TaxTMI 
TaxTMI 
TaxTMI 
2020 (10) TMI 76
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....heard at length. Soft copies of the case records carefully perused and with the assistance of the ld. Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules and have also perused the judicial decisions relied upon by both the sides. 5. Briefly stated, the facts of the case are that the appellant company is engaged in the provision of software development services, provision of professional services, provision of maintenance services, and provision of sales and post sales support services to its Associated Enterprises [AE] and third parties. In order to render services to its customers, the appellant has availed certain support and management services from its AEs during the year. 6. The return of income was filed declaring total income of Rs. 29.29 crores. The return was selected for scrutiny assessment and accordingly, statutory notices were issued and served upon the assessee. The matter was referred to the TPO who proposed TP adjustment of Rs. 16.99 crores to the income of the appellant by recomputing ALP for provision of software development services, provision of sales and post sales support serv....
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....r Ray Vs. CIT 191 ITR 634. The relevant findings of Hon'ble High Court read as under: "'Assessment' is one integrated process involving not only the assessment of the total income but also the determination of the tax. The latter is as crucial as the former. The Income tax Officer has to determine, by an order in writing, not only the total income but also the net sum which will be payable by the assessee for the assessment year in question and the demand notice has to be issued under section 156 of the Incometax Act, 1961, in consequence of such an order. The Of the tax. The latter is as crucial as the former. The Income tax Officer has to determine, by an order in writing, not only the total income but also the net sum which will be payable by the assessee for the assessment year in question and the demand notice has to be issued under section 156 of the Incometax Act, 1961, in consequence of such an order. The statute does not, Page No : 55 however, require that both the computations (i.e., of the total income as well as of the sum payable) should be done on the same sheet of paper, the sheet that is superscribed 'assessment order'. It does not prescribe any fo....
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....tep was taken by him after the prescribed period was over. The Tribunal was, therefore, right in holding that the assessment in this respect was time-barred. Page No : 56 We, therefore, answer the question in the affirmative, i.e., against the Revenue and in favour of the assessee. No order as to costs" 19. Through his written submissions dated 07.08.2020, the ld. DR strongly stated that there should be no confusion in relation to the order dated 27.12.2019 in as much as it was a draft of proposed order of assessment. The ld. DR further stated that notice of demand mentions proposed\draft notice of demand and referring to the communication with the DCIT, Circle 3(1), Gurgaon, the ld. DR pointed out that even the Assessing Officer has mentioned that no entry has been made in the Demand and Collection Register and order was not uploaded on ITD. 20. Referring to the decision of the Hon'ble High Court of Gujarat in the case of Purshottam Das [supra], the ld. DR stated that the same has to be considered in the light of the decision of the Hon'ble Supreme Court in the case of Sun Engineering Works Pvt Ltd 198 ITR 297 wherein the Hon'ble Supreme Court has held as under: ....
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....3) to section 144C of the Act mentioned elsewhere. 24. Whether by by-passing mandatory provisions of the Act can assessment survive? The answer has been given by the Hon'ble Supreme Court in the case of Dipak Babaria 3SCC 502 wherein theHon'ble Supreme Court has held as under: "If the law requires that a particular thing should be done in a particular manner, it must be done in that way and none other. State cannot ignore the policy intent and procedure contemplated by the statute. 25. In light of the above ratio laid down by the Hon'ble Supreme Court, we are of the considered opinion that by issuing the demand notice on 27.12.2018 itself the Assessing Officer has by passed all the mandatory sub-sections of section 144C of the Act. 26. The ld. DR has placed reliance on the decision of the Coordinate Bench in the case of Price Water House Company 117 Taxmann.com 276 in ITA No. 2298/KOL/2016. It is the say of the ld. DR that under similar circumstances, the Tribunal has upheld the assessment order. The ld. DR vehemently stated that by participating in subsequent proceedings, the assessee was well aware that the order dated 27.12.2018 is merely a draft assessment order and n....
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....rner International Pvt Ltd 398 ITR 177 and JCB India Ltd WPC 3399/2016. 33. The ld. DR has also drawn strong support from the provisions of section 292B of the Act stating that the subsequent participation of the assessee would debar the assessee to raise this issue before the appellate authority. The answer to this has been given by the Hon'ble High Court of Delhi in the case of JCB India Ltd [supra]. The relevant findings read as under: "14. The short question that arises for consideration is whether, after the remand proceedings, the AO could have, without issuing a draft assessment order under Section 144 C of the Act, straightway issued the final assessment order. 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 ....
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....t such an order. This has been explained by this Court in its decision dated 17th July 2015 passed in ITA No. 275/2015 (Pr. Commissioner of Income Tax, Delhi-2, New Delhi v. Citi Financial Consumer Finance India Pvt. Ltd.) where it was held: "Section 292B of the Act cannot be read to confer jurisdiction on the AO where none exists. The said Section only protects return of income, assessment, notice, summons or other proceedings from 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 theAssessee 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 ....
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....dia) (supra), the Court negated the plea that noncompliance with the terms of Section 144C of the Act is merely an 'irregularity'. The Gujarat High Court held that it was of 'great importance and mandatory'. The following passages of the said decision of Gujarat High Court are relevant for the present purposes: "6. These statutory provisions make it abundantly clear that the procedure laid down under Section 144C of the Act is of great importance and is mandatory. Before the Assessing Officer can make variations in the returned income of an eligible 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 direct....
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....o adhere to the mandatory requirement of issuing a draft assessment order under Section 144C (1) of the Act would, at best, be a curable defect. According to him the matter must be restored to the AO to pass a draft assessment order and for the Petitioner, thereafter, to pursue the matter before the DRP. The Court is unable to accept the above submission. The legal position as explained in the above decisions in unambiguous. The failure by the AO to adhere to the mandatory requirement of Section 144C (1) of the Act and first pass a draft assessment order would result in invalidation of the final assessment order and the consequent demand notices and penalty proceedings." 25. For all of the aforementioned reasons, the Court finds no difficulty in holding that the impugned final assessment orders dated 30th March 2016 passed by the AO for AYs 2006-07, 2007-08 and 2008 -09 are without jurisdiction on account of the failure, by the AO, to first pass a draft assessment order and thereafter, subject to the objections filed before the DRP and the orders of the DRP, to pass the final assessment order. The Court also sets aside the orders of the TPO dated 30th March 2016 issued pursuant to ....