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TMI Blog2024 (4) TMI 546X X X X Extracts X X X X X X X X Extracts X X X X ..... estion whether demand notice is an integral part of the assessment order has been answered in the case of CIT Vs. Purshottam Das T Patel [ 1993 (8) TMI 21 - GUJARAT HIGH COURT] wherein as reliying on the decision of Kalyan Kumar Ray [ 1991 (8) TMI 291 - SUPREME COURT] 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Member, And Ms Astha Chandra, Judicial Member For the Assessee : Shri Ajay Wadhwa, Adv, Ms Aayushi Gupta, Adv For the Department : Shri Rajesh Kumar, CIT-DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER:- This appeal by the assessee is preferred against the order dated 20.01.2023 framed u/s 153A r.w.s 144C(13) of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] pertaining to A.Y. 2019-20. 2. The assessee has raised the following grounds of appeal: 1. That on the facts and circumstances of the case and in law, the order passed by the Ld. Assessing Officer (hereinafter referred to as Ld. AO ) under section 153A r.w.s 144C (13) of the Income Tax Act 1961 ( the Act ) dated 20.01.2023 is bad in law and on facts, void ab initio as the same has been passed in violation of section 144C of the Act 2. That on the facts and circumstances of the case and in law, the Ld. AO has erred in violating the procedure laid down under section 144C of the Act by issuing penalty notice under section 274 read with section 270A and 274 read with section 271AAC (1) of the Act and the notice of demand under section 156 of the Act along with the assessment order dated 31.03.2022 instead of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustice. 3. The entire quarrel revolves around the issues mentioned in Ground No. 2 above. 4. The underlying facts in the above mentioned quarrel are that while framing the order dated 31.03.2022, the Assessing Officer has mentioned the same as draft assessment order framed under section 153A r.w.s 144C of the Act. 5. While doing so, the Assessing Officer has determined the total income of the assessee as under: 6. The bone of contention is the mention Assessed u/s 153A r.w.s 144C of the Act. Calculate tax and charge interest as per the I.T. Act. Give credit for prepaid taxes. Penalty proceedings u/s 270A r.w.s 274 and 271AAC of the Act are being initiated separately and this order is being passed after taking prior approval of the CIT, CC-4, New Delhi. . 7. While completing the draft assessment order, the aforementioned remarks make it abundantly clear that what the Assessing Officer has framed is final assessment order and, by any stretch of imagination, cannot be called as draft assessment order and is therefore, in violation of provisions of section 144C of the Act. 8. Before us, the ld. counsel for the assessee read the operative part of the alleged draft assessment order and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the draft assessment order and the demand notice are dated December 28, 2018. 14. Argument canvassed by the Revenue is, though demand notice has been issued, assessee had understood the order dated December 28, 2018 as a draft assessment order and filed its objections before the DRP. The defect if any is a curable one. On the other hand, Shri. Nageshwar Rao's argument is that the ACIT had completed the assessment at the stage of passing the draft assessment order and issued the demand notice. Thus, the re-assessment proceeding was complete. This procedure followed by ACIT is contrary to law laid down in Vijay Television Case and other authorities. 15. Section 144C lays down a detailed procedure. Under Section 144C(1), the AO7 is required to forward a draft of the proposed order of assessment to the assessee. Assessee may file its acceptance or objection before the DRP and the AO. If assessee intimates its acceptance or no objections are received within 30 days, the AO shall complete the assessment. Where the DRP receives any objection from the assessee, it shall issue necessary directions to the AO to enable him to complete the assessment after considering the documents/materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, the ACIT had assessed the tax, passed a final order and also issued a demand notice. 21. Mr. Aravind also contended that the demand notice was not enforced. It is settled that demand notice stems out of an order of assessment and it is enforceable. It meets the assessee with civil consequences. The argument on behalf of the Revenue that the demand notice was not enforced is fallacious and noted only to be rejected. 22. We have carefully considered Section 292B of the Act. The mistake which the ACIT has done in passing the final order at the stage of draft order is not curable under Section 292B of the Act. 23. We have considered the appeals both on delay and merits. In the light of discussion made hereinabove, these appeals are devoid of merit and they are accordingly, dismissed. The questions of law are answered in favour of the Assessee and against the Revenue. 14. All the apprehensions raised by the ld. DR have been duly considered by the Hon'ble High Court in its decision. The ld. DR has also heavily relied upon the decision of the co-ordinate Bench in the case of Hitachi Astemo Haryana Pvt Ltd [supra]. The facts of that case are nowhere near the facts under consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. The above case laws are binding upon us. Hence, following the same, we remit the issue to the file of AO. AO shall pass an order incorporating DRP's directions which has been given effect by the TPO . 15. The quarrel before us is entirely different. The quarrel is, while framing the draft assessment order, the Assessing Officer has, in fact, framed a final assessment order thereby passing the mandatory provision of section 144C(1) of the Act. Provisions of section 144C read under: 144C. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. 