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TMI Blog2024 (1) TMI 1314X X X X Extracts X X X X X X X X Extracts X X X X ..... e returned by an eligible assessee . We have examined the expression of eligible assessee as per the Act. The expression eligible assessee has been defined under sub-Section (15) of Section 144C of the Act. As per sub-Section (15)(b)(i) of Section 144C of the Act, eligible assessee means 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 of the Act. Thus, on going through the provisions of Section 144C(1) of the Income Tax Act, 1961 mandating forwarding of a draft Assessment Order, Explanatory notes to the Finance (2) Act, 2009, Circular No. 05/2010 and Circular No. 09/2013 of the CBDT, we hold that the Assessment Orders passed by the Assessing Officer are bad in law, hence, unsustainable for not passing the draft Assessment Order as per the provisions of Section 144C(1) of the Income Tax Act, 1961. Decided against revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... corporate veil under them to avoid taxability in India. 5. The Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in ignoring the provisions of section 9(1) of the I.T. Act as the revenue has been earned because of underlying assets of the assessee wholly and totally situated in India. 6. The Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in deleting the addition of Rs. 17,79,28,594/- made by Assessing Officer." 3. The common grounds raised in CO Nos. 344 to 347, 353 to 356, 360, 361, 388 & 393 to 396/Del/2015. In CO No. 353/Del/2015 following grounds have been raised by the assessee: "1. That on the facts and circumstances of the case, the learned A.O. has erred, both on facts and in law, in assuming jurisdiction over the subject company. 2.(i) On the facts and circumstances of the case, the learned A.O. has erred, both on facts and in law, in proceeding with the assessment proceedings without considering the aspect of jurisdiction in terms of Section 124(4) of the Income Tax Act, 1961 ('Act'), despite the fact that the company has objected to assumption of jurisdiction. 2.(ii) That on the facts of the case and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department on 22.03.2012 in M/s Focus Energy Group of cases. In the course of search operation, certain incriminating documents pertaining to the assessee were found and seized. Accordingly, notice u/s 153C was issued on the assessee and assessment has been completed u/s 153C/144 of the Income Tax Act on 28.03.2014. 9. The pertinent facts are that the assessee is a non-resident corporate entity, BVI based company incorporated in 1994 owns equipments related to exploration and development of oil fields and lease them to company named "Focus Energy Ltd." which is deducting tax on lease rent paid to assessee as per the provisions of TDS. 10. It was brought to our notice that the assessee is an 'eligible assessee' for the purpose of Section 144C(15)(b) of the Income Tax Act, 1961. The said provision reads as under: "(15) For the purposes of this section,-- (a) "Dispute Resolution Panel" means a collegium comprising of three 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 Pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the draft order,-- (a) file his acceptance of the variations to the Assessing Officer; or (b) file his objections, if any, to such variation with,-- (i) the Dispute Resolution Panel; and (ii) the Assessing Officer. (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) no objections are received within the period specified in sub-section (2). (4) The Assessing Officer 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,-- (a) the acceptance is received; or (b) the period of filing of objections under sub-section (2) expires. (5) The Dispute Resolution Panel 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 Assessing Officer to enable him to complete the assessment. (6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:-- (a) draft order; (b) objections filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible 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 foreign company.]" 15. A plain reading of Section indicates that it is obligatory on the part of the AO to forward a draft Assessment Order as per the provisions of Section 144C(1) of the Act. The sub-Section (1) of Section 144C being a non-obstante clause overrides all the provisions of the Act if they are contrary to Section 144C of the Act. This provision is applicable from 1st October 2009 in all the cases where the Assessing Officer proposes any variation to the income returned by an 'eligible assessee'. 