MAUSMI SA INVESTMENTS LLC (UNDER LIQUIDATION)FOR AND ON BEHALF O LIQUIDATED SUBSIDIARY MAUSMI VENTURES LIMITED, MUMBAI V. ACIT(IT)-3(2)(1), MUMBAI

ITA 7026/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8565 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2014-2015
• Appeal Filed On: 07-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Transfer pricing; Double taxation relief; Validity of assessment; Prejudicial to interest
• Section: 143(3)

Judgement Text

ITA. NO.7026/M.2018 A.Y.2014 - 15 1 IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN , A M AND SHRI AMARJIT SINGH JM / I .T.A. NO. 7026 / MUM/ 201 8 ( / ASSESSMENT YEAR: 2014 - 15 ) MAUSMI SA INVESTMENTS LLC (UNDER LIQUIDATION) (FOR AND ON BEHALF OF LIQUIDATED SUBSIDIARY MAUSMI VENTURES LIMITED) 1 ST FLOOR, WING A, CYBER TOWER 1, CYBERCITY, EBENE, MAURITIUS - 72201 C/O DELOITTE HASKINS & SELLS LLP 28 TH FLOOR , INDIABULLS FINANCE CENTRE, TOWER 3, SENAPATI BAPAT MARG, ELPHINSTONE (W), MUMBAI - 400013. / VS. ACIT INTERNATIONAL TAXATION - 3(2)(1) 16 TH FLOOR, ROOM NO. 1607, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI - 21. ./ ./ PAN/GIR NO. : AAGCM 0928 G ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 09 .0 4 .201 9 / DATE OF PRONOUNCEMENT : . 1 0. 0 4.2019 / O R D E R PER B. R. BASKARAN, A M: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) R.W.S. 144C OF THE ACT FOR ASSESSMENT YEAR 2014 - 15 , IN PURSUANCE OF DIRECTIONS GIVEN BY LD DISPUTE RESOLUTION PANEL (DRP). 2. THE ASSESSEE IS CHALLENGING THE VALIDITY OF ASSESSMENT ORDER PASSED ON THE GROUND THAT THE AO WAS NOT RIGHT IN LAW IN INVOKING THE PROVISIONS OF SEC.144C OF THE ACT IN THE INSTA NT YEAR, SINCE THE CONDITIONS PRESCRIBED FOR INVOKING THE ASSESSEE BY : SHRI P. J. PARDIWALA/ PARAS SAVLA REVENUE BY: SHRI V. SREEKAR (DR) ITA. NO.7026/M.2018 A.Y.2014 - 15 2 SAID PROVISIONS DO NOT EXIST IN THE PRESENT CASE . ACCORDINGLY , IT IS BEING CONTENDED THAT THE ASSESSMENT ORDER PASSED BY THE AO IS VOID AND IS LIABLE TO BE QUASHED. 3. WE HEARD THE PARTIES ON T HIS LEGAL ISSUE. THE FACTS RELEVANT TO THE SAME ARE DISCUSSED IN BRIEF. THE ASSESSEE HEREIN IS A TAX RESIDENT OF CYPRUS. IT HAS INVESTED IN AN INDIAN COMPANY NAMED KEYSTONE REALTORS P LTD (KRPL) BY SUBSCRIBING TO 1556 COMPULSORILY CONVERTIBLE DEBENTURES (CCD) OF KRPL. THE ASSESSEE EARNED INTEREST INCOME OF RS.1963.74 LAKHS DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE OFFERED THE SAME AS ITS BUSINESS INCOME IN THE RETURN OF INCOME FILED BY IT FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE COMPUTED TAX @ 10% AS PER ARTICLE 11(2) OF INDIA - CYPRUS TREATY. 