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TMI Blog2021 (5) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... n, no directions are received by the Assessing Officer to make any variations from the stand so taken, there is no occasion for making any variations from such a draft assessment order. When the Assessing Officer does not have an obligation to hear the assessee to review the draft orders or any specific powers enabling such a review, it is a natural corollary thereto that the Assessing Officer does not have the discretion, that too in such an unfettered and most opaque manner, to review the draft order nevertheless. The change of heart on the part of the Assessing Officer, howsoever well meaning and justified as it may be, is not permissible at the stage of passing the final assessment order. We disapprove and deprecate the same. Right now the limited question before us is whether an assessment order, contrary to the draft assessment order, could be subjected to revision or not, and, on that point, we uphold the action of the PCIT. Whether these disallowances were covered in favour of the assessee or not is immaterial because it is a conscious decision to keep the matters alive or not, and, in any case, all this was relevant before finalizing the draft assessment order. The reme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36(1)(iii), to the extent of ₹ 6,19,20,626 as inadmissible claim under section 37(1), to the extent of ₹ 3,13,50,440 as inadmissible claim under section 10B, and to the extent of ₹ 3,01,01,049 as an inadmissible claim under section 14A. The draft assessment order was, accordingly, served upon the assessee. Vide letter dated 22nd April 2015, the Assessing Officer was informed that the assessee does not wish to file any objections before the Dispute Resolution Panel. The Assessing Officer thus proceeded to frame the assessment under section 143(3) r.w.s. 144C(3), but what he did was that he suo motu dropped the disallowances of 2,97,83,922 under section 36(1)(iii), of ₹ 6,19,20,626 as inadmissible claim under section 37(1), and of ₹ 3,13,50,440 as inadmissible claim under section 10B. So far as disallowance under section 14 A was concerned, as against the proposed disallowance of ₹ 3,09,01,049 was concerned, he scaled it down to ₹ 6,197. The assessment under section 143(3) was thus completed at ₹ 42,47,58,190, as against an assessed income of ₹ 56,24,27,870 in the draft assessment order. The assessee successfully challenged the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause notice. 2. In particular, with regard to the four issues listed in the show cause notice namely: a) Omission to add u/s.36(1)(iii), b) Disallowance not made u/s37(1), and c)Addition not made u/s. 10B these three though proposed to be made as additions/ disallowance in the draft assessment order, none was made in the final order, and d) Reduced disallowance made under section 14A, of only ₹ 6,197/- in the final order of assessment against proposed disallowance of ₹ 3,01,01,049/ in the draft assessment order. 3. We respectfully submit that in the case of all the four issues mentioned above full enquiry was conducted by the Leaned Assessing Officer (the A.O) during course the assessment proceedings by issuing notices and getting responses from the assessee on every issue. For your kind reference enquiry letter/queries received and replies filed by the authorized representative of the assessee are enclosed. Consequently the A.O was obviously convince of the reasons given by the assessee of the factual and legal position in respect of each and every issue. Accordingly no disallowance or additions were made in respect of is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ones manufacturing the Chemical products in Europe were expected to comply within the time frame stipulated depending on the quantities already being sold in the European Union 5. Not impressed by these submissions, the learned PCIT proceeded to exercise his powers under section 263, and held as follows: The above submission of the assessee has been considered however the same is not acceptable based on following discussion. Draft order is passed as per the provisions of Section 143(3) r.w 144C of the Act. The assessee company is allowed thirty days, time from the date of receipt of the order to file its acceptance of the variations under section 144C (2)(a), made to its total income as per the return of income filed, or to file its objection, if any as per the provisions of section 144C(2)(b) of the Act, tailing which this order shall attain finality and the same shall be treated as final assessment order u/s.143(3) of the Act. For the case reference, section 144C(3) is reproduced here. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition. 8. The basic contention of Dr Ramaswamy, learned counsel for the assessee, is that the expression used in section 144C (3) is on the basis of inasmuch as it requires the Assessing Officer to complete the assessment on the basis of draft assessment order but then this expression is quite distinct and broader in approach vis- -vis the expression in conformity with used in Section 92CA(4) and the specific command of Section 144C(10) that every direction issued by the Dispute Resolution Panel will be binding on the Assessing Officer . It is thus contended that the expression on the basis of does give the liberty to the Assessing Officer to deviate from the draft assessment order as long as the Assessing Officer does not enhance the assessment i.e. by making the additions or disallowances which are not part of the draft assessment order. Learned counsel then refers to certain judicial precedents pointing out the reason, judicially noticed by Hon ble Courts above, that Assessing Officer cannot make further additions, vis- -vis the additions proposed in the draft assessment order, because there is no further opportunity of hearing to the assessee, by the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer , and compares it with the expression on the basis of appearing in Section 144C(3), he overlooks the fact that once again comparison is fallacious inasmuch as an external factor binding the statutory functioning of public office can only come into play when it is so mandated by law, but quite to the contrary of such a position, it is only when a public functionary deviates from the stand that such an authority has already taken that the support of law is needed. As regards learned counsel s reliance upon the judgment of Hon ble Madras High Court in the case of Cognizant Mauritius Ltd Vs DCIT [(2019) 106 taxmann.389 (Madras)], that was a case in which even though the Transfer Pricing Officer concluded the matter by stating that no adverse inference is drawn , the Assessing Officer proceeded to frame the assessment which was not in conformity with this conclusion. That was a case of an external input and the question before His Lordship was as to what extent the observations of the Transfer Pricing Officer actually fetter the discretion of the Assessing Officer. Apart from the fact that it was in a writ jurisdiction, and no adjudication was done on merits anyway, this ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order, that is the end of his domain of powers so far as framing of assessment is concerned- unless of course there are any directions from the Dispute Resolution Panel which are required to be implemented by the Assessing Officer. When Dispute Resolution Panel declines to interfere, the Assessing Officer proceeds to finalize the assessment order on the basis of the draft assessment order only. Similarly, when an assessee does not propose to take the matter to the Dispute Resolution Panel, the Assessing Officer has to proceed to pass the final assessment order on the basis of the draft assessment order. There are no further hearings on the issues in assessment in question. The expression used in Section 144C(3) undoubtedly is that the Assessing Officer shall complete the assessment on the basis of the draft assessment order but in a situation in which the final assessment drops certain proposed disallowances, can it really be said that the Assessing Officer has completed the assessment on the basis of the draft assessment order- more so when there is no further hearing, no further directions and no occasion for further application of mind. The answer has to be, in o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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