Tribunal invalidates assessment for time limit breach & jurisdictional error.

The Tribunal upheld the CIT(A)'s decision to quash the reassessment proceedings as they were initiated beyond the statutory period and lacked new material. The final assessment order was deemed invalid due to the AO's failure to issue a draft assessment order under Section 144C, constituting a jurisdictional error. The Tribunal dismissed the Revenue's appeal and upheld the relief granted to the assessee.

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Issues Involved:
1. Validity of reassessment proceedings beyond the period of four years.
2. Requirement of new material for reopening assessment.
3. Necessity of passing a draft assessment order under Section 144C of the Income Tax Act.

Detailed Analysis:

1. Validity of Reassessment Proceedings Beyond the Period of Four Years:
The Revenue challenged the order of the Commissioner of Income Tax (Appeals) [CIT(A)], which quashed the reassessment proceedings. The CIT(A) observed that the notice under Section 148 was issued on 31.03.2015, beyond the four-year limitation period which ended on 31.03.2013. The CIT(A) concluded that the Assessing Officer (AO) failed to establish the assessee's failure to disclose fully and truly all material facts necessary for the assessment. The Tribunal upheld this finding, noting that the reassessment proceedings were invalid as they were initiated beyond the statutory period without establishing the requisite failure on the part of the assessee.

2. Requirement of New Material for Reopening Assessment:
The CIT(A) found that the AO did not bring any new material on record to justify the reopening of the assessment. The Tribunal agreed with this finding, emphasizing that the 'reason to believe' must be based on new material and not merely a reappraisal of existing facts. The Tribunal reiterated that the AO must have independent satisfaction from the examination of facts on record, not relying on 'borrowed satisfaction' from other sources. The Tribunal upheld the CIT(A)'s decision that the reassessment proceedings were invalid due to the absence of new material.

3. Necessity of Passing a Draft Assessment Order Under Section 144C:
The assessee argued that the final assessment order was invalid because the AO did not pass a draft assessment order as required under Section 144C. The Tribunal examined the mandatory nature of Section 144C, which requires the AO to first issue a draft assessment order to the assessee if there is any proposed variation in the income or loss returned. The Tribunal referred to several judicial precedents, including decisions from the Hon'ble Jurisdictional High Court and the Hon'ble Supreme Court, which held that the provisions of Section 144C are mandatory. The Tribunal concluded that the failure to issue a draft assessment order constituted a jurisdictional error, rendering the final assessment order null and void. The Tribunal also dismissed the Revenue's argument that Section 144C applies only to 'eligible assessees,' noting that any case involving transfer pricing risk parameters must be referred to the Transfer Pricing Officer (TPO) by the AO, as per CBDT Instruction No. 3/2016.

Conclusion:
The Tribunal upheld the CIT(A)'s order quashing the reassessment proceedings on the grounds of being beyond the statutory period and lacking new material. Additionally, the Tribunal found the final assessment order invalid due to the AO's failure to issue a draft assessment order under Section 144C, constituting a jurisdictional error. Consequently, the Tribunal dismissed the Revenue's appeal and sustained the relief provided to the assessee.

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