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TMI Blog2024 (9) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order and pass a final order and the same being in violation of the procedure contemplated u/s 144C appears to have arisen before our Court on previous occasions also. The consistent view which this Court appears to have taken in that respect was that a failure to frame an assessment order in draft would clearly be violative of the mandatory prescriptions of Section 144C and the final order of assessment framed in violation thereof liable to be viewed as a nullity. Validity of final assessment order passed after the expiration of the limitation period prescribed u/s 153 - As we have arrived at is that it was imperative for the AO to frame an order in draft as opposed to a final order of assessment. Any consequential direction that could be framed would have to be in consonance with the aforesaid finding. That direction would additionally and necessarily have to be in accordance with the scheme of the Act and the statutory prescriptions comprised therein. The same would clearly not warrant or justify the Court enlarging the period of limitation as statutorily prescribed. As is well settled, while courts may, where legally permissible, consider condonation of delay, they ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ksh, JSCs, Mr. Nageswar Rao Mr. Parth, Advocates, Mr. Ajay Vohra, Sr. Adv with Mr. Aditya Vohra Mr. Shashwat Dhamija, Advs., Mr. Ajay Vohra, Sr. Adv with Mr. Aditya Vohra, Mr.Neeraj Jain, Mr. Shashwat, Advs. Mr. Manuj Sabharwal, Mr. Drona Negi Mr. Ayush Kumar, Advs, Mr. Amol Sinha, Mr. Kshitiz Garg Mr. Sourav Verma, Advs. Mr. Salil Kapoor, Ms. Ananya Kapoor, Mr. Tarun Chawla, Mr. Sumit Lal Chandani Mr. Utkarsa Kr. Gupta, Advocates. Ms. Ishita Farsaiya, Mr. Sparsh Bhargava, Ms. Vanshika Taneja Mr. Apurv Shukla, Advocates. Mr. Vishal Kalra Mr. Saumyendra S. Tomar, Mr. Ankit Sahni Ms. Snigdha Gautam, Advocates. For the Respondent Through: Mr. Himanshu S. Sinha, Mr. Prashant Meharchandani Mr. Jainender Singh Kataria, Advs, Ms. Kavita Jha, Sr. Adv with Mr. Vaibhav Kulkarni Mr. Himanshu Aggarwal, Advs. Mr. Gaurav Gupta, SSC with Mr. Shivendra Singh Mr. Yojit, Pareek, JSCs for IT Deptt. Mr. Siddharth Sinha, SSC with Ms. Dacchita Shahi, Ms. Anuja Pethia, JSCs, Mr. Nring Chamwibo Zeliang, Ms. Anu Priya Nisha Minz, Advs. Mr. Sanjay Kumar with Ms. Easha, Advs Mr. Sunil Agarwal, SSC with Mr. Shivansh B.Pandya, Mr. Viplav Acharya, JSCs Mr. Utkarsh Tiwari, Advocate. Mr. Indruj Singh Rai, SSC, Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 (3) read with section 144B of the Act along with demand notice under section 156 of the Act and penalty notice under section 274 read with section 270A of the Act. The final assessment order passed was also accompanied by a notice of demand issued under section 156 of the Act (along with the computation sheet), and a penalty notice issued under section 274 read with section 270A of the Act, thereby resulting in violation of mandatory provisions of section 144C of the Act. Whether a final assessment order passed without passing a draft assessment order as mandated under Section 144C of the Act is tenable or not? 3. Smart Cube India Pvt Ltd vs Joint Commissioner of Income-tax W.P. (C) 12844/2021 2010-11 Income-tax return (ITR) filed by the Petitioner returning income of Rs. 3,78,120 was selected for scrutiny and notice was issued under section 143(2) of the Act. Assessing Officer (AO) passed draft assessment order (DAO) dated 21.03.2014 under section 143 (3) read with section 144C, making addition of Rs.4,70,99,145, which included transfer pricing adjustment of Rs.1,91,52,594 and disallowance of deduction under section 10B of the Act of Rs.2,79,46,551. Objections were filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO could have passed final assessment order without adherence to the mandatory provisions of Section 144C? 5. Contata Solutions Private Limited v. NFAC W.P. (C) 11949/2021 2010-11 12.10.2010-Petitioner Company filed its original ITR. 29.08.2011-The case was selected for scrutiny assessment through CASS. 24.01.2014-On reference of the Assessing Officer, TPO passed an order u/s 92CA (3) of the Act. 10.03.2014-Draft Assessment Order under Section 143 (3) r/w Section 144C of the Act, was passed by the AO. 16.12.2014-Aggrieved by the Draft Assessment Order, the Petitioner filed objections before the Dispute Resolution Panel ['DRP']. The DRP issued directions. 29.01.2015-The TPO proposed upwards adjustment of INR 52,25,570/- and arrived at the arm s length price of INR 9,90,41,626/- (Rs.9,38,16,056/-+52,25,570/-) in the arm s length price for the international transaction. 30.01.2015-Final Assessment Order was passed by the Assessing Officer. 15.01.2019-In the appeal preferred by the Petitioner against the final Assessment Order, dated 30.01.2015, passed by the Assessing Officer, the Income Tax Appellate Tribunal ('ITAT') granted some relief to the Petitioner by dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not? Whether it is mandatory for the assessing officer to pass a draft assessment order under Section 144C of the Act during remand proceedings? 7. Axalta Coating Systems India Private Limited v. NFAC W.P. (C) 12319/2021 2018-19 The Respondents have illegally proceeded to pass the final assessment order (Annexure P-3). The TPO passed the order on 31.07.2021 (Annexure P-2) and the Respondents instead of following the binding mandate of Section 144C and instead of issuing the draft assessment order, have directly proceeded to pass the impugned final assessment order and have raised the demand as well and initiated penalty proceedings. 