained. The notice under section 143(2) of the Act issued to the assessee provides for 'limited scrutiny'. The ld. A.R. submitted that the notice was meant to verify refund of Rs. 23,78,460/- claimed in the return. It was not meant to confer jurisdiction to scrutinize the transactions in BEL shares. 7.2 He further submitted that the AO has expanded the scope of 'limited scrutiny' without obtaining prior approval of the PCIT/CIT as provided in the CBDT order. As prior approval was not taken, the expansion of the scope of limited scrutiny is bad in law. The impugned variations arising as a result of the expanded scope, sans prior approval, are without jurisdiction. The assessment order as passed is therefore liable to be quashed. 8. The ld. D.R. on the other hand although admitted the fact th....
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.... directions as below: 9.3 The instruction no.20/2015 dated 29.12.2015 clarifies the scope and applicability of the limited scrutiny cases. The procedure for handling "limited scrutiny" case clarified are as under: a) In "limited scrutiny" cases, the reasons/issues shall be forthwith communicated to the assessee concerned. b) The questionnaire under section 142(1) of the Act in "limited scrutiny" cases shall remain confined only to the specific reasons/issues for which case has been picked up for scrutiny. Further, the scope of enquiry shall be restricted to the "limited scrutiny" issues. c) These cases shall be completed expeditiously in a limited number of hearings. d) During the course of assessment proceedings in "limited scrutiny" cases, if it comes to the notice of the AO that there is potential escapement of income exceeding Rs. 5 lakhs (for Metro Rs. 10 lakhs) requiring substantial verification on any other issues then, the case may be taken up for complete scrutiny with the approval of the Principal CIT/CIT concerned. e) The Principal CIT/CIT shall accord the approval in writing after being satisfied about the merits of the is....
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....ns of section 144A of the Act may be invoked in suitable cases. v) Further, to prevent fishing and roving enquiries in these cases, it is desirable that these cases are invariably picked up for review/inspection by the administrative authority. 9.8 In the present case, admittedly the same AO who had issued the notice u/s 143(2) of the Act, while issuing notice u/s 142(1) of the Act dated 31.5.2018 had asked to submit details only with regard to high ratio of refund to TDS (part B-TTI of ITR) and large balance in foreign bank account (Schedule FA of ITR) along with the copy of Return, Computation of Income, Audited accounts & report as identified for the examination under 'limited scrutiny.' However, after the change in incumbency, on going through the notice u/s 142 (1) of the Act dated 5.10.2018 issued by the new AO, we find that AO has asked detailed questionnaire relating to number of shares purchased and sold along with the details of bonus shares and cost of acquisition as well as the details of dividend received, which in our view was not the issues identified for examination under the notice u/s 143(2) of the Act under the "limited scrutiny". We are further of th....
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....fied that in a "limited scrutiny", the scope of enquiry shall be restricted to the "limited scrutiny" issues. It will be confined only to issues and questionnaire, inquiry, investigation, etc. would be restricted to such issues in the "limited scrutiny". 9.11 In view of the above, the bench is of considered opinion that the very exercise of jurisdiction to examine/scrutinize the transaction in BEL shares are not covered in the any of the issues identified for the examination under the "limited scrutiny". The examination of refund claim in a limited scrutiny cannot be construed as giving jurisdiction to a complete scrutiny. The AO has expanded the scope of "limited scrutiny" without following due procedure as directed under various instructions/orders. Therefore we are inclined to hold that the AO has exceeded his jurisdiction in disallowing the capital loss of Rs. 20,24,90,717/- and further determining the business loss of Rs. 44,91,482/- by allowing the assessee to set off against capital gain from acquisition of smartplay startup by aricent and accordingly we set a-side the order of the AO being without jurisdiction & bad in law. 9.12 As the additional grounds raised by the....
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.... failed to appreciate that the jurisdiction of the Appellant, a non- resident, lies with the administrative control of Director General of Income-tax (Intl. Tax) and not the JAO. 3.3. The learned CIT(A) has erred in (i) concluding that the JAO has correctly assumed the jurisdiction as the Appellant was a resident during the year under consideration; (ii) concluding that the Appellant objected to incorrect assumption of jurisdiction by JAO at the fag end of the assessment proceedings; (iii) not appreciating that an objection to such jurisdiction was raised by the Appellant during the assessment proceedings. 4. GROUNDS RELATING TO PROCEEDINGS UNDER SECTION 147: 4.1. The learned CIT(A) has erred in confirming the order passed under section 147 consequent to the notice under section 148 issued by the JAO without any tangible material that suggests income has escaped assessment. 4.2. The learned CIT(A) has erred in not appreciating that (i) notice under section 148 was issued solely on the basis on the assessment order of AY 2016-17 and such borrowed satisfaction is not sufficient to confer power to initiate proceed....
