Appeal Dismissed: Assessment Order Invalid Without Proper Procedure

The ITAT upheld the CIT(A)'s decision, emphasizing the mandatory nature of passing a draft assessment order under section 144C of the Income Tax Act. The appeal by the Revenue was dismissed, affirming the invalidity of the assessment order passed without following the prescribed procedure.

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Issues:
Validity of assessment order passed without a draft assessment order under section 144C of the Income Tax Act.

Analysis:
1. The appeal by the Revenue challenges the CIT(A)'s order, contending that the assessment order under section 143(3) r.w.s. 254 of the Income Tax Act is invalid. The CIT(A) held that the order passed by the Assessing Officer without a draft assessment order is invalid, relying on judicial pronouncements.

2. The case involves a company providing software development services to its Associated Enterprise (AE). The return of income for the assessment year 2007-2008 declared a loss. The Transfer Pricing Adjustment under section 92CA was made, and after remand by the ITAT, a fresh order was passed by the TPO. The final assessment order was then passed without a draft assessment order, leading to the dispute.

3. The Hon'ble Delhi High Court's decision in Turner International India Pvt. Ltd. v. DCIT established that failure to pass a draft assessment order under section 144C(1) renders the final assessment order invalid. This decision was further supported by other judicial pronouncements, emphasizing the mandatory nature of passing a draft assessment order.

4. The Hon'ble Supreme Court in DCIT v. Control Risks India (P.) Ltd. reiterated the requirement for passing a draft assessment order when TPO proposes additions to the ALP. The failure to do so deprives the assessee of the opportunity to challenge the order before the DRP, contravening section 144C of the Income Tax Act.

5. Considering the above legal positions and precedents, the ITAT upheld the CIT(A)'s decision to quash the assessment order passed without a draft assessment order. The appeal by the Revenue was dismissed, affirming the invalidity of the assessment order under section 143(3) r.w.s. 254 dated 29.12.2017.

In conclusion, the ITAT upheld the CIT(A)'s decision, emphasizing the mandatory nature of passing a draft assessment order under section 144C of the Income Tax Act. The appeal by the Revenue was dismissed, affirming the invalidity of the assessment order passed without following the prescribed procedure.

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