4. THE ASSESSING OFFICER ISSUED A DRAFT ASSESSMENT ORDER ON 31 - 12 - 2017, WHEREIN HE ALSO ASSESSED THE INTEREST INCOME OF RS.1963.74 LAKHS UNDER THE HEAD INCOME FROM BUSINESS. HOWEVER, HE PROPOSED TO COMPUTE TAX @ 20% BY APPLYING THE PROVISIONS OF SEC.115A(1)(A)(II) OF INCOME TAX ACT. THE ASSESSEE FILED OBJECTIONS BEFORE LD DRP, WHEREIN, THE ASSESSEE, INTER ALIA, OBJECTED TO THE DRAFT ASSESSMENT ORDER BY SUBMITTING THAT THE SAME IS ILLEGAL AND BAD IN LAW, AS THE ASSESSING OFFICER DID NOT FOLLOW THE CORRECT PROCEDURE AS LAID DOWN IN THE ACT. THE SAID OBJECTION WAS REJECTED BY LD DRP. IT FURTHER WENT ON TO HOLD THAT THE PROVISIONS OF SEC.115A(1)(A)(II) OF THE ACT CANNOT BE APPLIED IN THE INSTANT CASE . IT TOOK THE VIEW THAT THE INTEREST INCOME SHOULD BE TAXED AT NORMAL RATES APPLICABLE TO FOREIGN COMPANIES. ACCORDINGLY , THE LD DRP ENHANCED THE ASSESSMENT AND DIRECTED THE AO TO COMPUTE TAX APPLYING NORMAL RATES APPLICABLE TO FOREIGN COMPANIES WHICH WA S 40% + EDUCATION CESS + SURCHARGE. THE AO PASSED THE FINAL ASSESSMENT ORDER ACCORDINGLY. 5. CHALLENGING THE ASSESSMENT ORDER, THE ASSESSEE HAS FILED THIS APPEAL. WE HEARD THE PARTIES ON THE LEGAL ISSUE MENTIONED ABOVE. THE LD A.R INVITED OUR ATTENTIO N TO THE PROVISIONS OF SEC.144C(1) AND SUBMITTED THAT THE AO CAN FOLLOW THE PROCEDURE PRESCRIBED UNDER THAT SECTION ONLY IF THERE IS VARIATION IN THE ITA. NO.7026/M.2018 A.Y.2014 - 15 3 INCOME OR LOSS RETURNED, WHICH IS PREJUDICIAL TO THE INTEREST OF THE ASSESSEE. HE SUBMITTED THAT, IN THE INSTANT CASE, THE AO DID NOT CHANGE THE INCOME RETURNED BY THE ASSESSEE AND HENCE THE RE WAS NO VARIATION OF INCOME RETURNED, WHICH IS PREJUDICIAL TO THE INTERESTS OF ASSESSEE. ACCORDINGLY HE SUBMITTED THAT THE SAID CONDITION PRESCRIBED U/S 144C WAS NOT SA TISFIED. ACCORDINGLY HE SUBMITTED THAT THE ASSESSMENT ORDER PASSED BY THE AO ADOPTING THE PROCEDURE PRESCRIBED IN SEC.144C OF THE ACT IS ILLEGAL AND HENCE THE ASSESSMENT ORDER IS LIABLE TO BE QUASHED. THE LD A.R PLACED HIS RELIANCE ON CERTAIN CASE LAWS T O SUPPORT HIS CONTENTIONS. 