CASE LAW

2017-TII-65-HC-DEL-INTL

PARADIGM GEOPHYSICAL PTY LTD Vs CIT: DELHI HIGH COURT (Dated: November 13, 2017)

Income Tax - Writ - Sections 44BB, 44DA, 143(3), 144C(3)(b) & 264.

Keywords: First appeal - Revisionary power.

The Assessee, a non-resident company, was engaged in the business of providing and developing software-enabled solutions and maintenance services to the oil and gas industry. However, the Assessee, a tax resident of Australia had filed its return for the relevant AY applying the provisions of section of 44BB. In the course of the assessment proceeding, the AO issued a notice for scrutiny and draft assessment proposing to tax the receipts as Royalty/ Fee from Technical Services. Since no objections were filed u/s 144C(2), no directions were passed by the DRP. The AO completed the assessment by confirming the addition/ adjustment proposed in the draft assessment order and computed the Assessee's income by applying section 44DA. The same was not challenged by the Assessee.

However, later, the Assessee filed a Revision petition u/s 264 before the CIT (International Taxation) stating that the AO had wrongly denied for not applying section 44BB and also incorrectly invoked and applied section 44DA. Certain queries were raised by the CIT (International Taxation), in reply to which, the Assessee informed that they had invoked alternate statutory remedy by filing the Revision petition u/s 264 since, they failed to avail the remedy of filing an appeal against the assessment order. After finding all the submissions made by the Assessee, the CIT (International Taxation) declined to interfere with the final assessment order. For the AYs 2011-12 and 2013-14, the Assessee filed appeals before the appellate authority but no appeal was preferred for the year 2012-13. Hence the Revision Petition filed u/s 264 for the AY 2012 – 13 was not maintainable.

In Writ, the High Court held that,

Whether revisionary powers u/s 264 can be exercised by the CIT on his own even if no appeal is filed - YES: HC

Whether it is sine qua non for the CIT to record reasons before accepting or rejecting the pleas of the assessee - YES: HC

+ the Commissioner's reasoning and observation was that the Assessee, for some unexplained reasons, deliberately did not file an appeal against the assessment order for AY 2012-13, though it had filed appeals for other years. He held that this was an attempt to invoke Section 264 as a backdoor entry to file an appeal. Hence, the Revision petition should be dismissed;

+ the reasoning cannot be sustained for it is contrary to the legislative mandate of Section 264 and the revisionary power conferred on the Commissioner. Section 264 empowers the jurisdictional Commissioner to revise any order (other than an order to which Section 263 applies) passed by an authority subordinate to him, on his own motion or on an application by the Assessee for revision. The Commissioner is empowered to call for the record of any proceeding under the Act in which such an order has been passed and may make such inquiry or cause such inquiry to be made and pass such order thereon, not being an order prejudicial to the Assessee and subject to the provisions of this Act, as he thinks fit. Statutory power has been conferred on the Commissioner to examine and correct any order passed by a subordinate authority;

+ a Revision Petition u/s 264 can be filed against any order (including an assessment order) passed by a subordinate officer, which is otherwise appealable before Commissioner (Appeals) under section 246A or u/s 253 before the Tribunal, where such appeal has not been filed and limitation period for invoking remedy has expired and the Assessee has waived his right to appeal. The statutory bar is that Revision Petition cannot be entertained when an appeal has been filed before Commissioner (Appeals) or before the Tribunal in respect of such order or if no such appeal has been filed, the time limit for filing such appeal has not expired. Right to file an appeal should be waived for a revision petition to be maintainable. The objective and purpose is to ensure that the Assessee does not assail the same order before two forums and that it can elect between either filing an appeal or a revision. The Assessee cannot avail of both remedies against the same order for the same AY. If the time period for filing the appeal has not expired, the revision cannot be entertained – only to ensure that after filing of Revision, the Assessee does not thereafter file an appeal. Even thereafter, the requirement is that the Assessee should have waived his right to appeal;

+ it is the admitted case that time for filing appeal against the assessment order for AY 2012-13 had expired. The Assessee had waived his right to file appeal. Clause (a) is therefore not attracted. Clause (b) to Section 264(4) is also not attracted in the present case and it is not the case of the Revenue that the Assessee has filed an appeal for 2012-13 before Dy. Commissioner (Appeals). The Assessee has also not filed any appeal against the said order before the Commissioner (Appeals) or the Tribunal to attract the negative stipulation in clause (c) to Section 264(4). The present case therefore, does not fall under clauses (a) to (c) of Section 264(4);

+ the CIT(A)'s order no doubt reflects and states that the contention of the Assessee was incorrect and merits rejection but it does not assign and give any reason for the said conclusion. The said order cannot be sustained as it does not examine the contention on merits while recording the decision. The Commissioner must give and assign reasons for taking a particular view, even if he accepts the findings and reasons recorded by the AO and does not agree with the contention raised by the Assessee. This court is, therefore, deprived and is unable to fathom the reasons and ground which were in the mind of the Commissioner. The order of the Commissioner should have contained reasons for the conclusions arrived at and ought to have dealt with the issue on merits as required u/s 264.

Case Remanded