16. We have examined the expression of 'eligible assessee' as per the Act. The expression 'eligible assessee' has been defined under sub-Section (15) of Section 144C of the Act. As per subSection (15)(b)(i) of Section 144C of the Act, 'eligible assessee' means 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 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee; (d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority; (e) records relating to the draft order; (f) evidence collected by, or caused 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. (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 by the Dispute Resolution Panel shall be binding on the Assessing Officer. (11) No direction under sub-section (5) shall be issued unless an oppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment order before the Commissioner of Income Tax (Appeals). In order to approach the DRP, the assessee must file an objection against the draft assessment order within the prescribed time limit. In case the assessee does not file an objection, the assessing officer shall pass the assessment order. The assessee can file an appeal against such assessment order before the CIT (Appeals). Once the option of filing an objection against the draft assessment order before the DRP has been exercised, the assessee cannot withdraw the objection and opt for the normal channel of filing appeal before CIT(Appeals). 45.5 Applicability - These amendments have been made applicable with effect from 1st October, 2009, and will accordingly apply in relation to assessment year 2010-11 and subsequent assessment years. The Dispute Resolution Panel Rules have been notified by S.O. No. 2958(E) dated 20th November, 2009." 18. Further, we have gone through the Circular No. 9/2013 dated 19.11.2013 where by the AO is required to forward a draft Assessment Order to the 'eligible assessee' if it is proposed to make any variation to the returned income after 1st October 2009. The said Circular of CBDT is as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year to which it pertains. Amendments to other sections of the Income-tax Act referred to in para 45.3 of the circular 5/2010 dated 3rd June, 2010 shall also apply from 1st October, 2009." -sd- [Ashis Mohanty] Under Secretary [Tax Policy & Legislation-IV] Orders of the ITAT: 19. Based on the provisions of the Act and the CBDT Circulars, the Co-ordinate Bench of ITAT Delhi in the case of DCIT Vs. Newbury Oil Company Ltd. in ITA Nos. 5398 & 5399/Del/2015, order dated 20.07.2021 and in the case of Xander Advisors India Pvt. Ltd. Vs. ACIT in ITA Nos. 1376 & 1377/Del/2016, order dated 30.08.2022 highlighted necessity of forwarding a draft Assessment Order. Judgment of Hon'ble High Court of Gujarat: 20. We have also gone through jurisprudence on the issue of non-forwarding of the draft Assessment Order and consequence thereof as per Section 144C(1) of the Act and. On this issue, the Hon'ble High Court of Gujarat in the case of CIT Vs. C-Sam (India) Pvt. Ltd. (84 taxmann.com 261) held as under: "6. These statutory provisions make & abundantly clear that the procedure laid down under Section 144C of the Act is of great importance and is mandatory Before the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of transfer pricing mechanism. Such opportunity cannot be taken away by treating it as purely procedural in nature. 8. Reference by the Revenue to the circulars dated 03.06.2010 and 19.11.2013 in this regard would be of no avail. First of these circulars was an explanatory circular issued by the Finance Ministry in which it was provided that these amendments (which included Section 144C of the Act) are made applicable with effect from 01.10.2009 and will accordingly apply in relation to assessment year 2010-11 and subsequent assessment years. In the latter clarificatory circular dated 19.11.2013, it was provided that in the earlier circular there was an inadvertent error and Section 144C would apply to any order which is being passed after 01.10.2009 irrespective of the concerned assessment year. The latter circular was thus merely in the nature of a clarificatory circular and clarified which all along was the correct position in law. Sub-section (1) of Section 144C itself in no uncertain terms provides that the Assessing Officer shall forward a draft order to the eligible assessee, if he proposes to make any variation in the income or loss which is prejudicial to the inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aside. The decision of the Andhra Pradesh High Court was affirmed by the Supreme Court by the dismissal of the Revenue's SLP © [CC No. 16694/2013] on 27th September, 2013. 13. In Vijay Television (P) Ltd. v. Dispute Resolution Panel [2014] 369 ITR 113 (Mad.), a similar question 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 Indi [2016] 388 ITR 383 (Del.), following the decision of the Andhra Pradesh High Court in Zuari Cement Ltd. v. ACIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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