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2019 (3) TMI 1783 - AT - Income TaxAssessment order without meeting the mandatory requirements under Section 144C - draft assessment order not forwarded - HELD THAT - Assessing Officer had not followed the procedure prescribed in the Act which was mandatory in nature and hence the final assessment order was void. No curable defect under Section 292B - Decided in favour of assessee.
Issues Involved:
1. Validity of the Draft Assessment Order. 2. Validity of the Final Assessment Order. Issue-wise Detailed Analysis: 1. Validity of the Draft Assessment Order: The assessee challenged the validity of the draft assessment order, arguing that it was, in essence, a final assessment order. The assessee received an order dated 29.12.2017, labeled as a draft assessment order, but it included computed income, taxes, a demand notice, and initiated penalty proceedings. The representative for the assessee contended that this bypassed Section 144C of the Income Tax Act, 1961, which mandates forwarding a draft assessment order to the assessee if there is a proposed variation in the income or loss returned. The representative argued that non-compliance with Section 144C renders any subsequent order void, citing the Pune Bench Tribunal's decision in Eaton Fluid Power Ltd vs. DCIT. In contrast, the Departmental Representative supported the lower authorities' orders, asserting that the draft assessment order was correctly captioned and that the assessee had cooperated with subsequent proceedings, culminating in a final assessment order on 20th September 2018. The Departmental Representative argued that any mistake in the draft assessment order was curable under Section 292B of the Act, referencing the Hon’ble Apex Court's judgment in Sky Light Hospitality LLP vs. ACIT. The Tribunal examined the rival contentions and the orders of the authorities. It noted that the order dated 29.12.2017, despite being labeled as a draft assessment order, had computed income, issued a demand notice, and initiated penalty proceedings, indicating that the assessment was complete. The Tribunal emphasized that compliance with Section 144C(1) is mandatory, and non-compliance cannot be considered a curable mistake under Section 292B. The Tribunal cited multiple judgments, including those from the Pune Bench, Hon’ble Madras High Court, and Hon’ble Andhra Pradesh High Court, which supported the view that failure to follow Section 144C renders the assessment order null and void. The Tribunal concluded that the assessment order dated 29.12.2017 was, in substance and effect, a final assessment order, and thus, the mandatory requirements of Section 144C were not adhered to, rendering the assessment order void. 2. Validity of the Final Assessment Order: The assessee argued that the final assessment order dated 20-09-2018, served on 10-11-2018, was time-barred as per Section 144C(13) of the Act. The Tribunal, having already determined that the draft assessment order was invalid due to non-compliance with Section 144C, held that any subsequent order, including the final assessment order, was also void. The Tribunal reiterated that lack of jurisdiction due to non-compliance with mandatory procedural requirements cannot be rectified by subsequent acquiescence or curable mistakes. Conclusion: The Tribunal allowed the grounds challenging the validity of the draft and final assessment orders, declaring them null and void due to non-compliance with Section 144C of the Income Tax Act, 1961. Consequently, the Tribunal did not consider the grounds on merits, as the jurisdictional issue was decided in favor of the assessee. The appeal filed by the assessee was allowed.
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