TaxTMI 
TaxTMI 
2015 (10) TMI 2622
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....he appellant objects to the order under section 263 of the Income-tax Act, 1961 passed by the Commissioner of Income-tax - I, Thane ('ClT') dated 29 January 2014 for the aforesaid assessment year on the following among other grounds: 1. The order of the learned CIT is contrary to the provisions of law and facts of the case and without appreciation of the facts and circumstances of the case in their right perspective. 2. The learned CIT erred in invoking the provisions of section 263 and holding that the order dated 14 December 2011 passed by the Assessing Officer ('AO') was erroneous and prejudicial to the interest of the revenue. 3. The learned CIT erred in not appreciating the fact that the order of the AO is null and void and accordingly the question of initiating proceedings under section 263 does not arise. The learned CIT erred in holding that the order passed by the AO without following law cannot be called as void unless the said order is declared as null and void by a competent authority. 4. The learned CIT erred in setting aside the order passed by the AO under section 143(3) and directing the AO to pass a draft....
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....24.08.2009. The Assessing Officer made a reference under section 92CA of the Act to the Transfer Price Officer (TPO), in view of the international transaction entered into by the assessee with its associate enterprises. The TPO in the order passed under section 92CA(3) of the Act held that adjustment on account of arm's length price of international transaction was to be made to the extent of Rs. 5,70,49,840/-, vide order dated 17.10.2011. The Assessing Officer thereafter, completed the assessment under section 143(3) of the Act vide order dated 14.12.2011 and sum of Rs. 5.70 crores was added to the income of the assessee in view of the order passed under section 92CA(3) of the Act. The assessee filed an appeal against the said assessment order dated 14.12.2011 alleging that the order passed by the Assessing Officer was ultravirus, invalid, bad in law and was passed without appreciating the facts of the case. The assessee also raised the issue against the transfer pricing adjustment made under section 92CA of the Act. The assessee thereafter, filed additional grounds of appeal during the course of appellate proceedings, which is as under:- "1. Without prejudice to any ....
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....er the appeal filed, notice under section 263 of the Act had been issued, which was not justified. Further, reliance was placed upon the decision of Hon'ble Supreme Court in ACIT Vs. M/s. Zuari Cement Ltd. vide Special Leave Petition CC No.16694/2013, judgment dated 27.09.2013 for the proposition that since the assessment order passed by the Assessing Officer was without following the procedure, was null and void, such an order cannot be subject matter of revision under section 263 of the Act. Further, reliance was placed on the decision of Hon'ble Madhya Pradesh High Court in Johilla Coalfields Co. Ltd. Vs. CIT 39 ITR 137 (MP) and the decision of Indore Bench of Tribunal in Rajgarh Liquors Vs. CIT 89 ITD 84 (Indore - Trib). 8. The Commissioner was of the view that under section 263 of the Act, the Commissioner may call for or examine the record of any proceedings under the Act and if he considers that any order passed by the Assessing Officer was erroneous in so far as it was prejudicial to the interests of revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiries, as he deems necessary, pass such order thereon....
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....ome null and void has to be established. An order passed by the Assessing Officer without following law may be a void order but such an order cannot be called as void unless the order of Assessing Officer is declared null and void by a competent authority, was the view of the Commissioner. Till the order is declared as null and void, the Commissioner had jurisdiction under section 263 of the Act to revise such an order where he is satisfied that the order passed by the Assessing Officer was erroneous in so far as it was prejudicial to the interests of revenue. Reliance was placed on the ratio laid down by the Hon'ble Madras High Court in V. Raju Vs. CIT (1984) 147 ITR 212 (Mad) wherein, it was held that any order passed by an authority without following principles of natural justice was null and void, even though it had been passed well within its jurisdiction. As per the Commissioner, the order passed in violation of principles of natural justice or without following the law was voidable order. However, such an order would become void only when it is declared as null and void by the competent authority and until and unless such an order passed by the Assessing Officer is declared ....
