BEFORE SHRI G.S. PANNU, PRESIDENT AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER
ITA No.376/Del/2021
Assessment Year: 2016-17
Danone Asia Pte Limited, 1 Walich Street, Guoco Tower $ 18-01, Singapore, Singapore, 078881
Vs.
ACIT, Int Tax-1 (2)(2), New Delhi.
PAN : AAFCD8967M
(Appellant) (Respondent)
PER SAKTIJIT DEY, JUDICIAL MEMBER:
Captioned appeal has been filed by the assessee against the order dated 04.02.2021 of learned Commissioner of Income-Tax (Appeals)-42, Delhi for the assessment year 2016-17.
2. Additional Ground
In addition to the grounds raised in the Memorandum of Appeal, vide letter dated 25.02.2022, assessee raised the following additional ground and sought admission of the said ground in terms of Rule 11 of Income-Tax (Appellate Tribunal) Rules, 1963:
“That under the facts and circumstances of the case, the Ld. A.O erred in examining an issue which was beyond the scope of limited scrutiny initiated vide notice dated 31.08.2017, rendering the assessment proceedings null, void and without jurisdiction.”
The learned Departmental Representative strongly objected to the admission of the additional grounds.
3. Admission of Additional Ground
Having considered rival submissions on the issue of admission of additional ground, we are of the view that the issue raised in the additional ground is purely a legal and jurisdictional issue going to the root of the matter. Since, the additional ground raised will have a crucial bearing on the outcome of the appeal and can be decided without making fresh investigation into facts, in our considered opinion, the additional ground deserves to be admitted for adjudication. In this context, we refer to the following observations of the Hon’ble jurisdictional High Court in the case of PCIT vs. Silver Lines (2016) 65 taxmann.com 137:
“As regards the objection of the Revenue to the ITAT permitting the Assessee to raise the point concerning non-issuance of notice under Section 143(2) of the Act for the first time in the appeal before the ITAT, the Court is of the considered view that in view of the settled legal position that the requirement of issuance of such notice is a jurisdictional one, it does go to the root of the matter as far as the validity of the reassessment proceedings under Section 147/148 of the Act is concerned…”
4. Facts of the Case
The assessee is a non-resident corporate entity incorporated in Singapore and is a tax resident of Singapore. The case for the impugned assessment year was selected for limited scrutiny under CAAS parameters to evaluate/verify whether the value of international transactions in respect of mutual agreement or arrangement has been correctly shown in Form 3CEB.
During the assessment proceedings, the assessing officer noticed that the assessee had entered into various international transactions with its associated enterprises in India and received revenues amounting to:
Since the assessee had entered into international transactions, the assessing officer referred the matter to the transfer pricing officer (TPO), who accepted the value of transactions. However, the assessing officer treated the revenue from provision of training services as Fee for Technical Services (FTS) and added back INR 16,20,992 to the income of the assessee, which was upheld by the learned Commissioner (Appeals).
5. Assessee’s Argument
The learned counsel for the assessee argued that the scope of limited scrutiny was to verify whether the value of international transactions was correctly shown in Form 3CEB. The matter was referred to the TPO, who accepted the value of transactions. The assessing officer exceeded his jurisdiction by treating the revenue from training services as FTS, which is beyond the scope of limited scrutiny. This action was in violation of Instruction nos. 20/2015 and 5/2016 issued by the Central Board of Direct Taxes (CBDT).
6. Tribunal’s Decision
We have considered rival submissions and perused the material on record. The assessing officer’s action of treating the revenue from training services as FTS was beyond the scope of limited scrutiny. The CBDT instructions clearly state that the scope of limited scrutiny should not be expanded without prior approval of the PCIT/CIT. In the present case, the assessing officer did not seek such approval, rendering the assessment order without jurisdiction and null and void.
Accordingly, we quash the assessment order and set aside the order of the learned Commissioner (Appeals). The appeal is allowed.
Order pronounced in the open court on 29th November, 2022.
Sd/- (G.S. PANNU) PRESIDENT
Sd/- (SAKTIJIT DEY) JUDICIAL MEMBER
Dated: 29th November, 2022.
Danone Asia Pte Limited vs. ACIT, Int Tax, Circle-1(2)(2), Delhi – ITA 376/DEL/2021
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