For NRI taxpayers, when their income is scrutinised by the income tax department and a draft assessment order is issued by the assessing officer, they have the option to file objections before the Dispute Resolution Panel (DRP) within 30 days from the date of receiving the notice. This 30-day period is crucial, as objections must be filed within this timeframe, and the assessing officer who issued the draft assessment order must also be notified within the same period. Failure to file objections before the DRP and inform the assessing officer within the stipulated 30 days may result in the dismissal of objections on the grounds that the assessing officer has already issued the final order.
Alternatively, NRI taxpayers have the right to appeal before the Commissioner of Income Tax (CIT) against the final order passed by the assessing officer. This allows them to present their case and submit all the evidence and records that were previously provided to the assessing officer but were unfortunately not considered.
Recent cases have demonstrated that when an NRI taxpayer filed objections before the DRP, but the AO passed the final order due to non-receipt of information within 30 days regarding the filing of objections, the NRI taxpayer approached the CIT Appeals against the final order passed by the assessing officer. However, the CIT rejected the appeal, citing that appeals before the DRP and CIT (A) cannot be filed simultaneously.
To circumvent such circumstances, we are outlining the case to facilitate NRI taxpayers in understanding their right to file an appeal in such situations. Now, let’s go into the specifics of the case, including the submissions made by the NRI taxpayer and the ruling of the tribunal.
Fact of the case
The NRI taxpayer, a non-resident individual (NRI), earned income during the relevant year from employment with the ‘Danish Refugee Council’ in Somalia and capital gains from the sale of two properties in India. When filing the income tax return under section 139 of the Act, the salary income was claimed as exempt under the Double Taxation Avoidance Agreement (DTAA). Similarly, the proceeds from the sale of immovable properties were claimed as exempt under section 54 of the Act after accounting for indexed cost of acquisition and improvement.
The case underwent scrutiny, and while various requested documents were submitted and recorded, some documents were not provided during the assessment proceedings due to the NRI taxpayer’s overseas residency, making it challenging to gather all documents promptly. Subsequently, a draft order was issued on September 30, 2021, proposing several additions/disallowances to the reported income, accompanied by a show cause notice prompting the NRI to either accept the proposed changes or raise objections before the Dispute Resolution Panel (DRP) within 30 days of receiving the draft order.
Upon receiving the draft order, the NRI chose to raise objections before the DRP and accordingly dispatched Form 35A (in 4 copies) to the DRP, New Delhi, with proof of dispatch provided. A copy of the same was also sent via registered post to the Assessing Officer as per the provisions of section 144C(2)(b) of the Act, at the specified address in Jaipur, within the stipulated 30-day period. However, the postal delivery was unsuccessful, marked as ‘insufficient address.’ Consequently, on November 16, 2021, the NRI taxpayer attempted to personally deliver the objections to the Assessing Officer, but the office declined to accept hardcopy objections and instead instructed the NRI taxpayer to communicate through email.
It’s noteworthy that the show cause notice accompanying the draft order did not include instructions for communicating objections via email to the Assessing Officer. Despite this, on November 25, 2021, an assessment order under section 143(3) read with section 144C(3) was issued, incorporating various additions as proposed in the draft order.
Dissatisfied with the additional assessments/disallowances made by the Assessing Officer in the order issued under sections 143(3) read with 144C(3) of the Act, the NRI taxpayer filed an appeal before the Learned Commissioner of Income Tax (Appeals). However, before the appeal hearing could take place, the objections submitted to the Dispute Resolution Panel (DRP) were dismissed on procedural grounds by an order. The order stated that since an order under sections 143(3) read with 144C(3) had already been issued by the AO in the NRI’s case, the objections filed before the DRP were now rendered ineffective.
During the appellate proceedings before the Learned Commissioner of Income Tax (Appeals), which concluded on December 13, 2022, comprehensive facts were presented through written submissions. Additionally, an application was submitted requesting permission to introduce certain additional evidence. This request was made on the grounds that the matter could not be adequately addressed on its merits before the DRP and could not be presented to the Assessing Officer due to the aforementioned reasons. However, the Learned Commissioner of Income Tax (Appeals) denied the application for admission of additional evidence and dismissed the appeal, citing that there was no mention in the appeal memorandum filed before them that objections against the draft order were pending disposal before the DRP.
Furthermore, the Learned Commissioner of Income Tax (Appeals) observed that upon receiving the draft order under section 144C, the NRI taxpayer has the option to either submit objections before the DRP or lodge an appeal before them. The NRI taxpayer cannot simultaneously raise objections before the DRP and file an appeal before the Learned Commissioner of Income Tax (Appeals). Therefore, it was concluded that the appeal filed by the NRI taxpayer against the order issued under sections 143(3) read with 144C of the Act was not legally maintainable.
Now, the NRI taxpayer approached the Income Tax Appellate Tribunal (ITAT) to challenge the abrupt dismissal of the appeal by the Learned Commissioner of Income Tax (Appeals).
