The Income Tax Appellate Tribunal ( ITAT ), Delhi Bench, has recently, in an appeal filed before it, while granting relief to Travelport, held that the assessee not responsible to explain recipients of receipts shown in Form No.26AS.
The aforesaid observation was made by the Delhi ITAT, when an appeal was preferred before it by the assessee, M/s Travelport LP, as against the order dated 21.06.2019 framed u/s 144C (13) r.w.s 147 r.w.s 143(3) of the Income Tax Act, 1961, pertaining to Assessment Year 2011-12.
The issues raised in the assessee’s appeal being that on the facts and in the circumstances of the case & in law, the order dated June 21, 2019 framed under Section 1440(13) read with Sections 147 and 143(3) of the Income Tax Act, 1961 , passed by the Deputy Commissioner of Income Tax, Circle 3(i)(i), International Taxation (AO), pursuant to the directions of the Dispute Resolution Panel ( DRP) is beyond jurisdiction, bad in law and void ab initio, and further that on the facts and in the circumstances of the case & in law, the draft assessment order dated December 03, 2018 passed by the AO under Section i44C(i) read with Sections 147 and 143(3) of the Income Tax Act, is invalid as the Appellant is not an ‘eligible assessee’ under Section i44C(is)(b) of the Income Tax Act, the brief facts of the case pertaining to these issues were that the assessee was a limited partnership based in the state of Delaware, USA having its principal business at Georgia and was engaged in the business of providing information reservations transaction processing and related services of airlines, travel agencies and other travel related entities. Further, the assessee also owned and operated global distribution system located outside India and provided subscribers with access to and use of this GDS.
It so happened that as per the information received through non-filers monitoring system, the Assessing Officer came to know that the assessee had received a sum of Rs. 6,63,17,256/- from different Airlines operating in India. And, having found that the assessee had not filed its return of income for the F.Y. 2010-11 relevant to Assessment Year 2011-12, the AO issued notice u/s 148 of the Act, pursuant to which, the assessee filed return of income declaring income at NIL.
While scrutinizing the return of income, the Assessing Officer noticed that the assessee did not have any receipts in India during the year under consideration, though the Revenue appears in Form No. 26AS. And subsequently, the assessee was asked to explain why it did not file its return of income in spite of having receipts during the year as appearing in Form 26AS.
In its reply, the assessee having stated that it did not have any receipts during the year under consideration and that TDS has been deducted by the payer companies inadvertently against the PAN of the assessee company, it was explained that the receipts disclosed in Form 26AS was of its subsidiary company M/s Travel Port Global Distribution System B.V. Netherlands.
And to a specific query, the assessee was having been asked as to whether the same has been offered to tax by its subsidiary company, the reply of the assessee, however, did not find any favour with the Assessing Officer, who after taking a leaf out of the proceedings for Assessment Year 2010-11, observed that there is no change in the facts of the case and concluded by holding that the assessee has PE in India and profit of 100% was attributed to the assessee company and addition of Rs. 6,63,17,256/- was made.
The assessee carried the matter before the CIT(A) and challenged the validity of the assessment order before the DRP but without any success. And, though it was strongly contended before the DRP that the assesseewas not an eligible assessee within the provisions of section 144C of the Act, this pleawas dismissed by the DRP who was of the firm belief that since there is no change of facts in the Assessment Year under consideration in regard to the status of the assessee as LLP, the objection on the issue of eligible assessee was found to be without any substance .And it is in this circumstance that the assessee has preferred the instant appeal before the Delhi ITAT.
With Shri Ravi Sharma, Adv Shri Rishab Malhotra, AR, the counsels on behalf of the assessee submitting that the assessee cannot be termed as an eligible assessee within the provisions of section 144C of the Income Tax Act, and therefore that being an eligible assessee, there was no need for framing the draft assessment order and by doing so, the final assessment order dated 21.06.2019 is void ab initio, Shri Jitender Kumar , the CIT-DR, on the other hand, strongly supported the orders of the authorities below.
Hearing the opposing contentions of either sides and thereby perusing the materials available on record, the Delhi ITAT noted:
“We have given thoughtful consideration to the orders of the authorities below.We have also given thoughtful consideration to this plea of the ld. counsel for the assessee. Provisions of section 144C of the Act which relates to reference to Dispute Resolutions Panel were inserted vide Finance Act [No. 2] Act 2009 w.e.f. 01.04.2009.The aforesaid section 144C of the Act can only apply prospectively i.e., from A.Y. 2011-12 and is not applicable to the Assessment Year under consideration. The Hon’ble High Court of Madras in the case of M/s Vedanta Limited vs. ACIT Writ Petition No.1729 of 2011 has categorically held that the provisions of Section 144C of the Act can be held to be applicable prospectively, from AY 2011-12 only.”
“In year under challenge is on the proposition that the order is void ab initio. The Assessing Officer has framed draft assessment order when the provisions were not applicable to the assessee. Also, “eligible Assessee” means, any person in whose case variation referred to in sub-section arises as a consequence of an order passed by the TPO u/ss (3) of section 92CA of the Act.”, the ITAT Bench added.
The ITAT Panel consisting of Anubhav Sharma, the Judicial Member, along with N.K. Billaiya, the Accountant Member further observed:
“The facts of the case in hand show that no order has been passed by the TPO, therefore, there is no question of any variation arising as a consequence of the order of the TPO and since the assessee is an LLP, therefore, it cannot be termed as a foreign company, which means that provisions of section 144C of the Act with all its sub section do not apply to the assessee, which means that the impugned assessment order dated 21.06.2019 is void ab initio.The co-ordinate bench at Mumbai in ITA No. 2572/Mum/2017 had the occasion to consider a similar issue, and in light of the above judicial decisions and provisions of section 144C of the Act, we have no hesitation in holding that the assessment order is void ab initio.”
“Even on merits of the case, the assessee has to succeed in as much as the findings given by the Assessing Officer is totally based upon the findings given in earlier Assessment Years. Even the directions of the DRP are based upon the directions given in earlier Assessment Years and both the authorities grossly erred in not realizing that the assessee has discontinued its business after Assessment Year2010-11. Therefore, drawing support from earlier year’s order would do no good to the Revenue as the facts are not similar. In fact, the Assessing Officer has put the entire burden on the assessee to show in whose hands the receipts shown in Form 26AS has been declared.”, they commented.
Thus, allowing the assessee’s appeal, the Delhi ITAT held:
“In our considered opinion, by putting the onus on the assessee, the Assessing Officer has grossly erred as the assessee is not responsible to explain the recipients of the receipts shown in Form No. 26AS. The Assessing Officer should have asked the payer, details of the payee to whom payments have been made by the payer on which it could deduct tax at source. Therefore, on merit also, addition cannot survive as facts are not identical to the facts of earlier Assessment Years.”
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