8. Ramtech Consulting v. NFAC W.P. (C) 4043/2022 2017-18 The Respondents have illegally proceeded to pass the final assessment order (Annexure P-7). The TPO passed the order on 29.01.2021 (Annexure P-1) and the Respondents instead of following the binding mandate of Section 144C and instead of issuing the draft assessment order, have directly proceeded to pass the impugned final assessment order and have raised the demand as well and initiated penalty proceedings. The Respondents in the first round had passed the draft assessment order and also fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t order was accompanied by notice of demand issued under section 156 and notice issued under section 274 read with section 271 (1) (c) of the Act for initiating penalty proceedings. In the 2nd round of proceedings pursuant to remand by the ITAT, despite the Petitioner qualifying as eligible assessee in terms of section 144C (15), draft assessment order was not passed by the Respondent, instead, assessment was straightaway finalized by way of final assessment order, which was accompanied by notice of demand and notice for initiating penalty proceedings. No opportunity was provided to the Petitioner to file objections before the DRP, even though the Respondent was mandated by law to first forward draft assessment order to the Petitioner under section 144C (1), thereby violating the substantive rights of the Petitioner as codified under section 144C of the Act 11. Aditya Talwar vs. DCIT-W.P. (C) 6786/2022 2017-18 The Respondents have illegally proceeded to pass the final assessment order (Annexure P-3). The Petitioner is admittedly a non-resident and the Respondents instead of following the binding mandate of Section 144C and instead of issuing the draft assessment order, have directl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , proposed an upward adjustment on account of AMP expenditure of INR 18,61,30,041. On 30.07.2023, the Respondent No.1, instead of passing a draft assessment order as mandated by the provisions of section 144C (1) of the Act, straightaway passed the final assessment order dated 30.07.2023 under section 143 (3) read with section 144B of the Act, confirming the additions made by the TPO. The final assessment order dated 30.07.2023 was accompanied by a notice of demand issued under section 156 of the Act (along with the computation sheet), and a penalty notice issued under section 274 read with section 270A of the Act, thereby resulting in violation of mandatory provisions of section 144C of the Act. Whether a final assessment order passed without passing a draft assessment order as mandated under Section 144C of the Act is tenable or not? 16. PCIT vs Wickwood Development Limited ITA 451/2024 2008-09 The assessee is company incorporated in BVI on 13.05.1991. A search and seizure operations under section 132 of the Act was conducted on 22.03.2012 in M/s Focus Energy group. Thereafter, a notice under section 153C of the Act was issued to the assessee on 18.11.2013. The assessing officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by the assessee for AY 2006-07 to 2012-13 The assessee filed detailed objections to the assumption of jurisdiction vide letter dated 05.03.2014. The assessee in response to notice under section 153C filed income-tax return ( ITR ) on 18.03.2014 returning income of Rs. 6,12,64,160. Assessing Officer (AO) passed final assessment order dated 28.03.2014 under section 153C read with section 144, making addition of Rs. 1,82,53,79,696. The final assessment order was challenged before the CIT(A), which allowed the appeal filed by the assessee vide order dated 26.02.2015. The order dated 26.02.2015 was assailed by the Revenue before the ITAT on merits and the assessee also filed Cross Objections being CO No. 361/Del/2015. The ITAT, following the decision of this Hon ble Court in the case of Turner International India Pvt. Ltd. vs DCIT: W.P. (C) 4260/2015 held that it was obligatory on the part of the assessing officer to pass the draft assessment order in the first instance before passing of the final assessment order and no adjudication was required and done on the merits of the matter. Whether on the facts and circumstances of the case and in law the Ld. ITAT is justified in allowin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 on pg. 78 of WP 31.10.2018 Annexure P-11 on pg. 88 of WP 31.10.2018 Annexure P-11 on pg. 90 of WP October 2018 Annexure P-11 on pg. 143 of WP 5 Notice u/s 142(1) of the Act issued by AO 20.11.2018 Annexure P-14 on pg. 138 of WP 20.11.2018 Annexure P-12 on pg. 143 of WP 20.11.2018 Annexure P-12 on pg. 156 of WP 20.11.2018 Annexure P-12 on pg. 158 of WP 20.11.2018 Annexure P-12 on pg. 211 of WP 6 Due date for passing assessment order u/s 153 pursuant to remand back 31.12.2018 31.12.20 18 31.12.2018 31.12.2018 31.12.2018 7 Final assessment order u/s 143 (3) rws 254 of the Act 20.11.2018 Annexure P-1 on pg. 24 of WP Nov 2018 (Undated) Annexure P-1 on pg. 24 of WP 28.12.2018 Annexure P-1 on pg. 25 of WP 30.12.2018 Annexure P-1 on pg. 25 of WP 25.12.2018 Annexure P-1 on pg. 24 of WP 8.1 Demand notice u/s 156 of the Act 20.12.2018 Annexure P-2 on pg. 29 of WP 20.12.2018 Annexure P-2 on pg. 26 of WP 28.12.2018 Annexure P-2 on pg. 30 of WP 30.12.2018 Annexure P-2 on pg. 31 of WP 25.12.2018 Annexure P-2 on pg. 30 of WP 8.2 Address to which demand notice u/s 156 has been sent in Round II of litigation F-40, NDSE-1, New Delhi 110049 Pg. 29 of WP F-40, NDSE-1, New Delhi 110049 Pg. 26 of WP F- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I was passed on 20.11.2018. Only after assessee filed submission dated 18.12.2018 (Annexure R-1 of rejoinder), the order was made available to assessee on 07.01.2019. This fact has not been denied by Revenue dept. in their counter affidavit. Para 6 on pg. 2-3 -Though final assessment order- Round II was undated of November 2018, assessee filed submission on 18.12.2018 and impugned order has been passed only after it. The FAO - Round II is antedate d and the same was made available to the assessee only on 07.01.2019. This fact has not been denied by Revenue dept. in their counter affidavit. Para 6 on pg. 2-3 - Though final assessment order- Round II was passed on 28.12.2018, the same was made available to the assessee only on 07.01.2019. This fact has not been denied by Revenue dept. in their counter affidavit. Para 6 on pg. 3- final assessment order- Round II passed on 30.12.2018, however the same was neither dispatched nor received within the statutory time limit. This fact has not been denied by the Revenue Dept in their counter affidavit. Para 6 on pg. 2-3 - Though final assessment order- Round II was passed on 25.12.2018, the same was made available to the assessee only on 07.