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2023 (9) TMI 1333 - AT - Income TaxValidity of assessment u/s 144C - AO without passing draft assessment order and providing an opportunity to file objections before the DRP by the assessee passed final assessment order u/s 144C - HELD THAT - As the AO passed the final assessment order without passing draft assessment order the ratio of the decisions of Headstrong Services India Pvt. Ltd. 2020 (12) TMI 1086 - DELHI HIGH COURT and Nokia India Pvt. Ltd. 2017 (9) TMI 1838 - DELHI HIGH COURT squarely applies to the facts of the assessee s case. Thus, respectfully following the above said decisions, we quash the final assessment order passed by the AO u/s 143(3)/144C/254 of the Act for the AY 2009-10 also. Ground no.1 of cross objection filed by the assessee is allowed.
Issues Involved:
1. Retrospective application of amendments to Section 40(a)(ia) and Section 201(1). 2. Levy of interest u/s 234B. 3. Validity of the final assessment order issued without a draft assessment order u/s 144C. 4. Disallowance of standby charges. Summary: Issue 1: Retrospective Application of Amendments to Section 40(a)(ia) and Section 201(1) The Revenue contended that the CIT(A) erred in holding that the amendments to Section 40(a)(ia) and Section 201(1), effective from 1st July 2012, are curative in nature and apply retrospectively to the assessee's case. The Tribunal did not specifically address this issue in the final judgment as the appeal by the Revenue was dismissed as infructuous. Issue 2: Levy of Interest u/s 234BThe Revenue also argued that the CIT(A) wrongly directed the Assessing Officer to not levy interest u/s 234B of the Income Tax Act, 1961, despite the decision of the Delhi High Court in GE Packaged Power Inc. not attaining finality. This issue was rendered academic due to the quashing of the final assessment order. Issue 3: Validity of Final Assessment Order Issued Without Draft Assessment Order u/s 144CThe assessee challenged the validity of the final assessment order passed by the Assessing Officer u/s 143(3)/144C r.w.s. 254, arguing that it was bad in law as the AO should have issued a draft assessment order instead. The Tribunal quashed the final assessment order, following the decision in the assessee's own case for AY 2008-09 and the Hon'ble Delhi High Court's ruling in PCIT Vs. Headstrong Services India Pvt. Ltd. The Tribunal emphasized that failure to pass a draft assessment order as mandated by Section 144C vitiates the entire proceedings, rendering the final assessment order null and void. Issue 4: Disallowance of Standby ChargesThe assessee contended that the CIT(A) and the Assessing Officer erred in disallowing standby charges totaling Rs. 54,600,000/- on the grounds of business exigency and business prudence not being proven. This issue was not adjudicated on merits as the final assessment order itself was quashed. Conclusion:The Tribunal allowed the cross objection filed by the assessee, quashing the final assessment order passed by the AO u/s 143(3)/144C/254 for AY 2009-10. Consequently, the appeal filed by the Revenue was dismissed as infructuous. Order Pronounced:Order pronounced in the open court on 26/09/2023.
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