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TMI Blog2020 (1) TMI 778X X X X Extracts X X X X X X X X Extracts X X X X ..... 144C have been clearly violated and not followed by the Assessing Officer. The contention of the Revenue that due opportunity has been provided to the assessee during the course of assessment proceedings wherein the matter relating to the adjustment proposed by the TPO was discussed with Assessee does not absolve the Assessing Officer from the mandatory and not just a procedural requirement of issuing the draft of the proposed order as required u/s 144C(1) of the Act. Therefore, following the decision in case of Jaipur Rugs Company (P) Ltd . [ 2018 (6) TMI 146 - ITAT JAIPUR] the assessment order so passed by the Assessing Officer u/s 144C(1) read with 143(3) without issuing the draft of the proposed order cannot be sustained in the eyes of law and is hereby set aside. In the result, the ground no. 1 of the assessee s appeal is allowed. - ITA No. 940/JP/2019 - - - Dated:- 16-1-2020 - Shri Sandeep Gosain, JM And Shri Vikram Singh Yadav, AM For the Assessee : None For the Revenue : Shri K. C. Gupta (CIT) ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the TPO, the returned income was finally determined by the AO at ₹ 1,65,32,653/- after making the adjustment on account of excess interest paid to related parties as determined by the TPO amounting to ₹ 2,84,613/- and order under section 144C(1)/143(3) dated 25.12.2017 was issued along with demand notice u/s 156 of even date determining a sum of ₹ 92,340 as tax payable by the assessee and penalty proceedings u/s 271(1)(c) was initiated for filing inaccurate particulars of income. 4. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) and it was contended that the Assessing Officer has passed the order u/s 144C(1)/143(3) dated 25.12.2017 along with demand notice u/s 156 and also issued notice u/s 271(1)(c) without providing a draft assessment order as laid down u/s 144C of the Act. It was submitted that the order passed by the Assessing Officer without forwarding a draft of the proposed order is against the provisions of Income Tax Act and is bad in law and void-ab-initio and reliance was placed on various decisions including the decision of the Co- ordinate Bench in case of Jaipur Rugs Company (P) Ltd vs. DCIT Circle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. (2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order,- (a) file his acceptance of the variations to the Assessing Officer; or (b) file his objections, if any, to such variation with,- (i) the Dispute Resolution Panel; and (ii) the Assessing Officer. (3) The Assessing Officer shall complete the assessment on the basis of the draft order, if- (a) the assessee intimates to the Assessing Officer the acceptance of the variation; or (b) no objections are received within the period specified in sub-section (2) (4) The Assessing Officer shall, notwithstanding anything contained in section 153 or section 153B, pass the assessment order under subsection (3) within one month from the end of the month in which,- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the revenue, respectively. (12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee. (13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 or section 153B, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received. (14) The Board may make rules for the purposes of the efficient functioning of the Dispute Resolution Panel and expeditious disposal of the objections filed under sub-section (2) by the eligible assessee. (14A) The provisions of this section shall not apply to any assessment or reassessment order passed by the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the penalty proceedings u/s 271(1)(c) were also initiated for furnishing of inaccurate particulars of income and a notice u/s 274 read with section 271 dated 18.02.2015 was issued to the assessee company. It is therefore a case where not only that income has been finally determined by the AO computed, the tax payable thereon has also been computed and demand entries are made on the basis of this order in the D CR register and even penalty proceedings are initiated. Such an exercise could not have been done if the assessment order was indeed a draft assessment order. Undoubtedly, if draft of assessment order is wrongly titled an assessment order, section 292B should have come to the rescue of the Assessing Officer. However given the fact that resultant tax demand and penalty proceedings have been initiated, it is a final assessment order which has been passed by the Assessing Officer in substance and in effect. 18. Now, coming to the contention of the ld DR that adequate opportunity has been provided to assessee to submit objections against the ALP adjustments by the TPO as well as by the Assessing Officer. Accordingly, it is not a case where th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apart from the adjustments made by the TPO. If the assessee had any objections on the proposed additions by the Assessing Officer, it should have filed such objections within 30 days before the DRP and the Assessing Officer. However, since the assessee had not filed any objections before the DRP and the Assessing Officer his contentions in this regard were not tenable. On appeal, the Coordinate Bench held as under: 7. We find that the issue is covered is now covered in favour in of the assessee by judgment of Hon'ble Madras High Court, in the case of Vijay Television (P.) Ltd v. Dispute Resolution Panel, wherein Hon'ble High Court has, inter alia, observed as follows: '20. Under Section 144 (C) of the Act, it is evident that the assessing officer is required to pass only a draft assessment order on the basis of the recommendations made by the TPO after giving an opportunity to the assessee to file their objections and then the assessing officer shall pass a final order. According to the learned senior counsel for the petitioners, this procedure has not been followed by the second respondent inasmuch as a final order has been straig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 144C (1) of the Act, the second respondent-assessing officer has no right to pass a final order pursuant to the recommendations made by the TPO. In fact, the second respondent-assessing officer himself has admitted by virtue of the corrigendum dated 15.04.2013, that the order dated 26.03.2013 is only a final order and it was directed to be treated as a draft assessment order. In this context, it is worthwhile to refer to the decision of the Honourable Supreme Court in the decision Deepak Agro Foods (supra) wherein in Para No.10, the Honourable Supreme Court discussed as to when an order