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TMI Blog2020 (10) TMI 945X X X X Extracts X X X X X X X X Extracts X X X X ..... ances of the case and in law, the Tribunal erred in holding that there was no infirmity in assuming revisionary jurisdiction by the CIT under section 263 of the Act, without appreciating that the assessment order which was sought to be revised by such revisionary action was itself bad in law and void ab initio ? 2. Whether on the facts and circumstances of the case and in law, the Tribunal erred in upholding the action of the CIT under section 263 of the Act, without appreciating that such action of the CIT directing the AO to frame de novo assessment would result in extending the period of limitation as provided in section 153 of the Act, to complete the assessment proceedings, and thus, the action of the CIT was non-est, invalid and illegal? 4. In this case, the Appellant-Assessee is engaged in the trading of computer components and peripherals, including motherboards, AGP cards, and optical disk drives. On 27/11/2006, the Appellant filed a return of income for the Assessment Year 2006-07. Notices under Sections 143(2) and 142(1) of the Income Tax Act, 1961 (said Act) were issued to the Assessee on 25/10/2007. On 27/3/2008, the Assessee's return of income was processed und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the very next day i.e. 20/3/2012, the CIT passed an order under Section 263 of the said Act, setting aside the assessment order dated 18/12/2009 and directing the AO to issue the Assessee draft assessment order as contemplated by Section 144C(1) of the said Act. 11. On 30/3/2012, the Commissioner (Appeals) dismissed the Assessee's appeal against the assessment order dated 18/12/2009 on the ground that the appeal was rendered infructuous because the CIT, in the exercise of powers under Section 263 of the said Act, had already set aside the assessment order dated 18/12/2009. 12. The Assessee appealed to the Income Tax Appellant Tribunal (ITAT), challenging both, the CIT's order dated 23/2/2012 purporting to exercise the revisional jurisdiction and the order of the Commissioner (Appeals) dated 30/03/2012, dismissing the Assessee's appeal. The ITAT, vide order dated 31/10/2014, dismissed both these appeals. Hence these two appeals under Section 260A of the said Act by the Assessee. 13. Tax Appeal No.77/2015 concerns the order dated 30/3/2012 made by the CIT in the purported exercise of its revisional jurisdiction under section 263 of the said Act. If this order, as wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (P.) Ltd. vs. Dispute Resolution Panel, Chennai [2014] 46 taxmann.com 100 (Madras). 17. Mr. Kalra submits that in this case, even it were to be assumed that the assessment order dated 18/12/2009 was merely erroneous and not a nullity, the revisional jurisdiction could not have been exercised, because, the assessment order dated 18/12/2009 was, in no manner, prejudicial to the interest of the Revenue. He submits that unless and until the twin conditions i.e. the order being erroneous and the order being prejudicial to the interest of the Revenue, are established, there is no jurisdiction to exercise the revisional powers under Section 263 of the said Act. 18. Mr. Kalra submits that in any case, by incorrectly exercising the revisional jurisdiction of Section 263 of the said Act, the CIT has purported to extend the period of limitation for making the assessment order, which is impermissible. He relies upon the decision of the Full Bench of the ITAT (Chennai Bench) in case of V. Narayanan vs. ACIT [2010] 2 ITD 446 (Chennai). He submits that the decision of the Full Bench in V. Narayanan (supra) was binding upon the ITAT in the present case, in view of the law laid down by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the variations to the AO; or - file his objections, if any, to such variation with,- (i) the Dispute Resolution Panel; and (ii) the Assessing Officer. 25. Section 144C(3) then provides that the AO shall complete the assessment based on the draft order, if the assessee intimates to the AO the acceptance of the variation; or no objections are received within the period specified in sub-section (2). 26. Section 144C(4) provides that the AO shall, notwithstanding anything contained in Section 153, pass the assessment order under sub-section (3) within one month from the end of the month in which, the acceptance is received, or the period of filing of objections under sub-section (2) expires. 27. Section 144C(5) provides that the DRP shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the AO to enable him to complete the assessment. 