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....ble. Consequently, it was pointed out that the demand notice issued pursuant to the order passed under section 143(3) of the Act without resorting to the provisions of section 144C of the Act, was set-aside by the Hon'ble High Court of Andhra Pradesh. The learned Authorized Representative for the assessee further pointed out that upon hearing the Counsel, the Hon'ble apex court dismissed the Special Leave Petition in CC No.16694/2013 vide judgment dated 27.09.2013. The learned Authorized Representative for the assessee further placed reliance on the ratio laid down by the Hon'ble Madras High Court in Vijay Television Pvt. Ltd. Vs. DRP & Others in WP Nos1526 and 1527/2014 and M.P Nos.1 and 1/2014. Further contention of the learned Authorized Representative for the assessee was that the order passed by the Assessing Officer without resorting to the mandatory provisions of law was void ab-initio and unenforceable and since it was invalid, the Commissioner could not exercise jurisdiction under section 263 of the Act. The learned Authorized Representative for the assessee further claimed that additional grounds of appeal were raised before the CIT(A) on 10.04.2013 and even otherwise, th....
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....ns of section 144C of the Act was akin to non-compliance with the principles of natural justice, which in turn proves that there was an error in the order passed by the Assessing Officer and completing the assessment without complying with the provisions tantamount to order being erroneous and prejudicial to the interest of revenue. It was pointed out by the learned Departmental Representative for the Revenue that facts before the Panani Bench of Tribunal in Gigabyte Technology (India) (P.) Ltd. Vs. CIT (supra) were similar to the facts of the present case before us. The learned Departmental Representative for the Revenue further pointed out that the said Bench had also considered the ratio laid down in M/s. Zuari Cements Ltd. Vs. ACIT (supra) and also Vijay Television Pvt. Ltd. Vs. DRP & Others (supra) with regard to the order being prejudicial. 14. In rejoinder, the learned Authorized Representative for the assessee pointed out that the Hon'ble Supreme Court lays down the law of land, which has been laid down in ACIT Vs. M/s. Zuari Cements Ltd. (supra), which in turn has not been considered by the Tribunal in Gigabyte Technology (India) (P.) Ltd. Vs. CIT (supra). Another disti....
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....om AEs in the medical imaging segment. The Assessing Officer on receipt of such order from the TPO completed the regular assessment under section 143(3) of the Act without resorting to the provisions of section 144C of the Act. The assessee filed an appeal against the order of Assessing Officer, which was pending. The assessee raised the issue of assessment being void in the said appeal. 17. The issue arising in the present appeal before us is whether such an assessment order passed by the Assessing Officer being void ab-initio, can be held to be erroneous order which is prejudicial to the interest of revenue and whether the Commissioner can exercise the jurisdiction under section 263 of the Act on such an order. The Commissioner on the examination of the record noted that the assessment order passed by the Assessing Officer without issuing draft order of the proposed addition to the assessee as is required under section 144C of the Act, had passed an order under section 143(3) of the Act making addition of Rs. 5,70,49,840/-. The said order passed by the Assessing Officer, as per the Commissioner was not in conformity with law and was held to be erroneous and prejudicial to the ....
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....ything to the contrary contained in section 153 or 153B of the Act, as per sub-section (13) to section 144C of the Act. In view of the provisions of section 144C of the Act impliedly where the TPO proposes any variation in the income or loss returned by the assessee, which is prejudicial to the interest of assessee, the Assessing Officer shall in the first instance forward the draft of the proposed assessment order to the assessee and thereafter, if no objections are received and/or the assessee files his acceptance to the variation to the Assessing Officer, then the Assessing Officer is empowered to complete the assessment within one month from the end of the month thereof. In case, the assessee files his objection before the DRP and where the said Panel issues directions as it thinks fit, then the Assessing Officer on receipt of such directions shall complete the assessment in conformity with such directions. In view of the said provisions of the Act, the compliance to section 144C of the Act is mandatory in all such cases, where the TPO proposes variation in the income or loss returned, which is prejudicial to the interests of assessee. Only after complying with the conditions l....
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....erefore, the final order as well as the the corrigendum issued by the second respondent are vitiated by errors apparent on the face of the record and they are legally not sustainable." 20. The Hon'ble High Court of Andhra Pradesh at Hyderabad in M/s. Zuari Cements Ltd. Vs. ACIT (supra) on similar issue where after receipt of the order passed by the TPO under section 92CA(3) of the Act, the Assessing Officer had passed the assessment order under section 143(3) of the Act raising a demand of Rs. 27,40,71,913/- without giving an opportunity to the assessee under section 144C of the Act, observed that where the Assessing Officer proposes to make on or after 01.10.2009, any variation in the income or loss returned by the assessee, then notwithstanding to the contrary contained in the Act, he shall first pass the draft assessment order, forward the same to the assessee and after assessee files his objections, if any, the Assessing Officer shall complete the assessment within one month, in view of the provisions of section 144C of the Act. It was further observed that the assessee is also given an option to file an objection before the DRP, in which the latter can issue directions for ....
