TaxTMI 
TaxTMI 
2024 (4) TMI 546
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.... Ld. AO has erred in violating the procedure laid down under section 144C of the Act by issuing penalty notice under section 274 read with section 270A and 274 read with section 271AAC (1) of the Act and the notice of demand under section 156 of the Act along with the assessment order dated 31.03.2022 instead of issuing a draft assessment order. 3. That the so-called draft assessment order dated 31.03.2022 passed by the Ld. AO is in contravention of provisions of section 144C (1) of the Act and thus, subsequent orders passed by the Hon'ble DRP-1 i.e, order dated 23.12.2022 as well as order dated 20.01.2023 passed by the Ld, AO are void ab initio. 4. That on facts and circumstances of the case and in law, the Ld. AO has erred in erred in making an addition of Rs. 8,00,000/- as unexplained expenditure under section 69C read with section 115BBE of the Act. 4.1 That the Ld. AO has erred in not considering the documentary evidences, in the form of confirmation and cheque, submitted by the assessee and merely rejected them without pointing out any defect in the same. 4.2 That the Ld. AO has erred in making addition on the basis of presumption and a....
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..... 7. While completing the draft assessment order, the aforementioned remarks make it abundantly clear that what the Assessing Officer has framed is final assessment order and, by any stretch of imagination, cannot be called as "draft assessment order" and is therefore, in violation of provisions of section 144C of the Act. 8. Before us, the ld. counsel for the assessee read the operative part of the alleged draft assessment order and placed strong reliance on the following decisions: (i) Hon'ble High Court of Karnataka in the case of CISCO Systems Services BV 293 Taxmann.com 85, (ii) Hon'ble High Court of Madras in the case of Vijay Television Pvt Ltd 46 Taxmann.com 113 and (iii) Hon'ble High Court of Bombay in the case of SHL (India) Ltd WPL No. 11293 of 2021. 9. The ld. counsel for the assessee also relied on the decision of the Hon'ble High Court of Delhi in the case of Nokia India Pvt Ltd, 98 Taxmann.com, Turner International India Pvt Ltd 4260/2015, JCB India Ltd WP(C) 3399/2016 and Control Risk India Pvt Ltd SLP (Civil) 7090/2018 and also the decision of the co-ordinate bench in the case of Perfetti Van Melle [India] Pvt Ltd....
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....d other authorities. 15. Section 144C lays down a detailed procedure. Under Section 144C(1), the AO7 is required to forward a draft of the proposed order of assessment to the assessee. Assessee may file its acceptance or objection before the DRP and the AO. If assessee intimates its acceptance or no objections are received within 30 days, the AO shall complete the assessment. Where the DRP receives any objection from the assessee, it shall issue necessary directions to the AO to enable him to complete the assessment after considering the documents/material mentioned in Section 144C (6)(a) to (g) which includes the draft order. Before issuing the directions, Assessing Officer , the DRP may also make such further enquiry by any Income Tax Authority. 16. Upon receipt of the directions from DRP under Sub- Section 5, the AO shall, in conformity with the directions, complete the assessment within one month from the end of the month in which such direction is received. A notice of demand under Section 156 may be issued after completion of the assessment under Section 144C(13). 17. In Vijay Television Case, it is held as follows: "21. As rightly pointed ....
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....ge of draft order is not curable under Section 292B of the Act. 23. We have considered the appeals both on delay and merits. In the light of discussion made hereinabove, these appeals are devoid of merit and they are accordingly, dismissed. The questions of law are answered in favour of the Assessee and against the Revenue." 14. All the apprehensions raised by the ld. DR have been duly considered by the Hon'ble High Court in its decision. The ld. DR has also heavily relied upon the decision of the co-ordinate Bench in the case of Hitachi Astemo Haryana Pvt Ltd [supra]. The facts of that case are nowhere near the facts under consideration. The findings of the co-ordinate bench speak for itself and the same read as under: "6. We have heard both the parties and perused the records. We have given very thoughtful consideration to the above submissions and case laws. We find that the ld. Counsel of the assessee relied upon the Tribunal decisions and one decision from Hon'ble Karnataka High Court (supra). On the other hand, ld. DR for the Revenue has relied upon three case laws from Hon'ble jurisdictional High Court and one decision from Hon'ble Madras....
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....der: "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 in the income or loss returned which is prejudicial to the interest of such assessee." 16. Most relevant clauses pertinent for adjudication of the quarrel reads as under: "(3) 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 the period specified in sub-section (2). (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 51a[or section 153B], the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which suc....
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....2. A perusal of Section 144C of the Act shows that the Assessing Officer shall, at the first instance, forward a draft of the proposed order of assessment and on receiving such order, the assessee may approach the DRP by raising objections. If the assessee accepts the variation, then the Assessing Officer shall proceed by framing the final assessment order and if the objections are raised before the DRP, then, upon receipt of directions issued by the DRP, the Assessing Officer shall complete the assessment. However, we find that while framing the said draft assessment order, the Assessing Officer not only issued and served demand notice, but has also initiated the penalty proceedings. 23. The question whether demand notice is an integral part of the assessment order has been answered by the Hon'ble High Court of Gujarat in the case of CIT Vs. Purshottam Das T Patel 209 ITR 52 wherein the Hon'ble High Court has relied on the decision of the Hon'ble Supreme Court in the case of Kalyan Kumar 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 th....
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....nnot be gainsaid that both of them will have to be taken within the time prescribed by the Act. Admittedly, in this case the second step was not taken within the prescribed time. After determining the total income, the Income-tax Officer possibly left the matter to his subordinates for the purpose of calculating the tax payable by the assessee on the basis of the assessed total income. Even if we assume in favour of the Assessing Officer that he approved the said calculation when the papers were put before him for signing the demand notice, and that he signed the same, the fact remains that that step 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. We, therefore, answer the question in the affirmative, i.e., against the Revenue and in favour of the assessee. No order as to costs" 24. Though the ld. DR time and again has stated that the conclusion of the Assessing Officer speaks for the order as a draft assessment order and there should not be any confusion on that point. In our considered view, the impugned order by the Assessing Officer has bypassed the relevant sub-section ....
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....o raise this issue before the appellate authority. 31. In support of this contention, strong reliance was placed on the decision of the Hon'ble High Court of Delhi in the case of M/s Jagat Novel Exhibitors Private Limited [supra]. 32. 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 144C 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 the DRP. The failure to do so, according to M....
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....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 the Assessee 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 decision are relevant for the present purposes: "11. The question whether the final assessment order stands vitiated fo....
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....ry'. 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. Subsection (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 directions without any further hearing being granted to the assessee. 7. The procedure laid down under Section 144C of the Act is thus of great importance. When an Assessing Officer proposes to ....
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....ter must be restored to the AO to pass a draft assessment order and for the Petitioner, thereafter, to pursue the matter before the DRP. 16. 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 the remand by the ITAT." 33. The Hon'ble Supreme Court, while dismissing the SLP filed by the Revenue in the case of Nokia India Pvt Ltd has....