Assessment orders for 2009-10 & 2010-11 quashed by Tribunal due to jurisdictional errors under Section 144C.

The Tribunal quashed the assessment orders for assessment years 2009-10 and 2010-11, holding them void ab initio due to jurisdictional errors under Section 144C. The orders were set aside, and the appeals were allowed, leading to the dismissal of other grounds raised by the assessee as academic and infructuous.

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Issues Involved:
1. Jurisdictional error under Section 144C(1) of the Income-Tax Act, 1961.
2. Applicability of Section 144C to assessment years prior to 2010-11.
3. Validity of the assessment order under Section 153A of the Act.

Detailed Analysis:

1. Jurisdictional Error under Section 144C(1) of the Income-Tax Act, 1961:
The primary issue raised by the assessee was that the assessment order dated March 30, 2014, issued by the Assessing Officer (AO) was void ab initio as it violated Section 144C(1) of the Income-Tax Act, 1961. The assessee argued that being an "eligible assessee" under Section 144C(15)(b), the AO should have proposed a draft assessment order as mandated by Section 144C(1) before making any variation to the income returned by the assessee. Instead, the AO directly passed a final assessment order under Section 153A, which was claimed to be without jurisdiction and hence null and void.

2. Applicability of Section 144C to Assessment Years Prior to 2010-11:
The assessee contended that Section 144C, introduced by Finance (No.2) Act, 2009 with retrospective effect from 01.04.2009, should apply to any assessment order proposing variations after 01.10.2009, irrespective of the assessment year. This interpretation was supported by the Hon'ble Andhra Pradesh High Court in Zuari Cement Ltd. vs. ACIT and affirmed by the Supreme Court. The Revenue, however, argued based on CBDT Circular No. 5/2010 that Section 144C applied only from assessment year 2010-11 onwards. This was countered by Circular No. 9/2013, which clarified that Section 144C applies to any order proposing variations after 01.10.2009, irrespective of the assessment year.

3. Validity of the Assessment Order under Section 153A of the Act:
The Tribunal noted that the AO made a variation to the income returned by the assessee based on the Transfer Pricing Officer's (TPO) adjustment, which qualifies the assessee as an "eligible assessee" under Section 144C(15)(b)(i). Since the variation was made after 01.10.2009, the AO was required to follow the procedure under Section 144C(1) by issuing a draft assessment order. The Tribunal emphasized that Section 144C overrides other provisions and mandates this procedure. The AO's failure to issue a draft assessment order and directly passing a final order under Section 153A was deemed a gross jurisdictional error, rendering the assessment order void ab initio.

Conclusion:
The Tribunal quashed the assessment orders for both assessment years 2009-10 and 2010-11, holding them to be without jurisdiction and void ab initio due to non-compliance with Section 144C. The Tribunal also set aside the orders of the Commissioner of Income-Tax (Appeals) and dismissed all other grounds raised by the assessee as academic and infructuous.

Order:
The appeals were allowed, and the assessment orders dated 30.03.2014 passed under Section 153A were quashed. The Tribunal's decision was pronounced in the open court on 30th August, 2022.

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