TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 988
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....law as well as on facts in holding that there is merit in the contention of the appellant regarding the unlawful initiation of proceedings u/s 153C of Income Tax Act. 2. The Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in holding that assessee company is not resident in terms of provisions under section 6(3)(ii) of the I.T. Act for the purpose of tax liability whereas on the basis of seized documents/e-mails and various statements of Sh. Ajay Kalsi/Sh. Anil Aggarwal, it has been established that control and management of the assessee company is situated wholly in India. 3. The Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in ignoring that underlying assets and sources of revenue of all the overseas companies are the Indian Companies. 4. The Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in ignoring the substantial evidence in form of seized material, E-mails, Share Holding pattern showing the ultimate control and management of Indian companies and overseas companies lies with Sh. Ajay Kalsi and Smt. Mala Kalsi, who have created different verticals of corporate ....
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....2014, the assessee preferred two appeals before the Commissioner of Income Tax (Appeals) by challenging assessment orders on the merits as well as on certain legal issues including the jurisdiction of the A.O. u/s 153C of the Act. The Ld. CIT(A) allowed the Appeals of the Assessee on 25/03/2015 on the grounds that the impugned assessment orders have been passed without passing the Draft Assessment Order as per Section 144C of the Act, the initiation of proceeding u/s 153C of the Act is unlawful and also on the ground of non-compliance of provisions of section 124 to 127 of the Act. 6. As against the orders of the Ld. CIT(A) dated 25/03/2015 pertaining to A.Ys. 2010-11 & 2011-12, the Revenue preferred the above Appeals and the Assessee has also filed Cross Objections in support of the order of the Ld. CIT(A) on the Grounds mentioned above. 7. The Ld. Department's Representative addressing on the ground No. 1 of Appeal of the Revenue, submitted that the Ld. CIT(A) erred in holding that the initiation of proceedings u/s 153C of the Act is unlawful. Further, the Ld. Department's Representative relying on the assessment orders sought for reversing the orders of Ld. CIT(A) ....
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.... action u/s 153C is to be taken in respect to overseas companies listed in Para 1 above, wherever documents pertaining to overseas companies have been seized." 10. From the above, it is crystal clear that, single consolidated satisfaction note has been treated as satisfaction for some of the foreign companies listed in para 1 including the Assessee. The Hon'ble Supreme Court in the case of CIT(A) Vs. Singhad Education Society (supra) held as that no adverse assessment can be made for a particular assessment year unless it is proved that the incriminated material so found pertains to that year. The relevant portion of the Hon'ble Supreme Court is reproduced as under:- "18) The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co- relation, document-wise, with these fo....
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....committed error in holding that Assessee is not a resident and erroneously held that passing of the assessment order in the absence of the draft assessment orders illegal. Thus, sought for allowing the Ground No. 2 to 6 of Revenue's appeals. 14. Per contra, the Ld. AR submitted that the Assessee is a foreign company and is an "eligible assessee" within the meaning of section 144C(15)(b) of the Act, therefore, as per section 144C(1) of the Act, it is mandatory for the AO to pass draft assessment orders. As the Assessing Officer has not passed draft assessment orders, the final assessment orders passed by the AO deserves to be set aside. The ld. AR by relying on the plethora of judicial precedents sought for dismissal of the ground Nos. 2 to 6 of the Revenue. 15. We have heard both the parties and perused the material available on the record. The assessee is a foreign company and the Assessee herein is an 'eligible assessee' in terms of section 144C(15)(b) of the Act. As per the provisions of section 144C(1) of the Act, the Assessing Officer is mandatorily required to pass the Draft Assessment order. For the purpose of ready reference, the provisions of section 144C(1) of the A....
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....e final assessment order "without jurisdiction, null and void and unenforceable." In that case, the consequent demand notice was also set aside. The decision of the Andhra Pradesh High Court was affirmed by the Supreme Court by the dismissal of the Revenue's SLP (C) [CC No. 16694/2013] on 27th September, 2013. 13. In Vijay Television (P) Ltd. v. Dispute Resolution Panel [2014] 369 ITR 113 (Mad.), a similar question arose. There, the Revenue sought to rectify a mistake by issuing a corrigendum after the final assessment order was passed. Consequently, not only the final assessment order but also the corrigendum issued thereafter was challenged. Following the decision of the Andhra Pradesh High Court in Zuari Cement Ltd. v. ACIT (supra) and a number of other decisions, the Madras High Court in Vijay Television (P) Ltd. v. Dispute Resolution Panel (supra) quashed the final order of the AO and the demand notice. Interestingly, even as regards the corrigendum issued, the Madras High Court held that it was beyond the time permissible for issuance of such corrigendum and, therefore, it could not be sustained in law. 14. Recently, this Court in ESPN Star Sports Maurit....
