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2023 (1) TMI 923
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....ed Transfer Pricing Officer (TPO) was only due to technical reason or seeking clarifications by the AE. 3. The learned DRP failed to appreciate the fact that during the year out of total 3,910 invoices raised on AE, only 335 invoices delayed for realisation which is less than 10% of the total number of invoices raised during the assessment year and by no stretch of imagination it can be said that by doing this the assessee had extended benefit to the AE by way of advancement of interest free loan. 4. The learned DRP erred in upholding ad-hoc credit period of 60 days for export realisation when the foreign exchange regulator, Reserve Bank of India allows a period of 1 year for realisation of export consideration. 5. The learned DRP failed to appreciate the fact that the assessee is a debt free company and has not incurred interest expenses and entire working capital requirements were made by internal accruals and capital contributions and hence there is no justification for charging notional interest on delayed realisation of receivables and erred in not following the decision of the jurisdictional Tribunal 'A' Bench in the case of Mis Value Labs T....
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....on 13 of Section 144C of the Act, the learned Assessing Officer was required to pass final order within one month from the end of the month in which a direction under subsection 5 of Section 144C of the Act was received by the Assessing Officer, ie., on or before 31/07/2021 and not having passed such an order, the entire assessment proceedings became vitiated and the draft assessment order passed by the learned Assessing Officer on 26/02/2021 becomes void ab intio and liable to be quashed. 3. Learned Assessing Officer erred in making an addition of Rs.11,72,618/- and initiating penalty proceedings under section 274 red with section 270A, 271BA, 271AA and 271G of the Act based on Draft Assessment Order without passing a final order as required under section 144C(13) of the Income Tax Act, 1961. 3. The brief facts of the case are that assessee is a company and filed the return declaring total income at Rs. Nil. Subsequently, the case was selected for limited scrutiny under CASS. A notice u/s. 143(2) issued to the assessee on 27.08.2018, which was duly served upon the assessee. Notices u/s. 142(1) along with questionnaire were issued on 12.02.2021 and duly served upon the ....
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....enalty notices to the assessee. 6. The ld.AR had filed the following written submissions in support of his contention before us. 1. The learned Assessing Officer failed to follow the procedures prescribed under section 144C for passing draft assessment order and passed a draft assessment order along with demand notice and initiated penalty proceedings and issued penalty notice. 2. The learned Assessing Officer passed the draft assessment order by designating it as the 'Assessment Order' under section 143(3) of the Act and also issued demand notice under section 156 and initiated penalty proceedings. 3. The learned Assessing Officer ought to have passed a final assessment order and issued demand notice and penalty notice only upon receiving direction from the Hon'ble Dispute Resolution Panel. 4. The Hon'ble Apex Court in the case of Kalyan Kumar Ray Vs. ClT191 ITR 634 (SC) held that the assessment proceedings come to an end on the issue of notice of demand U/s 156 of the Act. The Hon'ble Court held that "once a notice of demand is issued, the AO becomes functus officio in so far as the completion of the assessment is concern....
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....er the mandate of the provisions of section 144C and hence the draft assessment order and demand notice may be quashed and set aside. 7. Per contra the ld. DR, had filed the e-mail received from the ld.ACIT,Circle-1(1), Tirupati, wherein it was mentioned as under :- Date:25/10/22 3:21 PM From:"Tirupati.dcit1.1" Tirupati.dcit1.1@income tax.gov.in Sir/Madam "In the case of Apache footwear India Private Limited the order passed by NFAC, Delhi is a procedural mistake passing draft assessment order as final assessment order. Since the draft assessment order was passed as final assessment order, the assessment window was closed for the case and it could not be passed again despite of best efforts because of the technical difficulties on ITBA. Since the tax effect of both the orders remains the same, the same may be considered as final assessment order." 8. It was submitted that the error in passing the order was a curable defect being procedural in nature and further no fresh assessment order was required to be passed by the Assessing Officer. Further there is no provision in ITBA portal to correct the assessment order already passed even if the earlie....