could be construed as a final order:- 10. Shri Rajiv Dutta, learned senior counsel appearing on behalf of the appellant, submitted that in the light of its afore-extracted observations and a clear finding that the assessment order for the assessment year 1995-96 had been anti-dated, the order was null and void. It was urged that assessment proceedings after the expiry of the period of limitation being a nullity in law, the High Court should have annulled the assessment and there was no question of a fresh assessment. Thus, the nub of the grievance of the appellant is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent to pass a draft assessment order is mandatory and it is prescribed by the statute. Therefore, this decision relied on by the learned standing counsel for the respondents cannot be made applicable to this case. The learned senior counsel for the petitioners relied on the decision of the Allahabad High Court in the case of Shital Prasad Kharag Prasad (supra) wherein the Division Bench of the Allahabad High Court held that a notice contemplated under Section 148 of the Income Tax Act is a jurisdictional notice and it is not curable by issuing a notice under Section 292 B of the Act, if it was not served in accordance with the provisions of the Act. 27. Similarly, the Division Bench of this Court in the decision in the case of V. Ramaiah (supra) Madras held that when an order is passed under Section 158BC of the Act instead of Section 158BD, it is not valid since it is not a defect curable under Section 292B of the Act. It was also held that an order passed after the period of limitation laid down in Section 158BC is not a valid order. It was further held that when there is a prescribed procedure contemplated under the Act or in a partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return is filed, to complete the assessment under Section 143 (2) by following the procedure like issue of notice under Section 143 (2)/142. This does not provide accepting the return as provided under Section 143 (1) (a). The Officer has to complete the assessment order under Section 143 (3) only. If an assessment is to be completed under Section 143 (3) read with Section 158BC, notice under Section 143 (2) should be issued within one year from the date of filing of the block return. Omission on the part of the assessing officer to issue notice under Section 143(2) cannot be a procedural irregularity and is not curable. 30. It is evident from the above decision of the Division Bench of this Court that where there is an omission on the part of the assessing officer to follow the mandatory procedures prescribed in the Act, such an omission cannot be termed as a mere procedural irregularity and it cannot be cured. 31. In identical case as that of the case on hand, the Division Bench of the Andhra Pradesh High Court, in an unreported decision, had an occasion to consider the scope of the validity of the demand notice issued by the assessing offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and other provisions, in which similar contrary intention is not indicated, which were introduced by the said enactment, would apply from 01.04.2009 i.e., from the assessment year 2010-2011. It is not disputed that the memorandum explaining the Finance Bill and the Notes and clauses accompanying the Finance Bill which preceded the Finance (No.2) Act, 2009 clearly indicated that the amendments relating to S.144C would take effect from 01.10.2009. In our view, the circular No.5/2010 issued by the CBDT stating that S.144C(1) would apply only from the assessment year 2010-2011 and subsequent years and not for the assessment year 2008-09 is contrary to the express language in S.144C(1) and the said view of the Revenue is unacceptable. The circular may represent only the understanding of the Board/Central Government of the statutory provisions, but it will not bind this Court or the Supreme Court. It cannot interfere with the jurisdiction and power of this Court to declare what the legislature says and take a view contrary to that declared in the circular of the CBDT (Ratan Melting and Wire Industries Case (1 Supra), Indra Industries (2 supra). The Revenue has not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y provisions is not a curable defect by virtue of the corrigendum dated 15.04.2013. By issuing the corrigendum, the respondents cannot be allowed to develop their own case. Therefore, following the order passed by the Division Bench of the Andhra Pradesh High Court, which was also affirmed by the Honourable Supreme Court by dismissing the Special Leave Petition filed thereof, on 27.09.2013, the orders, which are impugned in these writ petitions are liable to be set aside.' 8. Learned Departmental Representative, on the other hand, submits that this lapse on the part of the Assessing Officer is at best a procedural lapse and the matter should, therefore, be restored to the file of the Assessing Officer for adjudication de novo. 9. We are, however, unable to see any legally sustainable merits in the stand so taken by the learned Departmental Representative. Hon'ble High Court's esteemed views, as extracted above, bind us and we have to respectfully follow the same. Accordingly, in due deference to this binding judicial precedent, and other binding judicial precedents referred to therein, we quash the impugned assessment order. It is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer shall in the first instance issue a draft of the proposed order and only where the assessee intimate the Assessing Officer the acceptance of the variations so proposed or no objection is received within the specified period, the Assessing Offer shall pass the final assessment order. In the instant case, the Assessing officer has not issued the draft of the proposed assessment order and the provisions of section 144C have been clearly violated and not followed by the Assessing Officer. The contention of the Revenue that due opportunity has been provided to the assessee during the course of assessment proceedings wherein the matter relating to the adjustment proposed by the TPO was discussed with the ld. AR of the assessee does not absolve the Assessing Officer from the mandatory and not just a procedural requirement of issuing the draft of the proposed order as required u/s 144C(1) of the Act. Therefore, following the decision in case of Jaipur Rugs Company (P) Ltd (supra), the assessment order so passed by the Assessing Officer u/s 144C(1) read with 143(3) without issuing the draft of the proposed order cannot be sustained in the eyes of law and is hereby set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X
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