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.... a) the Appellant was not a trader in shares; b) the Appellant held Bonus BEL Shares as his capital asset from the date of its allotment and c) such characterization is in conformity with the guidelines laid down by the Board and binding on the learned AU. 8. GROUND RELATING TO INTEREST UNDER SECTION 234A, 234B AND 234C: 8.1. The learned CIT(A) erred in confirming the interest levied by the Jearned AU under section 234A, section 234B and section 234C. On facts and circumstances of the case and law applicable, interest under section 234A, section 234B and section 234C is not leviable. The Appellant denies its liability to pay any interest under section 234A, section 234B and section 234C. The Appellant submits that each of the above grounds/ sub-grounds are independent and without prejudice to one another. The Appellant craves leave to add, alter, vary, omit, substitute, or amend the above grounds of appeal, at any time before or at the time of hearing, of the appeal, so as to enable the Income-tax Appellate Tribunal to decide the appeal according to law. 11.1 The assessee has raised the following additional grounds of appeal: ....
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....re held by him as long term capital asset before he sold them for a consideration of Rs. 22,55,37,300/-. The assessee in his return, inter-alia claimed an exemption under section 10(38) qua long term capital gain ('LTCG') of Rs. 22,55,37,300/- arising from sale of bonus shares. The Assessee was issued a notice under section 148 of the Act by the learned Deputy Commissioner of Income Tax, Circle 6(1)(1) ("AO") on 31.03.2021 to reassess the income for AY 2017-18. The notice required the Assessee to file a return of income within 30 days. The Assessee filed the return on 31.05.2021. Subsequently, vide notices under section 142(1) of the Act, reasons to believe were supplied and additional information were sought by the AO. The Assessee complied with the notices issued by the AO. Finally, the AO recharacterized the LTCG from sale of bonus shares to business income and denied the exemption claimed under section 10(38) of the Act and treated the same as business income amounting to Rs. 22,55,37,300/- & assessed on a total Income of Rs. 23,20,46,310/- 13.1 The AO passed the final assessment order on 29/03/2022 under section 147 of the Act without issuing a draft order under sec....
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.... Court in the case of Home Finders Housing Ltd. V. Income Tax Officer, Corporate Ward 2(3) reported in [2018] 94 taxmann.com 84 (SC) as well as judgement of the Apex Court in the case of Sky Light Hospitality LLP v. Assistant Commissioner of Income Tax [2018] 92 taxmann.com 93 (SC). 20. We have heard the rival submissions & perused the material available on record. It is undisputed that the Assessee is a nonresident during the previous year as observed by the AO in his assessment order. Hence, he is an 'eligible assessee' under section 144C(15)(b) of the Act. It is also undisputed that draft assessment order was not issued to the Assessee before passing the final assessment order u/s 147 of the Act. Section 144C of the Act is a machinery provision which has been incorporated for the benefit of the assessee including the "eligible assessee". The non-resident Indian has been included in the definition of 'eligible assessee' u/s 144C (15)(b)(ii) of the Act w.e.f. 1st April, 2020 and therefore, the assessment proceeding in respect of a non-resident Indian undertaken after the said date are to be governed under the provisions of section 144C of the Act. Further, we are of the....
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....ake on or after 01st day of October, 2009 any variation in the income or loss returned which is prejudicial to the interest of the assessee. Under sub-section (2) of Section 144C, the assessee gets an opportunity to file his objections within thirty days of such variation before the Dispute Resolution Panel as well as before the Assessing Officer. As per sub-section (3) of Section 144C, the Assessing Officer would complete the assessment on the basis of the draft order if the assessee either intimates his acceptance of the variation or does not raise objections within the time prescribed. Under sub-section (5) of Section 144C, the Dispute Resolution Panel could issue such directions to the Assessing Officer as it thinks fit for his guidance to enable him to complete the assessment in case the assessee has raised an objection. Under subsection (7) of Section 144C, it is open for the Dispute Resolution Panel to make further inquiries or have such inquiries made before issuing the directions referred to in sub-section (5). Sub- section (8) of Section 144C recognizes wide powers of the DRP to confirm, reduce or enhance the variations proposed in the draft order subject to the limitatio....