6. THE LD D.R, ON THE CONTRARY, SUBMITTED THAT THE LD DRP HAS ADDRESSED THIS ISSUE AND HAS STATED THAT THE EXPRESSION VARIATION USED IN SEC.144C(1) CANNOT BE RESTRICTED TO QUANTUM OF INCOME. THE LD DRP HAS NOTICED THAT TH E DICTIONARY MEANING OF THE TERM VARIATION IS DIFFERENCE IN QUALITY, AMOUNT O LEVEL. IN THE INSTANT CASE, THE AO HAS HELD THAT THE RATE OF TAX PRESCRIBED UNDER DTAA IS NOT APPLICABLE AND THE RATE PRESCRIBED IN SEC. 115A(1)(A)(II) OF THE ACT IS APPLIC ABLE, WHICH IS HIGHER THAN THE RATE PRESCRIBED IN DTAA. HE SUBMITTED THAT THE SAME MAKES THE ASSESSMENT ORDER PREJUDI CIAL TO THE INTERESTS OF ASSESSEE . ACCO RDINGLY THE LD DRP HAS CONFIRMED THE ACTION OF THE AO. THE LD DR REITERATED THAT THE IMPUGNED ASS ESSMENT ORDER WAS PREJUDI CIAL TO THE INTERESTS OF ASSESSEE , SINCE THE RATE OF TAX HAS BEEN INCREASED. HE SUBMITTED THAT THE EXPRESSION VARIATION IN THE INCOME OR LOSS RETURNED WHICH IS PREJUDICIAL TO THE INTEREST OF SUCH ASSESSEE USED IN SEC.144C(1) SHALL INCLUDE THE VARIATION IN TAX ALSO, AS ULTIMATE OBJECTIVE OF ASSESSMENT IS TO COLLECT TAX FROM THE ASSESSEE ON THE ASSESSED INCOME. 7. IN THE REJOINDER, THE LD A.R SUBMITTED THAT THE DICTIONARY MEANING OF THE TERM VARIATION MAY MEAN DIFFERENCE I N QUALITY, AMOUNT OR LEVEL. IN THE INSTANT CASE, WHAT WAS ASSESSED IS THE INTEREST INCOME. THE EXPRESSIONS QUALITY OR LEVEL ARE NOT APPLICABLE TO THE INTEREST INCOME. HENCE THE EXPRESSION AMOUNT ALONE SHALL APPLY IN THE INSTANT CASE, WHICH WOULD MEAN QUANTUM OF INTEREST INCOME. THE AO HAS NOT CHANGED THE QUANTUM OF INTEREST ITA. NO.7026/M.2018 A.Y.2014 - 15 4 INCOME AND HENCE THERE IS NO VARIATION OF INCOME OR LOSS RETURNED BY THE ASSESSEE, WHICH IS PREJUDICIAL TO THE INTERESTS OF REVENUE. ACCORDINGLY HE SUBMITTED THAT THE AO WAS NOT LEGALLY CORRECT IN ADOPTING THE PROCEDURE PRESCRIBED U/S 144C OF THE ACT AND THE SAME RENDERS THE ASSESSMENT ORDER ILLEGAL OR VOID. 8. WE HEARD THE PARTIES AND PERUSED THE RECORD. BEFORE US, THE LD A.R PLACED HIS RELIANCE ON THE DECISION RENDERE D BY THE CHENNAI BENCH OF TRIBUNAL IN THE CASE OF MOSBACHER INDIA LLC VS. ADDL CIT (2016)(76 TAXMANN.COM 31). WE NOTICE THAT THE TRIBUNAL HAS EXAMINED THE SCOPE OF PROVISIONS OF SEC.144C(1) OF THE ACT IN THE ABOVE SAID CASE. THE FACTS PREVAILING IN THIS CASE ARE THAT, IN THIS CASE ALSO, THE RETURNED INCOME WAS NOT VARIED BY THE AO, BUT ONLY HIGHER TAX RATE WAS APPLIED ON THE TOTAL INCOME. THE AO PASSED THE ORDER U/S 143(3), WHICH WAS CHALLENGED BEFORE LD CIT(A) AND THEN BEFORE TRIBUNAL. BEFORE THE TRIB UNAL, THE ASSESSEE TOOK THE PLEA THAT THE AO SHOULD HAVE PASSED DRAFT ASSESSMENT ORDER U/S 144C OF THE ACT. THE TRIBUNAL REJECTED THE SAME WITH THE FOLLOWING OBSERVATIONS: - [10] WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION [11] WE WILL FIRST TAKE UP THE ASSESSEES GRIEVANCE AGAINST NON ISSUANCE OF A DRAFT ASSESSMENT ORDER UNDER SECTION 144C. SECTION 144C, TO THE EXTENT RELEVANT FOR OUR DISCUSSION, P ROVIDES AS FOLLOWS: REFERENCE TO DISPUTE RESOLUTION PANEL. 