Draft assessment order requirement under section 144C was mandatory; omission vitiated the assessment and denied DRP remedy.

Where a remanded transfer pricing assessment fell within section 144C of the Income-tax Act, 1961, the Assessing Officer was required to issue a draft assessment order before passing the final order. The omission to do so deprived the assessee of the statutory right to approach the Dispute Resolution Panel, and the defect was held to vitiate the assessment proceedings. The tribunal treated the remand as fresh assessment proceedings, admitted the additional legal ground, and held that non-compliance with section 144C(1) was not a mere irregularity or curable procedural lapse. The assessments were therefore invalid.

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Issues: Whether the final assessment orders were vitiated for non-compliance with the procedure under section 144C of the Income-tax Act, 1961, in that no draft assessment order was issued after the matter was remanded for fresh adjudication.

Analysis: The additional ground raised a pure question of law arising from the record and was therefore admitted. The remand proceedings were treated as fresh assessment proceedings, and the Assessing Officer, after obtaining approval and making a fresh reference to the Transfer Pricing Officer, proceeded directly to pass final assessment orders. As the statutory procedure under section 144C(1) required issuance of a draft assessment order before passing the final order, the assessee was deprived of the statutory right to approach the Dispute Resolution Panel. Such non-compliance was held to vitiate the assessment proceedings and was not a mere irregularity or curable defect.

Conclusion: The assessments were invalid for breach of section 144C(1) of the Income-tax Act, 1961, and the additional ground was allowed.

Ratio Decidendi: Where, in a case covered by section 144C of the Income-tax Act, 1961, the Assessing Officer fails to issue a draft assessment order before passing the final assessment order, the assessment is vitiated because the omission deprives the assessee of a substantive statutory remedy and is not a curable procedural defect.

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