Mandatory section 144C procedure: premature demand notice and draft order rendered the assessment and DRP process void.

Section 144C requires a staged assessment process: issue of a draft assessment order, opportunity to object before the DRP, and completion of assessment only in conformity with that route. Where the Assessing Officer issued and served the demand notice, draft order and penalty notice on the same date, the process was treated as having been concluded prematurely and the mandatory procedure under section 144C was bypassed. The provision was treated as mandatory, not a curable irregularity, and later participation did not validate the defect because estoppel cannot operate against statute and section 292B cannot cure an order made without jurisdiction. The assessment and subsequent DRP and final orders were therefore non est.

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Issues: Whether the assessment and all subsequent proceedings were void for breach of the mandatory procedure under section 144C of the Income-tax Act, 1961, when the Assessing Officer issued and served the demand notice along with the draft assessment order and penalty notice on the same date.

Analysis: Section 144C contemplates a staged procedure: issuance of a draft assessment order, opportunity to object before the Dispute Resolution Panel, and completion of assessment only thereafter in conformity with the statutory route. The issuance and service of the demand notice, along with initiation of penalty proceedings, were treated as having brought the proceedings to a concluded stage on the same date, thereby bypassing the mandatory sub-sections governing completion of assessment. The requirement under section 144C was held to be mandatory and not a mere irregularity. Participation in later proceedings did not cure the defect, as estoppel cannot operate against statute, and section 292B could not validate an order passed without jurisdiction.

Conclusion: The additional ground was allowed, the subsequent DRP and final assessment orders were held to be non est, and the assessment was invalid for non-compliance with section 144C.

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