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exure P-12 on pg. 205 of WP 17.06.2019 Annexure P-12 on pg. 151 of WP 17.06.2019 Annexure P-10 on pg. 329 of WP 17.06.2019 Annexure P-10 on pg. 233 of WP 17.06.2019 Annexure P-12 on pg. 299 of WP 11 Response to sec 274 notice dated 17.06.2019 filed by the Petitioner before AO 27.06.2019 Annexure P-13 on pg. 206 of WP 28.06.2019 Annexure P-13 on pg. 152 of WP 27.06.2019 Annexure P-11 on pg. 330-347 28.06.2019 Annexure P-11 on pg. 234 of WP 28.06.2019 Annexure P-13 on pg. 300 of WP 12 Notice u/s 263 of the Act issued by the AO 04.03.2021 Annexure P-1 on pg. 30 of WP 04.03.2021 Annexure P-1 on pg. 31 of WP 04.03.2021 Annexure P-1 on pg. 29 of WP 04.03.2021 Annexure P-1 on pg. 30 of WP 04.03.2021 Annexure P-1 on pg. 30 of WP 13 Date of filing of Writ Petition 10.03.2021 16.03.2021 15.03.2021 11.03.2021 16.03.2021 14 Grounds in Writ Petition filed by assessee Pg. 20-25 of WP Pg. 20-26 of WP Pg. 19-24 of WP Pg. 19-25 of WP Pg. 20-25 of WP 15 Date of filing of Counter Affidavit Counter Affidavit filed in AY 2010-11, adopted for this year. Counter Affidavit filed in AY 2010-11, adopted for this year. Counter Affidavit filed in AY 2010-11, adopted for this year. Counter Affidavit filed in A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Aggrieved by the aforesaid, the petitioner approached the Tribunal. The Tribunal in terms of its order dated 28 June 2016 allowed the appeal and framed the following operative directions: - 19. However, in the present case, it is an admitted fact that the said Circular was not in existence when the TPO passed the impugned orders for the respective assessment years i.e. assessment years 2007-08 to 2009-10, under consideration. However, he admitted while passing the orders u/s 92CA of the Act for the assessment year 2010-11 that TNMM is most appropriate method for determining the Ann's Length Price. We, therefore, deem it appropriate to set aside this issue relating to the assessment years 2007-08 to 2009-10 to the file of the TPO/ AO to decide as to what is the most appropriate method by considering the facts and the guidelines available in the form of circular. As regards to the issue relating to the comparables for which the information u/s 133(6) of the Act were obtained by the TPO and which were not confronted to the assessee, we are of the view that this issue also deserves to be set aside to the file of the TPO/ AO for fresh adjudication in accordance with law after prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equential demand. 9. Telstra India Private Limited [Telstra] is the writ petitioner in the second matter which had been selected by us for the purposes of chronicling the facts as they obtained. Its challenge pertains to AY 2018-19 and in connection with which it submitted its Return of Income on 30 November 2018. During the course of examination of that return, a notice referable to Section 143(2) came to be issued on 22 September 2019. This was followed by an intimation under Section 143 (1) making aggregate disallowances of INR 113,88,283/-. This was assailed by Telstra before the Commissioner of Income Tax (Appeals) [CIT(A)] which ultimately allowed the challenge and deleted the disallowances. On 07 April and 28 July 2021, the petitioner was served with notices under Section 92CA intimating it of a reference having been made to the TPO. The TPO issued a show cause notice on 03 September 2021 apprising the writ petitioner of various adjustments which were proposed to be made. Since the additions proposed would have been binding on the AO in terms of Section 92CA (4), the petitioner chose not to make any further submissions. This led to a final order of assessment being passed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be collected by, it; and (g) result of any enquiry made by, or caused to be made by, it. (7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5), (a) make such further enquiry, as it thinks fit; or (b) cause any further enquiry to be made by any income tax authority and report the result of the same to it. (8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order. [ Explanation . For the removal of doubts, it is hereby declared that the power of the Dispute Resolution Panel to enhance the variation shall include and shall be deemed always to have included the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee.] (9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members. (10) Every direction issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (14B) and sub-section (14C) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.] (15) For the purposes of this section, (a) Dispute Resolution Panel means a collegium comprising of three [Principal Commissioners or] Commissioners of Income-tax constituted by the Board for this purpose; (b) eligible assessee means, (i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and [(ii) any non-resident not being a company, or any foreign company.] Time limit for completion of assessment, reassessment and recomputation. 