TaxTMI 
TaxTMI 
2026 (9) TMI 1147
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....ection 143(3) read with section 263 and 144C(13) of the Act beyond the time limit prescribed under section 144C(4) of the Act, therefore the final assessment order is bad in law and ought to be quashed. 2. Ground No.2 Without prejudice to ground no. 1, on the facts and in the circumstance of the case and in law, the learned AO erred in holding that gains amounting to INR 63,68,30,403 arising on account of cancellation of foreign exchange forward contracts (FX contracts) are chargeable to tax in India as 'income from other sources' as against 'income from capital gains' considered by the Appellant. 2.1. The learned AO erred in holding that the transaction in purchase and settlement of FX contracts cannot be said to be resulting in capital gains as FX contracts were never held by the Appellant as capital asset but were meant to be settled for price difference. 2.2. The learned AO erred in concluding that income arising from cancellation of FX contracts is neither capital gains nor business income but 'income from other sources' taxable under Article 23 of the India-Singapore Tax Treaty (IS Tax Treaty). 3. Ground No.....
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....cts be taxed as income from other sources and taxable in contracting state that is India as per India Singapore DTAA. 4. The assessee made an exhaustive submission before the Ld. CIT(IT) which was considered, however were not found acceptable by the Ld. CIT(IT). Accordingly, it is held by Ld. CIT(IT) that the assessee could not substantiate how the cancellation of forward contracts in foreign exchange in Indian market are related to its normal business claiming simultaneously that it does not have a PE in India. The assessee could not substantiate the capital nature of such asset wherein the gain has been as a result of cancellation of the deal. In view of such findings, the gain out of cancellation of forward contracts is recorded an income from other sources and accordingly approved in India, reference was drawn to Article 23 of the India Singapore DTAA. In terms of aforesaid findings by Ld. CIT(IT) in the order u/s 263 dated 25.03.2021, the Ld. AO has given effect by adding an amount of Rs. 63,68,30,403/- in the income of assessee under the income from other sources to be taxed at 40% + surcharge. 5. Before passing the final order, the Assessing Officer has also issued a d....
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....Astro Offshore PTE Ltd. vs DCIT International Taxation, New Delhi stating that the limitation prescribed under sub-section (2) and sub-section (4) of section 144C needs to be strictly followed both by assessee as well as the Revenue. The Assessing Officer has no compulsion to wait beyond the period of limitation prescribed under the statute for completing final assessment, anticipating that assessee would be filing an objection before DRP. Ld. AR also relied on the decision of ITAT Bangalore "C" Bench in the case of Yokogawa India Ltd. vs. The Asst. Commissioner of Income Tax in ITA (TP)A No. 1715 & 692/Bang/2016 for assessment years 2011-12 & 2012-13 vide order dated 8th March, 2021, wherein the identical ground has been decided by the Tribunal and has held that if the order u/s 143(3) r.w.s 144C is in violation of mandatory provisions of section 144C(10) and (13) of the Act by not passing the order in pursuance of and in conformity with the directions of DRP. It is held that, if the objections are invalid as time barred having not been filed within the time prescribed under sub-section (2) of section 1444C, the AO will have to act in terms of Section 144C(3)(b) and complete the a....
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....he Assessing Officer the acceptance of the variation; or (b) no objections are received within the period specified in sub-section (2). (4) The Assessing Officer shall, notwithstanding anything contained in section 153 or section 153B, pass the assessment order under sub-section (3) within one month from the end of the month in which,- (a) the acceptance is received; or (b) the period of filing of objections under sub-section (2) expires." 12. In the present case, the assessee has not filed its objections within a period of 30 days, according to DRP assessee's entitlement to file the objections was expired on 30th April, 2022, as the Ld. AO has confirmed service of draft order dated 31st March, 2022, on the same day through electronic mode i.e., ITBA system, therefore, the objection filed by assessee on 4th May,2022 are considered as time-barred. The facts remained undisputed that the DRP rejected the objection of assessee and the assessee has not objected to such observations of the DRP, instead the assessee raised the contention that in case as per sub-clause 3(b) of section 144C, if the objections are not received within a period specified ....
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.... (2) of section 144C of the Act, challenging the proposed variation, he has to complete the assessment within a period of one month from the end of the month in which the period of filing of objections under sub-section (2) expires. In the facts of the present appeal, as per Revenue's own admission the time limit for filing the objections before learned DRP against the draft assessment order was till 17-1-2020. 9. Whereas, the assessee, admittedly, filed the objections on 27-1-2020, which is beyond the period of limitation. Thus, as per the mandate of sub-section (4)(b) of section 144C, the Assessing Officer was duty-bound to complete the assessment based on the draft assessment order on expiry of thirty days from the date of receipt of draft assessment order, since, by that time the assessee had not filed the objections before learned DRP. Whereas, it is a fact on record that the Assessing Officer passed the final assessment order on 12-1-2021, ie., much beyond the period of limitation prescribed under section 144C(4)(b) of the Act. 10. The contention of learned Departmental Representative that before the Assessing Officer could have passed the final assessme....
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....led objections before DRP on 13/04/2016, thereby causing 2 days delay. The view taken by DRP that it has no power to condone the delay is inasmuch as such power is absent under section 144C of Income Tax (DRP) Rules 2009 cannot be found fault with. Hon'ble Pune Tribunal in case of TDK Electronics AG vs ACIT (supra) has dealt in detail with the various provisions, Act, wherein, the legislature has conferred the power of condoning delay to various authorities under the Act. Hon'ble Pune Tribunal in case of TDK Electronics AG US ACIT (supra) on identical issue has held as under: "15. The scheme of the relevant provisions in this regard is that when the AO makes a reference to the TPO, the latter passes an order u/s. 92CA(3) of the Act. On receipt of the order from the TPO, the AO passes a draft order u/s. 144C(i). If dissatisfied with the draft order, the assessee has an option to either approach the DRP route by filing objections before the DRP or choose the appellate recourse by filing an appeal before the CIT(A). If an assessee opts to be governed by the procedure enshrined for the DRP reference, then the DRP is supposed to issue directions within nine mon....
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....ry is that no valid objections were filed by the assessee. One cannot contemplate a situation that the objections are invalid for the DRP so as not to issue any direction u/s 144C(5) and valid for the AO so as to pass order u/s 144C(13) of the Act. If the objections are invalid as time barred having not been filed within the time prescribed under sub-section (2) of section 1444C, the AO will have to act in terms of Section 144C(3)(b) and complete the assessment within the time prescribed u/s 144C(4)(b) of the Act, namely, within one month from the end of the month in which the period of filing of objections under sub-section (2) expires. 17. Adverting to the facts of the instant case, it is found that, the period of 30 days for filing objections within sub-section (2) of section 144C expired on 23.01.2019. Going by the mandate of subsection (3) of section 144C(3)/144C(4), the AO was supposed to complete the assessment on the basis of the draft order by February, 2019. As against this, the AO actually completed the assessment u/s. 144C(13) on 24.10.2019. Such a completion of assessment not only under the wrong provision but also beyond the limitation period is ultra vires a....