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....ted the following questions of law in the present appeals: "2.1 Whether on the facts and in the circumstances of the case, the Ld. ITAT has erred in law in holding that assessment orders passed are unsustainable for not passing the draft assessment order as per the provisions of Section 144C(1) of the Act which is applicable to non-residents and the assessee in this case is a resident of lndia? 2.2 Whether on the facts and in the circumstances of the case, the Ld. ITAT has erred by relying on facts in ignoring statements of Sh. Ajay Kalsil Sh. Anil Aggarwal and the documents seized wherein it was established that the control and management of the assessee company is situated wholly in India with Sh. Ajay Kalsi and Smt. Mala Kalsi, who have created different verticals of corporate veil under them to avoid taxability in India?" 3. The context in which the aforesaid questions of law arise are briefly narrated as under: 3.1 Search and seizure operations were conducted by the Investigation Wing on 22.03.2012 in respect of group of entities (M/s Focus Energy Group). It is stated that during the search proceedings certain documents containing informatio....
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....t was necessary for the AO to pass a draft assessment order and not to proceed straightaway to pass a final assessment order. The said issue is covered in favour of the Assessee by the decision of this Court in Pr. Commissioner of Income Tax-7 v. Sumitomo Corporation India (P) Ltd.: 2024 SCC OnLine Del 6125. 6. The term "eligible assessee" is defined under Section 144C(15)(b) of the Act. which reads as under: "144C. ***** Reference to dispute resolution panel. *** (15) For the purposes of this section, (a) *** *** *** (b) "eligible assessee" means, (i) any person in whose case the variation referred to in subsection (1) arises as a consequence of the order of the Transfer Pricing Officer passed under subsection (3) of section 92CA; and (ii) any non-resident not being a company, or any foreign company." 7. The first question projected by the Revenue proceeds on the basis that the Assessee is taxable as a resident of India. However, it is not disputed that the Assessee is an eligible* assessee under Section 144C of the Act. There is no dispute that the Assessee is incorporated under the laws of British ....
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....mpany. It is, therefore, inferred that since the transaction between Focus Energy Ltd. with the assessee was accepted as an international transaction continuously over a period of time, it goes without saying that other party, i.e., the assessee is a foreign company. Any transaction between Indian Company and Indian company cannot be an international transaction and therefore, the international transaction of Focus Energy Ltd. which is an Indian Company, will necessarily be with the foreign company. On this premise also, CIT(A) concluded that it an unmistakable pointer that the assessee is a foreign company and such a fact is admitted by the Assessing Officer while dealing with the transactions of Focus Energy Ltd. with its foreign AEs continuously over a period of time. Basing on these facts, learned CIT(A) concluded that the material on record is more than enough to conclude that the assessee is a foreign company and therefore, under the provisions of section 144C, the Assessing Officer shall, in the first instance, forward a draft order of the proposed assessment to the assessee if he proposes to make any variation which is prejudicial to the interest of assessee. 16. E....
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....ment Ltd. v. ACIT (supra), the Madras High Court in Vijay Television (P) Ltd. v. Dispute Resolution Panel, Chennai (supra) as well as the Bombay High Court in International Air Transport Association v. DCIT (2016) 290 CTR (Bom) 46, came to the same conclusion. 15. Mr. Dileep Shivpuri, learned counsel for the Revenue sought to contend that the failure to adhere to the mandatory requirement of issuing a draft assessment order under Section 144C (1) of the Act would, at best, be a curable defect. According to him the matter must be restored to the AO to pass a draft assessment order and for the Petitioner, thereafter, to pursue the matter before the DRP. 16. The Court is unable to accept the above submission. The legal position as explained in the above decisions in unambiguous. The failure by the AO to adhere to the mandatory requirement of Section 144C (1) of the Act and first pass a draft assessment order would result in invalidation of the final assessment order and the consequent demand notices and penalty proceedings. 17. For the aforementioned reasons, the final assessment orders dated 31st March, 2015 passed by the AO for AYs 2007-08 and 2008-09, the....