153. (1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of twenty-one months from the end of the assessment year in which the income was first assessable: [ Provided that in respect of an order of assessment relating to the assessment year commencing on the 1st day of April, 2018, the provisions of this sub-section shall have effect, as if for the words twenty-one months , the words eighteen months had been substituted: [Provided further that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be,]: [Provided that where the order under section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be,] on or after the 1st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words nine months , the words twelve months had been substituted.] [(3A) Notwithstanding anything contained in sub-sections (1), (1A), (2) and (3), where an assessment or reassessment is pending on the date of initiation of search under section 132 or making of requisition under section 132A, the period available for completion of assessment or reassessment, as the case may be, under the said sub-sections shall, (a) in a case where such search is initiated under section 132 or such requisition is made under section 132A; (b) in the case of an assessee, to whom any money, bullion, jewellery or ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 264 shall be made within the time specified in sub-section (3).] [(5A) Where the Transfer Pricing Officer gives effect to an order or direction under section 263 by an order under section 92CA and forwards such order to the Assessing Officer, the Assessing Officer shall proceed to modify the order of assessment or reassessment or recomputation, in conformity with such order of the Transfer Pricing Officer, within two months from the end of the month in which such order of the Transfer Pricing Officer is received by him.] (6) Nothing contained in sub-sections (1) [, (1-A)] and (2) shall apply to the following classes of assessments, reassessments and recomputation which may, subject to the provisions of [sub-sections (3), (5) and (5-A)], be completed (i) where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250, section 254, section 260, section 262, section 263, or section 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act, on or before the expiry of twelve months from the end of the mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iso to section 129; or (ii) the period during which the assessment proceeding is stayed by an order or injunction of any court; or (iii) the period commencing from the date on which the Assessing Officer intimates the Central Government or the prescribed authority, the contravention of the provisions of clause (21) or clause (22B) or clause (23A) or clause (23B) [, under clause (i) of the first proviso] to sub-section (3) of section 143 and ending with the date on which the copy of the order withdrawing the approval or rescinding the notification, as the case may be, under those clauses is received by the Assessing Officer; or (iv) the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited [or inventory valued] under sub-section (2A) of section 142 and (a) ending with the last date on which the assessee is required to furnish a report of such audit [or inventory valuation] under that sub-section; or (b) where such direction is challenged before a court, ending with the date on which the order setting aside such direction is received by the Principal Commissioner or Commissioner; or (v) the period commencing from the date on w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (5) of the said section is received by the [Assessing Officer; or (xii) the period (not exceeding one hundred and eighty days) commencing from the date on which a search is initiated under section 132 or a requisition is made under section 132A and ending on the date on which the books of account or other documents, or any money, bullion, jewellery or other valuable article or thing seized under section 132 or requisitioned under section 132A, as the case may be, are handed over to the Assessing Officer having jurisdiction over the assessee, (a) in whose case such search is initiated under Section 132 or such requisition is made under Section 132-A; or (b) to whom any money, bullion, jewellery or other valuable article or thing seized or requisitioned belongs to; or (c) to whom any books of account or documents seized or requisitioned pertains or pertains to, or any information contained therein, relates to; or] [(xiii) the period commencing from the date on which the Assessing Officer makes a reference to the Principal Commissioner or Commissioner under the second proviso to sub-section (3) of section 143 and ending with the date on which the copy of the order under clause (ii) or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes of determining the period of limitation under sections 149, 154 and 155, and for the purposes of payment of interest under section 244A, the provisions of the fourth proviso shall apply accordingly.] Explanation 2. For the purposes of this section, where, by an order referred to in clause (i) of sub-section (6), (a) any income is excluded from the total income of the assessee for an assessment year, then, an assessment of such income for another assessment year shall, for the purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order; or (b) any income is excluded from the total income of one person and held to be the income of another person, then, an assessment of such income on such other person shall, for the purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order, if such other person was given an opportunity of being heard before the said order was passed.] 