NRI Appellant Prayer:
The assesssee humbly submits that the draft order u/s 144C of the act is not at all an appealable order before Ld. CIT(A) u/s 246A of the Act. It is only the assessment order passed u/s 143(3) / 144C(3) that could be appealed against before the first appellate authority. Therefore in the case of assessee, inspite of the fact that, while filing appeal before Ld. CIT(A) against the order passed u/s 143(3) r.w.s. 144C of the Act, the objection filed before the DRP were not disposed off – technically the objections so filed with the DRP became infructuous for the reason that the ld.AO had already passed the final order u/s 143(3) r.w.s.144C(3) of the Act. So to put it in a different manner the act of passing order u/s 143(3) of the Act, confirming the additions / disallowances proposed in the draft order, can be taken as the event when the variations proposed in draft order are not objected to by the assessee or the variations proposed in draft order are finalized as the time available for filing objections get expired and thus the variations proposed get finalized. And in such an event, when an order is passed by the AO u/s 143(3) of the Act, making the proposed variations, appeal against such order is undoubtedly maintainable when filed before the first appellate authority. Also even factually prior to the appellate proceedings before Ld. CIT(A), the objections filed before the DRP were dismissed on the ground that since the final order u/s 143(3) was already passed, the objections so filed had become infructuous, and this fact was duly communicated to Ld. CIT(A), which also finds mention in the appellate order. This being so, the order passed by ld.AO was undoubtedly not an order passed u/s 143(3) in pursuance to the direction given by the DRP, and therefore definitely not covered under the exceptions provided u/s 246A(1)(a) of the Act.
The assessee further humbly submits that the event in which appeal filed before Ld. CIT(A) could be non-maintainable would be, when the AO passes an order u/s 143(3) r.w.s 144C(5) of the Act in pursuance to the directions received as a result of objections filed by an assessee and the assessee files appeal before Ld. CIT(A) against such order (this order is covered in exceptions to sec 246A(1)(a) of the Act) as appeal against such order lies directly before Hon’ble Income Tax Appellate Tribunal). But in case of assessee the DRP had issued no directions to the AO as the order appealed against was passed without any reference to the DRP, and thus appeal filed against such order passed u/s 143(3) of the act being totally legal deserves to be held so and prayed accordingly.
Judgement relied upon by NRI taxpayer
M/s Inno Estate Private limited V/s DRP 2, ITO (Madras High Court). 406 ITR 553 , where under similar circumstances where the objections raised by assessee before the DRP was rejected for being barred by limitation and a writ was filed by assessee directly before Hon’ble Madras High Court, the Hon’ble High court dismissing the appeal held that , the single judge had rightly dismissed the writ petition and remitted the assessee to the remedy of appeal under section 246(1)(a) before the first appellate authority. An order of rejection of objections on the ground of it being barred by limitation was not a direction under sub-section (5) read with sub-section (6) of section 144C . Though the order rejecting the objections on the ground of the bar of limitation was captioned as a direction under section 144C(5) , it was not a direction under the section. The quoting of a wrong provision in an order was a mistake apparent on the face of the record and, therefore, inconsequential. The assessment order though stated to be an order under section 143(3) read with section 144C(13) , was not an order in pursuance of the directions of the Dispute Resolution Panel, but an order of assessment simpliciter from which an appeal would lie to the Commissioner (Appeals).
Thus the appeal so filed against the order passed u/s 143(3) of the Act being absolutely legal, deserves to be adjudicated on merits, and therefore dismissal of the appeal filed by assessee by Ld. CIT(A) without adjudication on merits being unwarranted and in violation of principles of natural justice deserves to be held so and prayed that the same may kindly be set aside to the file of Ld. CIT(A) with directions to be adjudicated on merits.’’
Decision of Tribunal
We have heard both the parties and perused the materials available on record. The Bench in nut shell noticed that the AO vide assessment order dated 25-11-2021 made additions in the case of the assessee for which the assessee carried the matter before the DRP to settle the issue who vide its order dated 22- 06-2022 dismissed the appeal of the assessee by observing as under:-
‘’4. Be that as it may, admittedly, the AO was not informed in time for whatever reasons and he was enjoined upon by law to pass the final order u/s `143(3) which he has done, rendering the proceedings before the panel instructions as a valid assessment order u/s 143(3) has already been passed on 30-09- 2021. The Panel, therefore, cannot adjudicate on merits of the case in terms of statutory position as this objection has been rendered infructuous.’’
The Bench also noted from the entire episode that the assessee is deprived off to get the justice from the judicial authorities because of technical latches which should not be done. Hence, the Bench in the interest of equity and justice restores the appeal of the assessee to the file of the ld. CIT(A) for afresh adjudication taking into consideration written submission filed by the assessee and the assessment order dated 25-11-2021. The assessee is also directed not take adjournment on frivolous ground and cooperate the ld. CIT(A) for adjudication of the appeal. Thus the appeal of the assessee is allowed for statistical purposes.
Citation: Vijender Singh vs The DCIT Circle (Intl. Tax) Jaipur IT(IT)A No. 28/JP/2022
