TaxTMI 
TaxTMI 
TaxTMI 
2017 (10) TMI 684
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....of the controversy at hand are : in compliance to the directions issued by ITAT vide letter F.No.DCIT/Cir 12 (1)/2013-14/714 dated 25.11.2013 AO/DCIT written to DRP-1, New Delhi for issuance of directions regarding the issue remitted back by the Tribunal. However, ITO/DRP-I written back that the matter is restored back to the AO and not to the DRP. Again, a letter F.No.DCIT/ Cir 12 (1)/2013-14/724 dated 03.03.2014 was written to DRP-1 for issuance of directions for ITAT order. However, ld. DRP has sent the copy of the previous reply issued by it. Consequently, AO passed assessment order without any direction issued by the DRP. AO in compliance to the order passed by the Tribunal computed the income of the assessee company as under :- "Subject to the above, the total income of the assessee is computed at Rs.5,26,41,184/- as under : Amount in Rupee Income as per return of income Nil Add : i) Excess claim of depreciation (As per para 3 above) 1,14,36,265 ii) Addition under transfer pricing adjustment as discussed in para 4.3 above 4,12,04,919 TOTAL TAXABLE INOCME 5,26,41,184 3. Aggrieved with the order passed by the AO, the assessee company come up befo....
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.... were rejected for want of limitation, which was not the case for the assessment year 2006-07. Be that as it may, the fact remains that the submissions of the assessee with regard to this issue were not gone into, much less adjudicated upon. Being seized of the matter by way of ground No.2 raised by the assessee, we deem it appropriate to remit this matter also to the file of the AO to be decided afresh in accordance with law on providing due opportunity of hearing to the assessee. The AO shall, no doubt, keep in consideration, besides facts for the year under consideration, the decision to be arrived at on both the issues, for the assessment year 2006-07." 8. No doubt, the Tribunal vide its order dated 15.03.2012 passed in the first round of litigation in this case remitted the matter back to the file of the AO to decide afresh but in accordance with the law by providing opportunity of being heard to the assessee. 9. In the backdrop of the aforesaid facts and circumstances of the case, the sole question for determination in this case is :- "as to whether the impugned order passed by AO u/s 254/143 (3) read with section 144C is not sustainable being not bad in law only but void....
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.... DCIT - WP (C) No.3399/2016 order dated 07.09.2017 wherein question arises for determination is, "Whether, after the remand proceedings, the AO could have, without issuing a draft assessment order under section 144C of the Act, straightway issued the final assessment order." 14. Hon'ble High Court determined the issue in favour of the assessee by returning following findings :- 15. Mr Syali, learned Senior Counsel for the Assessee, referred to the decision of this Court dated 17th May 2017 passed in W.P.(C) No.4260/2015(Turner International India Pvt. Ltd. v. Deputy Commissioner of Income Tax, Circle 25(2), New Delhi) to urge that the AO could not have passed the final assessment order without complying with the mandatory requirement under Section 144C of the Act whereby first a draft order had to be issued in respect of which an objection can be filed by the Assessee before the DRP. The failure to do so, according to Mr.Syali, was not a mere irregularity. He further referred to a decision of the Gujarat High Court dated 31st July 2017 in Tax Appeal No.542 of 2017 (Commissioner of Income Tax, Vadodara - 2 v. C- Sam (India) Pvt. Ltd.). 16. In response, Mr. Sanjay Jain, learne....
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.... any mistake in such return of income, assessment notices, summons or other proceedings, provided the same are in substance and in effect in conformity with the intent of purposes of the Act." 20. The Court further observed that Section 292B of the Act cannot save an order not passed in accordance with the provisions of the Act. As the Court explained, "the issue involved is not about a mistake in the said order but the power of the AO to pass the order." 21. In almost identical facts, in Turner International (supra), this Court held in favour of the Assessee on the ground that it was mandatory for the AO to have passed a draft assessment order under Section 144C of the Act prior to issuing the final assessment order. The following passages from said decision are relevant for the present purposes: "11. The question whether the final assessment order stands vitiated for failure to adhere to the mandatory requirements of first passing draft assessment order in terms of Section 144C(1) of the Act is no longer res intregra. There is a long series of decisions to which reference would be made presently. 12. In Zuari Cement Ltd. v. ACIT(decision dated 21st February, 2013 in WP(C)....
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....gible assessee, as noted, sub-section (1) of Section 144C lays down the procedure to be followed notwithstanding anything to the contrary contained in the Act. This non-obstante clause thus gives an overriding effect to the procedure 'notwithstanding anything to the contrary contained in the Act'. Sub-section (5) of Section 144C empowers the DRP to issue directions to the Assessing Officer to enable him to complete the assessment. Sub-section (10) of Section 144C makes, such directions binding on the Assessing Officer. As per Sub-Section 144C, the Assessing Officer is required to pass the order of assessment in terms of such directions without any further hearing being granted to the assessee. 7. The procedure laid down under Section 144C of the Act is thus of great importance. When an Assessing Officer proposes to make variations to the returned income declared by an eligible assesses he has to first pass a draft order, provide a copy thereof to the assessee and only thereupon the assessee could exercise his valuable right to raise objections before the DRP on any of the proposed variations. In addition to giving such opportunity to an assessee, decision of the DRP is ma....