TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1049
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....w 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. 2. 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. 3. 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 veil under them to avoid taxability in India. 4. The Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in deleting the addition of Rs. 5,03,78,662/- made by Assessing Officer. 5. The ld. Commis....
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....2007-08& 2008-09 on 30/03/2014 by making certain additions, wherein the A.O. held that the Assessee being a foreign company is a resident in India u/s 6(3) of the Act and even if the foreign company is non-resident in India, they will still be liable for tax in India u/s 9(1) of the Act. Accordingly, Ld. A.O. passed an assessment orders on 30/03/2014 u/s 153C/144 of the Act by holding that income of the Assessee for the years under consideration are liable to be taxed in India. 5. Aggrieved by the above assessment orders dated 30/03/2014, the assessee preferred two appeals before the Commissioner of Income Tax (Appeals) by challenging assessment orders on the merits as well as on the legal issue. The Ld. CIT(A) allowed the Appeals of the Assessee on 11/06/2015 finding that the Assessee is a non-resident in India and not liable to pay tax in the year under consideration, further held that the assessment orders have been passed without passing the Draft Assessment Order as per Section 144C of the Act. 6. As against the orders of the Ld. CIT(A) dated 11/06/2015 pertaining to A.Ys. 2007-08 & 2008-09, the Revenue preferred the above Appeals and the Assessee has also filed Cross Ob....
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....ation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92-CA; and(ii)any foreign company.]" 11. In the present cases, the AO has not passed the draft assessment order by in compliance with provisions of section 144C(1) of the Act. The Hon'ble High Courts and Co-ordinate Bench of the Tribunal have laid down the ratio that having failed to pass assessment orders, the final assessment orders passed by the AO stands vitiated for failure to adhere to mandatory requirement of passing of the draft assessment order in terms of section 144C(1) of the Act. 12. The Hon'ble jurisdictional High Court in the case of Turner International India Pvt. Ltd. Vs. DCIT 2017 (5) TMI 991 held as under: "10. The short ground on which the aforementioned final assessment orders and the consequent demand notices have been challenged is that there was non-compliance with the mandatory provision contained in Section 144C(1) of the Act requiring the AO to first frame draft assessment orders. 11. The question whether the final assessment order stands vitiated for failure to adhere to the mandatory re....
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....ssessment 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 consequential demand notices issued by the AO and the initiation of penalty proceedings are hereby set aside. 18. The petitions are allowed in the above terms. No order as to costs." 13. In an identical circumstances, the Hon'ble jurisdictional High Court while dealing with the substantial question of law as to whether not passing of draft assessment order as per the provisions of section 144C(1) of the Act which is applicable to non-resident and whether the Assessee thereon is a resident of India?, in the case of CIT International Taxation-2 Vs. Rolland Enterpr....
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....hat it is an "eligible assessee" and the procedure as prescribed under the Act was not followed. In as much as, the draft assessment order was not issued as required under Section 144C(1) of the Act. 3.4 The Assessing Officer (AO) held that the Assessee's income was chargeable to tax under the Act, as its control and management is situated in India. The AO held that the Assessee was a resident of India under Section 6(3) of the Act. And, passed assessment orders on 28.03.2014. 3.5 Aggrieved by the assessment orders, the Assessee preferred appeals before the Commissioner of Income Tax (Appeals) [hereafter CIT(A)], which were allowed by the orders dated 27.02.2015. The learned CIT(A) found that the control and management of the affairs of the Assessee was in the hands of its Board of Directors who were not the residents of India. The learned CIT(A) faulted the findings of the AO to treat the Assessee as a resident in terms of provision of Section 6(3)(ii) of the Act. 3.6 The Revenue being aggrieved by the orders passed by the learned CIT(A) preferred appeals in respect of the assessment orders in question before the Income Tax Appellate Tribunal (hereafter ....
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.... of section 144C of the Act, the assessment is bad in law, the first contention of the assessee is that they are foreign company and therefore, falls within the expression "eligible assessee" u/s. 144C of the Act. On this aspect it could be seen from the record that the assessee company incorporated in Cyprus as per laws of Cyprus and have been resident of Cyprus. The assessee has been filing the Income- tax Return with Cyprus Revenue Authorities. Copies of ITRs are also provided by FT & TR Division to the Assessing Officer. On examining these documents, Ld. CIT(A) recorded finding of fact that the information with the Ld. Assessing Officer amply and evidently substantiate as a pointer to the assessee's contention that it is a resident of Cyprus. Learned CIT(A) further referred to the observations of the Assessing Officer of the assessee in Cyprus that the assessee was registered outside India in accordance with the laws of Cyprus and such location was not challenged. CIT(A) found that the submissions made by the assessee tallied with the information and documents provided by FT & TR, more particularly at paragraph No. 5.9 of such an assessment order. 15. There is no c....
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....s to which reference would be made presently. 12. In Zuari Cement Ltd. v. ACIT (decision dated 21st February, 2013 in WP(C) No. 5557/2012), the Division Bench (DB) of the Andhra Pradesh High Court categorically held that the failure to pass a draft assessment order under Section 144C (1) of the Act would result in rendering the 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] 369ITR 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 ....
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....for reference to Dispute Resolution Panel (DRP), was inserted in the Income-tax Act, 1961 by Finance (No.2) Act, 2009. Sub section (1) of section 144C reads as under: "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 (hereinafter 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. Explanatory Circular for Finance (No.2) Act, 2009 i.e. Circular No. 5 of 2010 dated 03.06.2010, in para 45 has explained the said new section 144C and the consequential amendments made in other sections of Income-tax Act. Para 45.5 of the Circular No.5/2010 dated 03.06.2010 reads as under: "45.5 Applicability: These amendments have been made applicable with effect from 1st October, 2009 and will accordingly apply in relation to assessment year 2010-11 and subsequent assessment years. The Dispute Resolution Panel Rules have been notified by S. O. No. 2958 (E) dated ....