Final assessment orders void without draft order under Section 144C: Court upholds mandatory requirement, sets aside orders.

The court held that final assessment orders issued without a draft assessment order under Section 144C of the Income Tax Act were void. It emphasized the mandatory nature of Section 144C(1) and rejected arguments that the requirement could be bypassed after remand proceedings. Section 292B could not cure the defect of not issuing a draft assessment order, as it cannot confer jurisdiction where none exists. Non-compliance with Section 144C vitiates the final assessment order, providing the assessee with substantive rights. The court invalidated the final assessment orders for multiple assessment years due to the AO's failure to follow the mandatory procedure, setting them aside without costs.

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Issues Involved:
1. Validity of the final assessment orders without issuing a draft assessment order under Section 144C of the Income Tax Act.
2. Applicability of Section 292B of the Income Tax Act to cure the defect of not issuing a draft assessment order.
3. Jurisdiction of the Assessing Officer (AO) to pass the final assessment order without following the mandatory procedure under Section 144C.

Issue-wise Detailed Analysis:

1. Validity of the final assessment orders without issuing a draft assessment order under Section 144C of the Income Tax Act:

The primary issue was whether the AO could issue a final assessment order without first issuing a draft assessment order under Section 144C of the Act after the remand proceedings. The court held that Section 144C(1) is unambiguous and mandates the AO to pass a draft assessment order after receiving the TPO's report. The court rejected the Revenue's argument that this requirement does not apply in cases where the TPO's exercise follows a remand by the ITAT. The court emphasized that the failure to issue a draft assessment order is not a mere irregularity but an incurable illegality, rendering the final assessment orders void.

2. Applicability of Section 292B of the Income Tax Act to cure the defect of not issuing a draft assessment order:

The court discussed the applicability of Section 292B, which protects proceedings from mistakes provided they are in substance and effect in conformity with the Act's intent. However, the court held that Section 292B cannot confer jurisdiction where none exists and cannot save an order not passed in accordance with the Act's provisions. The final assessment orders were invalidated not due to a mere mistake but because of the AO's lack of power to pass such orders without following the mandatory procedure under Section 144C.

3. Jurisdiction of the Assessing Officer (AO) to pass the final assessment order without following the mandatory procedure under Section 144C:

The court reiterated that the requirement to pass a draft assessment order is mandatory and provides substantive rights to the assessee to object to any proposed variations before the DRP. The court referred to several precedents, including decisions from the Andhra Pradesh High Court, Madras High Court, and Gujarat High Court, which held that non-compliance with Section 144C vitiates the final assessment order. The court noted that the failure to issue a draft assessment order cannot be treated as a curable defect and results in the invalidation of the final assessment order and consequent proceedings.

Conclusion:

The court concluded that the final assessment orders dated 30th March 2016 for AYs 2006-07, 2007-08, and 2008-09 were without jurisdiction due to the AO's failure to first pass a draft assessment order. Consequently, the court set aside the orders of the TPO dated 30th March 2016 and allowed the writ petitions, with no orders as to costs.

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