144C. (1) 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 (HEREAFTER IN THI S 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. [EMPHASIS, BY UNDERLINI NG, SUPPLIED BY US] (15) FOR THE PURPOSES OF THIS SECTION, (B) 'ELIGIBLE ASSESSEE' MEANS, (I) ANY PERSON IN WHOSE CASE THE VARIATION 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 92CA; AND (II) ANY FOREIGN COMPANY. ITA. NO.7026/M.2018 A.Y.2014 - 15 5 [12] IN ORDER TO SUCCESSFULLY INVOKE THE PROVISIONS OF SECTION 144C, THUS, TWO BASIC CONDITIONS ARE REQUIRED TO BE FULFILLED: - THE ASSESSEE IS AN ELIGIBLE ASSESSEE [I.E. (I) ANY PERSON IN WHOSE CASE THE VARIATION REFERRED TO THE INCOME OR LOSS IN THE RETURNED INCOME OR LOSS, WHICH IS PREJUDICIAL TO THE INTEREST OF THE ASSESSEE, IS MADE ON ACCOUNT OF AN ORDER UNDER SECTION 92A(3) I.E.AN ALP ADJUSTMENT], OR (II) ANY FOREIGN COMPANY]; AND - THE ASSE SSING OFFICER PROPOSES TO MAKE ANY VARIATION IN THE INCOME OR LOSS RETURNED BY THE ASSESSEE WHICH IS PREJUDICIAL TO THE INTEREST OF SUCH ASSESSEE. [13] THERE IS NO DISPUTE THAT THE ASSESSEE IS AN ELIGIBLE ASSESSEE INASMUCH AS THE ASSESSEE IS A FOREIGN C OMPANY. THE FIRST CONDITION FOR GIVING A CHOICE TO THE ASSESSEE TO FOLLOW THE DRP ROUTE, WHICH, IN TURN, REQUIRES ISSUANCE OF DRAFT ASSESSMENT ORDER, IS THUS CLEARLY FULFILLED. [14] AS FOR THE SECOND CONDITION, I.E. THE ASSESSING OFFICER PROPOSING TO MAKE ANY VARIATION IN THE INCOME OR LOSS RETURNED BY THE ASSESSEE WHICH IS PREJUDICIAL TO THE INTEREST OF SUCH ASSESSEE, SINCE THE ASSESSING OFFICER HAS MERELY ACCEPTED THE RETURNED INCOME, AS FILED BY THE ASSESSEE, THE SECOND CONDITION IS NOT FULFILLED. IN THE PRESENT CASE, WHILE MAKING THE IMPUGNED ASSESSMENT UNDER SECTION 143(3), THE ASSESSING OFFICER HAS NOT MADE ANY VARIATION IN THE INCOME OR THE LOSS RETURNED BY THE ASSESSEE. THE ASSESSING OFFICER HAS SIMPLY ACCEPTED THE INCOME RETURNED BY THE ASSESSEE, AND THE VARIATIONS, IF AT ALL, ARE IN THE COMPUTATION OF TAX PAYABLE IN RESPECT OF INCOME RETURNED BY THE ASSESSEE. THE VARIATION, AS THE STATUTORY PROVISION UNAMBIGUOUSLY STATES, HAS TO BE VIS - - VIS RETURNED INCOME OR LOSS. THAT IS CERTAINLY NOT THE CASE BEFORE US. THE ASSESSEES CONTENTION IS THAT THE INCOME RETURNED BY THE ASSESSEE WAS AN INADVERTENT MISTAKE AND THE ASSESSING OFFICER OUGHT TO HAVE CORRECTED THE MISTAKE AS ALL THE RELEVANT