2024 (7) TMI 125 - AT - Income Tax

Validity of final assessment order passed u/s 144C without passing the draft assessment order - HELD THAT - Circulars cannot supersede the provisions of Section 144C(1) of the Act, and held the final assessment order null and void that was passed without passing the draft assessment order in violation to mandatory provisions of Section 144C(1) of the Act. Subsequently, the CBDT came out with another clarificatory circular dated 19.11.2013, the relevant contents of the same have been reproduced by us hereinabove in para 8 of this order. The subsequent clarificatory circular issued by CBDT is in line with the provisions of Section 144C(1) - CBDT Circular and decision referred above makes it explicit that after 01.10.2009, the AO is statutorily required to pass draft assessment order u/s. 144C(1) of the Act, if he makes any addition, before passing the final assessment order u/s. 144C(3) of the Act. As decided in the case of Xander Advisors India Pvt. Ltd. 2022 (12) TMI 501 - ITAT DELHI in somewhat similar case where the final assessment order was passed without passing draft assessment order, after considering various decisions including the decision rendered in the case of Zuari Cement Ltd. ( 2013 (9) TMI 1167 - SC ORDER ) the decision of CIT vs. C-Sam (India) (P.) Ltd 2017 (8) TMI 291 - GUJARAT HIGH COURT and CBDT circular dated 03.6.2010 and dated 19.11.2013 (supra) quashed the final assessment order. CIT(A) has correctly quashed the final assessment order that has been passed without following the mandatory provisions of Section 144C(1) of the Act. Appeal of the Revenue is dismissed.

Summary

Issues:
1. Condonation of delay in filing the appeal.
2. Validity of the assessment order passed without draft assessment order under Section 144C of the Income Tax Act, 1961.

Analysis:
1. The appeal was time-barred by 16 days, and the Assessing Officer filed for condonation of delay. The delay was condoned as it was not intentional, and the appeal was admitted for hearing on merits.

2. The Department challenged the order of the CIT(A) on the basis of CBDT Circulars and the applicability of Section 144C of the Act. The Department argued that the assessment order was valid, while the assessee contended that the order was passed in violation of the Act. The CIT(A) upheld the assessee's appeal, citing relevant case laws and circulars.

3. The Assessing Officer passed the final assessment order without a draft assessment order, contravening Section 144C of the Act. The CBDT Circulars clarified the mandatory requirement of passing a draft assessment order before the final assessment order. The High Court decisions and circulars supported the quashing of the final assessment order in such cases.

4. The Coordinate Bench in a similar case quashed the final assessment order for not following the mandatory provisions of passing a draft assessment order. The CIT(A) in this case also quashed the final assessment order, upholding the decisions of various High Courts. The appeal of the Revenue was dismissed for lacking merit.

In conclusion, the judgment highlighted the importance of adhering to the procedural requirements under the Income Tax Act, specifically regarding the passing of draft assessment orders before final assessment orders. The decision was based on legal precedents and circulars, ensuring the proper application of the law in assessment proceedings.