2020 (10) TMI 945 - HC - Income Tax

Assessment dated 18/12/2009 void ab initio for failure to furnish draft order under s.144C(1), order set aside

HC held that the assessment dated 18/12/2009 was void ab initio because the AO failed to furnish the draft assessment order under s.144C(1), breaching ... Revision u/s 263 - AO failing to provide the draft assessment order in terms of Section 144C(1) of the said Act to the Assessee, had violated the principles of natural justice and, therefore, the assessment order dated 18/12/2009, was erroneous and deserved to be set aside. whether the assessment order dated 18/12/2009 in this case, is void ab initio or not? - HELD THAT:- Going by the decisions of Control Risk India (P.) Ltd. [2018 (7) TMI 892 - SC ORDER]; International Air Transport Association; Lionbridge Technologies (P.) Ltd. [2018 (12) TMI 764 - BOMBAY HIGH COURT] and Vijay Television (P.) Ltd. [2014 (6) TMI 540 - MADRAS HIGH COURT], we have to hold that the assessment order dated 18/12/2009, in the present case, was clearly without jurisdiction and, therefore, null and void or void ab initio. The fact that the Assessee, in this case, may have not instituted a Writ Petition to challenge the same, but has instituted only an appeal challenging the same, can make no difference to the legal position which is otherwise quite clear. This was not a case where the assessee was merely throwing some collateral challenge to the assessment order dated 18/12/2009. The assessee had frontally challenged this order by instituting an appeal against the same. Therefore, all these decisions could not have been ignored by the ITAT by merely observing that these were the decisions in Writ Petitions instituted by the Assessees. - Decided in favour of assessee. Issues Involved:1. Validity of the assessment order dated 18/12/2009.2. Invocation of revisional jurisdiction under Section 263 of the Income Tax Act, 1961.3. Compliance with the provisions of Section 144C of the Income Tax Act, 1961.4. Prejudice to the interest of the Revenue.5. Extension of the period of limitation for making the assessment order.Detailed Analysis:1. Validity of the Assessment Order Dated 18/12/2009:The primary issue was whether the assessment order dated 18/12/2009 was void ab initio due to the non-compliance with Section 144C of the Income Tax Act, 1961. The court observed that the Assessing Officer (AO) failed to provide a draft assessment order to the Assessee as required under Section 144C(1). This omission rendered the assessment order 'without jurisdiction, null and void,' as supported by various precedents, including *Zuari Cement Ltd.*, *Control Risk India (P.) Ltd.*, and *International Air Transport Association*. The court emphasized that the assessment order was not merely erroneous but was void ab initio due to the breach of mandatory provisions.2. Invocation of Revisional Jurisdiction Under Section 263:The court examined whether the Commissioner of Income Tax (CIT) could invoke revisional jurisdiction under Section 263 for an order that was void ab initio. The court held that Section 263 presupposes the existence of an erroneous order but not one that is void ab initio. The CIT's notice dated 23/2/2012 failed to record any satisfaction that the assessment order was prejudicial to the interest of the Revenue, which is a prerequisite for invoking Section 263. The court concluded that the CIT's order dated 20/3/2012, setting aside the assessment order, was invalid.3. Compliance with the Provisions of Section 144C:The court reiterated the mandatory nature of Section 144C, which requires the AO to provide a draft assessment order to the Assessee. The failure to comply with this provision rendered the assessment order dated 18/12/2009 without jurisdiction. The court cited multiple decisions, including *Lionbridge Technologies (P.) Ltd.* and *Vijay Television (P.) Ltd.*, which confirmed that non-compliance with Section 144C results in an assessment order being void ab initio.4. Prejudice to the Interest of the Revenue:The court noted that the CIT's notice did not establish that the assessment order was prejudicial to the interest of the Revenue. The ITAT's reasoning that the assessment order was prejudicial because it could be set aside on appeal was insufficient. The court emphasized that both conditions—erroneous and prejudicial to the interest of the Revenue—must be satisfied for invoking Section 263.5. Extension of the Period of Limitation for Making the Assessment Order:The court addressed the issue of extending the period of limitation for making the assessment order. It held that the revisional jurisdiction under Section 263 could not be used to extend the period for making an assessment order where the prescribed period had already expired. The court referred to the Full Bench decision in *V. Narayanan vs. ACIT*, which was binding on the ITAT.Conclusion:The court answered the substantial questions of law in favor of the Assessee and against the Revenue. It set aside the CIT's order dated 23/2/2012 and the ITAT's order dated 31/10/2014. Consequently, the assessment order dated 18/12/2009 and the Commissioner (Appeals) order dated 30/3/2012 were also set aside. Both appeals were disposed of in these terms, with no order as to costs.