The Bombay High Court has issued an ad-interim order, staying the enforcement of a substantial tax demand amounting to Rs. 32.39 crore and all associated proceedings against PayPal Payments Private Limited.
The division bench, comprising Justices K. R. Shriram and Dr. Neela Gokhale, granted relief to the petitioners until January 31, 2024.
The court’s order explicitly halted the operation of several contentious elements, including the Impugned Order, Demand Notice, Notice, Penalty Notice, Draft Order, and TPO Order issued by the Assessment Unit ITD and Assistant Commissioner of Income Tax, respectively.
PayPal, represented by Senior Advocate Jehangir Mistri, instructed by Luthra and Luthra Law Offices, mounted a legal challenge against the actions of the Assessing Officers at the National Assessment Faceless Centre, Delhi.
The contested orders encompassed the Final Assessment Order dated October 17, 2023, issued under Section 143(3) in conjunction with Section 144C(3) and 144B of the Income-Tax Act, 1961. Additionally, the demand notice, penalty notices, and various other orders were vehemently contested by the company.
The petitioners asserted that they electronically filed income tax returns on February 14, 2021, for the financial year 2020-21, declaring a total income of Rs. 12,97,96,680. The case underwent scrutiny due to international transactions, refund claims, foreign outward remittances, and losses from currency fluctuations, among other factors.
Subsequently, following the issuance of notices, the Income Tax Department augmented PayPal’s income by Rs. 91,32,63,430, leading to a calculated assessed income under Section 144C(3) of the Act, read with Section 144B, at Rs. 1,04,30,60,110. Simultaneously, a demand notice exceeding Rs. 32,39,48,100 was raised, accompanied by penalty notices alleging under-reporting of income.
In their plea before the High Court, PayPal contended that the order passed by the Assessment Unit on October 17, 2023, was beyond the statutory limitation period specified in Section 153(1) of the Act. According to the petitioners, the order was “unambiguously beyond the statutory period of limitation” by a month and, therefore, was void ab-initio and without jurisdiction.
The court granted the respondents three weeks to file their replies, as requested, staying the orders until then. Additionally, the petitioners were directed to file their rejoinder within two weeks thereafter, and the matter is scheduled for a hearing on January 8, 2024.
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