Tribunal deems premature demand notice invalid, nullifies proceedings, bypassing mandatory provisions.

The Tribunal allowed the appeal, declaring subsequent proceedings and orders as invalid due to the Assessing Officer's premature issuance of a demand notice along with the draft assessment order. This action bypassed mandatory provisions, concluding the assessment process prematurely on 21.12.2018. Consequently, the Tribunal did not address the merits of the upward adjustment on Transfer Pricing and corporate tax additions. The appeal was allowed, and all subsequent proceedings were deemed non-est.

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Issues Involved:
1. Legality of the draft assessment order dated 21.12.2018.
2. Merits of the upward adjustment on Transfer Pricing (TP) and corporate tax additions.

Detailed Analysis:

1. Legality of the Draft Assessment Order:
The assessee challenged the legality of the draft assessment order dated 21.12.2018, arguing that the Assessing Officer (AO) issued a demand notice and initiated penalty proceedings simultaneously, which concluded the assessment proceedings. The Tribunal, after reviewing the facts and legal precedents, held that the AO's action of issuing a demand notice along with the draft assessment order effectively concluded the proceedings on 21.12.2018. This action bypassed the mandatory provisions of Section 144C of the Income Tax Act, which requires a draft assessment order to be issued first, allowing the assessee to raise objections before the Dispute Resolution Panel (DRP). The Tribunal cited several judicial decisions, including the Hon'ble High Court of Gujarat in CIT Vs. Purshottam Das T Patel and the Supreme Court's ruling in Kalyan Kumar Ray Vs. CIT, to support its conclusion that the assessment process is incomplete without the determination of tax and issuance of a demand notice. Consequently, the Tribunal declared all subsequent proceedings and orders as non-est (invalid).

2. Merits of the Upward Adjustment on TP and Corporate Tax Additions:
Given the Tribunal's decision on the first issue, it found it unnecessary to delve into the merits of the upward adjustment on TP and corporate tax additions. The Tribunal's ruling that the assessment proceedings were concluded on 21.12.2018 rendered all subsequent actions, including the DRP's directions and final assessment orders, invalid. Therefore, the grounds raised in the appeal concerning the merits of the additions were not addressed.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, holding that the proceedings culminated on 21.12.2018 when the demand notice was issued and served, making all subsequent proceedings and orders non-est. The Tribunal did not find it necessary to address the merits of the additions due to the invalidity of the subsequent proceedings. The order was pronounced in the open court on 28.09.2020.

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