11. It becomes pertinent to note that the issue of whether the AO could ignore the requirement of drawing up a dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be binding on the Assessing Officer. This is akin to the Assessing Officer giving effect to an order passed by the appellate authority or the courts. 18. Consequently, section 144C envisages a change of forum and it leads to complete cessation of the jurisdiction of the Assessing Officer on passing of the draft order. Thereafter the Assessing Officer is to give effect to either the direction of the Dispute Resolution Panel or pass an order on acceptance by the assessee. The expression in the first instance has been used in section 144C to signify the first step to be taken by the Assessing Officer in a series of acts contemplated by the said section. To accept the appellant's argument would be to permit the Assessing Officer to decide the objections filed by the assessee which power has been specifically denied by the statute. 14. It appears that the respondents in Headstrong India had contended that the expression in the first instance as appearing was suggestive of the requirement of framing a draft assessment order being obviated in a situation where the assessment proceedings are to be renewed consequent to a remit by the Tribunal. 15. This submission came to be rejected wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in Turner International India Pvt. Ltd. v. Dy. CIT [2017] 398 ITR 177 (Delhi) W. P. (C) Nos. 4260 and 4261 of 2015 as well Nokia India Pvt. Ltd. v. Addl. CIT WP (C) No. 3629 of 2017 . The relevant portion of the judgment in Turner International India Pvt. Ltd. (supra) is reproduced hereinbelow (page 180 of 398 ITR) : The question whether the final assessment order stands vitiated for failure to adhere to the mandatory requirements of first passing draft assessment order in terms of section 144C (1) of the Act is no longer res integra. There is a long series of decisions to which reference would be made presently. In Zuari Cement Ltd. v. Asst. CIT (decision dated February 21, 2013 in W. P. (C) No. 5557 of 2012), the Division Bench (DB) of the Andhra Pradesh High Court categorically held that the failure to pass a draft assessment order under section 144C (1) of the Act would result in rendering the final assessment order 'without jurisdiction, null and void and unenforceable'. In that case, the consequent demand notice was also set aside. The decision of the Andhra Pradesh High Court was affirmed by the Supreme Court by the dismissal of the Revenue's SLP (C) (CC No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see an opportunity to raise objections before the Dispute Resolution Panel. 25. Keeping in view the aforesaid, this court is of the opinion that no question of law, let alone a substantial question of law, arises in the present appeal. 26. This court is of the view that till the Income-tax Department ensures that the Assessing Officers follow the mandate of law, in particular, the binding provisions like section 144C and eschew filing of unnecessary appeals rather than in nearly all matters where the Assessing Officer has taken a view against the assessee, the assessments will not achieve finality for a number of years like in the present case where the case of assessment year 2007-08 stands remanded and restored to the file of the Assessing Officer. 18. We note that the legal position as enunciated by this Court also finds resonance in the decisions rendered by the Madras, Gujarat and Bombay High Courts in the decisions rendered in Vijay Television P. Ltd. v. Dispute Resolution Panel and Others 2014 SCC OnLine Mad 12885, Commissioner of Income-tax v. C-Sam (India) Pvt. Ltd. 2017 SCC OnLine Guj 2651 and Principal Commissioner of Income-tax v. Andrew Telecommunications P. Ltd. 2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer, which he otherwise lacked on the expiry of the said period. In that case, the honourable Supreme Court also held that there is a distinction between an order which is a nullity and an order which is irregular and illegal. Where an authority making order lacks inherent jurisdiction, such an order will be null and void ab initio, as the defect of jurisdiction goes to the root of the matter and strikes at his very authority to pass any order and such a defect cannot be cured even by consent of the parties. 24. This decision squarely applies to the facts of this case. In this case, the order passed by the second respondent lacks jurisdiction especially when it is beyond the period of limitation prescribed by the statute. When there is a statutory violation in not following the procedures prescribed, such an order cannot be cured by merely issuing a corrigendum. xxxx xxxx xxxx 33. The decision of the Division Bench of the Andhra Pradesh High Court deals with an identical issue as that of the present case. In this case, against the order passed by the second respondent on March 26, 2013, the petitioner filed objections before the Dispute Resolution Panel, the first respondent he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke on or after the 1st day of October, 2009 any variation in the income or loss returned which is prejudicial to the interest of the assessee. Under sub-section (2) of section 144C, the assessee gets an opportunity to file his objections within thirty days of such variation before the Dispute Resolution Panel as well as before the Assessing Officer. As per sub-section (3) of section 144C, the Assessing Officer would complete the assessment on the basis of the draft order if the assessee either intimates his acceptance of the variation or does not raise objections within the time prescribed. Under sub-section (5) of section 144C, the Dispute Resolution Panel could issue such directions