Draft assessment order procedure applies to section 172(4) assessments involving eligible foreign companies.

An order passed under section 172(4) of the Income-tax Act, though part of the summary mechanism for shipping income of non-residents, was treated as an assessment order in substance. The Tribunal noted that section 144C applies to eligible assessees, including a foreign company, where a prejudicial variation is proposed, and therefore the draft assessment order procedure had to be followed. As no draft order had been issued, the assessment could not stand in its existing form. The matter was restored to the Assessing Officer for fresh assessment after complying with section 144C.

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Issues: Whether an order passed under section 172(4) of the Income-tax Act, 1961 is covered by section 144C so as to require forwarding of a draft assessment order to an eligible foreign company, and whether the impugned assessment order passed without following that procedure can stand.

Analysis: Section 172 creates a summary mechanism for assessment of shipping income of non-residents, but the order under section 172(4) still computes taxable income and is therefore an assessment order in substance. The scheme of section 144C applies to eligible assessees, including a foreign company, and the statutory path contemplated by that provision must be followed where a variation prejudicial to the assessee is proposed. The earlier coordinate bench view in the assessee's own case was followed, and the Tribunal accepted that the draft-order procedure was required in such a case. Since no draft assessment order had been issued, the matter required restoration to the Assessing Officer for fresh assessment after following the section 144C procedure.

Conclusion: The order under section 172(4) was held to fall within the scheme of section 144C, and the assessment was set aside for fresh adjudication after issuing the draft order procedure.

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