Oxbow Energy Solutions LLC Vs DCIT (ITAT Delhi)
ITAT Delhi held that assessment order passed in violation of the directions of Dispute Resolution Penal (DRP) is against the provisions of sub-section (10) and (13) of section 144C of the Act and hence liable to be quashed
Facts- Assessee is a non-resident corporate entity incorporated in the United States of America (USA). From the information generated through the Annual Information Report (AIR) of the department, it was noticed that certain income earned by the assessee during the year was not offered to tax.
The assessee had not filed any return of income for the impugned assessment year. From the system generated information, it was noticed by AO that in the year under consideration, the assessee had entered into a transaction of sale and purchase in National/Multi-commodity exchange. In absence of any details due to non-filing of ROI, NMS notice was sent to the assessee.
However, the notice remained un-complied. Thus, AO forming a belief that income chargeable to tax under dispute has escaped assessment, reopened the assessment u/s 147 by issuing notice u/s 148. The same was also not responded. Due to non-furnishing of details, AO added the amount by invoking provisions of section 69A.
While passing the final assessment order in pursuance to the directions of learned DRP, the Assessing Officer, though, deleted the addition of Rs.53,14,19,634/- proposed in the draft assessment order, however, he added the amount of Rs.26,56,35,337/- accepted in the draft assessment order.
Conclusion- Held that the impugned assessment order has been passed in clear violation of the directions of learned DRP. Therefore, the assessment order is a nullity in the eyes of law as it is against the provisions contained under sub-section (10) and (13) of section 144C of the Act. That being the factual and legal position, we quash the final assessment order.
We have come across several instances of open defiance and non-implementation of directions issued by DRP by the Assessing Officers. This, in our view, is a very disturbing trend and reflects poorly on the credibility of the department and shakes the confidence of tax payers. Therefore, it goes against the Government’s policy of adopting taxpayer friendly approach. In any case of the matter, the DRP is constituted by three senior Commissioner level officers of the department and is a dispute resolution mechanism set up by the Government under the statute. As per the Statute, the Assessing Officer is duty-bound to implement the directions of the DRP. The Assessing Officer, being a statutory authority, is bound to act in accordance with the procedure laid down in Statute and cannot deviate. Since, we have come across several instances of non-implementation of directions given by the DRP to the Assessing Officers, it is high time to take appropriate corrective measures to stem the deficiencies. Therefore, we direct the matter to be brought to the notice of the concerned higher Authorities so that necessary advisory/guidelines are issued to sensitize the Assessing Officers in the matter of implementation of directions of the DRP. We leave the matter at this.
FULL TEXT OF THE ORDER OF ITAT DELHI
Captioned appeal has been filed by the assessee assailing the final assessment order dated 26.03.2021 passed under section 144C of Income-tax Act, 1961 (for short ‘the Act’) pertaining to assessment year 2012-13, in pursuance to direction of learned Dispute Resolution Panel (DRP).
2. The dispute in the present appeal is confined to addition of amount of Rs.26,56,35,337/- purportedly under section 69A of the Act.
