2021 (12) TMI 16 - AT - Income Tax

Validity of order passed u/s 144C - non passing a draft assessment order - HELD THAT - When case was remanded to the assessee to decide afresh on all the issues except one issue already decided in favour of the assessee, the AO was mandatorily required to pass a draft assessment order as per provisions contained u/s 144C(1) of the Act, but AO has straightaway passed final assessment order which is not sustainable in the eyes of law. Identical questions having already been decided by the Hon ble Delhi High Court in assessee s own case for AY 2008-09 2017 (9) TMI 1838 - DELHI HIGH COURT as to not passing a draft assessment order in accordance with the provisions contained u/s 144C(1) is a non-curable defect, we find no illegality or perversity in the impugned findings returned by the ld. CIT(A), hence the appeal filed by the Revenue is hereby dismissed.

Summary

Issues Involved:
1. Legality of allowing appeal based on procedural irregularity in giving effect to ITAT directions.
2. Legality of allowing appeal due to failure to refer ITAT order to DRP.

Analysis:

Issue 1:
The appeal questioned the legality of the CIT(A) allowing the assessee's appeal based on procedural irregularity in implementing ITAT directions. The facts revealed that the AO had passed a final assessment order without following the required procedure of issuing a draft assessment order under section 144C(1) of the Income Tax Act. The CIT(A) based the decision on the High Court's ruling in the assessee's case for AY 2008-09, emphasizing the non-curable defect of not passing a draft assessment order as per statutory provisions. The Tribunal found the CIT(A)'s decision justified, as the AO's failure to follow the prescribed procedure rendered the final assessment order unsustainable in law. The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision.

Issue 2:
The second issue raised the legality of allowing the appeal due to the AO's failure to refer the ITAT order to the Dispute Resolution Panel (DRP) under section 144C of the Act. The CIT(A) had favored the assessee by deleting certain additions made by the AO, citing non-compliance with the statutory requirement of referring transfer pricing issues to the DRP. The Tribunal concurred with the CIT(A)'s findings, emphasizing the necessity of adhering to procedural requirements. The Tribunal highlighted the High Court's precedent in similar cases, affirming the significance of following statutory provisions. Consequently, the Tribunal upheld the decision in favor of the assessee, dismissing the Revenue's appeal based on the AO's non-compliance with the mandated procedure.

In conclusion, the Tribunal's judgment in this case emphasized the critical importance of adhering to procedural requirements under the Income Tax Act, highlighting the consequences of non-compliance and the legal implications of such procedural irregularities. The decision underscored the significance of following statutory provisions to ensure the integrity and legality of assessment procedures, ultimately leading to the dismissal of the Revenue's appeal.