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2021 (9) TMI 1074 - AT - Income TaxRevision u/s 263 by CIT - AO's omission to frame draft assessment order u/s 144C - not framing the draft assessment order, after receipt of TPO order, the AO has acted arbitrarily without scant regard to the mandatory procedure to be followed as per section 144C - Whether assessment order passed by the Assessing Officer is void being passed without jurisdiction? - HELD THAT - AO was bound to follow the mandatory provision of law scrupulously and therefore non-framing and issue of draft assessment order is not curable defect because it is a jurisdictional defect which cannot be subsequently corrected by the Ld. PCIT u/s. 263 of the Act, since the assessment order of AO dated 25.09.2017 is null in the eyes of law We hold that the AO's omission to frame draft assessment order breached the Rule of Law and consequently, his non-action to frame draft assessment order before passing the final assessment order was in contravention of mandatory provision of law as stipulated in section 144C of the Act, consequently his action is arbitrary whimsical exercise of power which offends Article 14 21 of the Constitution of India and therefore an action made without jurisdiction and ergo the assessment order dated 25.09.2017 is null in the eyes of law and therefore, is non est. Therefore, when the foundation itself does not exist, i.e., assessment order dated 25.09.2017 is non-est, the Ld. PCIT could not have exercised his jurisdiction to interfere with void/null order which is not existing in the eyes of law and, therefore, the impugned order of Ld. PCIT is also a nullity. The assessee succeeds on the legal issue.
Issues Involved:
1. Jurisdiction of the Principal Commissioner of Income Tax (Pr. CIT) under section 263 of the Income Tax Act, 1961. 2. Validity of the assessment order passed by the Assessing Officer (AO) without issuing a draft assessment order under section 144C of the Act. Issue-wise Detailed Analysis: 1. Jurisdiction of the Principal Commissioner of Income Tax (Pr. CIT) under section 263 of the Income Tax Act, 1961: The Assessee challenged the jurisdiction of the Pr. CIT to invoke revisional jurisdiction under section 263 of the Act. The core argument was that the assessment order dated 25.09.2017, passed by the AO, was itself non-est in the eyes of law. The Pr. CIT had issued a Show Cause Notice (SCN) dated 30.11.2018 to the Assessee, intending to exercise his power under section 263 of the Act. The Pr. CIT set aside the AO’s order and directed a de novo assessment, citing the AO’s failure to frame a draft assessment order as required under section 144C of the Act. The Tribunal concluded that since the original assessment order was void, the Pr. CIT could not exercise jurisdiction under section 263 to revise a non-existent order. Therefore, the Pr. CIT’s order was also deemed a nullity. 2. Validity of the assessment order passed by the Assessing Officer (AO) without issuing a draft assessment order under section 144C of the Act: The Tribunal examined whether the AO’s failure to issue a draft assessment order rendered the final assessment order void. Under section 144C of the Act, the AO must issue a draft assessment order if there is any proposed variation in the income or loss returned by the Assessee, which is prejudicial to the Assessee. The Tribunal noted that the AO had not complied with this mandatory procedure, thereby violating the provisions of section 144C. Citing precedents such as Vijay Television vs. DRP and M/s. Zuari Cements Ltd. vs. ACIT, the Tribunal reiterated that non-compliance with section 144C renders the assessment order null and void. The AO’s omission to frame a draft assessment order breached the rule of law, making the final assessment order arbitrary and without jurisdiction. Consequently, the assessment order dated 25.09.2017 was declared non-est and null in the eyes of law. Conclusion: The Tribunal held that the AO’s failure to issue a draft assessment order as mandated by section 144C of the Act rendered the final assessment order void ab initio. Consequently, the Pr. CIT’s invocation of section 263 to revise a non-existent order was also invalid. The appeal of the Assessee was allowed, and the impugned order of the Pr. CIT was set aside. Order Pronouncement: The order was pronounced in the open court on 15th September 2021.
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