Case Number: ITA 653/DEL/2021
Appellant: LG Electronics Inc., Korea
Respondent: DCIT Int. Taxation, Circle 2(2)(1), New Delhi
Assessment Year: 2014-15
Case Filed On: 2021-06-01
Order Type: Final Tribunal Order
Date of Order: 2021-11-17
Pronounced On: 2021-11-17
This article provides an in-depth analysis of the case ITA No. 653/DEL/2021, where LG Electronics Inc., Korea challenged the revision of their assessment order under Section 263 of the Income Tax Act. The case examines the grounds for revision by the DCIT Int. Taxation and the tribunal’s detailed judgment.
LG Electronics Inc., a company incorporated under the laws of Korea, engaged in the business of manufacturing and selling electronic appliances, filed an appeal against the order of the Commissioner of Income Tax (International Taxation), New Delhi. The appeal pertained to the assessment years 2004-05, 2005-06, 2006-07, 2008-09, 2009-10, 2010-11, 2013-14, and 2014-15, challenging the revision of assessment orders under Section 263 of the Income Tax Act.
The primary issue was whether the CIT had correctly assumed jurisdiction under Section 263 of the Income Tax Act, given that the original assessment orders were allegedly neither erroneous nor prejudicial to the interests of the Revenue.
The dispute centered on the attribution of profit to the appellant’s PE in India. The original assessments had attributed 25% of the salary of expatriate employees to Indian operations, while the CIT contended that this should have been 50% as conceded by the appellant in prior proceedings.
The appellant, represented by Shri Deepak Chopra and Shri Ankul Goyal, Advocates, argued that the CIT erred in revising the assessment orders, which were based on a reasonable attribution of profit to Indian operations. They emphasized that the assessments were made following the directions of the Dispute Resolution Panel (DRP), and the CIT’s intervention was unjustified.
The respondent, represented by Mrs. Anupama Anand, CIT-DR, argued that the Assessing Officer (AO) had not correctly implemented the DRP’s directions, leading to an underassessment of income and resulting in a loss to the Revenue. The CIT contended that the correct attribution should have been 50% of the salary, as conceded by the appellant in prior years.
The tribunal examined the provisions of Section 144C of the Income Tax Act, which mandates that the AO must complete assessments in conformity with the DRP’s directions. The tribunal noted that the AO had indeed followed the DRP’s directions but had reduced the attribution of salary to 25%, contrary to the appellant’s earlier concession of 50%.
The tribunal emphasized that the AO’s deviation from the DRP’s directions rendered the assessment orders non-est. Consequently, the CIT could not assume jurisdiction under Section 263 over non-est assessment orders, as they could not be deemed erroneous or prejudicial to the interests of the Revenue.
The tribunal concluded that the CIT had erroneously assumed jurisdiction under Section 263 of the Income Tax Act. The assessment orders, being non-est due to the AO’s failure to fully comply with the DRP’s directions, could not be revised under Section 263.
Final Judgment:
Income Tax Appellate Tribunal, Delhi ‘D’ Bench, New Delhi
Before: Shri N.K. BILLAIYA, Accountant Member & Shri SUDHANSHU SRIVASTAVA, Judicial Member
Order:
The appeals filed by LG Electronics Inc., Korea, in ITA Nos. 646 to 653/DEL/2021 are allowed. The orders under Section 263 by the CIT are set aside. The tribunal emphasized that the assessment orders were non-est and could not be revised under Section 263.
Order Pronounced and Signed in Open Court on 17th November 2021.
Signed:
Shri N.K. BILLAIYA, Accountant Member
Shri SUDHANSHU SRIVASTAVA, Judicial Member
Date: 17th November 2021
LG Electronics Inc. Korea vs. DCIT Int. Taxation: Assessment Revision for 2014-15
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