2021 (6) TMI 875 - HC - Income Tax

Assessment u/s 144C - issuance of draft order as mandatory and contemplated u/s 144(C) not adhered to - whether the draft assessment order has been passed in the present case or not? - HELD THAT - Considering the findings of the ITAT this Court is of the considered opinion that once again following the procedures right from the beginning as contemplated under Section 144C would not arise at all. Admittedly the procedures contemplated u/s 144C in the present case had been scrupulously followed by the respondent by passing a draft assessment order on 31.03.2016 and the assessee filed an objection before the Disputes Resolution Panel who in turn also passed an order and thereafter a final assessment order under Section 143(3) was passed on 25.03.2016. Once again commencing from the beginning is not the idea behind the provision and therefore the very principles mooted out by the petitioner to commence the proceedings right from the initial stage deserves no merit consideration and stands rejected. Once the procedure has been followed and the Appellate Tribunal remitted the matter back to decide the particular issue with a specific finding then it is sufficient if the remitted issue was decided by the AO / TPO and a final assessment order is passed. Repetition of the same procedures would become an empty formality which is not intended under the provision and therefore this Court is of the considered opinion that when the matter was remitted with reference to a particular issue to be clarified or decided by the competent authority it is sufficient if such an issue is decided and thereafter a final assessment order is passed. Even in such circumstances the assessee is having a right of appeal under the provisions of the Act and therefore in the event of any grievance with reference to an assessment order subsequent passed after remitting the matter by the ITAT the petitioner is at liberty to file an appeal and thus the grounds raised once again to pass the draft assessment order would not arise at all. The procedures as contemplated u/s 144C must be meaningfully followed and constructive interpretation is to be adopted. Repeatedly passing draft assessment order is not the spirit of the provision. The legislative intention is to provide an opportunity to an assessee before passing the final assessment order. Such an opportunity is already provided and the assessee also availed of the opportunity by submitting an objection before the Disputes Resolution Panel and the Assessing Officer and thereafter a final assessment order is passed and after remitting the matter by ITAT to decide a particular issue the same procedure in entirety contemplated under Section 144 C of the Act need not be followed and such a repetition is not only unnecessary but not contemplated. The very intention of the provision is to provide an opportunity to the assessee. The opportunity has already been provided. The opportunity is made available before the Appellate authority to redress the grievances. In the event of again directing the authorities to follow the procedures right from the beginning the proceedings would not only be prolonged it will be protracted which would provide an undue advantage to the assessee in the matter of payment of income tax.

Summary

Issues Involved:
1. Validity of the final assessment order without issuing a draft assessment order post-remand.
2. Compliance with Section 144C of the Income Tax Act.
3. Availability of statutory remedy through appeal.

Issue-wise Detailed Analysis:

1. Validity of the final assessment order without issuing a draft assessment order post-remand:
The petitioner challenged the final assessment order dated 01.11.2018, arguing that the respondent failed to issue a draft assessment order as mandated by Section 144C(1) of the Income Tax Act. The petitioner contended that the absence of a draft assessment order deprived them of the opportunity to file objections before the Disputes Resolution Panel, violating the procedural requirements and thereby rendering the final assessment order invalid.

2. Compliance with Section 144C of the Income Tax Act:
The petitioner argued that the procedures under Section 144C were not followed after the remand by the Income Tax Appellate Tribunal (ITAT). The ITAT had remitted the matter back to the Transfer Pricing Officer to examine the selection of the most appropriate method for determining the Arm's Length Price and to verify if the Associated Enterprises derived any benefit or markup. The petitioner cited various judgments, including Principal Commissioner of Income Tax-4 Vs. Headstrong Services India (P) Ltd., and GE Oil & Gas India Private Limited Vs. Assistant Commissioner of Income Tax, to support their claim that the issuance of a draft order is mandatory and that the failure to do so violated the legal principles and provisions of the Act.

3. Availability of statutory remedy through appeal:
The respondent countered that the petitioner had an available statutory remedy of appeal under Section 246A before the Commissioner of Income Tax (Appeals). The respondent argued that the draft assessment order was initially passed on 31.03.2016, followed by the final assessment order on 25.12.2016, after the petitioner filed objections before the Disputes Resolution Panel. The ITAT's remand was specific to determining the appropriate method (CUP or TNMM) and did not necessitate starting the procedure from the beginning.

Analysis and Judgment:
The court analyzed the spirit and procedural requirements of Section 144C of the Income Tax Act. It noted that the provision mandates the issuance of a draft assessment order to provide the assessee an opportunity to file objections. However, the court observed that in the present case, the procedures under Section 144C were followed initially, with the draft assessment order issued on 31.03.2016, objections filed by the petitioner, and the final assessment order passed on 25.12.2016.

The court held that the ITAT's remand was specific to a particular issue regarding the selection of the most appropriate method for determining the Arm's Length Price and did not require the entire procedure under Section 144C to be repeated. The court emphasized that repeatedly passing draft assessment orders is not the legislative intent and would lead to unnecessary prolongation and protraction of proceedings.

The court concluded that the petitioner had not made out an acceptable ground for setting aside the final assessment order. It held that the petitioner has the liberty to prefer an appeal before the Commissioner of Income Tax (Appeals) if aggrieved by the assessment order.

Conclusion:
The writ petition was dismissed, with the court granting the petitioner the liberty to file an appeal before the Commissioner of Income Tax (Appeals). The court emphasized that the procedures under Section 144C were initially followed, and the specific remand by the ITAT did not necessitate starting the procedure from the beginning.