FACTS WERE ON RECORD AND WHAT THE ASSESSING OFFICER CAN BRING TO TAX IS INCOME OF THE ASSESSEE IN ACCORDANCE WITH THE LAW. WE WILL DEAL WITH THAT ASPECT OF THE MATTER SEPARATELY AS AND WHEN THE OCCASION COMES TO DEAL WITH THE MATTER ON MERITS. SO FAR AS THE APPLICATION OF SECTION 144C IS CONCERNED, IN OUR CONSIDERED VIE W, IT IS A CONDITION PRECEDENT THAT THE ASSESSING OFFICER PROPOSES A VARIATION IN THE INCOME OR LOSS RETURNED BY THE ASSESSEE WHICH IS PREJUDICIAL TO THE INTEREST OF THE ASSESSEE, AND SINCE THIS CONDITION IS ADMITTEDLY NOT SATISFIED ON THE FACTS OF THIS CASE, NO FAULT CAN BE FOUND IN THE PATH TAKEN BY THE ASSESSING OFFICER. [15] COMING TO THE JUDICIAL PRECEDENTS RELIED UPON BY THE LEARNED COUNSEL, THE COMMON THREAD IN ALL THESE JUDICIAL PRECEDENTS, I.E. IN THE CASES OF VIJAY TELEVISION (P.) LTD. V. DISPU TE RESOLUTION PANAL [(2014) 46 TAXMANN.COM 100 (MAD)], JAZZY CREATIONS PVT LTD VS ITO [(2016) 133 DTR 1 (MUM)] AND CAPSUGEL HEALTHCARE LTD VS ACIT [(2015) 152 ITD 142 (DEL)], IS THAT ALL THESE PRECEDENTS PERTAIN TO THE SITUATIONS IN WHICH APPLICABILITY OF SECTION 144C WAS NOT IN SLIGHTEST DOUBT AND YET THE ASSESSING OFFICER DID NOT ISSUE THE DRAFT ASSESSMENT ORDER - AS IS REQUIRED TO UNDER THE SCHEME OF SECTION 144C. THAT IS NOT THE CASE HERE. IT WAS A CONSCIOUS, AND IN FACT CORRECT, DECISION OF THE ASSESSIN G OFFICER, AS HE HAS DISCUSSED IN FAIR DETAIL IN THE IMPUGNED ORDER, THAT SINCE THERE IS NO VARIATION IN THE INCOME RETURNED BY THE ASSESSEE, THE PROVISIONS OF SECTION 144C CANNOT BE INVOKED. GIVEN ITA. NO.7026/M.2018 A.Y.2014 - 15 6 THESE CRUCIAL VARIATIONS IN THE FACTS OF THE CASE, THE JUD ICIAL PRECEDENTS CITED AT THE BAR DONOT COME TO THE RESCUE OF THE ASSESSEE. [16] WE, THEREFORE, REJECT THE PLEA OF THE ASSESSEE THAT SINCE THE ASSESSING OFFICER HAS ISSUED THE IMPUGNED ASSESSMENT ORDER DIRECTLY, WITHOUT FIRST ISSUING A DRAFT ASSESSMENT ORDER, THE IMPUGNED ASSESSMENT ORDER SHOULD BE QUASHED AND TREATED AS NON EST. 9. THE LD A.R ALSO PLACED HIS RELIANCE ON THE DECISION RENDERED BY PUNE BENCH OF ITAT IN THE CASE OF DCIT VS. MAGNA INTERNATIONAL INC (ITA NO.2098/PUN/2016 DATED 21 - 01 - 2019), WHEREIN ALSO IDENTICAL VIEW WAS EXPRESSED. IN THIS CASE, THE LD CIT(A) QUAS HED THE ASSESSMENT ORDER ON THE GROUND THAT THE AO DID NOT FOLLOW THE PROVISIONS OF SEC.144C OF THE ACT. THE TRIBUNAL FOUND THAT THERE WAS NO VARIATION IN THE INCOME RETURNED BY THE ASSESSEE, WHICH WAS PREJUDICIAL TO THE INTERESTS OF ASSESSEE. HENCE THE TRIBUNAL REVERSED THE ORDER PASSED BY LD CIT(A) IN THE APPEAL FILED BY THE REVENUE. