Assessment order quashed due to procedural irregularities

The Tribunal allowed the assessee's appeal, quashing the assessment order dated 25/02/2015 and declaring all other issues on merits as academic. The appeal was allowed based on the procedural irregularities in issuing the assessment order along with the demand notice and penalty notice, which were found to be in violation of the prescribed procedures. The Tribunal held that the order dated 25/02/2015 was passed without due process and was declared null and void.

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Issues Involved:
1. Validity of the draft assessment order dated 25/02/2015.
2. Transfer pricing adjustments and comparison with HLL Life Care Limited.
3. Issuance of demand notice along with the draft assessment order.

Issue-wise Detailed Analysis:

1. Validity of the Draft Assessment Order Dated 25/02/2015:

The assessee challenged the validity of the draft assessment order dated 25/02/2015, arguing that it was issued along with a demand notice under section 156 and a penalty notice under section 274 read with section 271, which is contrary to the procedure prescribed under the law. The Tribunal noted that this issue goes to the root of the assessment proceedings and admitted it for consideration. The Tribunal referenced several decisions, including those of the Hon’ble Supreme Court and various High Courts, which emphasize the mandatory nature of following the procedure under section 144C of the Act. The Tribunal concluded that the order dated 25/02/2015 was passed without following the due process of law and thus was liable to be set aside. Consequently, the assessment order dated 25/02/2015, along with the demand notice and penalty notice, was declared null and void.

2. Transfer Pricing Adjustments and Comparison with HLL Life Care Limited:

The assessee raised concerns about the transfer pricing adjustments made by the Transfer Pricing Officer (TPO), specifically the comparison with HLL Life Care Limited. The Tribunal did not delve into the merits of this issue because the assessment order itself was quashed. Therefore, the issues related to transfer pricing adjustments became academic and were not adjudicated upon.

3. Issuance of Demand Notice Along with the Draft Assessment Order:

The Tribunal found that issuing a demand notice along with the draft assessment order is contrary to the procedure prescribed under section 144C of the Act. The Tribunal relied on the decision of the Hon’ble Madras High Court in the case of Vijay Television, which held that such actions by the Assessing Officer (AO) without following due process are liable to be set aside. The Tribunal concluded that the AO's actions in issuing the demand notice and penalty notice along with the draft assessment order were not in compliance with the mandatory procedures, thereby rendering the entire process invalid.

Conclusion:

The Tribunal allowed the assessee's appeal on Ground No. 9, quashing and setting aside the assessment order dated 25/02/2015, and declared all other issues on merits as academic. The appeal filed by the assessee was thus allowed.

Order Pronouncement:

The order was pronounced in the open court on 1st April 2021.

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