2023 (7) TMI 1488 - AT - Income Tax

Validity of Final assessment order u/s 143(3) r.w.s. 144C(3) - non-framing of a draft assessment order u/s 144C(1) is not a curable defect u/s 292B - HELD THAT - There is no dispute between the parties in so far as factual aspects relating to the issue in dispute are concerned. The chronology of events discussed herein before clearly indicate that the AO had originally passed an assessment order under section 143(3) r.w.s. 144C(3). Thereafter, realizing the fact that the assessee, being an eligible assessee in terms of section 144C(15) and no variation in the income returned could be made, which is prejudicial to the interests of the assessee, without proposing a draft assessment order at the first instance in terms of section 144C(1) Assessing Officer issued a communication dated 09.11.2016 to the assessee indicating therein that the assessment order dated 31.10.2016 passed earlier was wrongly passed, hence, should be treated as null and void. On the very same date, the Assessing Officer passed a draft assessment order, purportedly, under section 143(3) r.w.s. 144C(1) of the Act and subsequently, passed the final assessment order on 19.01.2017, purportedly, under section 143(3) read with section 144C(3) of the Act. Once the Assessing Officer has passed an assessment order, whether rightly or wrongly, does he has the power to cancel / recall / withdraw the assessment order or declare it as null and void ? - On carefully scanning through the provisions of the Act, we were unable to locate any such power vested with the Assessing Officer to declare an assessment order passed by him earlier as null and void. However, in the facts of the present case, the Assessing Officer has not only declared the assessment order passed by him earlier as null and void, but has passed a fresh assessment order when earlier assessment order was under challenge before the first appellate authority. Once, an assessment order is passed by AO and communicated to the assessee, he becomes functus officio in respect of that assessment and cannot tinker with the assessment order passed. Of course, the Assessing Officer is empowered under the Act to reopen the assessment in case there is escapement of income or rectify the assessment order. However, such exercise of power by the AO has to be in strict compliance with the conditions of section 147 and 154, respectively. An assessment order passed by the AO can only be interfered with either by higher appellate authorities in terms of section 250 and 254 of the Act or by the revisionary authority under section 263 of the Act. AO himself cannot assume the role of either the appellate authority or the revisionary authority to revise / modify / cancel or withdraw the assessment order. The statute does not confer any power on the Assessing Officer to either withdraw or modify or substitute one assessment order passed by him earlier with another assessment order subsequently. If the AO is permitted to do so, it will lead to undesirable consequences and will give a free hand to the AO to pass an assessment order and subsequently withdraw/modify/cancel it according to his own whims and caprices. This will not only be against the scheme of the Act, but against all legal principles. In view of the aforesaid, we hold that the AO had no jurisdiction to declare the assessment order passed earlier by him as null and void and substitute it with another assessment order. In view of the aforesaid, we uphold the decision of Commissioner (Appeals) in declaring the assessment order as invalid, though, based on our own reasoning. Grounds are dismissed. Appeal is dismissed.

Summary

Issues:
Validity of assessment orders passed by the Assessing Officer under sections 143(3) and 144C(3) of the Income Tax Act, 1961. Jurisdiction of the Assessing Officer to cancel, recall, or declare an assessment order as null and void.

Analysis:

The appeal before the Appellate Tribunal ITAT DELHI arose from an order passed by the Commissioner of Income Tax (Appeals) concerning the assessment year 2013-14. The Assessing Officer had referred the case to the Transfer Pricing Officer due to international transactions with Indian Associated Enterprises. The TPO proposed an adjustment to the income of the assessee, leading to the Assessing Officer passing an assessment order under sections 143(3) and 144C(3) of the Act, determining the total income. The assessee appealed this order before the first appellate authority.

Subsequently, the Assessing Officer issued a letter stating the initial assessment order was null and void due to an inadvertent mistake and passed a draft assessment order under section 144C(1) of the Act. The final assessment order was then issued, which was also appealed by the assessee. The first appellate authority held the initial assessment order invalid for not following the correct procedure under section 144C(1) of the Act, a decision not challenged by the Department.

The Department argued that the error in not passing the draft assessment order initially was a curable defect under section 292B of the Act. However, the assessee contended that once an assessment order is passed and appealed, the Assessing Officer cannot cancel or nullify it. The Tribunal analyzed the situation and found that the Assessing Officer lacked the authority to declare the initial assessment order null and void and issue a fresh assessment order while the first order was under appeal.

The Tribunal emphasized that the Assessing Officer's role ends once an assessment order is communicated, and any changes must adhere to the provisions of the Act, such as reopening assessments or rectification orders under sections 147 and 154. The Tribunal concluded that the Assessing Officer cannot unilaterally modify, withdraw, or substitute an assessment order previously passed. Allowing such actions would undermine the statutory scheme and legal principles. Therefore, the Tribunal upheld the decision of the first appellate authority, declaring the assessment order invalid, and dismissed the appeal.

In summary, the Tribunal dismissed the appeal, affirming that the Assessing Officer exceeded jurisdiction by declaring the initial assessment order null and void and issuing a fresh assessment order while the initial order was under appeal. The decision highlighted the limitations on the Assessing Officer's authority once an assessment order is passed and communicated to the assessee.