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TMI Blog2015 (10) TMI 2622X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities cannot take the shelter of initiating the proceedings under section 263 of the Act in order to correct null and void order passed by the Assessing Officer. We find no merit in the exercise of jurisdiction by the Commissioner under section 263 of the Act. Non-following of the conditions laid down in section 144C of the Act, we hold that the assessment order passed by the Assessing Officer was both null and void and has to be quashed. - Decied in favour of assessee - ITA No. 341/PN/2014, ITA No. 1072/PN/2014 - - - Dated:- 28-10-2015 - R. K. Panda (Accountant Member) And Sushma Chowla (Judicial Member) For the Appellant : Girish Dave, Kadambari Dave For the Respondent : M. S. Verma, CIT ORDER Sushma Chowla (Judicial Member) Out of these two appeals, one appeal filed by the assessee is against the order of CIT-I, Thane, dated 29.01.2014 relating to assessment year 2008-09 against the order passed under section 263 of the Income Tax Act, 1961. The assessee also filed another appeal against the order of CIT(A)-II, Thane, dated 25.03.2014 relating to assessment year 2008-09 against order passed under section 143(3) of the Income Tax Act, 1961. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the appellant in proper perspective. 9. Each one of the above grounds of appeal is without prejudice to the other. 10. The appellant reserves the right to amend, alter or add to the grounds of appeal. 4. In ITA No.1072/PN/2014, the assessee has raised the following grounds of appeal:- The appellant objects to the order under section 250 of the Income-tax Act, 1961 passed by the Commissioner of Income-tax (Appeals) - II, Thane ('CIT(A)') dated 25 March 2014 for the aforesaid assessment year on the following among other grounds: 1. The learned CIT(A) erred in dismissing the appeal filed by the appellant as infructuous. 2. The learned CIT(A) erred in not holding that the order passed by the Assessing Officer is bad in law and needs to be quashed. 3. Each one of the above grounds of appeal is without prejudice to the other. 4. The appellant reserves the right to amend, alter or add to the grounds of appeal. 5. The assessee in ITA No.341/PN/2014 is aggrieved by the order of Commissioner in invoking the jurisdiction under section 263 of the Act. 6. The brief facts of the case are that the assessee had furnished return of income declaring total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 making addition of ₹ 5,70,49,840/- as directed by the TPO, without issuing draft order of the proposed addition to the assessee as is required under section 144C of the Act. The Commissioner was of the view that the order passed by the Assessing Officer was thus, was not in conformity with law and therefore, was erroneous and prejudicial to the interests of revenue. Hence notice under section 263 of the Act was issued to the assessee and the assessee was asked to explain as to why the order passed by the Assessing Officer under section 143(3), dated 14.12.2011 should not be revised or set-aside under section 263 of the Act. In response, the representative of the assessee objected to the proposed revision of the order of Assessing Officer under section 263 of the Act. The first objection raised by the assessee was that by passing the order under section 143(3) of the Act without complying with the provisions of section 144C of the Act, the Assessing Officer had deprived the assessee company of the right of approaching the Dispute Resolution Panel (DRP). It was further contended that the assessee company and its authorized representative had met the Assessing Officer, CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if containing any grievous error, would be an order prejudicial to the interests of revenue. Since in the instant case after receipt of the order of TPO, the Assessing Officer was required to send the draft order of proposed addition to the assessee under section 144C of the Act, which was not done, makes it obvious that the assessment order was passed by the Assessing Officer without following procedure as laid down in the statute and also in violation of principles of natural justice. Therefore, the Commissioner thus held that the assessment order passed by the Assessing Officer was erroneous as well as prejudicial to the interests of revenue. 9. The contention of the assessee that as the assessment order has been passed by the Assessing Officer without following procedure, was null and void and hence, the Commissioner was not authorized to take action under section 263 of the Act in respect of such order, was held to be not tenable. The Commissioner was of the view that he had the authority to take action under section 263 of the Act in respect of any order passed by the Assessing Officer. Further view of the Commissioner was that even if it is assumed that a null and void o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner was taking course under section 263 of the Act. In the entirety of the above said facts and circumstances of the case, the Commissioner held that the assessment order passed by the Assessing Officer without following procedure as laid down in law for the purpose, was erroneous as well as prejudicial to the interests of revenue and the same was set-aside. The Assessing Officer was directed to pass a fresh order following the procedure as laid down in section 144C of the Act. 11. The assessee is in appeal against the said order of Commissioner passed under section 263 of the Act holding the assessment order to be both erroneous and prejudicial to the interests of revenue. 