28. Section 144C(6) provides that the DRP shall issue the directions referred to in sub-section (5), after considering the following: (a) draft order; (b) objections filed by the assessee; (c) the evidence furnished by the assessee; (d) the report, if any, of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on order of TPO under Section 92 CA(3) of the said Act, it is incumbent upon the AO to pass a draft assessment order under Section 144C of the said Act and this is a settled position as explained by the Court in its decision in Turner International India (P.) Ltd. vs. CIT [2017] 82 taxmann.com 125. In the said case the AO overlooked the above legal position and proceeded to pass the final order, thereby depriving the Assessee of an opportunity of questioning the draft assessment order under Section 144C of the said Act before the DRP, the Court had no hesitation in setting aside the impugned assessment order and consequently the notice of demand. Again the Special Leave to Appeal against this decision was dismissed by the Hon'ble Supreme Court on 16/3/2018. 34. In International Air Transport Association (supra), the Division Bench of this Court has also taken a view that special rights are made available to an eligible Assessee under Section 144C of the said Act. These special rights contemplate the making of a draft assessment order under Section 144C by the AO before he makes a final assessment order under Section 143(3) of the said Act. Such a draft assessment order bestows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Ltd. (supra). 36. Thus, from the conspectus of the aforesaid decisions, the legal position which emerges is that where a final assessment order is made by the AO without compliance with the mandate of section 144C of the said Act, the same is not merely an erroneous order as contended by Ms. Linhares, but such an order is without jurisdiction, as held by this Court or, null and void, as held by Andhra Pradesh High Court. The assessment order dated 18/12/2009 was therefore not merely an erroneous order but the same was an order without jurisdiction, null and void. 37. Even the CIT, in his order dated 20/3/2012 made in the purported exercise of revisional jurisdiction, held that the AO could not have passed the final assessment order dated 18/12/2009, without providing a draft assessment order in terms of Section 144C(1) of the said Act to the Assessee in the present case. However, the CIT chose to style this final assessment order dated 18/12/2009 as merely 'erroneous'. Further, at least, in the notice dated 23/2/2012, by which the Commissioner purported to invoke the provisions of Section 263 of the said Act, there is no reference to the assessment order dated 18/12/200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raft assessment order before passing order u/s 143(3) of I.T. Act on the issues discussed above. The AO has violated the principle of natural justice and therefore the order passed is erroneous. I therefore prepose to pass appropriate order u/s 263 of the I.T. Act in your case for the A.Y. 2006-07 to set aside the assessment. You are hereby provided an opportunity of being heard in the matter within the meaning of sec. 263(1). The date fixed for hearing is 29.02.2012 at 11.30 am. If you do not avail this opportunity. It will be presumed that you have nothing to say in the matter and the issue will be decided on the basis of the facts available on record and on legal merits of the case. Yours faithfully, Sd/- (M.L.KARMAKAR) Commissioner of Income-tax Panaji-Goa" 39. Now, the legal position in so far as the invocation of the revisional powers under Section 263 of the said Act is quite clear. Before such invocation, the Commissioner is required to be satisfied that the order which is proposed to be revised is erroneous, as well as prejudicial to the interest of the Revenue. Unless and until these conditions are satisfied, there is no question of invocation of powers under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT in the case of V. Narayanan (supra), has held that revisional jurisdiction under Section 263 of the said Act cannot be invoked to give a fresh lease of life for making an assessment order where the period prescribed for making such an assessment order has already expired. This decision of the Full Bench was binding upon the ITAT in absence of any contrary decision of the Hon'ble Supreme Court or the jurisdictional High Court. 44. The ITAT has sought to distinguish the decisions in M/s. Zuari Cement Ltd. (supra), Control Risk India (P.) Ltd. (supra); International Air Transport Association; Lionbridge Technologies (P.) Ltd. (supra) and Vijay Television (P.) Ltd. (supra) on the basis that all these were decisions rendered in Writ Petitions where the High Courts held that the assessment orders without following the provisions under Section 144C of the said Act, is in excess of jurisdiction or null and void. The ITAT has reasoned that since in this case the Assessee had not instituted a Writ Petition and got the assessment order dated 18/12/2009 void ab initio or a nullity, such assessment order dated 18/12/2009 could always have been revised by the revisional authority. 45. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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