3. Briefly the facts relating to the issue in dispute are, the assessee is a non-resident corporate entity incorporated in United States of America (USA). From the information generated through Annual Information Report (AIR) of the department, it was noticed that certain income earned by the assessee during the year was not offered to tax. Further, form the internal system developed by the department, viz., I-Taxnet; it was found that the assessee’s name appears in the list of Non-Filers Monitoring System (NMS). Meaning thereby, the assessee had not filed any return of income for the impugned assessment year. From the system generated information, it was noticed by the Assessing Officer that in the year under consideration, the assessee had entered into transaction of sale and purchase in National/Multi-commodity exchange, amounting to Rs.27,05,30,735/- and has made foreign remittances amounting to Rs.79,70,54,971/-. As observed by the Assessing Officer, in absence of any details due to non-filing of return of income, NMS notice was sent to the assessee to furnish necessary information on financial transaction/activities made during the year. However, the notice remained un-complied. Thus, ultimately, the Assessing Officer, forming a belief that income chargeable to tax in the year under dispute has escaped assessment, reopened the assessment under section 147 of the Act by issuing a notice under section 148 of the Act. As alleged by the Assessing Officer, neither the assessee complied with the notice issued under section 148 of the Act, nor to the notice issued under section 142(1) of the Act. Due to this reason, the Assessing Officer issued notices under section 133(6) of the Act to M/s DSP Merrill Lynch Ltd., M/s. City Bank Ltd. and M/s. Bombay Stock Exchange Ltd. From the information received from M/s DSP Merrill Lynch Ltd., which acted as a broker in respect of share transaction entered by the assessee, the Assessing Officer found that in the year under consideration the assessee had remitted aggregate amount of Rs.79,70,54,971/- in three trenches. He further found that the assessee has sold shares of Rain Commodities and Rain Industries Ltd. held by it in demat account with M/s DSP Merrill Lynch Ltd. for a consideration of Rs.26,57,84,295/- on 14.11.2011, which was reflected in the client statement of account provided by M/s DSP Merrill Lynch Ltd. Thus, stating that out of total remittances of Rs.79,70,54,971/- source of Rs.26,56,35,337/- could be identified, whereas, the source of the balance amount of Rs.53,14,19,634/- could not be identified, nor explained by the assessee due to non-furnishing of details, the Assessing Officer added back the amount of Rs.53,14,19,634/- at the hands of the assessee by invoking the provisions of section 69A of the Act, while framing a draft completing the assessment order to the best of his judgment under section 144 read with section 147 and 144C(1) of the Act.
4. Against the draft assessment order so proposed, the assessee raised objections before learned DRP. In course of proceeding before learned DRP, the assessee explained the reason for non-compliance in assessment proceeding by stating that since it did not have any login id on the Income Tax e-filing portal, wherein notices under section 148 and 142(1) of the Act were issued, it could not respond to such notices.
5. Insofar as the merits of the addition is concerned, the assessee contended that during the year under consideration it had sold 92,50,000 equity shares of certain Indian companies through M/s. Bombay Stock Exchange for a net consideration of Rs.26,57,84,297/- and the amount was remitted outside India. The assessee submitted that the share transaction was Security Transaction Tax (STT)- paid, hence, resultant long-term capital gain was exempt under section 10(38) of the Act. It was submitted by the assessee that except this transaction, the assessee had neither made any other share transactions, nor made any other remittances over and above Rs.26,56,35,337/-. The assessee further submitted that the other two transactions alleged by the Assessing Officer and subject matter of addition in the assessment order are duplication of this transaction. To substantiate its claim, the assessee furnished certain additional evidences before learned DRP. After admitting the additional evidences, learned DRP forwarded them to the Assessing Officer for verification and furnishing the report thereon. As observed by learned DRP, without offering any comment/observation on the additional evidences furnished by the assessee, the Assessing Officer simply stated that the additional evidences should not be admitted and reiterated the stand taken in the assessment order. After considering the submissions of the assessee in the context of evidences brought on record, learned DRP, being convinced that the assessee had actually made a single remittance of Rs.26,56,35,337/-, whereas, other two amounts forming part of aggregate amount of Rs.79,7054,971/- considered by the Assessing Officer as three separate transactions, are in reality duplication of only one transaction, deleted the addition of Rs.53,14,19,634/- made by the Assessing Officer. While passing the final assessment order in pursuance to the directions of learned DRP, the Assessing Officer, though, deleted the addition of Rs.53,14,19,634/- proposed in the draft assessment order, however, he added the amount of Rs.26,56,35,337/- accepted in the draft assessment order.
6. We have considered rival submissions and perused the materials on record. Facts on record clearly reveal that based on certain information received from M/s DSP Merrill Lynch Ltd., the Assessing Officer found that in the year under consideration, the assessee had made the following remittances outside India:
