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2020 (12) TMI 1086
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....sessee, a wholly owned subsidiary of Headstrong Services LLC, USA, had filed its return of income declaring income of Rs. 30,64,480/- for the relevant assessment year. Thereafter, revised return of income was filed on 30thJanuary, 2009 that was processed under Section 143(1) of the Income Tax Act, 1961 (for short 'the Act') and subsequently, case of the respondent-assessee was selected for scrutiny assessment and notice under Section 143(2) of the Act was issued. 4. During scrutiny assessment, the Assessing Officer made a reference to the office of Transfer Pricing officer (TPO) in relation to the international transaction between the respondent-assessee and its Associated Enterprise (AE). Draft assessment order under Section 144C(1) of the Act was passed on 31st December, 2010 and the respondent-assessee filed objections before the Dispute Resolution Panel (DRP). Thereafter, assessment under Section 143(3)/144C of the Act was completed in pursuance to directions issued by the DRP, wherein addition was made on account of excess claim of deduction under Section 10A of the Act and transfer pricing adjustment made by the TPO. 5. Being aggrieved, the respondent-assessee filed an ....
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.... "92CA (1) Where any person, being the assessee, has entered into an international transaction in any previous year, and the Assessing Officer considers it necessary or expedient so to do, he may, with the previous approval of the Commissioner, refer the computation of the arms length price in relation to the said international transaction under Section 92C to the Transfer Pricing Officer. 11. From the above provisions it is crystal clear that the TPO after getting the reference from the AO is required to give an opportunity of being heard to the assessee who can furnish evidences including any information or document and after considering those the TPO shall by order in writing determine the arms length price in relation to the international transaction and send copy of his order to the AO as well as to the assessee. In this regard a specific provision has been made in sub section 3 of section 92CA of the Act which read as under: "92CA ........ (3) On the date specified in the notice under sub-section (2), or as soon thereafter as may be, after hearing such evidence as the assessee may produce, including any information or documents referred to ....
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....ry to be made by any income tax authority, and report the result of the same to it, the DRP may confirm, reduce or enhance the variation proposed in the draft order, however, it shall not set aside any proposed variation or issue any direction under sub section 5 of section 144C of the Act for further inquiry and passing of the assessment order. Every direction issued by the DRP shall be binding on the AO but no direction shall be issued unless an opportunity of being heard is given to the assessee. Thereafter the AO shall in conformity with the directions of the DRP complete the assessment order within one month from the end of the month in which such direction is received. However, in the instant case, the AO did not pass any draft order and also not asked the assessee to file the objection before the DRP, he framed the assessment on the basis of comment of the TPO to whom a reference was made by him vide letter dated 07.02.2014. The TPO also passed the order u/s 92CA(5) r.w.s 254 of the Act on 28.03.2014 and not u/s 92CA(3) of the Act. Therefore, it can be said that in the present case, the AO had not followed the procedure in accordance with law as was directed by the ITAT vide....
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....isposed of by a Co-ordinate Bench of this Tribunal vide order dated 30.09.2015 set aside the impugned order of the Ld. CIT (A) and held that the procedure contemplated under Section 144 of the Act was violated by the AO as such the assessment order dated 31.03.2014 framed by the AO was null & void ab initio. A copy of the said order is produced before us for perusal. Ld. DR does not dispute the fact of disposal of the appeal of the assessee by way of this order. 4. We have perused the order and operative portion of the order is as follows:- 14. "In view of the aforesaid discussion and the judicial pronouncement, we set aside the impugned order of the Ld. CIT(A)on this issue. In the present case, the procedure contemplated u/ s 144C of the Act is violated by the AO, therefore, we are of the confirmed view that the assessment vide order dated 31.03.2014 framed by the AO was null and void ab initio. Since we have decided the legal issue in favour of the assessee therefore, no separate findings are being given for the other issues raised by the assessee on merit." 5. In view of the annulment of the assessment and setting aside of the impugned order of the Ld.....
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....had to decide the matter in accordance with the elaborate procedure mentioned in Section 144C and not dehors it. SECTION 144C ENVISAGES A CHANGE OF FORUM AND IT LEADS TO COMPLETE CESSATION OF THE JURISDICTION OF THE ASSESSING OFFICER ON PASSING OF THE DRAFT ORDER. THEREAFTER THE ASSESSING OFFICER IS TO GIVE EFFECT TO EITHER THE DIRECTION OF THE DISPUTE RESOLUTION PANEL OR PASS AN ORDER ON ACCEPTANCE BY THE ASSESSEE. 16. This Court is of the opinion that it is essential to analyse Section 144C. The said Section reads as under:- "144C. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation which is prejudicial to the interest of such assessee. (2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order,- (a) file his acceptance of the variations to the Assessing Officer; or (b) file his objections, if an....
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....edings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee. (9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members. (10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer. (11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the revenue, respectively. (12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee. (13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 or section 153B, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of ....
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.... of the draft order. Thereafter the Assessing officer is to give effect to either the direction of the Dispute Resolution Panel or pass an order on acceptance by the Assessee. THE EXPRESSION 'IN THE FIRST INSTANCE' HAS BEEN USED IN SECTION 144C TO SIGNIFY THE FIRST STEP TO BE TAKEN BY THE ASSESSING OFFICER IN A SERIES OF ACTS CONTEMPLATED BY THE SAID SECTION. TO ACCEPT THE APPELLANT'S ARGUMENT WOULD BE TO PERMIT THE ASSESSING OFFICER TO DECIDE THE OBJECTIONS FILED BY THE ASSESSEE - WHICH POWER HAS BEEN SPECIFICALLY DENIED BY THE STATUTE. 19. The expression 'in the first instance' has been used in Section 144C to signify the first step to be taken by the Assessing Officer in a series of acts contemplated by the said Section while dealing with the case of an eligible assessee. This Court is further of the view that if the Assessing Officer under Section 144C can prepare a draft assessment order only, then by virtue of a remand order which directs the Assessing Officer to decide the matter de novo, the Assessing Officer cannot get the power to pass an assessment order, when there is an objection by the Assessee like in the present case, without reference of the Dispute Resolutio....
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....or 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) No.5557/2012), the Division Bench (DB) of the Andhra Pradesh High Court categorically held that the failure to pass a draft assessment order under Section 144C (1) of the Act would result in rendering the final assessment order "without jurisdiction, null and void and unenforceable." In that case, the consequent demand notice was also set aside. The decision of the Andhra Pradesh High Court was affirmed by the Supreme Court by the dismissal of the Revenue's SLP (C) [CC No. 16694/2013] on 27th September, 2013. 13. In Vijay Television (P) Ltd. v. Dispute Resolution Panel [2014] 369 ITR 113 (Mad.), a similar question arose. There, the Revenue sought to rectify a mistake by issuing a corrigendum after the final assessment order was passed. Consequently, not only the final assessment order but also the corrigendum issued thereafter was challenged. Followin....