to the Assessing Officer as it thinks fit for his guidance to enable him to complete the assessment in case the assessee has raised an objection. Under sub-section (7) of section 144C, it is open for the Dispute Resolution Panel to make further inquiries or have such inquiries made before issuing the directions referred to in sub-section (5). Sub-section (8) of section 144C recognizes wide powers of the Dispute Resolution Panel to confirm, reduce or enhance the variations proposed in the draft order s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red not by the Assessing Officer but by the Dispute Resolution Panel. Interestingly, once the Dispute Resolution Panel gives directions under sub-section (5) of section 144C, the Assessing Officer is expected to pass the order of assessment 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 Dispute Resolution Panel under sub-section (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 Dispute Resolution Panel 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. Principal Commissioner of Income-tax v. Andrew Telecommunications P. Ltd.: 5. Since the appeal raises a question relating to section 144C of the Income-tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der under section 144C (1) of the Act would result in rendering the final assessment as one without jurisdiction. This position of law is settled. 18. Now to consider whether after remand, it was necessary to issue a draft assessment order. Firstly, the issuance of a draft assessment order is not an empty formality. When a draft assessment order is passed and copy is given to the assessee, the assessee can raise objections before the Dispute Resolution Panel on any of the proposed variations. There is a right given to the assessee to object, and to have the objections considered not by the Assessing Officer, but by the Dispute Resolution Panel. 19. The Tribunal, by order dated October 1, 2012, set aside the entire exercise and the matter was relegated to the Assessing Officer. Once the matter was sent back to be decided afresh it went back to the stage of section 144C (1) of the Act. Since the Tribunal set aside the proceedings on the ground of violation of principles of natural justice, the first exercise was void and without jurisdiction. Therefore, nothing remained on the record, including the draft assessment order. Therefore, issuance of a draft assessment order was necessary. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a consequence thereof would not be a nullity. Mahinder Narain, J., on the other hand, expressed the opinion that an assessment framed contrary to the procedure prescribed in Section 144B(4) would render the same void and liable to be viewed as having been passed without jurisdiction. 25. This led to the appeal being referred for the opinion of a third learned Judge. D.K. Jain, J., in his opinion, ultimately ruled with B.N. Kirpal, J. and came to hold that an infraction of Section 144B(4) would be a mere procedural irregularity. 26. As noted hereinbefore, Sarabjit Singh was rendered in the context of the erstwhile Section 144B which was duly extracted in paragraph 13 of the report and is reproduced hereinbelow:- 13. Section 144B was inserted by the Taxation Laws (Amendment) Act, 1975, and was brought into force from January 1, 1976. It thus, applied to all assessments completed after January 1, 1976. The relevant portion of the section, as it existed at the relevant time, reads: (1) Notwithstanding anything contained in this Act, where, in an assessment to be made under sub-section (3) of section 143, the Assessing Officer proposes to make, before the 1st day of October, 1984, any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacked pecuniary or territorial jurisdiction or was not competent to have seisin over the assessee's case. The assessee's only grievance is that the Income-Tax Officer having not complied with the provisions of section 144B, the assessment order passed by him was rendered void and, therefore, should have been annulled by the appellate authorities. Having come to the conclusion that section 144B is procedural in nature, I am unable to persuade myself to agree with learned counsel for the assessee that failure on the part of the Income-Tax Officer to follow the procedure laid down therein renders the order passed by him void. There is no dispute with the proposition that an assessment order passed without complying with the provisions of section 144B cannot be regarded as a valid order but it cannot follow as a necessary corollary that such an order passed without following the procedural requirements must be regarded as a nullity. Non-compliance with the procedural law is merely a procedural irregularity, which can be cured unlike the defect of inherent lack of jurisdiction in an authority to pass an order which of course will be a nullity. Support for this view is lent by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) of the Act continues to vest in the Income-Tax Officer. Thus, the ratio of the decision in Dhadi Sahu's case, [1993] 199 ITR 610 (SC) does not apply to the issue in hand. The decisions of the Punjab and Haryana High Court in Mohinder Lal's case, [1987] 168 ITR 101 [FB] and this court in Sudhir Sareen's case, [1981] 128 ITR 445 merely say that the provisions of section 144B are mandatory, with which proposition there is no quarrel. I am, therefore, of the considered opinion that section 144B of the Act is only a procedural provision and the assessment order passed by ignoring the said provisions cannot be regarded as null and void. 28. According to Mr. Agarwal, learned counsel who led submissions on behalf of the respondents, the decision in Sarabjit Singh since rendered in the context of a pari materia provision, the principles enunciated therein should guide the interpretation that we accord upon Section 144C. Viewed in that light, it was argued that a failure on the part of the AO to frame a draft assessment order is a curable infraction and cannot be viewed as a complete nullity. 