TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1313
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....s of the 2nd respondent for the purposes of the Income Tax Act, 1961. For the assessment year 2007-08 they filed returns of income. Their cases were selected for scrutiny and pursuant to notices issued under Section 143(2) of the Act, the assessment was sought to be completed under Section 143(3). 3. Second respondent noticed that the petitioners had entered into international transactions with associated enterprises and hence the cases were transferred to the Transfer Pricing Officer under Section 92CA of the Act to determine the arm's length price. Thereafter, the Transfer Pricing Officer issued orders under Section 92CA(3) of the Act. The 2nd respondent, after receiving the orders from the Transfer Pricing Officer, proceeded to compute total income of the petitioners and finalised the assessment under Section 143(3) of the Act on the basis of those orders. 4. Petitioners' prime contention is that though they were eligible assessees as per Section 144C(15)(b), the mandatory procedure under Section 144C was not followed and therefore the assessment orders are non est and void ab initio. According to the petitioners, the 2nd respondent, after receiving the orders from the....
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....er of Income Tax [2017 SCC OnLine Del 12952]. 3. Assistant Commissioner of Income-tax and Another v. Vijay Television Private Ltd and Another [2018 SCC OnLine Mad 13752] 4. Hope Textiles Ltd and Another v. Union of India and Others [(1995 Supp (3) SCC 199 : (1994) 205 ITR 508]. 7. Sri.P.G.Jayasankar, the learned Standing Counsel appearing for the respondents submitted that the assessment was done following Circular No.5/2010 dated 3.6.2010 in which it was stated by the Central Board of Direct Taxes that Section 144C will apply in relation to assessment year 2010-11 and subsequent assessment years. The learned counsel submitted that the respondents were bound to follow the Circular and therefore it cannot be said that they had committed any error. He submitted that Circular No.9/2013 was issued much later on 19.11.2013. The learned Standing Counsel further submitted that huge amounts are involved in these cases and if the assessments are held illegal on technical grounds it will cause severe loss to the revenue. The learned Standing Counsel also submitted that the purpose of assessment itself will be defeated if the contentions of the petitioners are accepted and the assessm....
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....t from 1st October, 2009 and will accordingly apply in relation to assessment year 2010-11 and subsequent assessment years. The Dispute Resolution Panel Rules have been notified by S.O.No.2958(E), dated 20th November, 2009". 10. The above explanation given by the Board regarding applicability of Section 144C was beyond any doubt inconsistent with the provision. As noticed above, there is no mention about assessment years in Section 144C(1). The Board in fact misinterpreted the provision by stating as above in paragraph 45.5 of the Circular No.5/2010. The Board is certainly an authority under the Act. However, it is not open to any authority under the Act to misconstrue the provisions of the Act and thus defeat the legislative intention. Hence, the explanation regarding applicability of Section 144C given by the Board in Circular No.5/2010 was improper and illegal. 11. It is evident from Circular No.9/2013 issued on 19.11.2013 by the Board that it realised the mistake. Paragraph 45.5 of Circular No.5/2010 was replaced with the following:- "45.5. Applicability -Section 144C has been inserted with effect from 1st April, 2009. Accordingly, the Assessing Officer is required to for....
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....le illegality. 27. It is important to note that Section 144- C(1) is a non obstante provision, which requires its compliance irrespective of the other provisions that may be contained in the IT Act. There is no dispute that petitioner is an eligible assessee and also there is no dispute as to the applicability of Section 144-C. It is also not in dispute that the final assessment order has been passed without the draft assessment order as contemplated under Section 144-C(1) of the IT Act. The assessing officer ought to have in the first instance forwarded a draft of the proposed order of assessment to petitioner, as there was a proposed variation prejudicial to the interest of the assessee. This important step has been completely omitted by the respondent taking away a very necessary right of petitioner to file objections to the proposed variation with the DRP and the assessing officer, which in our view, strikes to the root of the procedure contemplated by Section 144-C. 28. Applying the aforesaid principles to the facts of this case, we are of the view that the failure on the part of the assessing officer to follow the procedure under Section 144-C(1) is not a merely procedu....
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....ction on the assessing officer, where none exists. The Supreme Court decision in CIT v. M. Pirai Choodi [(2010) 15 SCC 283] : [(2011) 334 ITR 262] referred to in the Revenue's reply is also not applicable to the issue at hand as that was a case where the assessee was not given an opportunity to cross-examine the witness concerned and which assessee also had a statutory appellate remedy which the assessee had failed to avail of, whereas there is no such right available to petitioner in this case. In fact, petitioner has lost a substantive right due to the failure of the respondents to pass and forward a draft assessment order in the first instance on a variance, prejudicial to the interest of petitioner. In our view, this is clearly a case of jurisdictional error. The final assessment order passed by the assessing officer stands vitiated on account of lack of jurisdiction, which is incurable and deserves to be set aside as void ab initio." 15. A Division Bench of the Madras High Court in Assistant Commissioner of Income-tax and Another v. Vijay Television Private Ltd and Another [2018 SCC OnLine Mad 13752] held as follows:- "39. From the above it is unambiguously clear that ....