Facts of the Case

The petitioner, Salesforce.com Singapore Pte. Ltd., filed a writ petition challenging the assessment order dated 21.01.2025 passed under Section 147 read with Section 144C(13) of the Income-tax Act, 1961 for Assessment Year 2018–19, along with the consequential demand notice issued under Section 156. The petitioner had originally filed its return of income on 30.11.2018, which was selected for complete scrutiny and was pending assessment under Section 143(3).

While the original scrutiny proceedings were still ongoing, the Assessing Officer issued a show cause notice dated 30.03.2022 under Section 148A(b), followed by an order dated 11.04.2022 under Section 148A(d), and thereafter issued a notice under Section 148 for the same assessment year. Parallel proceedings were thus initiated even before the original assessment had concluded.

Issues Involved

Whether reassessment proceedings under Sections 147 and 148 can be initiated when the original scrutiny assessment proceedings for the same assessment year are still pending, whether such parallel proceedings are without jurisdiction, and whether CRM receipts earned by the petitioner could be taxed as Fees for Technical Services under the Act or the India–Singapore DTAA.

Petitioner’s Arguments

The petitioner contended that initiation of reassessment proceedings while the original assessment proceedings were pending was wholly without jurisdiction, as income cannot be said to have escaped assessment before the completion of scrutiny assessment. It was further argued that the issue of taxability of CRM receipts had already been conclusively decided in favour of the petitioner by the Income Tax Appellate Tribunal and affirmed by the Delhi High Court in earlier years, holding that such receipts do not constitute Fees for Technical Services under the India–Singapore DTAA.

Respondent’s Arguments

The Revenue sought to justify the reassessment proceedings and the additions made on account of CRM receipts by treating them as Fees for Technical Services under the Act and the DTAA. However, the Revenue was unable to point out any statutory provision permitting initiation of reassessment proceedings while the original assessment proceedings were still ongoing.

Court Order / Findings

The Delhi High Court held that Section 147 contemplates reassessment only where income has escaped assessment, and there can be no question of income escaping assessment prior to the conclusion of the original assessment proceedings. The Court observed that the Assessing Officer had no jurisdiction to initiate reassessment proceedings under Section 148 while scrutiny assessment under Section 143(3) was pending for the same assessment year.

The Court further noted that the issue relating to taxability of CRM receipts stood conclusively settled in favour of the petitioner by earlier decisions of the Delhi High Court in the petitioner’s own case, which had attained finality after dismissal of the Revenue’s Special Leave Petition by the Supreme Court. The impugned assessment order was therefore held to be unsustainable both on jurisdictional grounds and on merits.

Important Clarification

The Court clarified that parallel assessment and reassessment proceedings for the same assessment year are impermissible under the Income-tax Act. Once scrutiny assessment proceedings are pending, the Assessing Officer must conclude those proceedings in accordance with law and cannot invoke reassessment provisions simultaneously.

Final Outcome

The writ petition was allowed. The Delhi High Court set aside the impugned assessment order dated 21.01.2025 passed under Section 147 read with Section 144C(13) for Assessment Year 2018–19 along with the consequential demand notice. All pending applications were disposed of, and the decision was rendered in favour of the petitioner and against the Revenue.

 

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769595377_SALESFORCE.COMSINGAPOREPTE.LTD.VsTHEDEPUTYCOMMISSIONEROFINCOMETAXCIRCLE312INTERNATIONALTAXATIONNEWDELHIANR.pdf 

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