NR Not Eligible to Approach DRP if He Was Declared as Resident by AO During Draft Assessment Proceedings

Case Details: Aldrin Alberto Araujo Soares v. Deputy Commissioner of Income-tax*- [2024] 162 taxmann.com 186 (Bombay)

Judiciary and Counsel Details

• • M.S. Sonak & Valmiki Sa Menezes, JJ.
  • Hanumant D. Naik, Adv. for the Petitioner. 
  • Ms Susan Linhares, Standing Counsel for the Respondent.

Facts of the Case

The assessee filed its return of income for the relevant assessment year, claiming the status of “resident in India” along with the tax audit report as per section 44AB of the Act. Afterwards, the assessee filed a revised return claiming the status of “non-resident” and declaring total income wherein a refund was claimed.

Subsequently, the Assessing Officer (AO) issued a draft order under Section 144C(1). The draft order was passed contending the assessee was a “resident in India” and not a “non-resident” as he claimed in his revised return. Aggrieved by the order, the assessee filed a writ petition to the High Court of Bombay.

High Court Held

The High Court held that unless it was established that the assessee is an “eligible assessee” as per section 144C(15)(b), there was no question of any reference to DRP.

As per section 114C(15)(b), an eligible assessee is defined as any person in whose case the variation arises as a consequence of the order of the Transfer Pricing Officer passed under section 92CA(3) or any non-resident not being a company, or any foreign company. It was admitted that the assessee is not a person in whose case variation arose due to the order of the Transfer Pricing Officer.

Upon considering the material on record, the AO categorically held that the assessee was a “resident in India” and not a “non-resident”. This was the Department’s finding, and the Department cannot distance itself from it merely because the assessee may have claimed otherwise in his revised returns.

The assessee also accepted that he was a “resident in India” and, based upon such acceptance, submitted that the authorities need not consider his revised return because the same proceeded on an erroneous premise that the assessee was a “non-resident”. Therefore, the assessee cannot now be held as an “eligible assessee” as defined under Section 144C(15) of the IT Act.

Accordingly, if the assessee is not an “eligible assessee”, then there is no question of applying the procedure under Section 144C to the assessee.

List of Cases Referred to

• • Pankaj Extrusion Ltd. v. Asstt. CIT (OSD) [2011] 10 taxmann.com 17/241 CTR 390/198 Taxman 6 (Gujarat) (para 4).