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....der after receiving a direction. 11. Further, in our opinion, the law mandates that if an Act is required to be done in the particular manner, it should be done in that manner or not. Further, during the course of argument, it was submitted that the draft assessment order/assessment order dated 26.02.2021 was passed by NFAC and window was not opening for passing the final assessment order and thereby giving effect to the directions of the DRP. In our view, it is for the revenue to devise its own means and ways to correct the software and pass the final assessment order in accordance with the law. In the present case, the Assessing Officer had straight way passed the assessment order instead of passing the draft assessment order as per section 144C(1) of the Act and further, the Assessing Officer has not passed the final order as per section 144C(10) of the Act. In view of the above, we find that the assessee has made out a case on quashing the entire assessment order being passed in violation of the mandatory provisions of the law. Even otherwise, the issue is fairly covered in favour of the assessee by the decision of the Mumbai Tribunal in case of Aker Powergas Pvt.Ltd. vs CIT....
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....(c) of the I.T. Act, 1961". A demand notice dated 29-12- 2011 was also simultaneously issued, a copy of which has been placed on record by the ld. AR. Then, the AO issued penalty notice u/s.274 r.w.s. 271(1)(c) of the Act, again, on 29-12-2012, whose copy has also been placed on record. Thereafter, the AO passed the final assessment order dated 27-02-2012 u/s.143(3) r.w.s. 144C of the Act determining total income at Rs. 156.73 crore. 8. From the above factual matrix, it is seen that the AO passed the draft order by designating it as the "Assessment order" u/s 143(3) of the Act on 29-12- 2011 and also issued notice of demand u/s.156 along with initiation of the penalty proceedings. Thereafter, he passed the final assessment order again characterizing it as `Assessment order' on 27- 2- 2012. Under such circumstances, the assessee has raised the issue that the final assessment order lacked validity and hence should be quashed as the AO/TPO failed to follow the statutorily prescribed procedure u/s.144C of the Act. 9. Section 144C of the Act with the marginal note "Reference to Dispute Resolution Panel" provides through sub-section (1) of section 144C that: "The Assess....
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.... it follows that, irrespective of the course of action followed by the assessee, whether or not accepting the variation in the draft order or choosing the route of the DRP or the CIT(A), a draft order has to be necessarily followed by an assessment order on the basis of which a notice of demand is issued and it is then that the assessment is said to have come to an end. 11. The Hon'ble Apex Court in Kalyan Kumar Ray (1991) 191 ITR 634 (SC) has held that assessment order involves determination of income and tax. It laid down that: `'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 for the assessee as the former.' Again the Hon'ble Summit Court in Auto and Metal Engineers vs. UOI (1998) 229 ITR 399 (SC) has held that the process of assessment involves (i) filing of the return of income under s. 139 or under s. 142 in response to a notice issued under s. 142(1) ; (ii) inquiry by the AO in accordance with the provisions of ss. 142 and 143 ; (iii) making of the order of assessment by the AO under s. 143(3) or s. 144; and (iv) issuing of the notice of demand under s. 15....
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....disapproved by the Hon'ble High Court. It, ergo, follows that the statutorily mandated procedure must be adhered to by the authorities, non-observance of which renders the assessment order null and void. 14. Similar issue came up for consideration before the Pune Benches of the Tribunal in Skoda Auto India Ltd. Vs. ACIT. In that case also the AO passed the draft order and simultaneously issued notice of demand and initiated penalty proceedings by issuing notice u/s 274 of the Act. It was thereafter that the final assessment order was passed. The assessee challenged the legality of the final assessment order. Vide its order dated 02-07-2019, the Tribunal in ITA No.714/PUN/2011 has held that the demand got crystallised on passing of the draft order pursuant to issue of demand notice which is contrary to the relevant provision of the Act. Ex Consequenti, the draft order was held to be invalid in law and the consequential assessment order void ab-initio. 15. The ld. DR buttressed his point of view by relying on an order passed by the Hyderabad Benches in BS Ltd. Vs. ACIT (2018) 94 taxmann.com 346 (Hyderabad-Trib.) in which it has been held that the issuance of demand ....