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE OPERATIVE PORTION OF THE ORDER PASSED ON THIS ISSUE BY THE PUNE BENCH OF TRIBUNAL IN THE ABOVE SAID CASE: - 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IS A FOREIGN COMPANY. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD FURNISHED RETURN OF INCOME DECLARING TOTAL INCOME AT 11,75,89,802/ - ON 25.03.2015. THE SAID FACT IS MENT IONED IN THE STATEMENT OF FACTS FILED BY THE ASSESSEE BEFORE THE CIT(A). ON THE OTHER HAND, THE ASSESSING OFFICER STARTS ASSESSMENT ORDER WITH A REMARK THAT THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME AT NIL, WHICH IS INCORRECT. THE ASSESSEE BEING A NO N - RESIDENT HAD OFFERED THE SAID INCOME TO TAX UNDER SECTION 115A OF THE. 6 AT 10% (PLUS SURCHARGE AND CESS), WHICH WAS APPLICABLE FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE DURING THE COURSE OF ASSESSMEN T ITA NO.2098/PUN/2016 CO NO.54/PUN/2018 MAGNA IN TERNATIONAL INC ASSOCIATION VS. DCIT (SUPRA) HAD QUASHED THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. 12. THE RELEVANT PROVISIONS OF THE ACT ARE IN SECTION 144C(1) OF THE ACT, WHICH PROVIDE THAT THE ASSESSING OFFICER IN THE FIRST INSTANCE FORWARD A DRAFT OF THE PROPOSED ORDER OF ASSESSMENT TO THE ELIGIBLE ASSESSEE IF HE PROPOSES TO MAKE ANY VARIATION IN THE INCOME OR LOSS RETURNED, WHICH IS PREJUDICIAL TO THE INTEREST OF SUCH ASSESSEE. THE TERM ELIGIBLE ASSESSEE IS DEFINED UNDER SECTION 144C(1 5)(B) OF THE ACT. AS PER DEFINITION, ELIGIBLE ASSESSEE MEANS ANY PERSON (I) IN WHOSE CASE VARIATION REFERRED TO IN SUB - SECTION (1) ARISES AS A CONSEQUENCE OF THE ORDER OF TRANSFER PRICING OFFICER PASSED UNDER SECTION 92CA(3); AND (II) IN FOREIGN COMPANY. ITA. NO.7026/M.2018 A.Y.2014 - 15 7 13. THE ISSUE WHICH ARISES BEFORE US IS WHETHER IN THE PRESENT SET OF FACTS IS THERE ANY VARIATION IN THE INCOME OR LOSS RETURNED BY THE ASSESSEE AND THE ASSESSING OFFICER NOT HAVING PASSED DRAFT ASSESSMENT ORDER HAD VIOLATED THE PROVISIONS OF SECTION 14 4C(1) OF THE ACT. ADMITTEDLY, THE ASSESSEE IS A FOREIGN COMPANY AND IS ELIGIBLE ASSESSEE. AS POINTED OUT IN THE PARAS HEREINABOVE, THE ASSESSEE HAD FILED THE RETURN OF INCOME DECLARING TOTAL RECEIPTS OF 11.76 CRORES (APPROX.) IN THE RETURN OF INCOME FI LED ON 25.03.2015. THEREAFTER, ON ITS OWN MOTION THE ASSESSEE HAD OFFERED ADDITIONAL INCOME OF 62,12,060/ - I.E. ON ACCOUNT OF RECEIPTS WHICH WERE RECEIVED BY THE ASSESSEE DURING THE YEAR BUT