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2023 (11) TMI 230 - AT - Income TaxValidity of Assessment order u/s 144C - While issuing Draft order, AO issued demand notice with penalty notice - assessee vehemently stated that the assessment order so framed by AO by any stretch of imagination, cannot be called as “draft assessment order” and, is therefore, in violation of provisions of section 144C - HELD THAT:- 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 AO shall complete the assessment. However, we find that while framing the said draft assessment order, the AO not only issued and served demand notice, but has also initiated the penalty proceedings. Though the ld. DR time and again has stated that the conclusion of the AO 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 AO has bypassed the relevant sub-section i.e. sub-section (3) and (13) to section 144C of the Act. Whether by by-passing mandatory provisions of the Act can assessment survive? - As decided in Dipak Babaria [2015 (8) TMI 775 - SUPREME COURT] if the law requires that a particular thing should be done in a particular manner, it must be done in that way and none other. State cannot ignore the policy intent and procedure contemplated by the statute. We are of the considered opinion that by issuing the demand notice on 28.06.2022 itself the Assessing Officer has bypassed all the mandatory sub-sections of section 144C. DR stated that by participating in the subsequent proceedings, the assessee was well aware that the order passes is merely a draft assessment order and not final assessment order and the assessee cannot blow hot and cold in the same breath - As decided in MR. P. FIRM, MAUR. [1964 (10) TMI 13 - SUPREME COURT] Approbate and Reprobate” is only species of estoppel. It applies only to conduct of parties as in the case of estoppel, it cannot operate against the provisions of a statute. If particular income is taxable under the I.T. Act, it cannot be taxed on the basis of estoppel or any other equal document. Equity is out of placed in tax place. A particular income is either exigible under the Income tax under taxing statute or not. If it is not, the ITO Has no power to tax the said income. Argument of the ld. DR that merely issue of notice of demand and penalty notice will not convert draft assessment order into final assessment order, does not hold any water, in as much as the mandatory provisions of the Act have to be followed and the Assessing Officer does not get any leverage for bypassing the mandatory provisions of the Act. Whether a curable defect u/s 292B? - As decided in M/S NOKIA INDIA PVT LTD [2018 (5) TMI 1913 - SC ORDER] there is a clear order of setting aside of an assessment order with the requirement of the AO/TPO to undertake fresh exercise of determining the arm’s length price, failure to pass draft assessment order would violate the provisions of section 144(1) - This is not a curable defect in terms of section 292B Thus we have no hesitation to hold that the proceedings culminated on 28.06.20228 when the demand notice was issued and served upon the assessee along with penalty notice u/s 274 and, therefore, all the subsequent proceedings and orders become non est. Decided in favour of assessee/
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