Draft assessment order is mandatory after remand in transfer pricing proceedings before final assessment can be completed.

Where issues are remanded to the Assessing Officer or Transfer Pricing Officer in proceedings under section 144C, the draft assessment order mechanism remains mandatory before final assessment. The assessee must be given the statutory opportunity to contest the draft order through the Dispute Resolution Panel before a final order is passed. An assessment made directly after remand, without first issuing a draft assessment order, is procedurally vulnerable and unsustainable. The distinction between remand only to the Dispute Resolution Panel and remand involving the Assessing Officer or Transfer Pricing Officer did not assist the Revenue on the facts noted.

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Issues: (i) Whether, after remand of some issues by the Tribunal to the Assessing Officer and Transfer Pricing Officer, the Assessing Officer was required to first issue a draft assessment order under section 144C(1) of the Income-tax Act before passing the final order.

Analysis: The dispute concerned an assessment order passed directly after implementation of directions from the Tribunal, the Transfer Pricing Officer and the Dispute Resolution Panel, without a draft order being issued to the assessee. It was held that where issues are restored to the Assessing Officer or Transfer Pricing Officer, the statutory scheme under section 144C(1) requires a draft assessment order at the initial stage so that the assessee may avail the prescribed mechanism before the Dispute Resolution Panel. The omission to follow that procedure renders the assessment vulnerable. The distinction noted for matters restored only to the Dispute Resolution Panel did not assist the Revenue on the facts, because the remand in the present case included the Assessing Officer and Transfer Pricing Officer as well.

Conclusion: The Assessing Officer was obliged to issue a draft assessment order, and the final assessment order passed without doing so was unsustainable and had to be set aside.

Ratio Decidendi: When issues are remanded to the Assessing Officer or Transfer Pricing Officer in proceedings governed by section 144C of the Income-tax Act, the draft assessment order mechanism is mandatory before final assessment.

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