TaxTMI 
TaxTMI 
2021 (5) TMI 765
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....42,43,47,423, on 25th November 2011. This appeal was subjected to a scrutiny assessment under section 143(3). In addition to the arm's length price adjustment of Rs. 4,04,566, as determined by the TPO, the Assessing Officer proposed disallowances by rejecting deduction claims, as made by the assessee, to the extent of Rs. 2,97,83,922 as inadmissible under section 36(1)(iii), to the extent of Rs. 6,19,20,626 as inadmissible claim under section 37(1), to the extent of Rs. 3,13,50,440 as inadmissible claim under section 10B, and to the extent of Rs. 3,01,01,049 as an inadmissible claim under section 14A. The draft assessment order was, accordingly, served upon the assessee. Vide letter dated 22nd April 2015, the Assessing Officer was informed that the assessee does not wish to file any objections before the Dispute Resolution Panel. The Assessing Officer thus proceeded to frame the assessment under section 143(3) r.w.s. 144C(3), but what he did was that he suo motu dropped the disallowances of 2,97,83,922 under section 36(1)(iii), of Rs. 6,19,20,626 as inadmissible claim under section 37(1), and of Rs. 3,13,50,440 as inadmissible claim under section 10B. So far as disallowance under s....
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....assed u/s.143(3) r/w. 144C(4) of the Income Tax Act, 1961 is neither erroneous nor prejudicial to the interests of the revenue in the view that all the four situations given the Explarnation-2 to section 263 are absent in our case with regard to the four issues raised in the show cause notice. 2. In particular, with regard to the four issues listed in the show cause notice namely: a) Omission to add u/s.36(1)(iii), b) Disallowance not made u/s37(1), and c)Addition not made u/s. 10B these three though proposed to be made as additions/ disallowance in the draft assessment order, none was made in the final order, and d) Reduced disallowance made under section 14A, of only Rs. 6,197/- in the final order of assessment against proposed disallowance of Rs. 3,01,01,049/ in the draft assessment order. 3. We respectfully submit that in the case of all the four issues mentioned above full enquiry was conducted by the Leaned Assessing Officer (the A.O) during course the assessment proceedings by issuing notices and getting responses from the assessee on every issue. For your kind reference enquiry letter/queries received and replies filed by the authorized representative of the ass....
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....ressed by these submissions, the learned PCIT proceeded to exercise his powers under section 263, and held as follows: The above submission of the assessee has been considered however the same is not acceptable based on following discussion. Draft order is passed as per the provisions of Section 143(3) r.w 144C of the Act. The assessee company is allowed thirty days, time from the date of receipt of the order to file its acceptance of the variations under section 144C (2)(a), made to its total income as per the return of income filed, or to file its objection, if any as per the provisions of section 144C(2)(b) of the Act, tailing which this order shall attain finality and the same shall be treated as final assessment order u/s.143(3) of the Act. For the case reference, section 144C(3) is reproduced here. The Assessing officer shall complete the assessment on the basis of the draft order if - a) The assessee intimates to the Assessing officer the acceptance of the variation; or b) No objections are received within period specified in sub-section (2) However, in this case Draft Assessment Order has been passed u/s.143(3) r.w.s. 144C(1) completed on 27-03-2015 determining....
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....assessment order" but then this expression is quite distinct and broader in approach vis-à-vis the expression "in conformity with" used in Section 92CA(4) and the specific command of Section 144C(10) that "every direction issued by the Dispute Resolution Panel will be binding on the Assessing Officer". It is thus contended that the expression "on the basis of" does give the liberty to the Assessing Officer to deviate from the draft assessment order as long as the Assessing Officer does not enhance the assessment i.e. by making the additions or disallowances which are not part of the draft assessment order. Learned counsel then refers to certain judicial precedents pointing out the reason, judicially noticed by Hon'ble Courts above, that Assessing Officer cannot make further additions, vis-à-vis the additions proposed in the draft assessment order, because there is no further opportunity of hearing to the assessee, by the Assessing Officer, after the draft assessment order is passed and before the final assessment order is passed. He submits that this reason does not hold good in the context of scaling down the disallowances inasmuch as no opportunity of hearing to the....
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....an only come into play when it is so mandated by law, but quite to the contrary of such a position, it is only when a public functionary deviates from the stand that such an authority has already taken that the support of law is needed. As regards learned counsel's reliance upon the judgment of Hon'ble Madras High Court in the case of Cognizant Mauritius Ltd Vs DCIT [(2019) 106 taxmann.389 (Madras)], that was a case in which even though the Transfer Pricing Officer concluded the matter by stating that "no adverse inference is drawn", the Assessing Officer proceeded to frame the assessment which was not "in conformity with" this conclusion. That was a case of an external input and the question before His Lordship was as to what extent the observations of the Transfer Pricing Officer actually fetter the discretion of the Assessing Officer. Apart from the fact that it was in a writ jurisdiction, and no adjudication was done on merits anyway, this case was materially different from the present situation inasmuch as here is a situation in which Assessing Officer comes to certain conclusions, confronts the assessee with these conclusions, there is no further hearing on these issues, ther....
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....g Officer. When Dispute Resolution Panel declines to interfere, the Assessing Officer proceeds to finalize the assessment order on the basis of the draft assessment order only. Similarly, when an assessee does not propose to take the matter to the Dispute Resolution Panel, the Assessing Officer has to proceed to pass the final assessment order "on the basis" of the draft assessment order. There are no further hearings on the issues in assessment in question. The expression used in Section 144C(3) undoubtedly is that "the Assessing Officer shall complete the assessment on the basis of the draft assessment order" but in a situation in which the final assessment drops certain proposed disallowances, can it really be said that the Assessing Officer has completed the assessment on the basis of the draft assessment order- more so when there is no further hearing, no further directions and no occasion for further application of mind. The answer has to be, in our humble understanding, emphatically in negative. When a draft order is finalized by the Assessing Officer, no further hearings take place on the issues raised therein, no directions are received by the Assessing Officer to make any....