BY AN INADVERTENT ERROR, WERE NOT OFFERED IN THE RETURN OF INCO ME. WE HAVE ALREADY REFERRED TO THE STATEMENT OF FACTS IN THE PARAS ABOVE; THE ASSESSEE SUO MOTU AND IN GOOD FAITH CLAIMS TO HAVE OFFERED ADDITIONAL INCOME TO TAX AT THE BEGINNING OF ASSESSMENT PROCEEDINGS ITSELF. THE ASSESSEE CLAIMS THAT THE SAID OFFER WA S MADE EVEN BEFORE THE QUESTIONNAIRE WAS RAISED. IN SUCH SCENARIO WHEN THE ASSESSING OFFICER PASSES THE ORDER AFTER INCLUDING SUM OF 62,12,060/ - TO THE RECEIPTS OFFERED IN THE RETURN OF INCOME, THEN INCOME TOTALS TO 12,38,01,862/ - . THE ASSESSING OFFICE R HAS ASSESSED THE AFORESAID INCOME IN THE HANDS OF ASSESSEE UNDER SECTION 143(3) OF THE ACT. IN SUCH FACTS AND CIRCUMSTANCES, VARIATION IN THE INCOME IS NOT ON ACCOUNT OF ANY ADDITION MADE BY THE ASSESSING OFFICER BUT IS ON ACCOUNT OF VOLUNTARY OFFER OF A DDITIONAL INCOME BY THE ASSESSEE AND IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAS MADE VARIATION IN THE INCOME RETURNED, WHICH IS PREJUDICIAL TO THE INTEREST OF SUCH ASSESSEE. THE VARIATION IN THE INCOME IS QUALIFIED BY THE WORDS WHICH IS PREJUDICIAL T O THE INTEREST OF SUCH ASSESSEE. 14. IN THE FACTS OF PRESENT CASE, ADDITION, IF ANY IS MADE TO THE RETURNED INCOME IS ON ACCOUNT OF SUO MOTU OFFER BY THE ASSESSEE OF THE RECEIPTS RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION FROM AN INDIAN ENTITY AND BY AN INADVERTENT ERROR, THE SAME WERE NOT OFFERED IN THE RETURN OF INCOME. SO, IT DOES FAIL THE TEST OF PREJUDICIAL TO INTEREST OF ASSESSEE. HENCE, THERE IS NO MERIT IN THE ORDER OF CIT(A) IN QUASHING THE ASSESSMENT ORDER. THE SAME IS THUS, REV ERSED. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THUS, ALLOWED. 10. THE LD A.R ALSO PLACED HIS RELIANCE ON THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF ESPN STAR SPORTS MAURITIUS SNC ET CAMPAGNIE VS. UNION OF INDIA (2016)(68 T AXMANN.COM 377). IN THIS CASE, THE AO, FOLLOWING THE PROCEDURE LAID DOWN IN SEC.144C OF THE ACT, PASSED A DRAFT ASSESSMENT ORDER IN THE HANDS OF THE ASSESSEE. BEFORE LD DRP, THE ASSESSEE RAISED AN OBJECTION THAT THE PROVISIONS OF SEC.144C WILL NOT APPLY TO IT, SINCE IT WAS NOT AN ELIGIBLE ASSESSEE IN TERMS OF SEC.144C OF THE ACT. LD DRP ALSO ACCEPTED THE SAID CONTENTIONS OF THE ASSESSEE. HOWEVER, THE AO, DISREGARDING THE ORDER OF LD DRP, PASSED THE FINAL ASSESSMENT ORDER ON THE BASIS DRAFT ASSESSMENT ORDER. THIS ACTION OF THE ASSESSING OFFICER WAS FOUND TO BE ILLEGAL ITA. NO.7026/M.2018 A.Y.2014 - 15 8 BY HONBLE DELHI HIGH COURT. FOLLOWING