Assessment order under section 153C quashed for foreign company due to missing mandatory section 144C(1) draft order

ITAT Visakhapatnam quashed an assessment order passed under section 153C against a foreign company, ruling it null and void. The tribunal held that the Assessing Officer lacked jurisdiction as no draft assessment order was issued as mandatorily required under section 144C(1) for foreign companies. Following consistency principle and its own precedent for assessment year 2018-19, the tribunal concluded the assessment violated mandatory provisions, making it unsustainable in law. The appeal was decided in favor of the assessee.

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Issues Involved:
1. Condonation of delay in filing the appeals.
2. Validity of the final assessment order passed without issuing a draft assessment order as mandated under section 144C of the Income Tax Act, 1961.

Summary:

Condonation of Delay:

The appeals were filed by the assessee with a delay of 29 days. The delay was attributed to the appellant being unaware of the receipt of the order due to the non-receipt of an SMS notification. The Chartered Accountant obtained the physical copy of the appellate order on 31/7/2023. The Managing Director's absence abroad further delayed the filing. The Tribunal found the reasons to constitute 'reasonable and sufficient cause' and condoned the delay, allowing the appeals to be adjudicated on merits.

Validity of Final Assessment Order Without Draft Assessment Order:

The assessee, a foreign company, argued that the final assessment order was invalid as it was passed without issuing a draft assessment order, violating section 144C of the Act. The Tribunal referenced its own decision in ITA No. 222/Viz/2023 (AY 2018-19) and various High Court judgments, including the Hon'ble Andhra Pradesh High Court in M/s. Zuari Cement Ltd. vs. ACIT, which mandated that the Assessing Officer must pass a draft assessment order for eligible assessees, including foreign companies. Failure to do so renders the final assessment order null and void. The Tribunal quashed the final assessment order for AY 2013-14 and similarly disposed of the appeals for AYs 2014-15, 2015-16, 2017-18, 2019-20, and 2020-21, deeming the original grounds of appeal on merits as infructuous.

Conclusion:

The appeals for all the assessment years involved were allowed, and the final assessment orders were quashed due to the non-issuance of draft assessment orders, rendering them null and void.

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