TaxTMI 
TaxTMI 
2018 (3) TMI 1578
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....icer (Ld. AO), erred in issuing notice of demand under section 156 and notice under section 274 read with section 271(1)(c) of the Act along with the draft assessment order and hence, since the procedure laid down in section 144C was not followed by the learned AO, the assessment order issued be held invalid in law. 4. The plea of learned Authorized Representative for the assessee before us was that the additional grounds of appeal goes to the root of the issue and the same does not require any investigation of facts and is purely legal issue, hence the additional grounds of appeal be admitted and decide first. 5. We have gone through the additional grounds of appeal raised by the assessee, by which the assessee has raised legal issue and we proceed to decide the additional grounds of appeal first before going into merits of additions made in the hands of assessee. 6. The learned Authorized Representative for the assessee pointed out that the Assessing Officer has erred in completing proceedings under section 143(3) r.w.s. 144C of the Act. He pointed out that reference was made to the Transfer Pricing Officer (TPO) under section 92CA(1) of the Act and the TPO passed the order u....
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....the case along with issue of demand notice is correct start of proceedings against the assessee. The requirement of the Act is that in the draft assessment order proposed, additions are to be made and show cause notice is to be issued to the assessee either accepting the same or file objections before the DRP. However, in the facts of the present case, the Assessing Officer though while concluding draft assessment order calls it to be draft order and also states that the assessee shall within 30 days of receipt of this order, file acceptance of the variation or file objections with the DRP, however, he directs the issue of notice under section 271(1)(c) of the Act in the said order itself. Our attention has been drawn to the demand notice issued and penalty notice issued. 9. We find similar issue arose before Tribunal in the case of DCIT Vs. M/s. Rehau Polymers Pvt. Ltd. in ITA No.566/PUN/2015, relating to assessment year 2010-11 with CO No.27/PUN/2017, order dated 14.06.2017, wherein it was held as under:- "10. We have heard the rival contentions and perused the record. The issue which arises in the present appeal is in relation to the draft assessment order passed by the Asses....
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....ed the said order. The Assessing Officer on receipt of said order passed order under section 143(3) r.w.s. 92C(4) and 144C of the Act. The said order of Assessing Officer was forwarded to the assessee along with letter dated 28.02.2014, wherein the Assessing Officer categorically said that the draft assessment order was being forwarded for necessary action at the end of assessee. It was clearly mentioned in the said letter that on receipt of draft order, the assessee may within 30 days of the receipt of draft order either file acceptance of variation as proposed in the order or file objections to the variation to the DRP or to the undersigned. However, the Assessing Officer also issued demand notice under section 156 of the Act dated 28.02.2014 and also issued notice under section 274 r.w.s. 271 of the Act. The assessee on understanding that it was draft assessment order filed objections before the DRP on 07.04.2014 i.e. within the time allowed under the Statute. However, the said objections of assessee were not considered by the DRP and the same were rejected on the surmise that the order passed by the Assessing Officer was final assessment order since the Assessing Officer had al....
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....ll in conformity with the same, complete the assessment without providing any further opportunity of being hearing to the assessee within one month from the end of the month in which such direction is received, notwithstanding anything 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, t....
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....nd was also made for payment of the amount and such demand has not been withdrawn by the second respondent even after issuing the corrigendum. Even as per the website of the department, the demand made to the petitioner company continues till date and therefore, 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." 9. The similar issue had arisen before the Pune Bench of Tribunal in Agfa India Pvt. Ltd. Vs. ACIT in ITA Nos.341/PN/2014 and 1072/PN/2014, relating to assessment year 2008-09, order dated 28.10.2015 and reference was made to the decision of the Hon'ble High Court of Andhra Pradesh at Hyderabad in M/s. Zuari Cements Ltd. Vs. ACIT in WP No.5557/2012, vide judgment dated 21.02.2013 and the 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 and it was held as under:- "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 ....
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....gned order of assessment dt. 23.12.2011 passed by the respondent is contrary to the mandatory provisions of S.144C of the Act and is passed in violation thereof. Therefore, it is declared as one without jurisdiction, null and void and unenforceable. Consequently, the demand notice dated 23.12.2011 issued by the respondent is set aside." 21. The Hon'ble Supreme Court (supra) in ACIT Vs. Zuari Cements Ltd. (supra) had dismissed the Special Leave Petition filed by the Department upon hearing the Counsel. The learned Authorized Representative for the assessee contended that since the said Special Leave Petition was dismissed after hearing the Counsel and the view taken by the Hon'ble High Court of Andhra Pradesh at Hyderabad has been approved by the Apex Court and any order contradicting the 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 asse....
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....orders passed on rectification application as well as on penalty are also quashed and set aside being unsustainable." 11. The learned Authorized Representative for the assessee has placed reliance on the ratio laid down by the International Air Transport Association Vs. DCIT (supra) and the Hon'ble Madras High Court in the case of Vijay Television Writ Petition Nos.1526 and 1527 of 2014 & M.P. Nos.1 and 1 of 2014 vis-à-vis. Whereas the learned Departmental Representative for the Revenue strongly opposed and pointed out that the Assessing Officer has sent the draft assessment order wherein the letter clearly says that it is draft assessment order. He pointed out that the DRP had mis-interpreted and the issue may be sent back to the file of DRP. He also pointed out that the facts before the Hon'ble Bombay High Court were different and the said proposition is not applicable. We find no merit in the plea of learned Departmental Representative for the Revenue. The Assessing Officer passed the order on 28.02.2014 along with which it also issued the demand notice and show cause notice for levy of penalty. In other words, the Assessing Officer has crystallized the demand in the c....
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.... same, but in actual fact, the order passed by the Assessing Officer was complete assessment order which is not envisaged under section 143(3) r.w.s. 144C of the Act. Accordingly, we hold that draft assessment order passed in the case is invalid in law." 10. Further, similar issue has been decided by the Tribunal in assessee's own case in ITA No.467/PUN/2015 and Cross Appeal in ITA No.564/PUN/2015 along with CO No.24/PUN/2017, relating to assessment year 2010-11, order dated 25.01.2018. 11. We further find that the Hon'ble High Court of Delhi in JCB India Ltd. Vs. DCIT (2017) 85 taxmann.com 155 (Del) has laid down that even in remand proceedings the Assessing Officer cannot straightaway pass final assessment order without issuing draft assessment order under section 144C of the Act. The Hon'ble High Court did not accept the stand of Revenue that it was an irregularity which was curable under section 292B of the Act. Relying on earlier decision of the said High Court, it was observed that section 292B of the Act could not save an order not passed in accordance with the provisions of the Act, where the issue involved was not about the mistake in the said order but the power of Ass....