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TMI Blog2025 (3) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... stating that order dated 27.12.2010 may be taken to be a DAO has itself been issued only on 21.02.2011, two months after order dated 27.12.2010. Hence, the period of 30 days provided in terms of Section 144C(2) has expired by then and the attempt of the Department to circumvent the issue and pin the blame for its error on the assessee is nothing short of a travesty of its statutory responsibilities under that provision. Importantly, a demand accompanying an assessment order is a statutory demand in terms of Section 156 of the Act, which states that 'when any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the assessing officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable'. The recovery of the demand under that notice is as per the modes of recovery under Section 226 of the Act. There is hence, a sanctity attached to a demand under a notice under Section 156 of the Act that cannot be wished away merely by issuing a letter styled as a 'corrigendum'. If at all such demand is to be extinguished, the order under which such demand was raised ought to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 144C(3) of the Income Tax Act on 25.08.2011 is valid in law inasmuch as the Assessing Officer had already passed an order under Section 143(3) read with Section 144C of the Income Tax Act on 27.12.2010 and again on 28.02.2011? 4. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the adjustments made to international transactions by the Transfer Pricing Officer and confirmed by the Dispute Resolution Panel? 5. Whether on the facts and in the circumstances of the case, the Tribunal was right i law in holding that no adjustment is required in respect of differential method of depreciation provided by the comparable companies as otherwise the profit margins of the companies taken as comparables are not computed on the same basis and cannot be taken as ALP? 6. Whether on the facts and circumstances of the case, the Tribunal ought to have appreciated that difference in method of rate of depreciation adopted by the assessee which materially affect the profitability and hence as per Rule 10B(2) and 10B(3) suitable adjustments have to be made in determining the ALP?' 3. The appellant/assessee had filed a return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed a statutory appeal within 30 days as provided for under Section 246A of the Act. 8. The grievance of the assessee hinges on the position that the procedure under Section 144C has not been followed in this case. Section 144C, entitled 'Reference to Dispute Resolution Panel', is a self-contained code that requires, at the first instance, a Draft Assessment Order (DAO) to be passed. A DAO is a set of assessment proposals that are put to the assessee soliciting its acquiescence or objections thereto. 9. Upon receipt of a DAO, the assessee is required to respond, and shall, within 30 days of receipt of the DAO, (a) file its acceptance of the variations contained in the DAO with the assessing officer or (b) file its objection to the variations with the Dispute Resolution Panel and submit a copy thereof to the assessing officer. 10. In the present case, order of assessment dated 27.12.2010 contains no such stipulation. It is couched exactly like an order under Section 143(3), and moreover, is accompanied by a statutory demand notice in terms of Section 156 of the Act. The assessing authority has, as is normally done in the case of regular assessments, consciously enclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bad in law, since the very assumption of jurisdiction in respect of the subsequent proceedings is vitiated. 17. For this proposition, he relies on two decisions, one of a Division Bench of this Court in the case of ACIT v. Vijay Television Private Limited [407 ITR 642] and the other of the Writ Court in G.E. Oil & Gas India P. Ltd v. ACIT [WP.No.1575 of 2020 dated 05.01.2021). 18. Mr.J.Narayanaswamy, learned Senior Standing Counsel, appearing for the Department would defend the orders of the authorities on four primary grounds. 19. Firstly, he cannot but accede to the position that order dated 27.12.2010 does certain aberrations, in that it is not in conformity with the requirements of a DAO per Section 144C of the Act. However, he would insist that corrigendum dated 21.02.2011 had set right all errors by withdrawing the demand raised under that order. 20. Secondly, he would submit that the assessee has acquiesced to the procedure followed, by participating in the proceedings before both the DRP as well the Tribunal and hence cannot be permitted to turn around now and challenge the same now. 21. Thirdly, he would point out that in order dated 28.02.2011, the assessing author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , mere reference to Section 144C(1) without having followed any of the procedures paving the way to the passing of a DAO will not lead to the inference that the assessment order passed is a DAO. 29. As regards the judgment in the case of Mantra Industries Ltd. (supra), we agree with the assessee that the circumstances under which that judgement was passed were entirely different. The Faceless Assessment Scheme was introduced in 2007 and sets out the procedure to be followed in framing an assessment deploying a methodology that maintains the anonymity of the officers involved. 30. In the case of Mantra Industries Ltd. (supra) the Court was concerned with the question as to whether errors in the implementation of the Faceless Assessment Scheme would be fatal to the validity of the assessment orders passed. 31. The Faceless Assessment Scheme contained a requirement for issuance of a show cause notice encompassing proposals for assessment. In cases where notices had been issued prior to completion of the proceedings, but not in the form of the show cause notice containing assessment proposals, various High Courts, in exercise of powers under Article 226 of the Constitution of India, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the income proposed in the draft assessment order prepared by the Assessing Officer or file its objections to such variations, if any, with the Dispute Resolution Panel (DRP) within thirty days of the receipt of the draft assessment order. However, the assessee has neither filed its acceptance nor filed its objections with DRP.' 36. The above statement is wholly erroneous and indicates total non-application of mind by the officer. The officer has made reference to the statutory requirement under Section 144C(2) of the Act, which requires an assessee on receipt of a DAO, to either indicate acceptance or file objections to the DAO proposals with the DRP within 30 days. The officer then blames the assessee for neither filing its acceptance nor objections with the DRP within the time provided. 37. The fact of the matter was that such statutory option was never extended to the assessee. Hence, the assessee could not have complied with the statutory requirement as order of assessment dated 27.12.2010 does not extend such option as it ought to have. The corrigendum stating that order dated 27.12.2010 may be taken to be a DAO has itself been issued only on 21.02.2011, two months ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground relating to illegality of the proceedings before the DRP in its objection dated 30.03.2011. 43. This was prior to finalisation of the proceedings both before the DRP as well as passing of final assessment order and hence, the benefit of the proviso would directly come to the aid of the assessee since the argument in relation to illegality of procedure has been raised at the very threshold. 44. We also draw support from the decision of the Division Bench of this Court in Vijay Television Private Limited (supra). In the case of Vijay Television, an order of assessment had been passed which was sought to be rectified as a DAO. Both the assessment order dated 26.03.2013 and corrigendum dated 15.04.2013, were challenged on the ground that the assessment order should be treated as a final order and that the corrigendum was non est, as it had been issued beyond limitation for passing of an order of assessment. 45. Arguments similar to those addressed before us were considered by the Division Bench in appeal against the order of the writ Court allowing the writ petition. In that case as well, order dated 26.03.2013 had been accompanied by a statutory demand notice and the argume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and void as there is a fine distinction between the orders which are null and void and orders which are irregular, wrong or illegal. Where an authority making order lacks inherent jurisdiction, such order would be without jurisdiction, null, non est and void ab initio as defect of jurisdiction of an authority goes to the root of the matter and strikes at its very authority to pass any order and such a defect cannot be cured even by consent of the parties. (See: Kiran Singh & Ors. Vs. Chaman Paswan & Ors.1). However, exercise of jurisdiction in a wrongful manner cannot result in a nullity - it is an illegality, AIR 1954 SC 340 capable of being cured in a duly constituted legal proceedings. 16. Proceedings for assessment under a fiscal statute are not in the nature of judicial proceedings, like proceedings in a suit inasmuch as the assessing officer does not adjudicate on a lis between an assessee and the State and, therefore, the law on the issue laid down under the civil law may not stricto sensu apply to assessment proceedings. Nevertheless, in order to appreciate the distinction between a "null and void" order and an "illegal or irregular" order, it would be profitable to notic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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