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....he conditions laid down in section 144C of the Act is null and void and unenforceable in law. 22. Further, the Delhi Bench of Tribunal in the case of Capsugel Healthcare Limited in ITA No.1356/Del/2012, vide order dated 30.09.2014 have upheld the similar view that "Failure to pass draft assessment order after TPO's order renders proceedings void. Show cause notice cannot be quoted with draft assessment order". 23. The learned Departmental Representative for the Revenue and also the Commissioner had placed reliance on the ratio laid down in Simran Farms Ltd. Vs. CIT (supra). The Hon'ble Madhya Pradesh High Court while deciding the issue of invoking jurisdiction under section 263 of the Act noted that according to Commissioner, the Assessing Officer had committed an error of law in granting benefit of deduction under section 80HHA and 80I of the Act, where the assessee was not engaged in any industrial activity as held by the Hon'ble Supreme Court in CIT Vs. Venkateshwara Hatcheries Pvt. Ltd. (1999) 237 ITR 174 (SC). The Hon'ble High Court upheld the exercise of jurisdiction by the Commissioner under section 263 of the Act, in view of the law having been settled by the decision....
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....elf, order passed by the Commissioner under section 263 of the Act without giving an opportunity of hearing to the assessee suffers from only procedural irregularities and could not be void ab-initio and non-est in law. The Hon'ble High Court further held that it is well established that any order passed by an authority without following the principles of natural justice is null and void and even though it has been passed well within its jurisdiction. However, though not giving due opportunity of being heard to any party before the order is passed against him by way of statutory authority can be taken to violation of principles of natural justice. The Courts, however, further held that violation of principles of natural justice, which is procedural violation and the order of the Tribunal setting aside the order of Commissioner with direction to pass a fresh order and after giving the assessee due opportunity of hearing, was approved by the Hon'ble High Court. 26. The plea raised by the learned Departmental Representative for the Revenue and the Commissioner in this regard was that where the order has been passed in violation of principles of natural justice or without following ....
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....as pending. Further, where the order has been passed by the Assessing Officer, which is both null and void and is not sustainable in law, then in such circumstances, we find no merit in the exercise of jurisdiction by the Commissioner since for such exercise a valid order should be in existence and when no such valid order is in existence, the Revenue authorities cannot take the shelter of initiating the proceedings under section 263 of the Act in order to correct null and void order passed by the Assessing Officer. We find no merit in the exercise of jurisdiction by the Commissioner under section 263 of the Act. 28. Another issue raised by the learned Authorized Representative for the assessee was that the order passed by the Assessing Officer cannot be said to be prejudicial to the interest of Revenue since in the original order, the adjustment has been made by the Assessing Officer on account of order passed by the TPO under section 92CA(3) of the Act proposing an adjustment of Rs. 5.70 crores. In case, the order is set-aside as per the directions of Commissioner under section 263 of the Act, thereafter also, the same adjustment proposed by the TPO is to be made after followi....
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....bunal does not have jurisdiction to examine and hold that the assessment order passed by the Assessing Officer in violation of provisions of section 144C(2) of the Act was illegal and void. The jurisdiction of the Tribunal under section 254 of the Act is limited to the grounds of appeal before the Tribunal, such was of the view taken by Panaji Bench of Tribunal. However, as pointed out and as referred to by us in the paras hereinabove, the facts of the present case are at variance, wherein the assessee had agitated the issue before the CIT(A) and had raised additional ground of appeal on 10.04.2013 i.e. even before the issue of show cause notice by the Commissioner on 17.12.2013. In such facts and circumstances, we find no merit and for the reasons stated above and in view of the ratio laid down by the Apex Court in ACIT Vs. M/s. Zuari Cement Ltd. (supra) and also by the Hon'ble Madras High Court in Vijay Television Pvt. Ltd. Vs. DRP & Others (supra), we find no merit in the exercise of jurisdiction by the Commissioner under section 263 of the Act against the assessment order which was passed by the Assessing Officer without following procedure and conditions laid down in section 1....