TaxTMI 
TaxTMI 
2021 (11) TMI 415
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....ssee whereas the AO has brought out the material on records necessary for assessment and proved that there is escapement of income. 4. The Ld. CIT(A) grossly erred in allowing the appeal in favour of the assessee whereas the AO has passed speaking order against the objection filed by the assessee during the re-assessment proceedings. 5. For these and such other grounds as may be urged at the time of hearing, the order of the Ld. Commissioner of Income Tax (Appeals) may be vacated and that of the Assessing Officer be restored. 6. The appellant craves to add, amend, alter or delete any of the grounds of appeal during the course of appellate proceedings before the Hon'ble Tribunal." 2. That also there is an application under Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963 filed by the assessee and therein additional grounds has been filed and that the Assessing Officer had erred in passing final assessment order u/s. 143(3) r.w.s. 147 of the Act dated 17.03.2016 without passing draft assessment order as per the mandate laid down u/s. 144C of the Act. 3. That at the First Appellate stage, the assessee had submitted that reopening of assessment was bad in law on t....
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....t was opined by the Ld. CIT(Appeals) that it is fundamental that 'reason to believe' is stronger than the 'reason to suspect'. Therefore, belief shall be formed from a material which would act as a link with the 'reason to believe'. It is a settled position of law that the material on the basis of which, the belief is formed should exist in the recorded reasons and the same cannot be found externally. The Ld. CIT(Appeals) at Para 2.1.10 of his order has given categorical finding that there is no new material brought on record on the basis of which 'reason to believe' could be said to have been formed. This is a case of re-appraisal of the existing facts and re-opening of assessment without new material on record thus was not permissible even if this had been a case where the original return was processed u/s. 143(1) of the Act and the assessment order was not passed u/s. 143(3) of the Act. 7. The Ld. CIT(Appeals) on this proposition relied on specific judicial precedents which are on record as per his order. Thereafter, the Ld. CIT(Appeals) held that first of all, the re-opening of assessment for assessment year 2008-09 had to be done within four ye....
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....147 of the Act. We find the Hon'ble Bombay High Court in the case of Pr. Commissioner of Income Tax Vs. Vaman International Pvt. Ltd., ITA No. 1940 of 2017 has held that mere reliance by the Assessing Officer on information obtained from the Sales Tax Department or the statements of two persons made before the Sales Tax Department would not be sufficient to treat the purchases as bogus for making addition u/s. 69C of the Act. 11. Reverting to the facts of the present case, though the aforesaid matter was in relation to addition u/s. 69C of the Act and the present case before us is with regard to Section 147/148 of the Act, the guiding principles still is that it is mandatory for the Assessing Officer to conduct independent enquiry and examination of facts to arrive at satisfaction justifying 'reason to believe' that "income has escaped assessment". Considering the totality of facts and circumstances, We are, therefore, of the considered view that the findings of the Ld. CIT(Appeals) needs no interference and the same is upheld. 12. Now we would examine the ground invoked by assessee under Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963 stating that since t....
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....tion of law formulated for adjudication were: (i) Whether the provisions contained in Section 144C of the Act are mandatory or directory and (ii) Whether there has been a mere procedural error on the part of the Assessing Officer in passing the final assessment order without passing a draft assessment order as required u/s. 144C(1) of the Act. 15. The Hon'ble Jurisdictional High Court on the issue "whether the provisions of section 144C(1) of the Act are mandatory in nature" considered the decision of the Hon'ble Andhra Pradesh High Court in the case of M/s. Zuari Cement Limited Vs. Assistant Commissioner of Income Tax, Writ Petition No. 5557 of 2012 decided on 21.02.2013 (Andhra Pradesh). In this case, the Hon'ble Andhra Pradesh High Court after considering the provisions of Section 144C(1) of the Act held that provisions of section 144C are mandatory as the Assessing Officer u/s. 144C(1) of the Act is mandated to first pass a draft assessment order, communicate it to the assessee, hear his objections and then complete assessment. The relevant extract of the said decision are as follows: "A reading of the above section shows that if the Assessing Officer propose....
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....t order passed under Section 144C(1) of the Act bestows certain rights upon an eligible assessee such as to approach the DRP with its objections to such a draft assessment order. This is for the reason that an eligible assessee's grievance can be addressed before a final assessment order is passed and appellate proceedings invoked by it. However, these special rights made available to eligible assessee under Section 144C of the Act are rendered futile, if directly a final order under Section 143 of the Act is passed without being preceded by draft assessment order. Thereafter, also the Hon'ble High Court referred and concurred with the findings of the Hon'ble Andhra Pradesh High Court in the case of M/s. Zuari Cement Limited Vs. Assistant Commissioner of Income Tax (supra.). 17. The Hon'ble Delhi High Court in the case of JCB India Limited Vs. Deputy Commissioner of Income Tax (2017) 85 taxmann.com 155 (Delhi) had also re-emphasizes that the Assessing Officer cannot straight away pass a final assessment order without issuing a draft assessment order under Section 144C of the Act, even in the case of remand of proceedings and that such an omission is not a mere irre....
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....ss a draft Assessment Order and to provide a copy thereof to the assessee is a mandatory requirement which gave substantive right to the assessee to object to any variation, that is prejudicial to it. In this case, the order under Section 92CA (3) of the IT Act, proposed to make an adjustment of Rs. 107,454,337/- to the arm's length price considered as Nil by Petitioner and to that extent the said adjustment was evidently prejudicial to the interest of Petitioner. Depriving Petitioner of this valuable right to raise objection before DRP would be denial of substantive rights to the assessee, for which, in our view, the Assessing Officer has no power under the statute, as the provision clearly mandates the Assessing Officer to pass and furnish a draft Assessment Order in the first instance in such a case. The legislature, in our view, has intended to give an important opportunity to Petitioner, who is an eligible assessee, which in our view, has been taken away. In our view, failure to follow the procedure under Section 144C(1) would be a jurisdictional error and not merely procedural error or a mere irregularity. The Assessment Order has not been passed in accordance with the pr....
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....t this time, the Ld. DR raised a contention that the mandatory element of Provisions to section 144C of the Act shall apply to eligible assessee only as contained therein but not in every case. That referring to Section 92CA of the Act, the Ld. DR submitted that on reference to TPO first examination has to be done based on parameters contained in the said provision whether, the assessee is an eligible assessee and only then the mandatory provisions of Section 144C of the Act would apply and not before that. 20. Per contra, the Ld. Senior Counsel referring to CBDT Instruction No. 3/2016 [F No. 500/9/2015-APA-II] dated 10.03.2016 submitted that at Para 2 therein provides the basis for which this Instruction has been issued and it reads as follows: "2. In terms of the provisions, any income arising from an international transaction or specified domestic transaction between two or more associated enterprises shall be computed having regard to the Arm's Length Price. Instruction No. 3 was issued on 20th May, 2003 to provide guidance to the Transfer pricing Officers (TPOs) and the Assessing Officers (AOs) to operationalize the transfer pricing provisions and to have procedural uni....