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TMI Blog2020 (8) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... ought permission for admission of additional ground of appeal drawing support from the decision of the Hon'ble Supreme Court in the case of NTPC 229 ITR 383. 4. The additional ground reads as under: "That the draft assessment order dated 27.12.2018 passed by the Assessing Officer is in contravention of provisions of section 144C of the Act and thus, subsequent orders passed by the DRP/Assessing Officer are void ab initio." 5. Vide his written submissions as well as arguments, the ld. DR strongly objected to the afore-stated additional ground. The ld. DR vehemently contended that this issue was never raised before any of the lower authorities and has been raised for the first time. It is the say of the ld. DR that the issue is not purely a legal one but has aspects of facts as well. 6. Per contra, the ld. counsel for the assessee reiterated his reliance on the decision of the Hon'ble Supreme Court in the case of NTPC [supra]. 7. We have carefully considered the issue raised in the additional ground [supra]. We do not find any force in the contention of the ld. DR. The additional ground is purely a legal issue and does not require verification of any facts outside the record. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. In our considered view, provisions of section 144C of the Act triggers a series of steps prescribed in sub-section (2) to section 12 and as can be seen from the most relevant sub-sections (3) and (13) extracted hereinabove, the assessment is complete either under subsection (3) or sub section (13). 16. Facts on record show that on 27.12.2018, the Assessing Officer quantified the taxable income and determined tax payable by issuing and serving demand notice u/s 156 of the Act. In our considered opinion, this action of the Assessing Officer has brought the proceedings to an end and the proceedings initiated u/s 144C of the Act stand concluded. 17. A perusal of Section 144C of the Act shows that the Assessing Officer shall, at the first instance, forward a draft of the proposed order of assessment and on receiving such order, the assessee may approach the DRP by raising objections. If the assessee accepts the variation, then the Assessing Officer shall proceed by framing the final assessment order and if the objections are raised before the DRP, then, upon receipt of directions issued by the DRP, the assessee shall complete the assessment. However, we find that while framing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the former. Therefore, unless the total income is determined and the determination of tax is also done, it cannot be said that the process of assessment is complete. What section 153 requires is that the assessment should be completed within the prescribed time-limit. The words "order of assessment" cannot be construed to mean assessment of total income only. Those words would mean an order in writing whereby the total income of the assessee is assessed and the tax payable by him is determined. When an order in writing in respect of both these things is passed, it can be said that there is a complete order of assessment. These two steps may be taken simultaneously or separately, but it cannot be gainsaid that both of them will have to be taken within the time prescribed by the Act. Admittedly, in this case the second step was not taken within the prescribed time. After determining the total income, the Income-tax Officer possibly left the matter to his subordinates for the purpose of calculating the tax payable by the assessee on the basis of the assessed total income. Even if we assume in favour of the Assessing Officer that he approved the said calculation when the papers w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion when the question did not even fall to be answered in that judgment." 21. We fail to persuade ourselves to agree with the submissions of the ld. DR. In our understanding of the law, there is no provision in the I.T> Act which provides for proposed/draft notice of demand and secondly, whether the demand has been entered in Demand and Collection Register or the order uploaded in the ITD is and internal matter/procedure of the Revenue and cannot be taken into consideration to decide whether the demand notice issued alongwith order dated 27.12.2018 complete the proceedings. 22. In so far as the decision of the Hon'ble Supreme Court in the case of Sun Engineering Works is concerned, the decision of the Hon'ble High Court of Gujarat has been in the context of whether notice of demand is an integral part of assessment or not and while deciding the issue, the Hon'ble High Court has considered the decision of the Hon'ble Supreme Court in the case of Kalyan Kumar Ray [supra] and, therefore, the decisions referred to hereinabove are in the same context in which the facts of the case in hand are considered. 23. In light of the aforesaid decision, we are of the considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon'ble Supreme Court discussed hereinabove and the decision is per incurium. 29. The ld. DR has tried to distinguish the decisions relied upon by the ld. counsel for the assessee in his written submissions. 30. We have carefully perused the written submissions of the ld. DR. We are of the considered view that the decisions relied upon by us extracted hereinabove are directly related to the underlying facts in issue before us. 31. Another argument of the ld. DR that merely issue of notice of demand and penalty notice will not convert draft assessment order into final assessment order, does not hold any water, in as much as the mandatory provisions of the Act have to be followed and the Assessing Officer does not get any leverage for bypassing the mandatory provisions of the Act. 32. We find that there are series of decisions of the Tribunal wherein in the set aside proceedings, if the Assessing Officer has not followed the mandatory steps mentioned in section 144C of the Act, assessment order has been treated as void. To name a few such decisions, Nikon India Pvt Ltd ITA Nos. 8752 & 8753/DE/2019. The principles laid down by the co-ordinate bench in this decision were ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T or completely set aside, it is the provisions of Section 153 (3) (ii) of the Act which would apply. Mr Jain submitted that the requirement of passing a draft assessment order under Section 144C was only in the first instance and not after the remand by the ITAT. 17. The Court is unable to agree with the submissions made on behalf of the Revenue by Mr. Jain. Section 144C (1) of the Act is unambiguous. It requires the AO to pass a draft assessment order after receipt of the report from the TPO. There is nothing in the wording of Section 144C (1) which would indicate that this requirement of passing a draft assessment order does not arise where the exercise had been undertaken by the TPO on remand to it, of the said issue, by the ITAT. 18. It was then contended by Mr. Jain that the assessment order passed by the AO should not be declared to be invalid because of the failure to first W.P.(C) Nos. 3399/2016, 3429/2016 & 3431/2016 Page 8 of 12 pass a draft assessment order under Section 144C of the Act. In this regard, reference is made to Section 292B of the Act. 19. As already noted, the final assessment order of the AO stood vitiated not on account of mere irregularity but s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arose. There, the Revenue sought to rectify a mistake by issuing a corrigendum after the final assessment order was passed. Consequently, not only the final assessment order but also the 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." W.P.(C) Nos. 3399/2016, 3429/2016 & 3431 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in terms of such directions without giving any further hearing to the assessee. Thus, at the level of the Assessing Officer, the directions of the DRP under subsection (5) of Section 144C would bind even the assessee. He may of course challenge the order of the Assessing Officer before the Tribunal and take up all contentions. Nevertheless at the stage of assessment, he has no remedy against the directions issued by the DRP under sub-section (5). All these provisions amply demonstrate that the legislature desired to give an important opportunity to an assessee who is likely to be subjected to upward revision of income on the basis of, transfer pricing mechanism. Such opportunity cannot be taken away by treating it as purely procedural in nature." 23. In the present case, just as in Turner International (supra), it is submitted that, at the most, failure to pass a draft assessment order under Section 144C of the Act is a curable defect and that the Court should now delegate the parties to a stage as it was when the TPO issued a fresh order after the remand by the ITAT. 24. This very argument of the Revenue has been negated by the Court in Turner International (supra) where it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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