2026 (4) TMI 101 - AT - Income Tax

Draft assessment order requirement under section 144C is mandatory; omission made the final assessment void.

Section 144C(1) requires prior issuance of a draft assessment order to an eligible assessee before finalising the assessment. Where the assessee falls ... Validity of assessment order passed u/s 144C(1) - Mandatory draft assessment procedure for eligible assessee - Void assessment order - HELD THAT: - The Tribunal admitted the additional ground as a pure legal issue going to the root of the assessment. It found that, despite a transfer pricing order having been passed, the AO had proceeded directly to the final assessment order and the absence of a draft assessment order was not disputed by the Revenue. Similar view has been taken in the case of DCIT Vs. Control Risks India Pvt. Ltd. [2017 (7) TMI 1077 - DELHI HIGH COURT] and SLP filed by the revenue was dismissed by the Hon’ble Supreme Court [2018 (7) TMI 892 - SC ORDER] Tribunal held that compliance with the draft assessment requirement is mandatory for an eligible assessee, and failure to follow that procedure vitiates the final assessment order itself. [Paras 10, 11] Final Conclusion: Tribunal quashed the assessment for A.Y.2011-12 on the ground that no draft assessment order had been issued before passing the final assessment order in the case of an eligible assessee. Consequently, the Revenue's appeal and the assessee's cross-objection were dismissed as infructuous. Issues: Whether the final assessment order was invalid and liable to be quashed for want of a draft assessment order under section 144C(1) of the Income-tax Act, 1961.Analysis: The assessee was an eligible assessee within the meaning of section 144C(15), and the assessment was completed without first issuing a draft assessment order. The absence of the draft assessment order was not disputed. The mandatory character of section 144C(1) required prior issuance of a draft assessment order before finalisation, and failure to follow that procedure constituted a jurisdictional defect. The defect could not be cured by section 292B. Accordingly, the final assessment order could not be sustained.Conclusion: The final assessment order was held to be without jurisdiction, null and void, and was quashed. The additional ground was allowed.