12. The learned Authorized Representative for the assessee pointed out that after the TPO proposed adjustment of ₹ 5.70 crores in the arm's length price of international transaction, the Assessing Officer had passed the order under section 143(3) of the Act without resorting to the provisions of section 144C of the Act. The learned Authorized Representative for the assessee placed reliance on the ratio laid down by the Hon ble High Court of Andhra Pradesh in M/s. Zuari Cement Ltd. in WP No.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out by the learned Departmental Representative for the Revenue that where the assessment order passed by the Assessing Officer is enforceable and it becomes prejudicial to the interests of revenue, then the Commissioner is empowered to exercise the jurisdiction under section 263 of the Act. Reliance in this regard was placed on the ratio laid down by the Hon ble Punjab Haryana High Court in CIT Vs. Desraj, IT Reference No.4/1980, judgment dated 22.11.1988. Another contention raised by the learned Departmental Representative for the Revenue was when the order becomes invalid. It was pointed out by her that the order perse cannot be invalid and it has to be declared invalid as held by the Indore Bench of Tribunal in Rajgarh Liquors Vs. CIT (supra) and the Hon ble Punjab Haryana High Court in CIT Vs. Amin Chand (supra). Another reliance was placed upon by the learned Departmental Representative for the Revenue on the ratio laid down by Panaji Bench of Tribunal in Gigabyte Technology (India) (P.) Ltd. Vs. CIT (2015) 53 taxmann.com 30 (Panaji), wherein similar order was passed by the Assessing Officer under section 143(3) of the Act without complying to the provisions of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to exercise jurisdiction where he considers that any order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of revenue. The Commissioner in this regard may call for and examine the record of any proceedings under the Act and after giving assessee an opportunity of being heard and after making or causing to make such enquiries as he may deem necessary, pass such orders as the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. Both the conditions of the order being erroneous and prejudicial to the interest of revenue are to be simultaneously fulfilled before the Commissioner can exercise the jurisdiction under section 263 of the Act. 16. In the facts of the present case, the Assessing Officer during the course of assessment proceedings noted that the assessee had entered into international transaction with its AEs. A reference was made by the Assessing Officer to the TPO on 10.06.2010 under the provisions of section 92CA of the Act for determining the arm's length price of the international transaction of the assessee. The TPO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the eligible assessee shall within 30 days of the receipt, file his acceptance of the variation to the Assessing Officer or file his objections, if any, to such variation with the Dispute Resolution Panel and the Assessing Officer. Under sub-section (3) of section 144C of the Act, the Assessing Officer shall complete the assessment on the basis of draft order if the assessee intimates to the Assessing Officer the acceptance of the variation or no objections are received within period specified in sub-section (2) of section 144C of the Act. Thereafter, the Assessing Officer is empowered to pass the assessment order within one month from the end of month, in which the acceptance is received or the period of filing objections under sub-section (2) of section 144C of the Act expires. Under sub-section (5) of section 144C of the Act, it is provided that the Dispute Resolution Panel shall in case where objection is received under sub-section (2) issue such directions as it thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment. Upon receipt of the said directions, the Assessing Officer shall in conformity with the same, complete the assessment with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee, the DRP shall issue appropriate direction for the guidance of the Assessing Officer under section 144C(5) of the Act. It is only thereafter, the AO is bound to pass a final order of assessment in compliance with the directions issued by the DRP under section 144C(3) of the Act. In the present case, without following the above mandatory procedure, the AO has passed the order of assessment on 26.03.2013 and subsequently issued a corrigendum on 15.04.2014 to rectify the mistake committed in passing the final order of assessment inter alia to treat it as a draft assessment order. This course of action adopted by the second respondent is contrary to the mandatory provisions contained in the Act and the corrigendum issued by the AO could not cure the defect. The very fact that the Assessing Officer has signed the order of assessment and also assessed the amount payable by the assessee has