29. Mr. Agarwal while seeking to sustain the contention of Section 144B being pari ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30. Mr. Agarwal then cited for our consideration the decision of the Supreme Court in Commissioner of Income Tax, Gujarat Central v. Saurashtra Cement and Chemical Industries Ltd. (2016) 11 SCC 762 and where the ambit of Section 144B was explained in the following terms:- 9. Section 144-B of the Act deals with a situation where ITO intends to pass an assessment order which is in variation to the income or loss that is shown in the return of the assessee and the amount of such variation exceeds the amount that can be fixed by the Board under sub-section (6) thereof. In such a situation, ITO is under obligation to first forward a draft of the proposed order of assessment to the assessee who can file his objections within 7 days thereof and if the objections are received, ITO is to forward the draft order together with the objections to IAC. IAC, after considering the draft order and the objections, is empowered to issue such directions as he thinks fit for the guidance of ITO to complete the assessment. 31. In view of the aforesaid, Mr. Agarwal submitted that the procedure as contemplated under Section 144B (4) is similar to that which obtains under Section 144C. According to learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding consequent upon a purported non-compliance with that notice, it became necessary to obtain the quashing of the assessment order also. The character of an assessment proceeding, of which the impugned notice and the assessment order formed part, being quasi-judicial, the certiorari jurisdiction of the High Court under Article 226 was attracted. Ordinarily, where the High Court exercises such jurisdiction it merely quashes the offending order and the consequential legal effect is that but for the offending order the remaining part of the proceeding stands automatically revived before the inferior court or tribunal with the need for fresh consideration and disposal by a fresh order. Ordinarily, the High Court does not substitute its own order for the order quashed by it. It is, of course, a different case where the adjudication by the High Court establishes a complete want of jurisdiction in the inferior court or tribunal to entertain or to take the proceeding at all. In that event on the quashing of the proceeding by the High Court there is no revival at all. But although in the former kind of case the High Court, after quashing the offending order, does not substitute its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Article 226 has to mould the remedy to suit the facts of a case. If in a particular case a court takes the view that the Income Tax Officer while passing an order under Section 132 (5) did not give an adequate opportunity to the party concerned it should not be left with the only option of quashing it and putting the party at an advantage even though it may be satisfied that on the material before him the conclusion arrived at by the Income Tax Officer was correct or dismissing the petition because otherwise the party would get an unfair advantage. The power to quash an order under Article 226 can be exercised not merely when the order sought to be quashed is one made without jurisdiction in which case there can be no room for the same authority to be directed to deal with it. But in the circumstances of a case the court might take the view that another authority has the jurisdiction to deal with the matter and may direct that authority to deal with it or where the order of the authority which has the jurisdiction is vitiated by circumstances like failure to observe the principles of natural justice the court may quash the order and direct the authority to dispose of the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on subject to the rider that it is not empowered to set aside a proposed variation. Mr. Vohra, learned senior counsel, rightly underscored the distinction between the extent of the power that stood conferred under Section 144B and 144C by pointing out that the Deputy Commissioner assumed a quasi-judicial role only if it were proposing to pass an order prejudicial to the assessee. It was rightly pointed out by learned senior counsel that the DRP under the Section 144C regime also stands conferred with the power to call for additional evidence, take into consideration additional material that may be introduced by the assessee, collate further evidence or undertake such further enquiries as may be warranted. The extent of jurisdiction which stands conferred upon the DRP by virtue of sub-sections (6), (7) and (8) of Section 144C are thus clearly distinct and different from those conferred upon the Deputy Commissioner under the erstwhile Section 144B. 39. The power entrusted in the DRP also cannot be recognised to be one which seamlessly transformed into one which did not envisage a change of forum. In Sarabjit Singh, the Court bearing in mind the limited power of review which stood con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bedrock of Sarabjeet Singh. That decision proceeded on the premise that the reference to the Deputy Commissioner did not fundamentally alter the hierarchy of the adjudicatory function since and notwithstanding the guidance provided by the superior, the assessment remained an order made by the AO. 45. To the contrary, the draft of the assessment order under Section 144C is subject to challenge before the DRP or liable to be assailed in appellate proceedings. Our view of the Section 144C assessment being unique and distinct is also fortified by the various decisions rendered in its context. The limited review which the Deputy Commissioner was enabled to exercise under Section 144B is liable to be contrasted with the independent enquiry that the DRP is empowered to undertake under the Income Tax (Dispute Resolution Panel) Rules, 2009 [DRP Rules] , an aspect which was duly highlighted by Mr. Vohra. 