INCOME TAX ACT, 1961

Section 153, Expln. 1

Assessment - Time limit - -

Assessee was a foreign company incorporated in finland marketed and distributed specialized software products to end user customers in India through a distribution channel consisting of its subsidiary and a third party distributor, in the course of the draft assessment proceedings, assessee had in last week of July, 2016 orally informed AO that it had filed an application dated 19-10-2012 under section 245Q(1) before Authority of Advance Ruling (AAR) for seeking advance ruling on taxability of software payments received by it from India, which application was however subsequently withdrawn by it. As order of AAR allowing withdrawal of the application by the assessee was not received by either AO jurisdictional Commissioner (IT)-4, Mumbai, from the office of AAR, therefore, on the basis of information provided by assessee a letter dated 2-8-2016 was written by AO to AAR for an official copy of its order. On 12-8-2016, CIT-4, Mumbai also wrote to the Secretary, AAR New Delhi and sought a copy of the order of AAR. Order of AAR allowing the withdrawal of application by the assessee was received by the CIT-4, Mumbai on 29-8-2016. Observing, that since the order of the AAR was received by the CIT (IT)-4, Mumbai office on 29-8-2016, therefore, AO took of the view that as per clause (viii) of Explanation 1 to section 153, the assessment could be validly framed upto 31-10-2016. On the contrary, it was the claim of the assessee that as the order of AAR was received by the AO (as orally confirmed by him) on 24-2-2015, therefore, the draft assessment order could have been passed latest by 30-8-2015, which not having been passed within said stipulated time period was thus barred by limitation. Assessee contended that as per despatch register obtained from the office of AAR. Withdrawal order of AAR was despatched to CIT(IT)-II, Mumbai on 20-2-2015 and period of limitation stood commenced from that date and same would not cease to run only because concerend CIT(IT)-4, Mumbai had not received the said order.Held: Though it was the claim of assessee that AAR order of withdrawal, dated 17-2-2015 was despatched to Commissioner (IT)-II, Mumbai on 20-2-2015, however, there was no material available on record which to evidence that order of AAR was received by the CIT (IT)-II, Mumbai. Also, the assessee failed to lead any evidence to prove its claim that the order of the AAR, dated 17-2-2015 was ever served upon the CIT (IT)-II, Mumbai. As was discernible from the order of DRP, a letter dated 29-8-2016 communicating the order of AAR to CIT (IT)-4, Mumbai, that was received on 30-8-2016 was found available on record. In the backdrop of facts which had not been dislodged by assessee before order of withdrawal of AAR was received by revenue only as on 30-8-2016. Even as per assessee's contention, date of pronouncement of impugned order could safely be taken as the date on which revenue was aware of the order, but for the purpose of commencement of limitation time taken by counsel for the revenue to obtain a copy of order had to be excluded. Therefore, draft assessment order passed by AO under section 144C(1) read with section 143(3), dated 26-10-2016, was pased well within stipulated time limit envisaged in clause (viii) of Explanation 1 to section 153.

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