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TMI Blog2019 (3) TMI 1783X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced hereunder:- ''Validity of the Draft Assessment Order: 2.For that the Learned Dispute Resolution Panel erred in holding the "Draft Assessment Order" passed by the Learned Assessing officer as valid, in-spite of such order being passed in violation of the procedure laid down u/s 144C of the Act. 3.For that the Learned Dispute Resolution Panel erred in holding the "Draft Assessment Order" passed by the Learned Assessing officer as valid without considering the fact that the AO has issued a demand notice u/s 156 and a notice u/s 271 (1)(c) of the Act along with such 'Draft Assessment Order'. Validity of the Final Assessment Order: 4.For that the Final Assessment Order dated 20-09-2018 passed by the Learned Assessing Officer served on the assessee on 10-11-2018 is time-barred as per section 144C(13) and hence the same is not valid''. Since the above grounds questions the very validity of the assessment, these are considered first. 3. Ld. Counsel for the assessee submitted that assessee had received an order dated 29.12.2017 which was captioned as draft assessment order. However, as per the ld. Authorised Representative, in reality, this w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to him, assessee could not now turn around and say that the final assessment order was invalid due to a mistake in the draft assessment order, which was curable under Section 292B of the Act. 5. We have considered the rival contentions and perused the orders of the authorities below. There is no dispute that the order dated 29.12.2017 passed by the ld. Assessing Officer was captioned as a draft assessment order. Paras 2 to 8 of the said order is reproduced hereunder:- ''In this case, the assessee entered into specified domestic transactions with associated enterprises of value of H30,59,92,082/-. One of the reasons for selections of the assessee's case for scrutiny was large domestic transactions. Since the scrutiny of assessee's case was covered under transfer pricing risk parameters in respect of specified domestic transactions, this case was referred to Transfer Pricing Officer with prior approval of the Principal Commissioner of Income Tax, Chennai-9, Chennai as per Boards Direction. Subsequently, the Transfer Pricing Officer has passed an order u/s.92CA of the Income Tax Act, 1961 dated 31.10.2017, vide F.No.C-116/TPO-1(1)/A.Y. 2014-15, in which the Transfer Pricing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of those goods and accordingly, we are currently not in a position to present the suppliers for confirmation and for your personal verification. The goods are supplied on credit and later on payments are made. The closing balances of these suppliers are as follows:- Suppliers Closing Balance (Amount in H M/s. Sambhav Distributors 10,995,585.00 M/s.Siddarth Industrial Suppliers, 9,847,198.00 M/s. Rishab Enterprises 4,005,720.00 M/s. Kuber Enterprises 65,766,323.98 However, we wish to state that the balances as stated above are not correct balances and are subject to adjustments and reconciliations. At the instances of those suppliers and on instructions of their agents, goods were supplied by our concern to various parties on credit. The ex-accountant who is not currently with the concern has erroneously debited the various parties to whom the sales were made for the goods supplied. Payments from many of these debtors are still pending as on date for the reason that the said debate would have paid the amount to the suppliers directly. Accordingly, we have not made payment to the said suppliers, till the time the above referred transactions are reconciled. We are current ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details in this regard and the assessee has submitted copy of travels bills. On going the travel bills, it is seen that the following bills are not related to the assessee. Sl.No. Invoice/ Date Bill raised in the name of Bill Amount Remarks 1 0927/11.07.13 Manoj Lalith 16,200 Not related to the assessee 2 0940/16.07.13 Manoj Lalith 14,600 --do-- 3 1585/19.09.13 Lalit/Pinky 16,100 --do-- 4 2014/05.11.13 Ankita Kumari 5,500 Bill for 11,000/raised both in the name of the assessee and Ankita Kumari. Hence, 50% disallowed. 5 2126/16.11.13 Ankita Kumari 15,400 Bill for 30,800/raised both in the name of the assessee and Ankita Kumari. Hence, 50% disallowed. 