Court quashes assessment order for Foreign Companies under Income-Tax Act

The court quashed the assessment order dated 31st January, 2018, passed under Section 143(3) read with Section 144C (13) of the Income-Tax Act. It ruled that the order lacked jurisdiction as it did not adhere to the mandatory provisions of Section 144C, which require the issuance of a draft assessment order before final assessment orders for Foreign Companies. The court emphasized the importance of following procedural requirements and set aside the impugned order, allowing the petitioner to challenge any subsequent actions lawfully.

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Issues:
Challenge to assessment order under Income-Tax Act - Jurisdiction under Section 144C disputed by petitioner - Eligibility of petitioner as Foreign Company - Compliance with draft assessment order procedure - Invocation of Section 144C(13) without draft order - Applicability of alternate remedy - Quashing of impugned order.

Analysis:

Issue 1: Challenge to assessment order under Income-Tax Act
The petitioner challenged the assessment order dated 31st January, 2018, passed under Section 143(3) read with Section 144C (13) of the Income-Tax Act, 1961. The petitioner contended that the impugned order was without jurisdiction as it did not comply with the mandatory provisions of Section 144C of the Act.

Issue 2: Jurisdiction under Section 144C disputed by petitioner
The petitioner, being a Foreign Company, argued that it was entitled to the special procedure provided under Section 144C of the Act for passing assessment orders and appellate procedures. The petitioner claimed that the impugned order ignored the mandate of Section 144C, thereby depriving it of the right to object to the Draft Assessment Order before the Dispute Resolution Panel (DRP).

Issue 3: Compliance with draft assessment order procedure
The court noted that Section 144C of the Act provides a separate scheme for assessing Foreign Companies, ensuring disputes are resolved efficiently before final assessment orders are passed. It obliges the Assessing Officer to first pass a draft assessment order, allowing eligible assesses like the petitioner to approach the DRP with objections before the final assessment order is issued.

Issue 4: Invocation of Section 144C(13) without draft order
The court held that the impugned order, passed under Section 143(3) read with Section 144C (13) of the Act, made a variation to the returned income without preceding it with a Draft Assessment Order as required by Section 144C. The Assessing Officer was obligated to comply with the provisions of Section 144C in full and not partially, even in cases where the returned income was varied.

Issue 5: Applicability of alternate remedy
The Revenue contended that the petitioner should seek remedy through an appeal to the Income Tax Appellate Tribunal or the Commissioner of Income-Tax (Appeals). However, the court held that the impugned order was without jurisdiction, and the plea of alternate remedy did not merit acceptance in the present circumstances.

Issue 6: Quashing of impugned order
Ultimately, the court quashed and set aside the impugned order dated 31st January, 2018, as it was passed without complying with the mandatory requirements of Section 144C of the Act applicable to Foreign Companies. The decision did not prevent the Revenue from taking lawful steps, nor did it restrict the petitioner from contesting such actions in accordance with the law.

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