Delhi HC: Absence of Any Variation Income, AO Can’t Allocate a Draft Assessment Order

Delhi High Court judgment in the case of CIT Vs S.A. Chitra Ventures Ltd. specifies the jurisdiction of Assessing Officers (AOs) in passing draft assessment orders. The ruling of the court specifies the restrictions on AO’s authority in the absence of any variation in income or loss.

Detailed Analysis in the Case of S.A. Chitra Ventures Ltd

The case mentioned two pleas filed by the Commissioner of Income Tax – International Taxation challenging the Income Tax Appellate Tribunal (ITAT) judgment. The opinion is related to the Assessing Officers (AOs) jurisdiction to pass a draft assessment order without any variation in the income or loss returned by the taxpayer.

AO formulated a draft assessment order that seeks a tax rate of 20% on the income reported via taxpayers, denying their claim for benefits under the India Cyprus Double Taxation Avoidance Agreement (DTAA). The total income as reported by the taxpayer stayed unvaried.

The provisions of Section 144C of the Income Tax Act have been analyzed by the Delhi High Court, specifically the phrase “any variation in the income or loss returned.” AO’s power to formulate the draft assessment order is contingent on the variation in the income or loss returned, which was not the case in this. 

The court ruled the decision of the ITAT underscoring the absence of the variation of income stops the AO from practising the jurisdiction to pass the draft assessment order. The petitions were dismissed since they did not ask any substantial question of law. 

Closure: The judgment of the Delhi High Court in CIT Vs S.A. Chitra Ventures Ltd. emphasizes the significance of income variation in choosing the jurisdiction of Assessing Officers to pass draft assessment orders. This judgment specifies the limitations on AO’s authority and ensures adherence to the provisions of the Income Tax Act.