2014 (6) TMI 540 - HC - Income Tax

Validity of corrigendum issued to the order passed u/s 144C - TPO instead of passing a provisional order or a draft assessment order, has passed a final assessment order dated 26.03.2013 In the corrigendum it was only stated that the order passed on 26.03.2013 under Section 143C of the Act has to be read and treated as a draft assessment order as per Section 143C read with Section 93CA (4) read with Section 143 (3) of the Act - Held that - In and by the order dated 15.04.2013, the second respondent granted thirty days time to enable the assessee to file their objections. On receipt of the corrigendum dated 15.04.2013, the assessee company approached the first respondent, but the first respondent declined to issue any direction to the assessment officer on the ground that the first respondent has got jurisdiction only to entertain such an appeal if the order passed by the second respondent is a pre-assessment order - the first respondent declined to entertain the objections raised by the assessee company on the ground that the order passed is not a draft assessment order, rather it is a final order. Relying upon Deepak Agro Foods v. State of Rajasthan and others 2008 (7) TMI 553 - SUPREME COURT OF INDIA - if an order is passed beyond the statutory period prescribed, such order is a nullity and has no force of law - the period for assessment proceedings expired and fresh assessment orders have been issued by anti-dating it the High Court ought not to have remanded the matter back to the assessment officer and by doing so, the statutory period prescribed for completion of assessment has been extended by conferring jurisdiction upon the AO, which he otherwise lacked on the expiry of the period - there is a distinction between an order which is a nullity and an order which is irregular and illegal - Where an authority making order lacks inherent jurisdiction, such an order will be null and void ab initio, as the defect of jurisdiction goes to the root of the matter and strikes at his very authority to pass any order and such a defect cannot be cured even by consent of the parties. Where there is an omission on the part of the AO to follow the mandatory procedures prescribed in the Act, such an omission cannot be termed as a mere procedural irregularity and it cannot be cured - the website of the department indicate the amount determined by the second respondent payable by the company inspite of issuance of the corrigendum on 15.04.2013 as a tax due amount - while issuing the corrigendum, the second respondent did not even withdraw the taxable amount determined by him or updated the status in the website - such an order passed by the second respondent can only be construed as a final order passed in violation of the statutory provisions of the Act - The corrigendum dated 15.04.2013 is also beyond the period prescribed for limitation - Such a defect or failure on the part of the second respondent to adhere to the statutory provisions is not a curable defect by virtue of the corrigendum dated 15.04.2013 - the respondents cannot be allowed to develop their own case Decided against Assessee.

Issues Involved:
1. Validity of the final assessment order dated 26.03.2013.
2. Legality of the corrigendum issued on 15.04.2013.
3. Jurisdiction and procedural adherence under Section 144C of the Income Tax Act, 1961.
4. Applicability and limitations of Section 154 of the Income Tax Act, 1961.
5. Impact of procedural errors on the validity of tax assessment orders.

Detailed Analysis:

1. Validity of the Final Assessment Order Dated 26.03.2013:
The petitioners challenged the assessment order dated 26.03.2013, arguing it was unsustainable under law as it was issued as a final order instead of a draft assessment order, violating Section 144C of the Income Tax Act, 1961. The court noted that the order included a demand for tax and penalties, indicating it was indeed a final order. This was contrary to the mandatory procedure under Section 144C, which requires a draft assessment order to be issued first, allowing the assessee to file objections.

2. Legality of the Corrigendum Issued on 15.04.2013:
The corrigendum issued by the second respondent on 15.04.2013 aimed to rectify the final assessment order by treating it as a draft assessment order. The petitioners argued that the corrigendum was issued beyond the limitation period and could not cure the defect of the original final order. The court agreed, stating that the corrigendum could not retroactively convert a final order into a draft assessment order, especially after the statutory period had expired.

3. Jurisdiction and Procedural Adherence Under Section 144C:
Section 144C mandates that the Assessing Officer must issue a draft assessment order if there is a proposed variation to the income or loss returned by the assessee. The court emphasized that the failure to follow this mandatory procedure rendered the final assessment order dated 26.03.2013 null and void. The corrigendum could not rectify this fundamental procedural lapse.

4. Applicability and Limitations of Section 154:
The respondents argued that Section 154 of the Act, which allows for rectification of mistakes, could be invoked to issue the corrigendum. However, the court clarified that Section 154 could not be applied to cure the defect of issuing a final order instead of a draft assessment order. The corrigendum did not indicate it was issued under Section 154, and even if it had, it could not extend the period of limitation or substitute the mandatory procedure under Section 144C.

5. Impact of Procedural Errors on the Validity of Tax Assessment Orders:
The court referred to several precedents, including decisions of the Supreme Court and High Courts, to underline that procedural errors, especially those violating statutory mandates, cannot be cured by subsequent actions like issuing a corrigendum. The court highlighted the principle that an order passed without jurisdiction or beyond the statutory period is null and void, and such defects are not curable.

Conclusion:
The court concluded that the final assessment order dated 26.03.2013 was issued in violation of the mandatory procedures under Section 144C and was therefore null and void. The corrigendum issued on 15.04.2013 could not cure this defect, as it was beyond the statutory period and did not adhere to the mandatory procedural requirements. Consequently, the court set aside both the final assessment order and the corrigendum, allowing the writ petitions filed by the petitioners.

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