16. Most relevant clauses pertinent for adjudication of the quarrel reads as under: (3) 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 the variation; or ( b ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Page 16 of its order wherein the DRP rejected the objections as not sustainable. 22. Facts on record show that on 31.03.2022, the 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 has been concluded. 22. 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 Assessing Officer shall complete the assessment. However, we find that while framing the said draft assessment order, the Assessing Officer not only issued and served demand notice, but has also initiated the penalty proceedings. 23. The question whether demand notice is an integral part of the assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 were put before him for signing the demand notice, and that he signed the same, the fact remains that that step was taken by him after the prescribed period was over. The Tribunal was, therefore, right in holding that the assessment in this respect was time-barred. We, therefore, answer the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld 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. 30. The ld. DR has also drawn strong support from the provisions of section 292B of the Act stating that the subsequent participation of the assessee would debar the assessee to raise this issue before the appellate authority. 31. In support of this contention, strong reliance was placed on the decision of the Hon'ble High Court of Delhi in the case of M/s Jagat Novel Exhibitors Private Limited [supra]. 32. The answer to this has been given by the Hon'ble High Court of Delhi in the case of JCB India Ltd [supra]. The relevant findings read as under: 14. The short question that arises for consideration is whether, after the remand proceedings, the AO could have, without issuing a draft assessment order under Section 144C of the Act, straightway issued the final assessment order. 15. Mr Syali, learned Senior Counsel for the Assessee, referred to the decision of this Court dated 17th May 2017 passed in W.P. (C) No. 4260/2015 (Turner International India Pvt. Ltd. v. Deputy Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the AO stood vitiated not on account of mere irregularity but since it was an incurable illegality. Section 292B of the Act would not protect such an order. This has been explained by this Court in its decision dated 17th July 2015 passed in ITA No. 275/2015 (Pr. Commissioner of Income Tax, Delhi-2, New Delhi v. Citi Financial Consumer Finance India Pvt. Ltd.) where it was held: Section 292B of the Act cannot be read to confer jurisdiction on the AO where none exists. The said Section only protects return of income, assessment, notice, summons or other proceedings from any mistake in such return of income, assessment notices, summons or other proceedings, provided the same are in substance and in effect in conformity with the intent of purposes of the Act. 20. The Court further observed that Section 292B of the Act cannot save an order not passed in accordance with the provisions of the Act. As the Court explained, the issue involved is not about a mistake in the said order but the power of the AO to pass the order. 21. In almost identical facts, in Turner International (supra), this Court held in favour of the Assessee on the ground that it was mandatory for the AO to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sam (India) (supra), the Court negated the plea that non-compliance with the terms of Section 144C of the Act is merely an irregularity . The Gujarat High Court held that it was of great importance and mandatory . The following passages of the said decision of Gujarat High Court are relevant for the present purposes: 6. These statutory provisions make it abundantly clear that the procedure laid down under Section 144C of the Act is of great importance and is mandatory. Before the Assessing Officer can make variations in the returned income of an eligible assessee, as noted, sub-section (1) of Section 144C lays down the procedure to be followed notwithstanding anything to the contrary contained in the Act. This non-obstante clause thus gives an overriding effect to the procedure 'notwithstanding anything to the contrary contained in the Act'. Sub-section (5) of Section 144C empowers the DRP to issue directions to the Assessing Officer to enable him to complete the assessment. Subsection (10) of Section 144C makes, such directions binding on the Assessing Officer. As per Sub- Section 144C, the Assessing Officer is required to pass the order of assessment in terms of such dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the mandatory requirement of issuing a draft assessment order under Section 144C (1) of the Act would, at best, be a curable defect. According to him the matter must be restored to the AO to pass a draft assessment order and for the Petitioner, thereafter, to pursue the matter before the DRP. 16. The Court is unable to accept the above submission. The legal position as explained in the above decisions in unambiguous. The failure by the AO to adhere to the mandatory requirement of Section 144C (1) of the Act and first pass a draft assessment order would result in invalidation of the final assessment order and the consequent demand notices and penalty proceedings. 25. For all of the aforementioned reasons, the Court finds no difficulty in holding that the impugned final assessment orders dated 30th March 2016 passed by the AO for AYs 2006-07, 2007-08 and 2008 -09 are without jurisdiction on account of the failure, by the AO, to first pass a draft assessment order and thereafter, subject to the objections filed before the DRP and the orders of the DRP, to pass the final assessment order. The Court also sets aside the orders of the TPO dated 30th March 2016 issued pursuant to the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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