46. As is manifest from a reading of Section 144C as well as the Rules aforenoted, the DRP is independently empowered to admit evidence, call for reports or even direct further enquiries. Its powers extend to confirming, reducing or even enhancing the variations proposed in the draft ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mere procedural requirement. As is manifest from a reading of that section, it not only adopts remedies that may be pursued to assail an order rendered on adjudication, but the decision is itself made subject to internal review at more than one level and a hierarchy of authorities. It creates a right to challenge a decision at multiple levels be it before the DRP, CIT(A) or the Tribunal. It is in that sense a self-contained code for assessment in respect of eligible assessees. 52. A failure to frame a draft order of assessment not only curtails the right of the assessee to adopt corrective measures, it also deprives it of a salutary right to challenge the draft in terms of the statutory mechanism laid in place. We thus find that the imperative of framing an order in draft was correctly propounded by JCB India Ltd., Nokia India, C-Sam as well as the host of precedents noticed above as being mandatory, a legal imperative and not merely a procedural irregularity as was contended at the behest of the respondents. 53. It would thus be wholly incorrect to accept the contention of Section 144C being similar or akin to the statutory provision which formed the subject matter of considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention to the judgment of the Constitution Bench in Income Tax Officer, A Ward, Sitapur v. Murlidhar Bhagwan Das 1964 SCC OnLine SC 18 where the expression finding and direction was explained in the following words: - 9. Now, let us scrutinize the expressions on which strong reliance is placed for the contrary conclusion. The words relied upon are section limiting the time , any person , in consequence of or to give effect to any finding or direction . Pointing out that before the amendment the word sub section was in the proviso but it was replaced by the expression section , it is contended that this particular amendment will be otiose if it is confined to the assessment year under appeal, for it is said that under no circumstances the Income-tax Officer would have to initiate proceedings for the said year pursuant to an order made by an Appellate Assistant Commissioner. This contention is obviously untenable. The Appellate Assistant Commissioner or the Appellate Tribunal may set aside the notice itself for one reason or other and in that event the Income-tax Officer may have to initiate the proceedings once again in which case Section 34(1) will be attracted. The expression find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as the Full Bench of the Allahabad High Court. Ramachandra Iyer J., as he then was, speaking for the Court, observed that the word finding in the proviso must be given a wide significance so as to include not only findings necessary for the disposal of the appeal but also findings which were incidental to it. With respect, this interpretation also is inconsistent with the well-known meaning of that expression in the legal terminology. Indeed, learned counsel for the respondent himself will not go so far, for he concedes that the expression finding cannot be any incidental finding, but says that it must be a conclusion on a material question necessary for the disposal of the appeal, though it need not necessarily conclude the appeal. This concession does not materially differ from the definition we have given, but the difference lies in the application of that definition to the finding given in the present case. A finding , therefore, can be only that which is necessary for the disposal of an appeal in respect of an assessment of a particular year. The Appellate Assistant Commissioner may hold, on the evidence, that the income shown by the assessee is not the income for the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would additionally and necessarily have to be in accordance with the scheme of the Act and the statutory prescriptions comprised therein. The same would clearly not warrant or justify the Court enlarging the period of limitation as statutorily prescribed. As is well settled, while courts may, where legally permissible, consider condonation of delay, they are not entitled to expand or enlarge a period of limitation as statutorily prescribed. 59. It becomes relevant to note that Grindlays Bank was a decision where the Explanation to Section 153 applied and the court was mandated to exclude the period during which a stay order operated. That is not the position which obtains in these matters since the only injunction which operated was with respect to the consequential demands which stood created. There was no interim order which restrained the AO from proceeding with assessment. 60. We thus find ourselves unable to accede to the submission addressed by the respondents on this score. Once it is conceded that the period for completion of the assessment exercise in terms of sub-sections (3) and (4) of Section 153 has expired, it would be wholly impermissible for us to expand or enlarge ..... X X X X Extracts X X X X X X X X Extracts X X X X
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