ARE THE RELEVANT OBSERVATIONS MADE BY THE COURT: - 29. THE ABOVE SUBMISSIONS HAVE BEEN CONSIDERED. IN THE FIRST PLACE THE COURT WOULD LIKE TO OBSER VE THAT THIS IS AN INSTANCE OF BLATANT DISREGARD BY THE AO OF THE ORDER OF THE DRP NOTWITHSTANDING THAT THE DRI' HAD CATEGORICALLY HELD THAT THE TWO PETITIONERS DO NOT SATISFY THE CONDITIONS OF AN 'ELIGIBLE ASSESSEE' IN TERMS OF SECTION 144(15)(B)(II) OF T HE ACT. AS ALREADY NOTICED UNDER SECTION I 44C(10) OF THE ACT THE AO HAD NO OPTION BUT TO COMPLY WITH THE ORDER OF THE DRP. EVEN IF NO DIRECTION WAS ISSUED BY THE DRI' UNDER SECTION 144C(5) OF THE ACT, THE TACT THAT THE DRP HELD THAT 1)0111 THE PETITIONERS WERE NOT 'ELIGIBLE ASSESSEES' COULD 1101 HAVE BEEN IGNORED BY THE 40. 30. IT APPEARS TO THE COURT THA TIT IS PLAIN THAT UNDER SECTION 144C, THE AO SHOULD HAVE PROCEEDED TO PASS AN ORDER UNDER SECTION 143(3) OF THE ACT. INSTEAD THE AO CONFIRMED THE DRAFT A SSESSMENT ORDER PASSED UNDER SECTION 144C(1) OF THE ACT. THIS, THEREFORE, VITIATED THE ENTIRE EXERCISE. THE COURT HAS NO HESITATION IN HOLDING THAT THE FINAL ASSESSMENT ORDER DATED 28 TH JANUARY, 2015 IS WITHOUT JURISDICTION AND NULL AND VOID. THE DRAFT ASS ESSMENT ORDER DATED 28 TH MARCH, 2014, HAVING BEEN PASSED IN RESPECT OF ENTITIES WHICH WERE NOT ELIGIBLE ASSESSEE, IS ALSO HELD TO BE INVALID. 11. IN THE INSTANT CASE, THE ASSESSEE HEREIN IS AN ELIGIBLE ASSESSEE. HOWEVER, THERE IS NO VARIATION IN THE INCOME OR LOSS RETURNED, WHICH IS PREJUDICIAL TO THE INTERESTS OF THE ASSESSEE. HENCE THE SECOND CONDITION PRESCR IBED IN SEC.144C(1) WAS NOT SATISFIED. HENCE THE APPROACH OF THE AO IN ADOPTING THE PROCEDURE PRESCRIBED IN SEC.144C OF THE ACT IS NOT IN ACC ORDANCE WITH THE MANDATE OF LAW. WE GET SUPPORT FOR OUR VIEW FROM THE DECISIONS RENDERED BY CHENNAI BENCH AND PUNE BENCH OF TRIBUNAL IN THE CASES REFERRED ABOVE. HENCE THE ASSESSMENT ORDER PASSED BY THE AO GETS VITIATED AND THE SAME IS LIABLE TO BE QUASH ED. WE ORDER ACCORDINGLY. 12. SINCE WE HAVE DECIDED THE LEGAL ISSUE IN FAVOUR OF THE ASSESSEE BY QUASHING THE ASSESSMENT ORDER, THERE IS NO REQUIREMENT TO ADJUDICATE OTHER ISSUES URGED BY THE ASSESSEE. ITA. NO.7026/M.2018 A.Y.2014 - 15 9 13. IN THE RESULT, THE APPEAL FILED BY THE ASSE SSEE IS TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 . 04.2019. SD/ - SD/ - (AMARJIT SINGH) ( B. R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 10. 04.2019 . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// ( SR. PRIVATE SECRETARY ) , / ITAT, MUMBAI