Court sets aside final assessment order under Income Tax Act due to Section 144C violation, favoring Assessee.

The Court allowed the writ petition challenging the final assessment order under the Income Tax Act, finding a violation of Section 144C as the order was passed without a mandatory draft assessment order. Citing previous judgments, the Court held that the mandatory requirements under Section 144C must be met. As a result, the final assessment order and subsequent penalty proceedings were set aside in favor of the Assessee. The Court did not address the issue of exceeding the limitation period due to the finding of the Section 144C violation.

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Issues:
Challenge to final assessment order under Income Tax Act, violation of Section 144C, exceeding limitation period.

Analysis:
1. The writ petition challenges an order passed under Section 143(3) read with Section 254 of the Income Tax Act, 1961 for the Assessment Year 2008-09 by the Additional Commissioner of Income Tax. The Assessee, engaged in manufacturing and selling mobile handsets, filed its return of income declaring an amount.

2. Due to international transactions with Associated Enterprises, the Transfer Pricing Officer recommended additions, leading to a draft assessment order proposing a significant addition to the Assessee's income. The Dispute Resolution Panel affirmed these additions, resulting in a final assessment order with a substantial total addition to the Assessee's income.

3. The Assessee's appeal was allowed by the Income Tax Appellate Tribunal concerning transfer pricing addition on AMP expenses, leading to a fresh order by the TPO. The Assessee raised an objection regarding the time-bar under Section 153(2A) of the Act, but the AO passed the final assessment order without addressing this objection.

4. The principal ground of challenge by the Assessee is the violation of Section 144C of the Act, as the final order was passed without a mandatory draft assessment order. The Court referred to previous judgments, including one where it was held that mandatory requirements under Section 144C(1) must be met even after a TPO's order on remand.

5. The Court also cited a decision by the Gujarat High Court supporting the view that failure to pass a draft assessment order in such cases is not a curable defect. Consequently, the Court allowed the writ petition, setting aside the final assessment order and subsequent penalty proceedings.

6. Since the Court found in favor of the Assessee regarding the violation of Section 144C, it did not delve into the issue of exceeding the limitation period. The final assessment order, penalty proceedings, and penalty orders were all set aside by the Court based on the grounds of violation of Section 144C.

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