Assessing Officer must follow procedure for fair tax assessment

The High Court held that the Assessing Officer cannot skip passing a draft assessment order under Section 144(C) of the Act based on the Transfer Pricing Officer's report under Section 92(CA). Failure to comply with this requirement violates the law and is not curable. The Court overturned the assessment order and ruled in favor of the Petitioner, emphasizing the importance of adhering to statutory procedures for fair tax assessments.

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Issues:
1. Can the Assessing Officer proceed to pass a final assessment order without first passing the draft order under Section 144 (C) of the Act based on the report of the Transfer Pricing Officer (TPO) under Section 92 (CA) of the ActRs.

Analysis:
The High Court addressed the issue of whether the Assessing Officer can proceed directly to pass a final assessment order without following the mandatory requirement of passing the draft order under Section 144 (C) of the Act. The Court referred to previous judgments, including JCB India Limited v. Deputy Commissioner of Income Tax and Turner International India Private Limited v. DCIT, emphasizing the importance of complying with the legal provisions. It was reiterated that failure to pass a draft assessment order in cases requiring determination of arm's length price violates Section 144C (1) of the Act and is not a curable defect under Section 292B of the Act.

The Court noted that the Revenue's Special Leave Petition against a previous order on a similar issue had been dismissed by the Supreme Court. Additionally, reliance was placed on an order where the Joint Commissioner of Income Tax suggested treating the final assessment order as a draft order to follow the procedure under Section 144 (C). However, the Court clarified that such an approach did not establish a binding precedent and emphasized the importance of adhering to the legal requirements outlined in Section 144 (C).

In light of the above analysis, the Court set aside the impugned order dated 30th October, 2017, and allowed the writ petition in favor of the Petitioner. The Court's decision underscored the significance of following the statutory provisions and established legal principles in assessment proceedings to ensure procedural compliance and fairness in tax matters.

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