become complete and it cannot be simply treated as a draft assessment order or it can be rectified by issuing the corrigendum. In fact, pursuant to the order of assessment under section 143C, demand was also made for payment of the amount and such demand has not been withdrawn by the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and subsequent years and not from assessment year 2008-09 was contrary to the expressed language of the section and the said view of the Revenue was held to be not acceptable. The Hon ble High Court of A.P thereafter held that the impugned order of assessment dated 23.12.2011 passed by the respondent was contrary to the mandatory provisions of section 144C of the Act is declared as one without jurisdiction, null and void and unenforceable. The Hon ble High Court of Andhra Pradesh held as under:- In this view of the matter we are of the view that the impugned order of assessment dt. 23.12.2011 passed by the respondent is contrary to the mandatory provisions of S.144C of the Act and is passed in violation thereof. Therefore, it is declared as one without jurisdiction, null and void and unenforceable. Consequently, the demand notice dated 23.12.2011 issued by the respondent is set aside. 21. The Hon ble Supreme Court (supra) in ACIT Vs. Zuari Cements Ltd. (supra) had dismissed the Special Leave Petition filed by the Department upon hearing the Counsel. The learned Authorized Representative for the assessee contended that since the said Special Leave Petition was dismissed af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the Assessing Officer passed an order without following the provisions of law, such an order would be erroneous as well as prejudicial to the interests of Revenue, held the present order under appeal to be both erroneous and prejudicial to the interests of Revenue. However, the Commissioner has not considered the proposition laid down by the Hon ble High Court of Andhra Pradesh in M/s. Zuari Cements Ltd. Vs. ACIT (supra), which was the decision of Hon ble High Court on the issue before the Commissioner. The Hon ble Supreme Court in ACIT Vs. Zuari Cements Ltd. (supra) have dismissed the Special Leave Petition filed by the Department and hence, the ratio laid down by the Hon ble High Court of Andhra Pradesh is available and is to be applied while deciding identical issue. Thus, where an order is passed by the Assessing Officer, which is contrary to the mandatory provisions of section 144C of the Act, then the same is to be declared one without jurisdiction, null and void and unenforceable in law. Accordingly, we hold so. 25. Another reliance was placed by the learned Departmental Representative for the Revenue on the ratio laid down by the Hon ble Madras High Court in V. Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Pvt. Ltd. Vs. DRP Others (supra). The order passed by the Assessing Officer without complying to the provisions of section 144C of the Act is null and void. Such an order which is null and void and has been passed without resorting to the provisions of the Act, cannot be said to be voidable. 27. The next contention raised by the learned Departmental Representative for the Revenue was that such an order would become only void only if it is declared as null and void by the competent authority or court. In the facts of the present case, the assessee had filed an appeal before the CIT(A) and has raised an additional ground of appeal No.3 on 10.04.2013 before the CIT(A) that the ACIT had erred in passing the final assessment order without passing draft assessment order as required under section 144C(1) r.w.s. 143(3) of the Act, thereby denying the assessee its right to raise the objections before the DRP. Before the said appeal filed by the assessee could be decided by the CIT(A), the Commissioner on its own motion issued show cause notice on 17.12.2013 and had exercised the jurisdiction under section 263 of the Act and on the premise that the assessment order passed was withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed by the Assessing Officer and the said order tantamount to order being erroneous and prejudicial to the interests of Revenue. Though, a contrary view has been taken by another Bench of Tribunal but the said view is not applicable to the facts of the present case, as in the case before the Panaji Bench of Tribunal, after the receipt of the order passed under section 143(3) of the Act, no action was taken by the assessee therein i.e. by way of filing an appeal before the CIT(A). However, in the facts of the present case before us, the assessee had agitated the exercise of jurisdiction by the Assessing Officer before the CIT(A) and once an issue was pending before the CIT(A), the Commissioner could not exercise his jurisdiction under section 263 of the Act. The Panaji Bench of Tribunal has taken note of the fact that the assessee had not filed any appeal before the Tribunal in this regard by which the assessment order could have been quashed. As on today, the assessment order is very much in existence. The said assessment was in existence when the Commissioner invokes the jurisdiction under section 263 of the Act. The Tribunal further held that since the assessee had come in app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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