6 2579/07.11.14 Lalith 8,800 Not related to the assessee Total 76,600 Since the above claim of the assessee is not related to his business, H76,600/- is disallowed u/s.37 of the I.T. Act and added to the total income. Disallowance H.76,600/- Subject to the above discussion, the assessment is completed as under:- Returned Income H43,65,790 Add: Adddition on account of Transfer Pricing Adjustment as in para 2 H1,81,99,469 Add: Addition/ Disallowance as discussed in para 3 H2,05,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 144C(1) of the Act was not adhered to. Lack of jurisdiction, in our opinion, cannot be overcome by pleading acquiescence of the assessee to any subsequent proceedings. In a similar fact situation, Pune Bench of this Tribunal in the case of Eaton Fluid Power Ltd (supra) had held as under at paras 6 to 10 of its order. ''6. On hearing both the parties on the legal issue of admission of additional grounds, we find the said additional grounds should be admitted and adjudicated in this order. Further, on the merits of these additional grounds, we find the relevant facts of the case include that assessee is a company and is engaged in the manufacture and distribution of fluid power equipment such as pumps, gear pumps, valves, cylinders and related components for mobile & industrial markets. In this case, a reference was made to the Transfer Pricing Officer (TPO) u/s. 92CA(1) of the Act, who in turn, passed an order dated 24-01-2013 u/s. 92CA(3) of the Act, proposing total adjustments of ₹ 344,308,840/-. The AO thereafter, passed draft assessment order dated 26-03-2013 u/s.143(3) r.w.s. 144C(1) of the Act. Ld. AR for the assessee referring to the said draft assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings against the assessee. The requirement of the Act is that in the draft assessment order proposed, additions are to be made and show cause notice is to be issued to the assessee either accepting the same or to file objections before the DRP. However, in the facts of the present case, there was no proposal for making addition but the final assessment order was passed though the Assessing Officer calls it a draft assessment order and also observed that the assessee was at liberty to file objections before the DRP or accept the same. The Assessing Officer in the draft assessment order itself crystallized the demand on income assessed in the hands of assessee and he also issued demand notice under section 156 of the Act. The Assessing Officer further initiated penalty proceedings under section 271(1)(c) of the Act by issuing notice under section 274 of the Act. The contention of learned Departmental Representative for the Revenue is that though the demand notice was issued but the same was not served upon the assessee. However, we find that the assessee in the Appeal Memo itself had attached copy of demand notice issued and has also filed the same during the course of hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer had also issued the demand notice and had also issued show cause notice under section 274 r.w.s. 271(1)(c) of the Act for levy of penalty. In view of the said facts, the Tribunal observed as under:- "6. We have heard the rival contentions and perused the record. Briefly, in the facts of the case, the Assessing Officer had made reference to the TPO vis-à-vis to determine the arm's length price of international transaction entered into by the assessee with its associate enterprises. The TPO vide order dated 28.01.2014 under section 92CA(3) of the Act had proposed the adjustment to arm's length price of international transaction and had passed the said order. The Assessing Officer on receipt of said order passed order under section 143(3) r.w.s. 92C(4) and 144C of the Act. The said order of Assessing Officer was forwarded to the assessee along with letter dated 28.02.2014, wherein the Assessing Officer categorically said that the draft assessment order was being forwarded for necessary action at the end of assessee. It was clearly mentioned in the said letter that on receipt of draft order, the assessee may within 30 days of the receipt of draft order either file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved 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 without providing any further opportunity of being hearing to the assessee within one month from the end of the month in which such direction is received, notwithstanding anything to the contrary contained in section 153 or 153B of the Act, as per sub-section (13) to section 144C of the Act. In view of the provisions of section 144C of the Act impliedly where the TPO proposes any variation in the income or loss returned by the assessee, which is prejudicial to the interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 second respondent even after issuing the corrigendum. Even as per the website of the department, the demand made to the petitioner company continues till date and therefore, the final order as well as the corrigendum issued by the second respondent are vitiated by errors apparent on the face of the record and they are legally not sustainable." 9. The similar issue had arisen before the Pune Bench of Tribunal in Agfa India Pvt. Ltd. Vs. ACI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the CBDT stating that section 144C(1) of the Act would apply only from assessment year 2010-11 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 9 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 Rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate proceedings invoked by it. However, these special rights made available to eligible assessee under Section 144C of the Act are rendered futile, if directly a final order under Section 143(3) of the Act is passed without being preceded by draft assessment order. 