Assessment order quashed for failure to issue draft order, rendering final assessment unenforceable.

The tribunal quashed the assessment order dated 28.12.2018, deeming it null and void due to the Assessing Officer's failure to issue a draft assessment order as required by Section 144C. This procedural error was considered an incurable illegality, leading to the final assessment order being unenforceable. As a result, the appellant's appeal was successful, and the assessment order was overturned.

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Issues Involved:
1. Validity of the final assessment order without passing a draft assessment order.
2. Applicability of Section 292B to cure defects in the assessment order.
3. Transfer Pricing adjustments and related procedural errors.
4. Selection and rejection of comparable companies for Transfer Pricing.
5. Treatment of outstanding receivables as a separate international transaction.
6. Deductibility of education cess on income tax.

Detailed Analysis:

1. Validity of the Final Assessment Order Without Passing a Draft Assessment Order:
The primary issue concerns whether the final assessment order passed by the Deputy Commissioner of Income Tax without issuing a draft assessment order is valid. The appellant argued that as an 'eligible assessee' under Section 144C(15) of the Income Tax Act, the Assessing Officer (AO) was required to first pass a draft assessment order before issuing a final assessment order. The AO's failure to do so, accompanied by a notice of demand, rendered the assessment order null and void. The tribunal concurred, citing multiple precedents, including Zuari Cement Ltd. vs. ACIT, where similar procedural lapses led to the quashing of the assessment order. The tribunal concluded that the AO's order dated 28.12.2018, styled as a draft assessment order but accompanied by a demand notice, should be construed as a final assessment order and is thus void for non-compliance with Section 144C.

2. Applicability of Section 292B to Cure Defects in the Assessment Order:
The appellant contended that the defect in the assessment order could not be cured under Section 292B of the Act, which allows for rectification of minor errors. The tribunal supported this view, emphasizing that the procedural lapse of not issuing a draft assessment order is a substantive error, not a mere technicality. This stance aligns with the ruling in ACIT vs. Vijay Television (P) Ltd., where the court held that such a procedural failure is an incurable illegality that cannot be rectified by Section 292B.

3. Transfer Pricing Adjustments and Related Procedural Errors:
The appellant challenged the Transfer Pricing Officer's (TPO) adjustments, arguing that the TPO erred in invoking Section 92C(3) and rejecting the Transfer Pricing documentation. The tribunal noted that the AO had adopted the TPO's adjustments without issuing a draft assessment order, thus violating Section 144C. Consequently, the tribunal did not delve into the specifics of the TPO's adjustments, as the entire assessment order was quashed on procedural grounds.

4. Selection and Rejection of Comparable Companies for Transfer Pricing:
The appellant raised several grounds regarding the TPO's selection and rejection of comparable companies, arguing that the TPO applied arbitrary filters and failed to consider functionally comparable companies. However, the tribunal did not address these grounds in detail due to the overarching procedural issue that invalidated the assessment order.

5. Treatment of Outstanding Receivables as a Separate International Transaction:
The appellant disputed the TPO's treatment of outstanding receivables as a separate international transaction and the imposition of notional interest. This issue was also not specifically addressed by the tribunal, given the quashing of the assessment order on procedural grounds.

6. Deductibility of Education Cess on Income Tax:
The appellant contended that the liability of education cess on income tax should be allowed as a tax-deductible expense. This issue, like others related to the specifics of the assessment, was not adjudicated due to the procedural invalidity of the assessment order.

Conclusion:
The tribunal quashed the assessment order dated 28.12.2018, holding it null and void due to the AO's failure to issue a draft assessment order as mandated by Section 144C. The procedural lapse was deemed an incurable illegality, rendering the final assessment order unenforceable. Consequently, the appellant's appeal was allowed, and the assessment order was set aside.

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