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.... sub-section (5) of Section 144C, the Assessing Officer is expected to pass the order of assessment in terms of such directions without giving any further hearing to the assessee. Thus, at the level of the Assessing Officer, the directions of the DRP under subsection (5) of Section 144C would bind even the assessee. He may of course challenge the order of the Assessing Officer before the Tribunal and take up all contentions. Nevertheless at the stage of assessment, he has no remedy against the directions issued by the DRP under sub-section (5). All these provisions amply demonstrate that the legislature desired to give an important opportunity to an assessee who is likely to be subjected to upward revision of income on the basis of transfer pricing mechanism. Such opportunity cannot be taken away by treating it as purely procedural in nature. 8. Reference by the Revenue to the circulars dated 03.06.2010 and 19.11.2013 in this regard would be of no avail. First of these circulars was an explanatory circular issued by the Finance Ministry in which it was provided that these amendments (which included Section 144C of the Act) are made applicable with effect from 01.10.2009 an....
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....ns to the AO; or-file his objections, if any, to such variation with,-(i) the DRP; and (ii) the AO. 25. Sec. 144C(3) then provides that the AO shall complete the assessment based on the draft order, if the assessee intimates to the AO the acceptance of the variation; or no objections are received within the period specified in sub-s. (2). 26. Sec. 144C(4) provides that the AO shall, notwithstanding anything contained in s. 153, pass the assessment order under sub-s. (3) within one month from the end of the month in which, the acceptance is received, or the period of filing of objections under sub-s. (2) expires. 27. Sec. 144C(5) provides that the DRP shall, in a case where any objection is received under sub-s. (2), issue such directions, as it thinks fit, for the guidance of the AO to enable him to complete the assessment. 28. Sec. 144C(6) provides that the DRP shall issue the directions referred to in sub-s. (5), after considering the following : (a) draft order; (b) objections filed by the assessee; (c) the evidence furnished by the assessee; (d) the report, if any, of the AO, Valuation Officer or TPO or any....
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....O to pass a draft assessment order under s. 144C of the said Act and this is a settled position as explained by the Court in its decision in Turner International India (P) Ltd. vs. Dy. CIT (2017) 297 CTR (Del) 460 : (2017) 152 DTR (Del) 303 : (2017) 82 taxmann.com 125 (Del). In the said case the AO overlooked the above legal position and proceeded to pass the final order, thereby depriving the assessee of an opportunity of questioning the draft assessment order under s. 144C of the said Act before the DRP, the Court had no hesitation in setting aside the impugned assessment order and consequently the notice of demand. Again the Special Leave to appeal against this decision was dismissed by the Hon'ble Supreme Court on 16th March, 2018. 34. In International Air Transport Association (supra), the Division Bench of this Court has also taken a view that special rights are made available to an eligible assessee under s. 144C of the said Act. These special rights contemplate the making of a draft assessment order under s. 144C by the AO before he makes a final assessment order under s. 143(3) of the said Act. Such a draft assessment order bestows certain rights upon an eligible ....
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....m the conspectus of the aforesaid decisions, the legal position which emerges is that where a final assessment order is made by the AO without compliance with the mandate of s. 144C of the said Act, the same is not merely an erroneous order as contended by Ms. Linhares, but such an order is without jurisdiction, as held by this Court or, null and void, as held by Andhra Pradesh High Court. The assessment order dt. 18th Dec., 2009 was therefore not merely an erroneous order but the same was an order without jurisdiction, null and void. 20.2 We respectfully following the judgements of Hon'ble High Court of Gujarat and Hon'ble High Court of Bombay at Goa cited (supra), held that the order passed by the AO lacked jurisdiction as there is a statutory violation in not following the procedure prescribed and the same order also cannot be cured. As the order passed by the AO is without jurisdiction, the assessment order dated 29.3.2022 is without jurisdiction, null and void. 20.3 As the additional grounds raised by the assessee are allowed & accordingly other ground of appeal on merits of the case are not adjudicated & are kept open. 21. In the result, appeals filed by the assessee....
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....en identified for examination: i. Whether refund claim is justified. il. Whether Investment and Income relating to foreign bank account are duly disclosed.L 2. उपरोकà¥à¤¤ के समà¥à¤¬à¤¨à¥à¤§ में, में आप को उपरà¥à¤¯à¥à¤•à¥à¤¤ आपफर विवरणी के समरà¥à¤¥à¤¨ में दिनांक 09/08/2017 को 03:30 PM या उसके पहले कोई साधà¥à¤¯/सूचना पà¥à¤°à¤¸à¥à¤¤à¥à¤¤ करने का अवसर मदान करता/करती है। In view of the above, I would like to give you an opportunity to produce any evidence/information which you feel is necessary in support of the said return of income on or before 09/08/2017 at 03:30 PM. उपà¤....