6. In the above view, the assessment order dated 23rd March, 2015 passed by the Assessing Officer for the assessment year 2012-13 is completely without jurisdiction. This is so as it has not been preceded by a draft assessment order. Hence, the foundational/basic order viz. the assessment order dated 23rd March, 2015 is set aside and quashed as being without jurisdiction. Consequent orders passed on rectification application as well as on penalty are also quashed and set aside being unsustainable." 11. The learned Authorized Representative for the assessee has placed reliance on the ratio laid down by the International Air Transport Association Vs. DCIT (supra) and the Hon'ble Madras High Court in the case of Vijay Television Writ Petition Nos.1526 and 1527 of 2014 & M.P. Nos.1 and 1 of 2014 vis-à-vis. Whereas the learned Departmental Representative for the Revenue strongly opposed and pointed out that the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s draft assessment but in actual fact, the Assessing Officer had made the assessment in the hands of assessee by not only assessing the income but also determining the demand payable. In the case of draft assessment order, proposed additions are to be made and the assessee is show caused either to accept the same or file the objections before the DRP. However, in the present facts, there was not a proposal for making addition but final assessment order was passed. Undoubtedly, the Assessing Officer said that he is passing draft assessment order and the assessee was also at liberty to file the objections before the DRP or accept the same, but in actual fact, the order passed by the Assessing Officer was complete assessment order which is not envisaged under section 143(3) r.w.s. 144C of the Act. Accordingly, we hold that draft assessment order passed in the case is invalid in law''. 11. We further find that the Hon'ble High Court of B India Ltd. Vs. DCIT (2017) 85 taxmann.com 155 (Del) has laid down that even in remand proceedings the Assessing Officer cannot straightaway pass final assessment order without issuing draft assessment order under section 144C of the Act. The Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he corrigendum issued thereafter was challenged. Following the decision of the Andhra Pradesh High Court in Zuari Cement Ltd. v. ACIT (supra) and a number of other decisions, the Madras High Court in Vijay Television (P) Ltd. v. Dispute Resolution Panel (supra) quashed the final order of the AO and the demand notice. Interestingly, even as regards the corrigendum issued, the Madras High Court held that it was beyond the time permissible for issuance of such corrigendum and, therefore, it could not be sustained in law. 14. Recently, this Court in ESPN Star Sports Mauritius S.N.C. ET Compagnie v. Union of India [2016] 388 ITR 383 (Del.), following the decision of the Andhra Pradesh High Court in Zuari Cement Ltd. v. ACIT (supra), the Madras High Court in Vijay Television (P) Ltd. v. Dispute Resolution Panel, Chennai (supra) as well as the Bombay High Court in International Air Transport Association v. DCIT (2016) 290 CTR (Bom) 46, came to the same conclusion." 12. Applying the said ratio to the facts of the present case and also the issue arising before us being identical to the issue before Tribunal in DCIT Vs. M/s. Rehau Polymers Pvt. Ltd. (supra) and in M/s. Sandvik Asia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xercise. Accordingly, the said grounds are dismissed as academic''. Pune Bench in the above decision had considered a number of orders of various other Benches as well as the judgments of Hon'ble Jurisdictional High Court in the case of Vijay Television (P) Ltd vs. Dispute Resolution Panel (369 ITR 113), that of Hon'ble Andhra Pradesh High Court in the case of Zuari Cement Ltd vs ACIT (Writ Petition 5557/2012 dated 21-02-2013), that of Hon'ble Delhi High Court in the case of JCB India Ltd vs. DCIT, (2017) 100 CCH 0006 and a host of other judgments. Ld. DRP had endeavoured to distinguish the above cited decision of the Pune Bench relying on the judgment of Hon'ble Apex Court in the case of Sky Light Hospitality LLP (supra). No doubt their Lordships had affirmed the order of Hon'ble Delhi High Court in the case of Sky Light Hospitality LLP vs. Assistant Commissioner of Income Tax, (2018) 405 ITR 296. However, the mistake which was held to be curable u/s.292B of the Act in the said case, was relating to the address to which the notice was sent. Their Lordship held that notice being addressed to a company which was dissolved, was only an error and technical lapse on the part of the De ..... X X X X Extracts X X X X X X X X Extracts X X X X
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