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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 ..... tating that notice has been duly served on the assessee by the Assessing Officer on 19th December, 2019. It thus appears that the assessee has nothing further to submit/make any personal representation and it was accordingly decided to hear the matter ex- parte qua the assessee based on material available on record. 3. Briefly stated, the facts of the case are that the assessee filed its return of income declaring total income of Rs. 1,62,48,040/- which was selected for scrutiny assessment and notice u/s 143(2) was issued to the assessee. On examination of audit report in Form 3CEB, the Assessing officer noticed that the domestic transactions with Associated Enterprises (AE) were more than Rs. 15 crores and which is also one of the reasons for selection of matter under scrutiny, therefore, the matter was referred to the TPO for determination of arm's length price of the domestic transactions as provided u/s 92CA of the Act. The TPO thereafter examined the matter and has passed an order u/s 92CA(3) dated 10.07.2017 wherein he has proposed an adjustment of Rs. 2,84,613/- being excess interest paid to the related parties. Thereafter, on receipt of the TPO order, notice u/s 142(1) was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee during the course of assessment proceedings, there is no prejudice which has been caused to the assessee and therefore, the principle of natural justice has been followed. In view of the same, not issuing the draft order being a prejudicial lapse should not be basis to hold that the whole of the proceedings are bad in law. 7. We have heard the rival contentions and perused the material available on record. The issue under consideration is whether non-issue of draft order as provided under section 144C(1) is a procedural lapse on part of the Assessing officer or the same being an essential requirement and non-issue of draft order before issuing the final order will make the final order as bad in law. In this regard, we find that during the course of appellate proceedings before the ld CIT(A), the ld AR has placed reliance on the decision of Coordinate Bench in case of Jaipur Rugs Company (P) Ltd vs. DCIT, Jaipur (Supra) wherein we find that the similar issue has been examined at length and we deem it appropriate to reproduce the relevant findings as under:- "14. Firstly, it would be relevant to refer to the provisions of section 144C which reads as under:- "144C. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order. Explanation.-For the removal of doubts, it is hereby declared that the power of the Dispute Resolution Panel to enhance the variation shall include and shall be deemed always to have included the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee. (9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members. (10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer. (11) No direction 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n recorded in the order sheet to this effect that draft assessment order was prepared and furnished to the assessee. Therefore, it is a undisputed fact that in the instant case, there was no draft assessment order which was prepared and furnished to the assessee as contemplated under section 144C(1) of the Act. 17. We have also carefully perused the assessment order passed under section 143(3) of the Act dated 18.02.2015. It is a regular assessment order in form and in substance. Along with assessment order, a notice of demand u/s 156 vide entry in D&CR No. 104/20 dated 18.02.2015 was raised wherein an amount of Rs. 38,98,400/- was determined as payable by the assessee. Separately, 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 bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the instant case, after receipt of the order passed by TPO, the Assessing Officer issued a show cause notice proposing to make additions as per the adjustments made by the TPO. In response to this, the assessee instead of filing objections, if any, with the DRP and the Assessing Officer had simply filed a brief note before the Assessing Officer giving a gist of the basis of adjustments made by the TPO with the remark that the explanation may be put on record for further reference. The show cause notice issued by the Assessing Officer was nothing but a draft assessment order as no other additions had been made by the Assessing Officer 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tertain such an appeal if the order passed by the second respondent is a pre- assessment order. Therefore, it is evident that the first respondent declined to entertain the objections raised by the petitioner company on the ground that the order passed by the second respondent is not a draft assessment order, rather it is a final order. Thus, the first respondent had treated the order dated 26.03.2013 of the second respondent as a final order and therefore it refused to entertain the objections filed on behalf of the petitioner company. 22. As mentioned supra, as per 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court of India in the case of (L. Hazari Mal Kuthiala (supra), which was relied on by the learned standing counsel for the respondents, it was held that the mistake or defect on the part of the Commissioner to consult the Central Board of Revenue did not render his order invalid since the provision about consultation in terms of Section 5 (3) of Patiala Act was merely directory and not mandatory. In the present case, the procedure that was required to be followed by the second 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 thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as follows:- "Under Section 158BC of the Act empowers the assessing officer to determine the undisclosed income of the block period in the manner laid down in Section 158BB and 'the provisions of Section 142, subsections (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be apply. This indicates that this clause enables the Assessing Officer, after the 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 procedur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able, if there is a proposal by the Assessing Officer to make a variation in the income or loss returned by the assessee which is prejudicial to the assessee, after 01.10.2009. Therefore, this particular provision introduced by Finance (No.2) Act, 2009, would apply if the above condition is satisfied 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 Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the statutory provisions of the Act. The corrigendum dated 15.04.2013 is also beyond the period prescribed for limitation. Such a defect or failure on the part of the second respondent to adhere to the statutory 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is any variation to the returned income proposed in the hands of the eligible assessee, the Assessing 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 issuin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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