2021 (6) TMI 271 - AT - Income Tax

Tribunal Upholds Appeal Dismissal Due to Procedural Deficiencies in Income-tax Act

ACIT, Circle 21 (2), New Delhi. Versus M/s. Rolls Royce India Pvt. Ltd.

The Tribunal dismissed the Revenue's appeal, affirming the decision to invalidate the final assessment order due to procedural deficiencies and ... Assessment passed u/s 143 (3)/144C/92CA (3) - No draft assessment order was passed before passing final assessment order - HELD THAT:- When undisputedly the order passed by the Tribunal in the first round of litigation is to be treated under the provisions contained u/s 92CA(3) and section 144C of the Act and in these circumstances, the TP order is also to be treated u/s 92CA(3) of the Act on the basis of which draft assessment order was required to be passed so as to enable the taxpayer to approach the ld. DRP, if so require. So, assessment order passed by the AO without passing draft assessment order to enable the taxpayer to approach ld. DRP is not sustainable in the eyes of law. Identical issue has been decided in the cases of Turner International India (P) Ltd. vs. DCIT [2017 (5) TMI 991 - DELHI HIGH COURT], DCIT vs. Control Risks India (P) Ltd. [2017 (7) TMI 1077 - DELHI HIGH COURT] and JCB India Ltd [2017 (9) TMI 673 - DELHI HIGH COURT] whereby final assessment order has been quashed on the ground that no draft assessment order was passed before passing final assessment order. Procedure adopted in this case by the ld. TPO/AO is unheard of. In these circumstances, we are of the considered view that ld. CIT (A) has rightly quashed the final assessment order. So, finding no perversity or illegality in the impugned order, present appeal filed by the Revenue is hereby dismissed. Issues Involved:1. Validity of treating appeal effect order as final assessment order without TPO's final order2. Validity of treating appeal effect order as final assessment order during pending High Court appeal3. Nature of order by TPO giving partial effect to ITAT directions4. Mechanical application of ITAT directions in appeal effect order5. Invalidation of order u/s 254/143(3) due to absence of Draft Assessment Order6. Draft Assessment Order presentation to eligible assessee as per section 144C7. Justification of invalidating order u/s 254/143(3) without Draft Assessment Order8. Reliance on judgments regarding Draft Assessment Order in quashing final assessment orderAnalysis:Issue 1: The appeal sought to set aside the order passed by the Assessing Officer (AO) due to the treatment of the appeal effect order as the final assessment order without the final order from the Transfer Pricing Officer (TPO) under section 92CA(3) of the Income-tax Act, 1961.Issue 2: The challenge was raised on the grounds of treating the appeal effect order as final during a pending High Court appeal for the same assessment year, questioning the validity of such treatment.Issue 3: The nature of the order by the TPO giving partial effect to the ITAT directions was scrutinized to determine if it constituted a final assessment order or was merely a step towards further appeal before the High Court.Issue 4: The concern was raised regarding the mechanical application of ITAT directions in the appeal effect order, emphasizing the need for a comprehensive and conclusive assessment process.Issue 5: The invalidation of the order under section 254/143(3) was debated due to the absence of a Draft Assessment Order, highlighting the procedural requirement for presenting such an order before passing the final assessment.Issue 6: The presentation of the Draft Assessment Order to the eligible assessee as per section 144C was discussed to determine the procedural compliance in the assessment process.Issue 7: The justification for invalidating the order under section 254/143(3) without presenting a Draft Assessment Order was analyzed in light of the provisions of section 144C and the interests of the assessee.Issue 8: The reliance on judgments regarding the necessity of a Draft Assessment Order before passing the final assessment order was considered, emphasizing the importance of following due process in assessment procedures.In conclusion, the Tribunal dismissed the appeal filed by the Revenue, upholding the decision to quash the final assessment order due to procedural irregularities and lack of compliance with the necessary steps outlined in the Income-tax Act and relevant case law.