Failure to serve draft assessment order under Income Tax Act renders final assessment unsustainable. Procedural compliance is crucial.

The Tribunal ruled in favor of the appellant, holding that the failure to serve the draft assessment order as required by section 144C of the Income Tax Act rendered the final assessment order unsustainable. As a critical procedural error, the failure to comply with this mandatory requirement invalidated the assessment. Consequently, the appellant's appeal was allowed, and the assessment order was quashed. The Tribunal emphasized the importance of procedural compliance in tax assessments and the repercussions of disregarding statutory obligations.

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Issues Involved:
Jurisdictional issue regarding the failure to serve draft assessment order to the appellant as required by section 144C of the Income Tax Act, 1961.

Detailed Analysis:

1. The appellant challenged the order of Ld. CIT(A)-22, Kolkata against the assessment order by DCIT, Circle-11(1), Kolkata under section 143(3)r.w.s. 144C(3) of the Income-tax Act, 1961. The appellant raised various grounds of appeal, including the arbitrary nature of lower authorities' orders and the failure to consider different methods for determining Arm's Length Price.

2. Additional grounds of appeal were submitted, emphasizing the failure of the Assessing Officer to forward a draft of the proposed assessment order to the appellant, as mandated by section 144C. The Tribunal admitted these additional grounds for consideration.

3. During the hearing, the appellant decided not to press the main grounds of appeal on merits but focused solely on the additional grounds related to the jurisdictional issue under section 144C. The appellant highlighted the importance of this section in cases involving Transfer Pricing Adjustments.

4. The Assessing Officer's failure to serve the draft assessment order was a critical procedural error. The appellant argued that this mandatory requirement could not be waived by the appellant during the assessment proceedings. The waiver given by the appellant did not absolve the Assessing Officer of the obligation to comply with section 144C.

5. The Tribunal agreed with the appellant's contention that the failure to pass the draft assessment order violated the provisions of section 144C. The Tribunal cited previous decisions emphasizing the necessity of passing the draft order before finalizing the assessment.

6. The Tribunal held that the failure to comply with the mandatory procedural requirements rendered the final assessment order unsustainable. The appellant's additional grounds were allowed, and the assessment order was quashed in favor of the appellant.

7. As the jurisdictional issue was decided in favor of the appellant, the Tribunal did not adjudicate on the merits of the case. The appellant's appeal was allowed, and the order was pronounced on 24th February 2023.

This detailed analysis showcases the significance of procedural compliance in tax assessments and the consequences of failing to adhere to statutory requirements, as exemplified in this judgment.

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