Tribunal quashes invalid assessment order for failure to propose draft order as required by law

The Tribunal allowed the appeal, quashing the invalid assessment order due to the failure to propose a draft assessment order as required by law. Other grounds were considered academic and did not require adjudication.

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Issues:
1. Challenge to the validity of the assessment order passed under section 143(3) r.w.s. 254 of the Income Tax Act, 1961.
2. Whether the assessment order passed without proposing a draft assessment order is valid.

Issue 1 - Challenge to the validity of the assessment order:
The appeal challenged the order dated 15.10.2018 of the Commissioner of Income Tax (Appeals) for the assessment year 2008-09. The additional grounds raised by the assessee questioned the legality and validity of the assessment order passed by the Deputy Commissioner of Income Tax and upheld by the Commissioner of Income Tax (Appeals). The issue raised was a legal and jurisdictional one, going to the core of the matter and could be decided based on existing facts without the need for further investigation. The Tribunal decided to admit the additional ground for adjudication.

Issue 2 - Validity of the assessment order without proposing a draft order:
The key contention was that the Assessing Officer (AO) did not follow the statutory requirement of proposing a draft assessment order under section 144C(1) of the Act before passing the final assessment order. The AO directly added the adjustment proposed by the Transfer Pricing Officer (TPO) to the income of the assessee without following the prescribed procedure. The Tribunal analyzed relevant legal precedents and highlighted the mandatory nature of proposing a draft assessment order under section 144C(1) when there is a variation in income prejudicial to the assessee's interest. By not following this procedure, the AO effectively denied the assessee the opportunity to raise objections before the Dispute Resolution Panel. Citing decisions by jurisdictional High Courts and other High Courts, the Tribunal concluded that the assessment order passed without proposing a draft order is invalid. Therefore, the impugned assessment order under section 143(3) r.w.s. 254 of the Act was deemed invalid and quashed.

Conclusion:
The Tribunal allowed the appeal, quashing the invalid assessment order due to the failure to propose a draft assessment order as required by law. Other grounds were considered academic and did not require adjudication. The decision was pronounced in the open court on 6th August 2021.

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