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2018 (10) TMI 1125 - HC - Income TaxValidity of corrigendum order to to cure the defect / mistake - Non-compliance of the mandatory provisions of Section 144-C while passing an scrutiny assessment order u/s 143(3) - transfer pricing - procedure contemplated under Section 292B - Held that - The window dressing which has been attempted by the Revenue would not give life to an order passed without jurisdiction. It is to be pointed out that the order of assessment, once issued under Section 143 (3), becomes final and reopening the same is impermissible. The mistake committed by the Revenue in not following the mandatory requirement of Section 144-C by passing an order under Section 143 (3) cannot be cured by the issuance of a corrigendum. In other words, the proceedings issued in the name of corrigendum trying to correct its mistakes only by introducing a Section without realising the consequences of not following the mandatory requirement u/s 144-C will not do justice to either of the parties. The necessity for the Parliament to incorporate Section 144-C is not only to safeguard the Revenue, but also the assessee and any mistake committed by any one of them, the said party is supposed to face the consequences and cannot put the hands of the clock back and start afresh.Though it is the submission of the Revenue that it is a procedural irregularity, which can be corrected through issuance of a corrigendum and no prejudice would be caused to the assessee, however, it is to be pointed out that the act committed by the Revenue is an incurable illegality, which cannot stand protected by Section 292B of the Act. If the contention of the Revenue is accepted, then it would literally render all the provisions of the Income Tax Act subservient to Section 292B. In effect, any error or omission or mistake committed by the Revenue at any stage of a proceeding cannot be sought to be cured by taking umbrage under Section 292B. Allowing such a contention would be misreading the intention of the Parliament in enacting Section 292B and Section 144-C. The question of limitation raised by the Revenue would in no way save the Revenue from the non-compliance of Section 144-C of the Act. The non-compliance of the mandatory provisions of Section 144-C of the Act, being an incurable illegality, renders the assessment order null and void. Learned single Judge has taken into account all the relevant facts and laws and has given a well considered finding and we are of the considered opinion that no interference is called for with the order passed by the learned single Judge. Appeal dismissed.
Issues Involved:
1. Validity of the assessment order dated 26.3.2013. 2. Legality of the corrigendum issued on 15.4.2013. 3. Applicability of Section 292B of the Income Tax Act. 4. Compliance with the procedural mandate under Section 144-C of the Income Tax Act. 5. Impact of procedural lapses on the substantive rights of the assessee. Issue-wise Detailed Analysis: 1. Validity of the Assessment Order Dated 26.3.2013: The assessee filed its return for the Assessment Year 2009-2010, which was selected for scrutiny. The AO issued notices and the case was transferred multiple times due to administrative changes. The assessment order dated 26.3.2013 was challenged by the assessee on the grounds that it should be treated as a final order without passing the mandated Draft Assessment Order (DAO). The learned single Judge accepted the assessee's contention, holding that the order dated 26.3.2013 was a final order, not a DAO, as it raised a demand and imposed a penalty, which indicated finality. 2. Legality of the Corrigendum Issued on 15.4.2013: The corrigendum issued on 15.4.2013 attempted to rectify the order dated 26.3.2013 by amending the section under which the assessment was passed. The assessee argued that the corrigendum was issued beyond the limitation period and could not cure the defect in the original order. The learned single Judge held that the corrigendum could not convert the final order into a DAO, as it was beyond the limitation period and did not withdraw the demand and penalty made in the original order. 3. Applicability of Section 292B of the Income Tax Act: The Revenue argued that Section 292B could cure the procedural defects in the assessment order. However, the court noted that Section 292B protects returns, assessments, and other proceedings from invalidation due to mistakes, defects, or omissions, provided they are in substance and effect in conformity with the intent and purpose of the Act. The court held that the procedural lapse in not issuing a DAO was not a mere irregularity but an incurable illegality, which Section 292B could not protect. 4. Compliance with the Procedural Mandate under Section 144-C of the Income Tax Act: Section 144-C mandates the AO to issue a DAO before passing a final assessment order. The court emphasized that this procedure safeguards the rights of both the Revenue and the assessee. The AO's failure to issue a DAO, as mandated, invalidated the final assessment order. The court highlighted that the corrigendum could not cure this procedural lapse, as it struck at the substratum of the assessee's rights. 5. Impact of Procedural Lapses on the Substantive Rights of the Assessee: The court observed that the procedural violation by the AO in not adhering to Section 144-C resulted in substantial injustice to the assessee. The failure to issue a DAO deprived the assessee of the opportunity to file objections with the Dispute Resolution Panel (DRP). The court noted that various High Courts across the country, including the Andhra Pradesh, Bombay, Delhi, and Gujarat High Courts, had held that non-compliance with Section 144-C invalidates the final assessment order. Conclusion: The court concluded that the assessment order dated 26.3.2013 was a final order and not a DAO. The corrigendum issued on 15.4.2013 could not cure the defect in the original order, as it was issued beyond the limitation period and did not withdraw the demand and penalty. The procedural lapse in not issuing a DAO was an incurable illegality, which Section 292B could not protect. The non-compliance with Section 144-C invalidated the final assessment order and the consequent demand notices and penalty proceedings. The appeals by the Revenue were dismissed, upholding the learned single Judge's order.
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